CPUC Proposes T-Mobile/Sprint Approval With Conditions

In the pact with AGs, T-Mobile agreed to reimburse up to $15 million of states’ legal costs in exchange for the states agreeing not to appeal U.S. District Court for Southern District of New York's decision to allow the carriers' combination. Becerra announced the settlement Wednesday. It covers California, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Oregon, Pennsylvania, Virginia, Wisconsin and Washington, D.C. New York, which previously decided not to appeal the SDNY loss, won’t get any of the money. It wasn’t part of the settlement because it left the state plaintiff group last month (see 2002180052). “Following our work on this case, we have secured commitments from T-Mobile that include jobs, competitive pricing, and robust diversity initiatives across the nation," said New York AG Letitia James (D) in a statement to us. James noted those promises Feb. 16. "We continue to be in talks on additional matters."

Tunney Act approval is "the final loose end" and "should come soon," Hedgeye Potomac Research analyst Paul Glenchur emailed us. Judge Timothy Kelly of the U.S. District Court in Washington must weigh in on that antitrust nod. It’s “interesting” the Tunney Act review is ongoing, said Anna Pavlik, United First Partners senior counsel-special situations. “It's highly unusual as we were expecting Kelly to approve shortly after [SDNY Judge Victor] Marrero.”

Becerra told the commission anti-competitive effects outweighed potential benefits, in a March 2 advisory opinion, noted the commission ALJ's proposal. “We are left with a dilemma," the judge wrote. "Three units of the federal government have approved the proposed Merger, albeit with substantial conditions imposed on the merging parties. On the other hand, we have serious reservations about the competitive effects of the Merger here in California, particularly in regional markets where T-Mobile is already a dominant competitor, and we are concerned that the conditions the FCC and the DOJ previously imposed on the Merger may be insufficient to ensure robust post-Merger competition in California or to close the existing ‘digital divide’ between those Californians with access to the most modern wireless technology and those without it.”

The ALJ pointed to T-Mobile’s “history of aggressive competition and market capture at the expense of Verizon and AT&T,” and “substantial uncertainty whether Sprint could continue to play an effective role as a fourth nationwide competitor.” T-Mobile hasn’t participated in state LifeLine, so requiring participation would benefit low-income Californians, Bemesderfer said. With that and other conditions, benefits outweigh potential reduced competition, he wrote.

T-Mobile must add 300,000 California LifeLine customers over five years, said one proposed CPUC condition. The agency also laid out rural and statewide 5G deployment milestones, like carriers have promised other states. By 2024, T-Mobile would have to bring 50 Mbps to 91% of the state population and 81% of the rural population; and 100 Mbps to 86% statewide and 79% rural. By 2027, the carrier must bring 50 Mbps to 94% of rural people, and 100 Mbps to 99% statewide and 85% rural. By 2031, the carrier must cover 96% of the rural population with 50 Mbps and 90% with 100 Mbps. Within three years, T-Mobile should have fixed service to at least 912,000 California households, including at least 58,000 rural, and within six years, T-Mobile should increase that to 2.3 million households, including at least 123,000 rural. Comments are due April 1.

The AG settlement requires T-Mobile to make low-cost plans available for at least five years, extending by two years the rate plans it committed to the FCC. The carriers pledged to offer 100 GB free broadband per year for five years and a free mobile Wi-Fi hot spot to 10 million low-income households. For three years after closing, T-Mobile’s total number of employees will be at least equal to T-Mobile and Sprint combined today. The carrier agreed to open a call center in Kingsburg, California, with 1,000 new jobs, and promised to increase participation in its diversity-and-inclusion program to 60 percent within three years.

“You can really come to terms even with those with whom you go to battle in court,” Becerra said on a livestreamed news conference from Sacramento. “We saw eye-to-eye enough to reach a settlement.”

“We had a strong case but a judge ruled against us and we weren’t likely to win on appeal," said Minnesota Attorney General Keith Ellison (D).

The CPUC and AG office seemed to be “coordinating to the extent they could given open government and settlement rules," The Utility Reform Network Managing Director-San Diego Christine Mailloux said. TURN opposes the wireless combination.

The carriers “already committed to most of these ‘settlement terms'" reached with Becerra, emailed LightShed Partners analyst Walter Piecyk, asking how much states spent on the case and “what percent of legal fees that $15 million deferred.” The California AG office wouldn’t say.

The AG pact is “short on tangible benefits,” with no rural coverage deployment commitments, said the Rural Wireless Association. States should enforce all terms and impose penalties if the carrier misses any deadlines or fails to meet commitments, RWA said.

The California Emerging Technology Fund promised to “vigorously” enforce the memorandum of understanding it signed with T-Mobile and Sprint last April (see 1904080041), said a Friday filing in docket A.18-07-011 on March 3 and 4 meetings with aides to assigned Commissioner Cliff Rechtschaffen and President Marybel Batjer.