House Communications Democrats Voice T-Mobile/Sprint Skepticism

House Commerce Committee Chairman Frank Pallone, D-N.J., and House Communications Subcommittee Chairman Mike Doyle, D-Pa., cited the hearing's importance as the subcommittee's first on communications sector transaction activity since Democrats last held House majority in 2010. In that time, “we’ve seen mergers jack up consumer prices, cut away meaningful choices, and outsource, undercut, and eviscerate good paying jobs,” Pallone said. "We’ve seen previous merger conditions that weren’t met or weren’t enforced.”

House Commerce ranking member Greg Walden, R-Ore., countered that the committee aimed under GOP control to avoid “hearings focused on any specific transaction in an effort to allow the regulators who are responsible for assessing them” to do their work “free from intense political influence.” It's “my hope the experts” at the FCC and DOJ's Antitrust Division, “who as we speak are reviewing this transaction and its potential impact on the public interest and competition, will continue their analysis in this vein,” he said.

“It’s a very high bar for [T-Mobile/Sprint] to go through” the FCC and DOJ Antitrust, Doyle told reporters. “A lot of us still have some concerns” about potential impacts. “We heard pretty strong commitments from” the carriers about how the combined company would ensure Sprint's existing USF Lifeline program obligations and other issues, but “there are some further questions that need to be asked about that,” he said. Those are things the FCC “is going to be looking at, too.”

Walden and other House Communications Republicans appeared supportive of the transaction. Walden told reporters he “probably” will support the deal: "I haven’t heard anything to throw me off.” Walden said he met Legere Tuesday and, while he has some concerns, the combination generally “makes for a more competitive environment.” House Minority Whip Steve Scalise, R-La., was among others who appeared to favor the deal during the hearing.

Rep. Anna Eshoo, Calif., was the lone Democrat to publicly favor the transaction Wednesday, repeating the argument she and other House members made last month in a letter to Pai and Antitrust Division Chief Makan Delrahim (see 1901280051). The U.S. wireless market is for all intents and purposes “a duopoly,” with AT&T and Verizon holding “approximately two-thirds,” Eshoo said. T-Mobile and Sprint “are missing crucial ingredients to become heavyweight competitors this market needs” but can compete if combined.

Testimony

Claure and Legere maintained the transaction could simultaneously deliver improved service while maintaining lower prices and not cut many jobs.

“Most mergers do not create jobs,” Claure said. “This merger is the opposite. It’s a growth story.” Legere argued the transaction “is the best path forward” for the U.S. to improve wireless connectivity, saying it would greatly aid the U.S.' ability to retain a lead in deploying and developing the technology amid stiff competition from Chinese firms Huawei and ZTE. Information Technology and Innovation Foundation Broadband and Spectrum Policy Director Doug Brake also concentrated on the deal's benefits.

Communications Workers of America President Chris Shelton and other opponents testifying Wednesday countered against the carriers' arguments. Sprint and T-Mobile stores “tend to be right next to each other,” Shelton said. “So if the companies merge, why would they keep two neighboring stores open? Chances are they won’t.” Communications sector observers have heard similar arguments in the past, particularly during AT&T's aborted 2011 bid to buy T-Mobile, said Public Knowledge Senior Policy Counsel Phillip Berenbroick.

Pallone, Doyle and other Democrats zeroed in on promises to not raise service plan prices and on the deal's effect on the communications sector job market. “How can we be sure that consumers who can least afford to pay more are not harmed by the merger?” Pallone asked. Doyle appreciates the carriers' belief “this merger will benefit consumers and result in lower prices,” along with “their commitments to an accelerated deployment of 5G and promises of expanded rural broadband.” But "it’s hard to think of one [transaction] where consolidation didn’t result in people losing their jobs, prices going up, and innovation being stifled,” Doyle said.

Rep. Peter Welch, D-Vt., and several others aimed at the company's claims about the deal's potential to improve rural wireless coverage. Welch called himself a T-Mobile/Sprint “skeptic,” noting “we do not have good coverage in Vermont and the assertion that both gentlemen are making is that this will be tremendous” for rural consumers. “I’d like to believe that’s true but I have an apprehension that it won’t necessarily occur,” he said. Rep. Ben Ray Lujan, D-N.M., questioned “how this merger specifically incentivizes the proposed new T-Mobile to better serve rural communities and when can my constituents expect to enjoy the wonders of 5G connectivity.”

Rep. Tony Cardenas, D-Calif., was preparing a letter to Claure and Legere pressing the executives about how the combined carrier would handle Lifeline commitments. “We are encouraged by T-Mobile and Sprint’s voluntary commitment to continue providing Lifeline services should the merger be approved,” but want “more details,” Cardenas said in a draft circulated to House members. Cardenas sought information on how long the combined carrier would commit to maintain Lifeline service. At least 20 lawmakers signed.

Rep. Darren Soto, D-Fla., told us he's “keeping an open mind, ” but “there are complex concerns” about the transaction's implications. “Both CEOs say that they'd name those promises,” including maintaining current prices for three years, “as a condition” for federal approval, he said. “I'd be interested to see if that actually comes to fruition before I can form a final opinion.”

Sprint Quits Incompas

Sprint said it's leaving Incompas, after the group opposed its combination with T-Mobile Tuesday evening.

Incompas said it opposes the deal and will join the 4Competition Coalition, previously formed to solidify opposition. Incompas “represents a number of competitive fiber builders” and is “hoping to raise the impact of wholesale as policy makers deliberate the merger,” the group said. “As currently proposed, the merger threatens to undercut the competitive wireless ecosystem that has been the shining star for competition and choice,” said Incompas CEO Chip Pickering.

Sprint said Charles McKee, vice president-federal and state regulatory government affairs, resigned from Incompas’ board. “Sprint believes strongly that the most effective way of bringing greater competition to the wireless marketplace is to create an entity with the scale and assets that can challenge the status quo,” the carrier said. “The proposed merger of T-Mobile and Sprint will allow the creation of a new entity that can deploy a more robust and more advanced network than either company could on its own."

C Spire and some other Competitive Carriers Association members oppose the deal, but that group hasn’t taken a stand for or against (see 1810030004). Sprint and T-Mobile remain CCA members.

The combining carriers included in their FCC ex parte filing a slide deck the executives brought with them when meeting Pai, but didn’t distribute. Parts were redacted. The deck argued that absent the combination, “spectrum and financial constraints prevent a broad and deep nationwide 5G network” and “standalone 5G rollout only contemplates a thin layer of coverage with limited capacity.” It said prepaid customers would benefit.