Let ‘Em Merge! Why Regulators Should Approve T-Mobile-Sprint Merger

Federal regulators approved a merger between AT&T and Time Warner earlier this year, a deal that will benefit the industry and its customers. On deck for major telecommunication mergers are Sprint and T-Mobile, who want to consolidate as “New T-Mobile.”


The Federal Communications Commission recently paused the 180-day “shot clock” on its review of the proposed merger so that it can consider new submissions regarding the companies’ business, economic, and engineering modeling. If American consumers want higher quality cell service, they should cross their fingers for another federal stamp of approval.

As officials at the FCC and Department of Justice consider this merger, they should keep in mind a few important points.

First, worries about the creation of a so-called “super-company” are misplaced. A superficial look at the U.S. telecommunications market might identify four strong competitors — AT&T, Verizon, T-Mobile and Sprint — surrounded by a host of relatively small providers that rely on the big four for infrastructure. But a closer look at the large providers’ market valuations reveals the truth: AT&T ($334 billion) and Verizon ($313 billion) dominate the industry, and third place doesn’t even come close to contention. Combined, the value of T-Mobile and Sprint ($146 billion) would not amount to half that of either of the two front-runners.

Subscriber numbers tell a similar story. At the end of last year, Verizon had 150.5 million subscriptions followed by AT&T’s 141.6 million. T-Mobile had 72.6 million, and Sprint supported 54 million. If combined, T-Mobile and Sprint still would trail Verizon by 23.9 million subscribers and AT&T by 15 million. There are already two “super-companies” in the telecommunications market: They are Verizon and AT&T.

Bigger Can Be Better

Another thing officials should remember is that when it comes to the number of players in a market, quantity does not necessarily mean quality. A commonplace assumption is that more competitors in telecommunication would achieve stronger competition, benefiting customers through lower prices and better services.

According to this logic, the creation of New T-Mobile would remove a competitor from the market, weaken competition, and harm consumers. But that argument wrongly assumes that all the telecommunications companies can apply adequate competitive pressure on the industry leaders. Investing in telecommunications infrastructure is expensive. In the race to upgrade their networks, the carriers with less capital will have trouble keeping up.

The merger of T-Mobile and Sprint would actually make the market more competitive by creating a strong rival to the duumvirate status quo. Separately, the two companies do not seriously threaten Verizon or AT&T and have little hope of doing so without a merger. Sprint, in particular, faces uncertain prospects if regulators obstruct its ability to effectively serve consumers.

Robust Competition

Together, however, T-Mobile and Sprint would have the requisite size, money, and spectrum licenses to compete with Verizon and AT&T in pushing forward the industry’s technological capabilities. By allowing the two carriers to join forces, the FCC and the DOJ would empower a third, robust competitor to vie with telecommunication’s front-runners. In that race, cellular customers win.

“Winning,” in this case, means broader access to 5G, or “fifth generation,” wireless networks, which leads to the final point that the FCC and DOJ must remember: Stronger competition will be a boon not only to individual customers but also to the country’s technological infrastructure. Advances in cellular network technology have made video streaming on laptops and mobile devices available almost anywhere in the country.

As 4K resolution quality becomes standard, however, current infrastructure will struggle to meet consumer demand. In creating their own 5G networks, which they will begin connecting customers to in the next few months, AT&T and Verizon last year invested $22 billion and $17 billion, respectively. New T-Mobile has proposed to invest $40 billion in 5G development over the next three years — an investment that is dependent on the approval of its merger by federal regulators.

The New T-Mobile merger is pro-competition and pro-consumer. If regulators want as many Americans as possible to have expedient access to cutting-edge cellular tech at competitive prices, they should approve the Sprint/T-Mobile merger.

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Originally posted 2019-09-19 23:21:40.


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