The New T-Mobile scored a sweeping victory in New York v. Deutsche Telekom AG. A decision handed down by U.S. District Court Judge Victor Marrero on February 10, 2020 rejected claims brought by the Attorneys General of 13 states to block the T-Mobile/Sprint merger. The District Court concluded that the merger will accelerate deployment of a high-capacity, high-speed nationwide 5G wireless beyond what either provider alone could achieve.
The proposed T-Mobile/Sprint merger has now been approved by the Federal Communications Commission, the U.S. Department of Justice, the U.S. District Court, and all but one state public utility commission. The last holdout, the California Public Utilities Commission, should sign off on the merger without further delay or risk forestalling and reducing 5G-related and other consumer welfare benefits that the courts and regulatory entities expect to result from the merger.
My Perspectives from FSF Scholars paper, "Court Affirms T-Mobile/Sprint Merger Will Speed 5G Deployment: California PUC Should Act Without Further Delay," reviews the District Court's decision rejecting antitrust claims brought by certain State AGs under Section 7 of the Clayton Act. As the U.S. District Court for the Southern District of New York explained, "undisputed evidence at trial" showed that combining Sprint's 2.5 GHz spectrum with T-Mobile's nationwide 600 MHz spectrum and other assets will multiply the New T-Mobile's 5G network's capacity and geographic reach beyond what either provider could deploy alone.
The District Court credited T-Mobile's projections of $26 billion merger-related efficiencies in acquiring Sprint. And the District Court bluntly concluded that Sprint's $37 billion debt, poor credit rating, and lack of necessary spectrum resources made it doubtful that Sprint could exist as a standalone nationwide provider in a 5G world. By merging, the New T-Mobile will pose a stronger competitive challenge to wireless market leaders AT&T and Verizon. Additionally, the District Court found that merger conditions imposed by the FCC and DOJ pursuant to a settlement expected to soon be approved by another court for divesting the Boost Mobile brand and certain assets to DISH Network will provide DISH, which already possesses spectrum licenses worth about $22 billion, a fast-track to become another competing nationwide 5G wireless provider.
As described in more detail in my paper, the District Court found that much of the State AGs' case rested on unconvincing hypotheticals that rested on traditional static antitrust models. Importantly, the District Court's decision characterized competitive conditions in the retail mobile wireless telecommunications services market as "exceptional," and it treated the market's dynamism as a lens for evaluating the potential competitive effects of the T-Mobile/Sprint merger. The District Court rightly recognized the market's driving forces of innovation, investment, and consumer demand in the wireless market as well as the centrality of rapid nationwide 5G deployment. Given those dynamics as well as T-Mobile's real-life record and brand identity as a strong challenger to market leaders, the District Court found it unlikely that the New T-Mobile would suddenly shift tactics to constrain innovation or coordinate price increases with rivals.
For attorneys and legal analysts, Part II.D.1.c. of the District Court's opinion includes a useful recitation of court precedents applying dynamical considerations in addressing alleged anticompetitive practices. Add the decision in New York v. Deutsche Telekom AG to the ranks of instructive and persuasive authorities on competition analysis in dynamic markets.
Despite the decisive courtroom victory for the New T-Mobile, the California PUC has put off approving the T-Mobile/Sprint merger. The California regulators are scheduled to consider the merger at a public hearing on March 26. The California PUC should sign off on the merger and remove the last regulatory obstacle to realizing the consumer welfare benefits that the New T-Mobile will bring.
Read my paper, which is available here at the Free State Foundation's website.
Seth L. Cooper is Director of Policy Studies and a Senior Fellow of the Free State Foundation, an independent, nonpartisan free market-oriented think tank located in Rockville, Maryland.