Ten Democratic state Attorneys General on Tuesday sued to block T-Mobile’s merger with Sprint, and the timing was no coincidence. The Justice Department will soon make its decision on the merger, and Democrats, unions and big business are lining up to defeat it at the expense of America’s leadership in 5G telecom networks.
The State AGs say the merger “would eliminate Sprint as a competitor and reduce the number of (mobile network operators) with nationwide networks in the United States from four to three.” But a market of three strong wireless players would be more competitive than a de facto duopoly led by AT&T and Verizon. T-Mobile has 79 million customers while Sprint boasts 54 million compared to Verizon (118 million) and AT&T (94 million). The Big Two need a strong competitor, not two weaklings that may not survive for long.
More spectrum improves connectivity and boosts download speeds, which helps the two giants attract more customers. With more revenue, they can procure more spectrum at government auctions to improve their networks. AT&T also came into a sweet spectrum deal two years ago when the Commerce Department selected it to build a national emergency network for first-responders.
For years T-Mobile and Sprint have been slashing prices to compete with the Big Two. As the state AGs note, the average cost per megabyte of data declined by between 72% and 83% between 2013 and 2017. The problem is that all of the carriers have piled up debt that could retard their 5G build-out.
AT&T and Verizon have used much of their cash paying for content acquisitions rather than investing in 5G. AT&T has curbed price cuts to pay down $171 billion in debt from buying DirecTV and Time Warner. Verizon has $113 billion in debt and is writing off its misconceived Yahoo and AOL acquisitions that were supposed to help it compete with Google.
The Democratic AGs claim to be standing for competition, but in opposing the T-Mobile-Sprint merger they’re entrenching the Big Two. It’s worth recalling that competition from Sprint and MCI is what finally broke AT&T’s monopoly on long-distance service in the 1980s. Long-distance prices fell rapidly.
Sprint and T-Mobile have already committed to deploying a 5G network that would cover 97% of the U.S. population within three years including 85% of rural Americans. They have also agreed to maintain current prices for at least three years, which is three years longer than either Verizon or AT&T. The AG warnings about price increases are false.
As ever, there’s a union-Democratic Party merger here. The Communications Workers of America, who represent AT&T and Verizon workers, oppose the tie between the nonunion Sprint and T-Mobile. The last thing they want is a stronger nonunion competitor. The union is a big financier of Democrats, and it endorsed the AGs in coordinated fashion on Tuesday.
All of this lobbying is aimed directly at persuading Justice antitrust chief Makan Delrahim to oppose the deal. Justice attorneys have been demanding divestitures with perhaps an eye to recreating a fourth wireless carrier. Cable companies that aim to launch plans with wireless carriers’ spectrum — Altice already has a contract with Sprint — have criticized the deal for thwarting competition. But cable companies merely want to fortify their regional monopolies, especially in rural areas where a merged T-Mobile-Sprint could compete.
While the media obsess about Big Tech and antitrust, the T-Mobile-Sprint merger may be more consequential for America’s future. More of the world economy is becoming digital every day, and 5G is essential to capturing the benefits of artificial intelligence and much more. The U.S. can’t afford to fall behind by depending on a unionized duopoly. While Democratic AGs and unions may not care if 5G plods along, anyone who wants to preserve America’s global competitiveness should.
-The Wall Street Journal