As Sprint and T-Mobile continue to hawk their proposed merger to antitrust enforcers, Congress, and the public, they face a growing tsunami of opposition from consumers, workers, and smaller competitors. This week, the companies go before another congressional committee to attempt to justify a deal that would combine the third and fourth wireless largest telecommunications carriers in the U.S.
The reality of a Sprint-T-Mobile merger is the elimination of the two “disruptive” competitors that have kept the big guys, AT&T and Verizon, on their toes. Worse, it would leave U.S. consumers with a cozy trio of national wireless carriers with strong incentives to collude rather than compete. The deal would virtually guarantee higher prices, less quality, and slower innovation for wireless services for millions of U.S. consumers.
So what is the justification for a combination that would fundamentally restructure the U.S. wireless industry? The deal will purportedly enable Sprint and T-Mobile to roll out 5G networks better and faster than if they did not combine forces. The companies have continued to dangle this enticing but elusive benefit before antitrust enforcers, Congress, and the public, even though both carriers are on record as ready, able, and willing to roll out 5G before they proposed to merge in early 2018.
The Sprint-T-Mobile story boils down to a fallacy that everyone can and should understand. That is, accepting significant harms to competition, consumers, and workers on the claim that the companies can deliver a benefit that both could achieve without the merger. We should not forget that it is the very competition between the existing four wireless carriers that drove Sprint and T-Mobile to begin rolling out 5G as independent wireless rivals.
The specter of Sprint and T-Mobile succeeding in justifying their merger should make every U.S. consumer hot under the collar. It prompted the American Antitrust Institute (AAI) to issue a commentary in June 2018, “Why the Sprint-T-Mobile Merger Should be DOA at the DOJ.” AAI’s piece laid out the facts: mergers that leave three competitors in a market are demonstrably some of the most virulently anticompetitive and anti-consumer deals because they create incentives to collude and weaken incentives to compete.
AAI’s analysis emphasized that under antitrust law, a deal like Sprint-T-Mobile is presumptively illegal because it would likely substantially lessen competition. Under the standard used by antitrust enforcers and the courts, any benefits produced by the deal would have to incentivize a merged Sprint-T-Mobile not to raise prices over the long haul. This is a far, far cry from the carriers’ promises not to raise prices for a few years. And when benefits, like faster 5G rollout, could be achieved by each company independently, they simply do not count in the antitrust equation.
Beleaguered consumers, workers, and innovators continue to weather the wave of consolidation, growing concentration, and declining competition in the U.S. This includes the wireless industry. Anticompetitive deals have been permitted for years on the premise that harms will be eliminated by promised benefits. Perversely, U.S. enforcers have no ability to hold any merged company’s “feet to the fire” to prove that any benefits actually materialized. In contrast, higher prices, loss of choice and quality, and stifled innovation are almost guaranteed to materialize in the wake of anticompetitive mergers, including Sprint-T-Mobile. And consumers will feel the pain.
A government move to block the Sprint-T-Mobile merger would signal a willingness to return to first principles and to enforce the U.S. antitrust laws to defend our markets and protect competition and consumers.