Hill Gets Wildly Divergent Views of T-Mobile-Sprint

Combo will either be job- and competition-killing consolidator or bigger disruptor and job creator
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T-Mobile-Sprint

The major takeway from the House Energy & Commerce Committee's Communications Subcommittee hearing Wednesday (Feb. 13) on the proposed T-Mobile-Sprint merger was that regulators are having to reconcile wildly divergent views of the impact of the deal, with congressional Democrats focused on trying to provide some guidance along those lines.

It was the first of two Hill hearings this week on the deal.

According to the various witnesses at the hearing on the deal:

It will either reduce jobs by as many as 30,000 and reduce wages by as much as $3,000 per year (Communications Workers of America), or will absolutely increase jobs "on day one and beyond" (T-Mobile). CWA suggested that trusting the companies with jobs was like trusting a vampire with a bloodbank. T-Mobile CEO John Legere was asked by Rep. Darren Soto (D-Fla.) if he would accept his pledges of no job losses and rates not going up for three years being made binding conditions of the deal. He said he would commit to that in any fashion.

It is either necessary to speed the investment in, and deployment of, "full, broad and deep" national 5G next-gen wireless, including in rural areas (T-Mobile and Sprint) or it is not necessary that the companies combine to speed that rollout, which they will undertake separately anyway, and that rural communities will not necessarily benefit (Rural Wireless Association).

Related: Leger Says They Are Un-Cable, Too

It will either raise prices to consumers and wholesalers and reduce choices (Public Knowledge) or it won't (Information Technology and Innovation Foundation).

The Committee's Democratic leadership made the point that this was the first oversight hearing of a merger in the committee in over eight years, but signaled it would not become a regular practice with merger proposals.

Both Subcommittee chairman Mike Doyle (D-Pa.) and parent committee chair Frank Pallone (D-N.J.) said the committee should have been conducting that oversight. Pallone said that consumers had born the consequences of that lack of oversight, with good-paying jobs undercut and the public interest undermined by mergers that had been approved in that time.

But former full committee chairman Greg Walden (R-Ore.), said the committee had avoided such hearings because the decision on whether to approve or reject a deal fell to the FCC or Department of Justice, not Congress, and that the point was to let them conduct those reviews "without undue political influence."

Related: Public Knowledge Tells Hill That T-Mobile-Sprint is Presumptively Illegal

T-Mobile CEO John Legere

T-Mobile CEO John Legere

T-Mobile CEO John Legere took the opportunity to address the criticism that allowing the merger would be a security issue given the presence of network tech from Chinese telecoms ZTE and Huawei. Legere said there was no such tech in his network and there would not be any of it in the combined company, "not now, not tomorrow, not ever."

Communications Workers of America president Chris Shelton had another international issue. He said the deal would cost American jobs in favor of two foreign companies, Germany's Deutche Bank (T-Mobile) and Japan's Softbank (Sprint), which he likened to "economic treason."

Another big takeaway is that former subcommittee ranking member Anna Eshoo (D-Calif.) has joined with Republican Rep. Billy Long (R-Mo.) and a handful of other legislators in support of the merger.

Eshoo used her time during the hearing not to ask a question, but explain her support for the deal. She said she had met with stakeholders, and given a lot of thought to it. She said healthy competition and protecting consumers were her guiding principles.

She said wireless is a duopoly that needs a heavyweight competitor with critical midband spectrum, like Sprint, but pointed out that Sprint also has unsustainable debt that makes it hard to stay afloat. She said bankruptcy could mean Sprint spectrum going to the existing duopoly. She signaled she thought the new company would continue to fight tooth and nail for new customers. "Why would someone buy and sit on their oars," she said.

T-Mobile Announces Post-Merger Call Center Expansion

She also pointed to call centers being repatriated, which she said would be more jobs, and ended with her support for the deal.

Democrats were focused on the merger's reduction of the major carriers from four to three, while Republicans argued that a focus on numbers might miss the bigger picture of a changed marketplace. Walden said they should take a more "holistic" view of the deal rather than intervene to keep four carriers "at all costs." He said that almost digital video is now viewed via smartphones, the wireless industry is not what it used to be and it was important to adjust expectations to that new reality and resist calls to impose artificial restraints.

Witness Doug Brake, director, Broadband and Spectrum Policy, Information Technology and Innovation Foundation, agreed that there was no magic about the number four, and that in some cases more competitors is not necessarily better, particularly in the network business with high fixed costs and where companies benefit from competing at sufficient scale.

That point about scale was made both by Legere and Marcelo Claure, executive chairman of Sprint, particularly in arguing that such scale and the combination of T-Mobile's lower-band 600 MHz spectrum (it was the broadcast incentive auction's biggest winner) and Sprint's higher-band 2.5 spectrum will allow the combined company to provide a more robust, nationwide, service than they could separately. Leger also said that the combo would lower their per-gig data cost of delivery by 87%, which would translate to lower prices for customers.

Legere said that his company has blurred the lines between pre-paid and post-paid service and that his pre-paid, generally lower-income, customers had seen lower prices and that would continue. "Prices will go down," generally, he said. "Customers will not pay more," he said flatly. He also said many of the new jobs, retail store and "customer care," will be in rural areas. Claure said both pre-paid and post-paid will benefit, and that the companies will preserve their existing brands.

Deal critics at the hearing heard the promises about jobs and prices, but some suggested that the FCC would be reluctant to impose those as conditions, and that without that backstop, they were promises easily caveated and/or broken.

Legere and Claure said that they were out to take on the duopoly or AT&T and Verizon, and that is going to be good for consumers and competition. Without the influx of T-Mobile capital, said Claure, the cash-strapped Sprint can't build out that network at the same scale and pace.

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