Nearly two years have passed since T-Mobile and Sprint announced their intent to merge two smaller wireless companies into a competitor with enough customers and network resources to actively challenge larger rivals Verizon and AT&T. Since then, the challengers have survived a U.S. regulatory gauntlet, earning separate U.S. Department of Justice and Federal Communications Commission approvals while making special guarantees to some states. The attorneys general of other states asked a federal court to block the deal as anti-competitive, but a judge ruled yesterday that the merger can go forward — a decision these states are threatening to appeal.
I’d respectfully ask the holdout states to reconsider. As hard as it might be to believe at this disturbing time in U.S. history, the regulatory process actually worked in this case. Now it’s time for the remaining state attorneys general to walk away and let the merger happen.
There’s no question that confidence in government has sunk to all-time lows while cynicism about corporations is rising to all-time highs. So it would be easy to claim that the federal or state governments somehow failed in their duties to protect cellular customers from post-merger price hikes or other harms. But after spending years going through both the facts of this merger and broader industry trends, I don’t think that’s the case.
This wasn’t T-Mobile’s first time at the merger rodeo. The U.S. famously opposed AT&T’s 2011 attempt to acquire T-Mobile, a deal that would have bolstered already strong AT&T and left Sprint as a weak third-place rival. That deal fell apart for the right reasons and ultimately made T-Mobile stronger.
By contrast, the T-Mobile/Sprint merger creates a real third-place challenger to the duopoly posed by Verizon and AT&T, which have operated at a scale far above their cellular competitors. The federal government put the merger through multiple stages of review, pausing the process repeatedly as the companies provided additional details to sweeten the deal. At this point, the “new T-Mobile” has made more concrete guarantees regarding its future 5G plans than Verizon or AT&T have, and the promises are backed by significant federal penalties for non-compliance.
T-Mobile and Sprint ultimately pledged to create a nationwide 5G network meaningfully better than what either could have managed alone, offer a disruptive broadband internet service across the country, and keep prices at least as low as they were before the merger. They also guaranteed significant improvements in rural 5G coverage and made similar coverage promises to states that were willing to reach deals.
Although I applaud New York State Attorney General Letitia James and her fellow state attorneys general for initially standing up for consumers, their position has become untenable. James said the court’s decision was “a loss for every American who relies on their cell phone for work, to care for a family member, and to communicate with friends,” because it will hurt “their wallets.” She also claimed that there is “no doubt that reducing the mobile market from four to three will be bad for consumers, bad for workers, and bad for innovation, which is why the states stepped up and led this lawsuit.”
At this point, there’s actually a lot of doubt that the merger will be bad for consumers or innovation, and plenty of evidence that it will help customers’ wallets, not hurt them. Data plan prices weren’t about to fall before the merger; they were set to climb. Over the past two years, Verizon and AT&T have signaled that they’re planning to restrict 5G phone service to data plans starting at roughly $80 per month and have flagged multiple potential avenues for charging customers more in the future — including speed tiers and metered data. Meanwhile, T-Mobile has promised to offer unlimited 5G service at price points that, like its 4G plans, are already lower for individuals and families than those of rivals.
Some regulators (including the attorneys general) focused so much on the number of wireless competitors that they missed the importance of the competitors’ relative sizes. Until now, the U.S. had two wireless companies that were so dominant and so much larger in customer bases that they hardly cared about competition from smaller rivals. After the merger, T-Mobile will have well over 100 million wireless customers, compared with Verizon’s roughly 118 million and AT&T’s 165 million. It will have every incentive to try to rise to first or second at its rivals’ expense, an effort it has historically fueled with price and service tweaks — great for consumers and overall market competition.
“Innovation” is an amorphous concept, but it’s fair to say there’s little likelihood it will decrease as a result of the merger. To the contrary, phone makers will soon be able to support a larger number of possible customers with fewer carrier-specific SKUs, enabling engineers and testers to focus more on new developments and less on separate network certifications. To the extent that two of the country’s most insightful cellular network designers come together with a larger budget — able to combine and extend the low band and mid band 5G networks they designed — there’s good reason to expect their innovations will actually become available to more people.
I’ll concede that James might be correct about a negative impact on workers, but even there, the situation isn’t totally clear. Some existing Sprint and T-Mobile stores will surely become redundant after the merger, and there are other “synergies” that will be achieved by the deal, resulting in personnel cuts. That’s one of the consequences of virtually every merger. On the other hand, the combined company will create extended demand for 5G tower climbers and new stores in rural locations that previously weren’t served by their networks. I also suspect that some employees of the Boost Mobile division T-Mobile is selling to Dish Network for $1.5 billion will get similar jobs with the new owner.
That’s not to say this merger will be without any negative consequences, but the standard for approval isn’t and shouldn’t be perfection — the net gain is really what matters. As a current T-Mobile customer — notably not a shareholder or someone with any other financial interest in the deal — that’s what I’ll be looking for.
My hands-on testing strongly suggests I’ll get Sprint network-backed 5G data speeds 2-3 times higher than I was likely to get from T-Mobile anytime soon. It will certainly mean better coverage where I live and travel. Plus, I’m now guaranteed a monthly bill at the same prices I’ve been paying — or lower — rather than facing the uncertainty of higher prices as we kick off the 5G era.
The state attorneys general deserve plenty of praise for standing up for consumers’ interests on such an important issue. But now it’s time for them to stand down rather than appealing the verdict, which will only delay the merger process — and the tangible gains already won for consumers — with little long-term benefit.