CWA presentation to FCC refutes T-Mobile-Sprint arguments for proposed merger

The Communications Workers of America’s (CWA) November 28th presentation to the Federal Communications Commission (FCC) about the proposed T-Mobile-Sprint merger refutes the companies’ justifications for the merger and details the overwhelming evidence demonstrating that the merger should be rejected as currently constructed. The ex parte presentation is available online here (version redacted for public). Based on CWA’s review and analysis of both public and confidential documents, the presentation details the considerable competitive harms that would result from the proposed merger between T-Mobile and Sprint with little, if any, countervailing public interest benefits.

As the presentation notes, “The proposed merger would substantially lessen competition both upstream, hurting workers, and downstream, hurting consumers. In addition to fewer jobs and higher prices, the merger would concentrate valuable spectrum in a combined T-Mobile-Sprint in almost two-thirds of the counties in the United States. Moreover, the merger would do little to close the digital divide in rural areas and, by the Applicants’ own statements, T-Mobile and Sprint do not need to merge for deployment of 5G.”

According to Debbie Goldman, CWA Research and Telecommunications Policy Director, “As the detailed presentation to the FCC makes clear, the T-Mobile-Sprint merger’s harms to the public interest remain predictable and well-documented, while the supposed benefits of the merger are highly speculative and unsubstantiated by the companies. The FCC should not approve this merger as presently constructed."

CWA’s detailed ex parte presentation (redacted version) is available online here, with key topical arguments and excerpts presented below:

Competitive Impact of the Merger. CWA noted that two relevant markets implicated in this transaction are the market for mobile/telephony broadband services and the narrower market for prepaid wireless retail services. The merger would enhance market power in both markets as calculations of the HHI under any measure far exceed Merger Guidelines thresholds. In addition, the “New T-Mobile” would exceed the Commission’s spectrum screen in two-thirds of the counties in the United States, where 92 percent of the U.S. population resides. CWA also pointed out that the unilateral anticompetitive effects of the merger are likely to be significant, as products and services offered by T-Mobile and Sprint are very close substitutes for a large number of customers. Finally, the presentation  emphasized that there are glaring inconsistencies between Applicants’ economists.

Rural Service Comparable Whether or Not Merger Happens. Dr. Andrew Afflerbach of CTC Technology and Energy, an outside consultant for CWA, explained that his review of the Applicants’ Public Interest Statement (PIS) as well as confidential documents makes clear that the proposed merger would have marginal impact in rural areas. T-Mobile already holds low-band spectrum best suited for long distances in rural America, but not at high speeds. Moreover, Sprint contributes very little rural infrastructure, and its mid-band spectrum is poorly suited for rural areas because it has shorter range and is easily obstructed by foliage and terrain. Dr. Afflerbach pointed to the Applicants’ PIS which shows that post-merger, the New T-Mobile’s mid-band coverage would not reach 84.6 million Americans by 2021 and would leave 45.9 million rural Americans unserved in 2024. Dr. Afflerbach further emphasized that the Applicants’ post-merger 5G claims are overstated as they have approximately 2 percent of the millimeter-wave spectrum in the market, and that T-Mobile’s low-band 5G will only provide marginal improvements to rural areas. Furthermore, the Applicants have not provided corresponding GIS data to support their 2021 projections.

Employment Impact of the Merger. After noting that the employment impact of a merger is
part of the FCC’s public interest analysis, CWA presented its detailed analysis that the proposed merger would result in the loss of 30,000 jobs. Approximately 25,500 jobs would be eliminated as a result of overlapping retail store closures at postpaid and prepaid locations. Another 4,500 jobs would be eliminated due to duplicative functions at corporate headquarters in Overland Park, Kan. and Bellevue, Wash. In addition, CWA explained that the transaction would increase concentration in the wireless retail labor market which could have a negative impact on industry-wide wages. In addition, CWA noted that both T-Mobile and Sprint offshore many jobs, including call centers and (in the case of Sprint) network management. Finally, CWA detailed T-Mobile and Sprint’s long history of violation of workers’ rights. Given the substantial dispute in the record over the impact of the transaction on employment, CWA urged the Commission to issue a comprehensive information request regarding the merger impact on employment.

Sprint is Not a Failing Firm. CWA presented detailed charts showing that Wall Street analysts predict steady growth in Sprint’s earnings, and capital expenditures over the next five years as a standalone company.

T-Mobile and Sprint Do Not Have to Merge to Deploy 5G. As reflected in the Applicants’ public statements, Sprint and T-Mobile are well positioned to build a standalone nationwide 5G network. As recently as their 3Q18 earnings call, both T-Mobile and Sprint told investors that they plan to deploy 5G as standalone companies.

CWA concluded by stating that that the FCC should reject the merger as against the public interest unless the companies provide clear and enforceable commitments to protect all U.S. jobs and return all overseas call center jobs to the U.S.; the companies commit to complete neutrality in allowing employees to form a union of their own choosing; and the CFIUS national security review is completed with verifiable, enforceable commitments to protect national security.