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Top Experts Sound Off on Sprint and T-Mobile Merger - Community Broadband Bits Podcast 366
The Sprint / T-Mobile merger has been in process for about a year now, with a series of odd, dramatic twists and turns. Recently, a group of state attorneys general sued to stop the transaction. This week, Christopher talks with telecom policy experts Gigi Sohn and Blair Levin to get their takes on the whole affair.
We originally recorded the interviews for the Institute for Local Self-Reliance’s Building Local Power podcast, but decided that we needed to share them with the Community Broadband Bits audience. Gigi Sohn is a Distinguished Fellow at the Georgetown Law Institute for Technology Law & Policy and Blair Levin is a Senior Fellow at the Brookings Institute. Both have been on the show before. You'll also hear Hibba Meraay, our Communications Manager, give Christopher a hand.
During their conversation, Christopher and his guests discuss how the T-Mobile and Sprint merger will likely end in higher rates, affecting low-income subscribers the most. They talk about the history of the companies' roles in the industry and how this merger, if it goes through, will shift the field. They also look back on precedent that provides a guidepost for blocking this merger, and compare the attitudes Wall Street and Washington take toward mergers.
You can download the report mentioned in the podcast, Cooperatives Fiberize Rural America: A Trusted Model for the Internet Era [PDF], here.
This show is 50 minutes long and can be played on this page or via Apple Podcasts or the tool of your choice using this feed.
Transcript below.
We want your feedback and suggestions for the show-please e-mail us or leave a comment below.
Listen to other episodes here or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance here.
Thanks to Arne Huseby for the music. The song is Warm Duck Shuffle and is licensed under a Creative Commons Attribution (3.0) license.
DOJ's Sallet: Competition, Innovation, A "Virtuous Circle"
On December 6th, Deputy Assistant Jon Sallet of the Department of Justice Antitrust Division spoke at the Capitol Forum Broadband Competition Conference in Washington, DC. Sallet spent several years at the FCC and in July 2016 announced that he would begin working for the Department of Justice (DOJ).
Sallet’s remarks emphasized the importance of competition for the health of the Internet ecosystem. He pointed out that, in order for residents, businesses, and other entities to get the most out of the possibilities of Internet access, policy, regulation, and enforcement must encourage the mosaic that comes with competition. The DOJ will have decide how it wishes to apply these considerations as it faces upcoming decisions about potential mergers, such as the proposed CenturyLink and Level 3 merger or the AT&T and Time Warner merger.
When shaping our approach, he argues, we must consider four powerful elements that require a delicate balance:
Process Matters: Harold Feld's Guide to the Time Warner Cable/Comcast Merger
The proposed Comcast/Time Warner Cable deal will be on everyone's mind for many months to come. Thanks to Harold Feld, it is now possible to follow the process as it moves forward. Feld began a series of posts earlier this month that map out the review as it moves from the Department of Justice Antitrust Division to the Federal Communications, and finally to Congress. As Feld notes, the entire process will last six months at least and could run for more than a year.
In addition to drawing a process map, Feld provides insightful subtleties on the purpose behind each step in the review. He also offers political analysis that may influence the outcome. Feld gets into the unique review process, burdens of proof, and relevant definitions at each stop along the way. Highly recommended, especially for law students.
Part I - Introduction
Part II - Antitrust Review at the DOJ
Part III - Federal Communications Commission analyzes public interest
Part IV - The proposal moves through the committee process and the public has a chance to express themselves to their elected officials (including lobbyists)
Antitrust Enforcement Yields Increased Investment in Wireless
We have long argued that smart antitrust policy promotes investment and competition in the market. Allowing a few firms to consolidate too much power allows them to ignore our needs because we lack alternative service providers. In economic terms, they can use their market power to prevent market entry from innovative new firms.
Harold Feld recented provided more empirical evidence for our view by comparing the present cellular wireless market against that of 20 months ago. He notes new investment from abroad in T-Mobile and Sprint and that U.S. Cellular plans to expand its footprint; AT&T is planning upgrades in its spectrum holdings. Bottom line - investment is starting to happen, which was not the case a year ago.
Feld breaks out details in FCC and DoJ activities to show the relationship. In addition to the DoJ and FCC mutual block of the AT&T/T-Mobile deal, Feld notes the FCC's new attitude regarding regulatory reform. From the Feld blog:
On top of this, the FCC sudden[ly] started getting all serious about regulatory reforms designed to keep carriers other than AT&T and Verizon in the game as serious players. This included not just the long-awaited data roaming order (which now looks like it will probably survive review by the D.C. Circuit after all), but also revisiting special access, 700 MHz Interoperability, and renewed interest in clarifying the spectrum screen/possibly reviving the spectrum cap. While the last three are still in progress, the fact that the FCC is even talking about them in a serious way is so radically different from what folks expected at the beginning of 2011 that it puts heart into investors and competitors who were looking for some sign that anyone in DC gave a crap or if competitive wireless would end up going the way of competitive telecom and competitive ISPs.
Feld acknowledges that there will be those that jump to conclusions and discourages an all-or-nothing viewpoint in favor of a more measured approach. Also from his blog post:
Antitrust Allegations Against Comcast Nothing New
We have frequently written of Comcast's anti-consumer actions past posts, so we were not surprised to learn that the Department of Justice (DOJ) recently decided to investigate the cable company for antitrust. The borders between antitrust and hyper competitive business practices are grey; Comcast has experimented in the shadows on more than one occasion. We looked into one nine-year-old case, that recently advanced in the Pennsylvania courts.
The Behrend v. Comcast class action case began in 2003 against the cable giant. The suit alleges that Comcast violated the Sherman Antitrust Act by building itself into an “illegal monopoly.” The plaintiffs are current and former customers of Comcast and damages are estimated at $876 million, although the amount could be tripled under the Act.
The plaintiffs claim that Comcast’s strategy was to “cluster” as a way to eliminate competition and be able to raise rates above the market. “Clustering” involved acquiring the cable systems of other large multi-system operators that operated and offered multichannel video programming distributor service in various franchise areas in the Philadelphia area. There are internal documents, referred to in the April 12 Summary Judgment Memorandum [pdf], supporting the argument that Comcast’s business strategy was to eliminate competition through clustering.
Growing by gobbling up smaller entities in the same industry is not a new idea and certainly not illegal on its face. The issues in the 2003 case were how Comcast went about expanding, why they did it, and to what extent they took steps to hinder competition. There was a cable system asset swap with AT&T and the two worked together to divide up the Philadelphia assets of former MediaOne, rather than compete with each other during the bidding process. Other swaps involved Aldelphia, Time Warner, and even smaller operators, like Patriot Media & Communications.
Swapping and clustering with intent to eliminate competition may be considered Sherman Act violations.
AT&T Abandons Wireless Consolidation Attempt
It is hard to avoid becoming cynical when watching the federal government interact with big corporations like AT&T. So when AT&T announced it would merge with T-Mobile, giving AT&T and Verizon a combined 3 out of 4 cellular subscribers, I thought two things:
1) What a terrible idea. Higher prices, fewer jobs, less choices, etc.
2) The Federal Government will likely not prevent it - instead opting for some minor concessions that no one will bother to enforce.
Sometimes, it is very good to be wrong.
Cecilia Kang of the Washington Post, decodes the language from Wall Street to explain the biggest winner from the federal government blocking the merger: consumers.
“Without the combination, we think the wireless industry will be further weakened by continued hypercompetitive activity, particularly regarding subscriber acquisition costs,” said Nomura Securities analyst Mike McCormack. That means customers can still get lower rates as the industry competes for their dollars. T-Mobile, for example, will continue to be a low-cost competitor, according to consumer advocacy group Consumers Union. A survey showed that data plans from T-Mobile were $15 to $50 less per month than those offered by AT&T.An excellent reminder that what is best for Wall Street is not what is best for the 99%. Big companies like AT&T find competing for customers a hassle that lowers their profits -- they consider a market with four sellers to be hypercompetitive. In wireline, they have acquiesced to the "competition" of two competitors -- cable and DSL. This is one reason communities build their own networks -- the private sector is not truly competitive when it comes to ISPs and most communities have no prospect real of improvement absent a public investment. But we should rejoice in this victory -- because we earned it. Without the hard work of many grassroots groups, it is hard to imagine the Department of Justice or FCC standing up to such a powerful corporation.
AT&T&T Merger and DOJ: What is Happening?
In the aftermath of AT&T accidentally admitting they have nothing but a smokescreen to justify buying one of their few competitors, it seemed that nothing had changed and AT&T was going to continue pushing this anti-competition, anti-consumer deal through.
But then the Department of Justice filed suit to prevent it. What does that mean and what is next? Public Knowledge tells us below. In the meantime, Sprint has also filed suit under the Clayton Act to separately oppose the takeover.
Why do we care here at Community Broadband Networks? Because the biggest companies - AT&T, Comcast, Verizon, CenturyLink, etc. - have tremendous market power that allows them a disturbing amount of power over the future of access to the Internet and as they become even larger, the prospects of any community building a network in their territory becomes more bleak.
Community Groups Oppose AT&T Takeover of T-Mobile
We at the Institute for Local Self-Reliance signed on to a letter organized by our friends at the Media Action Grassroots Network asking the FCC and Department of Justice to thoroughly review AT&T's proposed takeover of T-Mobile -- read the press release.
“Our communities cannot afford higher prices and less choices. We need the FCC and DOJ to block this takeover if it's found to be in violation of antitrust law and does not meet public interest obligations,” said Betty Yu, National Organizer for MAG-Net. "If AT&T takes over T-Mobile, it will be a disaster for all mobile phone users. It will stifle information, choice and innovation- and lead to higher prices and fewer jobs nationwide, added CMJ's Policy Director, amalia deloney. "It's a real jobs and democracy killer.” The groups also contend the takeover will disproportionately harm consumers of color, who rely on their cell phones to access the Internet more than whites. While 10 percent of whites access the Internet only from their phones, 18 percent of blacks and 16 percent of English-speaking Latinos depend on affordable wireless coverage to get online.And an excerpt from the letter [pdf]:
The impact that this merger would have on affordable mobile phone service, broadband access and adoption, openness on the mobile web and broadband competition presents a real threat to our communities. We hope that the Department of Justice and Federal Communications Commission will examine AT&T's proposed acquisition of T-Mobile with appropriate scrutiny and protect our communities by blocking this merger. We intend to host a series of open and participatory meetings in our communities to discuss this merger, and we hope that FCC Commissioners will commit to joining us. It is only by communicating directly with people and hearing our stories that you will feel our deep concerns with this merger and the devastating impact it would have on our communities.We continue to advocate for universal, affordable, fast, and reliable broadband, which to us means a wired connection eventually to all homes that are connected to the electrical grid.