CWA: Divestiture agreement with DISH creates new T-Mobile customer, not a new competitor

Communications Workers of America (CWA) President Chris Shelton issued the following statement in response to the latest news about the T-Mobile-Sprint merger and the reported divestiture deal with DISH.

According to Chris Shelton, President of the Communications Workers of America, 

“The T-Mobile-Sprint merger remains harmful to workers and consumers - it is anti-competitive and will kill 30,000 jobs. The announced divestiture deal with DISH does not save these jobs and does not remedy the fundamental, anti-competitive nature of the merger. In fact, through the announced divestiture deal with DISH, T-Mobile is creating its largest customer, not a new competitor.

Thirteen states and the District of Columbia have recognized the anti-competitive nature of the merger and concerns raised by CWA and other merger opponents, and have sued to block the merger. It is critical for the state lawsuit to proceed. The state attorneys general are doing what the Justice Department will not -- protecting workers and consumers from the job loss and higher prices that will result from this merger.”

CWA also released the following assessment of the announced divestiture deal and implications:

• Divestiture deal does not replace loss of Sprint as fourth facilities-based carrier. While the reported T-Mobile-/DISH agreement includes divestiture of Sprint pre-paid customers, tower and equipment assets, a wholesale agreement with T-Mobile, it does not replace the loss of Sprint as a fourth facilities-based carrier. Sprint has 32.8 million post-paid subscribers and 12.5 million wholesale subscribers. These are not replaced by a divestiture of pre-paid customers to DISH. 

• Divestiture deal creates T-Mobile’s largest customer, not a true competitor: The divestiture deal creates an MVNO, not a facilities-based carrier. Therefore, DISH would remain dependent on T-Mobile and would not be an independent competitor – that’s why the divestiture deal creates a new customer for T-Mobile, not a true competitor. 

• The DOJ and FCC conditions do not mention jobs or take the harmful impact on workers seriously - the divestiture deal will not save these jobs. CWA’s economic analysis shows that the merger will lead to the loss of 30,000 jobs due to closing of duplicative stores and headquarters functions - the Boost divestiture will not save these jobs. MVNOs typically operate on low-margins and do not operate their own stores.  Additionally, there will be a negative impact on wages across the wireless industry, as a detailed study by the Economic Policy Institute and the Roosevelt Institute demonstrates.

• DISH has a history of non-compliance with federal rules, including hoarding spectrum. DISH and its CEO Charlie Ergen have a history of non-compliance with federal rules. He has hoarded spectrum since 2013 and failed to meet promised build-out requirements. He has a looming deadline in March 2020, with little capital to finance the build. The FCC and federal courts found him in violation of FCC spectrum auction rules by setting up two DISH-controlled companies, claiming $3 billion in “small entity” credits. 

• It will be difficult if not impossible to enforce the announced divestiture conditions. The conditions announced by DOJ are both complex to implement and difficult for the government to enforce.  Recently, the European Commission has alleged that Telefonica Spain failed to abide by similar conditions in a telecom deal five years ago. This should be a warning about what is likely to happen when the government gets into the business of trying to create a new competitor out of whole cloth and then overseeing the result.  Another European precedent is also telling: In Italy, a mandated MVNO divestiture to Iliad Italia has resulted in a company whose pricing does not support the capital required to build its own network, which was the main goal of the divestiture. Antitrust is law enforcement, not an invitation for the government to play kingmaker. 

• DISH’s lack of experience and capital means that it is being set up to fail.  DISH has never built or operated a wireless network. It lacks the tens of billions of dollars of capital necessary to create a nationwide 5G network.  It has never sold pre-paid wireless services like Boost. In short, DISH is an illusory buyer, not a real fourth competitor. Unfortunately, when DISH fails or sells out, the harm will already have been done.  Lower-income customers and workers already will have paid the price.     

Links:

CWA: Divestiture agreement with DISH creates new T-Mobile customer, not a new competitor (CWA, July 26, 2019)