Judge Rules That T-Mobile Can Acquire Sprint

You’ll likely have one less choice for mobile service soon.

Last year, nine states and the District of Columbia filed suit to block T-Mobile’s $26.5 billion acquisition of Sprint. Tuesday, a federal judge ruled against the states, allowing the merger to move forward. The deal still needs approval from the California Public Utilities Commission, but it’s not clear if the commission can actually block the deal.

The states argued that fewer wireless providers would mean higher prices and worse service. But US District Judge Victor Marrero ruled that the merger “is not reasonably likely to substantially lessen competition” in wireless markets. One key element of Marrero’s decision: that satellite television company Dish could become a viable fourth competitor. But it’s far from clear that Dish will be able to challenge the existing wireless companies.

Marrero ruled that the states failed to prove the merger would lead to higher prices. He also worried that Sprint wouldn’t be viable as an independent company.

As part of a deal with the Department of Justice, T-Mobile and Sprint agreed to sell Sprint’s prepaid brands, Boost and Virgin Mobile, to Dish, along with parts of Sprint’s wireless spectrum. Dish will essentially sell access to the newly merged T-Mobile/Sprint network under the prepaid brands. The new T-Mobile will have to provide Dish with “robust” access to its network for at least seven years. Meanwhile, Dish will have until 2023 to build its own mobile network covering 70 percent of the US population.

Wireless companies vary in how they report their number of subscribers, but the combined T-Mobile/Sprint could end up with around 131.2 million subscribers. That would put it ahead of the 120 million retail subscribers Verizon reported last year. AT&T reported 166 million wireless subscribers, including connected devices, last year. Dish will have a lot of catching up to do.

Avery Gardiner, a fellow at the internet freedom group Center for Democracy and Technology, says regulators usually block mergers that lead to high levels of market concentration. But regulators also consider whether new competitors can help offset the changes.

Marrero wrote that Dish is “well poised” to become a competitive fourth major carrier, but critics aren’t buying it.

“The DOJ’s proposed remedy is still very risky—at best we are losing a competitor today, in the hope of getting one back later,” John Bergmayer, legal director of the internet freedom group Public Knowledge, said in a statement.

Building a new national mobile wireless provider is hard, but Dish has a few advantages—most notably wireless spectrum. According to Marrero’s ruling, Dish already has a comparable amount of spectrum to Verizon. Alex Gellman, CEO of wireless infrastructure company Vertical Bridge, says Dish is particularly well stocked with “mid-band” spectrum, which will be crucial for building next generation 5G networks that can cover large areas.


The WIRED Guide to 5G

Gellman says the arrangement offering Dish access to T-Mobile/Sprint’s network for the next seven years will free Dish to focus on building a 5G network, and not have to also build 3G or 4G networks. “They get to start from scratch, without the financial and operational burden of aging network infrastructure,” Gellman says.

The states that challenged the merger questioned Dish’s commitment to building the network. Dish has been buying spectrum licenses for a potential mobile network since at least 2012. The Federal Communications Commission requires companies to use spectrum they’ve licensed within a certain period of time or risk losing it. Ergen had promised the company would build a wireless network for Internet of Things devices, as opposed to mobile phones, before a March 2020 deadline to use a chunk of valuable spectrum. But last year the FCC granted Dish an extension until June 2023 to use its spectrum as part of the T-Mobile/Sprint deal.

Dish could, in theory, face $2 billion in fines and lose $12 billion worth of spectrum if it does not deploy a network covering at least 70 percent of the US by then. But the FCC could always grant another extension, and Gardiner worries they’d be motivated to do so because taking spectrum away from Dish would make it harder for the company to ever become a solid fourth carrier.

Former FCC lawyer Gigi Sohn also points out that if Dish can’t or won’t build a mobile network, it could simply sell spectrum leases it purchased prior to the T-Mobile/Sprint deal.

Marrero wasn’t swayed by speculation that Dish might sell its spectrum, rather than use it. “DISH’s statements at trial persuade the Court that the new firm will take advantage of its opportunity aggressively competing in the [retail mobile wireless telecommunications services markets] to the benefit of price-conscious consumers and opening for consumer use a broad range of spectrum that had heretofore remained fallow,” he wrote in the ruling.

Gardiner worries that basing the ruling on testimony from Ergen and other CEOs, instead of economic analysis and other evidence, sets a bad precedent for future antitrust cases.

“I worry in the future that someone will say, ‘My industry is just as fast moving,'” she says. “If that becomes the standard, merger analysis would become pure theater.”

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