Clyburn Makes Case for T-Mobile/Sprint; Has No Plans to Lobby on Deal
Former FCC Commissioner Mignon Clyburn, now a consultant to T-Mobile/Sprint on their proposed deal, offered her first public defense during a Capitol Hill lunch sponsored by the Georgetown Institute for Tech Law & Policy Tuesday. The panel presented arguments for and against the transaction, now before the FCC and DOJ. T-Mobile acknowledged to lawmakers it spent $195,000 at the Trump International Hotel in Washington since announcing its proposed buy of Sprint in April (see 1903050044).
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“The companies have said that they’re going to build 5G,” Clyburn said. “The real question for today is how and when.” T-Mobile pledged $40 billion toward 5G, she said. Sprint is among the highest leveraged companies in the S&P, she said. It could take Sprint up to $25 billion to construct a 5G network, only in the largest cities and the suburbs, she said. “News flash -- I didn’t grow up is those traditional areas,” Clyburn said. “When do my neighbors get this next-gen opportunity?”
“For me, the question boils down to how and when,” Clyburn said. The companies can build 5G on their own, but “when these communities will benefit, that deserves an answer,” she said. People in the most economically disadvantaged markets will get 5G under the new T-Mobile, she said. “They have traditionally been afterthoughts with the larger carriers,” she said. “T-Mobile/Sprint are continuing to blur the lines when it comes to pre- and postpaid customers. They don’t look as one party is an afterthought and the other is … a premium customer.”
Clyburn told us she has been working behind the scenes as an adviser. “You’ll probably be seeing me more,” she said. She said that on her way into the Capitol, the woman who checked her in asked if as a Sprint customer, her prices would go down. “Those are the types of things that matter,” Clyburn said. “You cannot argue with the numbers when it comes to Sprint.”
Verizon and AT&T will still have two-thirds of the market, Clyburn said. “How strong is No. 3 and how viable is No. 3?” Some places still need 3G and 4G, she said: “How can we ensure that we move to the next evolution for those people, particularly in markets that are economically distressed or rural?” The USF by itself isn’t closing all the gaps, she said.
Clyburn said her role is to be an “individual voice who is committed to Lifeline, committed to closing gaps. … I’m going to go out into communities and listen and learn” and provide advice on what she learns to T-Mobile. “I am not a lobbyist, I’m not going to pretend to be a lobbyist,” she said.
The Herfindahl-Hirschman Index by itself demands that the FCC reject the deal, said David Goodfriend of the Goodfriend Group, who does work for Communications Workers of America and Dish Network, among others. “This proposed merger blows through every warning flag the HHI sets up,” Goodfriend said. “Today we have four nationwide facilities-based wireless carriers. … What the merger does is trim that number four into the number three. Than raises the HII index more than double from what is likely to enhance market power, more than twice the threat level.”
In the prepaid and MVNO markets, it would be worse, Goodfriend said. “The numbers are screaming that this merger is presumptively illegal.” Price is also a major concern, he said. Economists say the deal will drive up prices as much as 15 percent, he said. T-Mobile and Sprint offered a “flimsy” promise not to raise prices for three years, he said. The offer is “in effect an offer to engage in rate regulation,” he said. “Rate regulation these days is not exactly something the current Republican administration embraces.”
“Don’t believe the hype on 5G,” Goodfriend said. T-Mobile and Sprint say they need the deal to better compete against Verizon and AT&T, he said. “It turns out that T-Mobile and Sprint spend a lot more time competing against each other; that’s what’s revealed in the so-called porting data,” he said. “That’s why I think they’re fighting so hard to not have porting data revealed in the proceeding.”
“The merger is not a matter of four to three -- it is two to three,” said Robert McDowell of Cooley, who's working for approval of the deal. “It strengthens competition and is in the public interest.” Approval “will help deliver America’s 5G future faster by creating efficiencies through the combination of the two networks and other assets, making it possible to finance a new $40 billion 5G network over three years,” he said.
The wireless market today is “frozen in two tiers” with Verizon and AT&T at the top and everyone else in tier two, McDowell said. Combining T-Mobile and Sprint will “create a supercharged maverick, which will still be only No. 3,” he said. As stand-alone companies, they don’t have the nationwide reach or financial strength to compete as tier one carriers, he said. The new T-Mobile is as likely to stop being a maverick as CEO John Legere is to cut his hair and start wearing pinstripe suits, McDowell said.
“The biggest take-away is that the merging parties haven’t made their case,” said Gigi Sohn, a former FCC staffer who organized the event. “They have some compelling arguments, but I’m still not convinced that the benefits they portray are merger-specific … that we were going to get 5G faster and with more capacity, that we were going to get to more rural coverage, more jobs," she told us. "That’s where I think their case is the weakest." Asked about the effect of having Clyburn on the team, Sohn said, “Of course it helps … she has a 10-year reputation as a consumer advocate and understandably when she speaks, people listen.”