Summer Decision Seen in California on T-Mobile/Sprint

T-Mobile and Sprint might have to wait until June or longer for California’s decision on their $26 billion deal, observers of the state review told us last week. Claiming due process violation by the combining carriers, the CPUC's Public Advocates Office Thursday urged the CPUC to grant more time to respond to carrier testimony that the advocates say was introduced too late in the process. New York earlier this month cleared the deal (see 1902070009).

T-Mobile remains confident about getting regulatory OKs in the first half of 2019, CEO John Legere blogged Friday. Signoffs also are needed from Hawaii, Pennsylvania and the federal government.

The CPUC held four days of hearings earlier this month. Public advocates afterward asked to supplement their testimony and for more hearings because they said the carriers provided “vast” amounts of new information in rebuttal. If the regulator doesn’t let public advocates add to testimony, the agency should extend the deadline for opening briefs by at least three weeks so parties can respond there, advocates said Thursday in docket A18-07-011. Under the current schedule, opening briefs are due March 1, replies March 15, with the CPUC targeting Q2 for a proposed decision. The agency then would take comments on the proposal and vote on a final decision.

“The applicants filed testimony according to the schedule established by the Commission,” a Sprint spokesperson said Friday. In a Feb. 12 filing forwarded to us by Sprint, applicants said advocates’ "last-minute request to reopen testimony and hearings is baseless, would substantially disrupt the schedule established by the Commission months ago -- including causing at least six weeks of unjustifiable delay -- and should be denied." The public advocates "had ample opportunity" at the hearings to cross-examine the carriers' witnesses, said the carriers, adding the schedule is one that public advocates proposed.

California review “could go as late as July or August,” said Tellus Venture Associates' President Steve Blum, a local government consultant. “The CPUC has stuck to the tentative schedule set by the commissioner in charge of the review, which will result in a decision no earlier than May, with June a good possibility." If Administrative Law Judge Karl Bemesderfer grants public advocates’ request for more hearings, “it could add another four to eight weeks,” he said.

The ALJ may rule on public advocates’ motion this week, especially since carriers want to wrap the deal soon, The Utility Reform Network Managing Director-San Diego Christine Mailloux said in an interview. A proposed decision in May followed by commissioners voting in June seems likely, she said, adding that she would be surprised if it took until July or August. The Communications Workers of America union expects a July decision if more time is granted; June if not, CWA Telecom Policy Director Debbie Goldman told us. TURN and CWA oppose the deal and supported public advocates’ request for more time.

Public Advocate Concerns

Sprint and T-Mobile’s opposition to advocates’ motion “highlights the woefully inadequate nature of the Application and serves to underline the due process violation being perpetrated on the Public Advocates Office in this proceeding,” public advocates said. The application didn't contain enough information for CPUC to determine merger is in the public interest, the office said: Carriers provided “vast” additional evidence in rebuttal testimony, but the commission previously said it's unfair to do that in a rebuttal because parties generally don't have meaningful opportunity to respond.

Months ago when proposing a schedule, advocates “could not have foreseen the nature and extent of the evidence and other statements that Joint Applicants placed in their rebuttal testimony,” they said. Prior to their rebuttal testimony, carriers didn't adequately explain their new in-home broadband product, mention any network modeling or provide county-level maps specific to California, they said. The rebuttal also included 563 additional pages of FCC filings, plus new arguments and information about privacy, wholesale services and MetroPCS customer migration to T-Mobile, they said.

The February hearings were “very valuable” in fleshing out the record, with Bemesderfer and Assigned Commissioner Cliff Rechtschaffen seeming “engaged,” said Mailloux. TURN left the hearings even “more skeptical” about the deal, particularly regarding impact to rural and low-income consumers, with the carriers promising a lot without giving much substance, she said.

Wireless market impact was a focus all four days, with CWA and others challenging “vague promises” by carriers, Goldman said. Challengers raised concerns about Lifeline, whether the deal is needed for 5G deployment, how the merger will affect prices and impact on jobs, she said.

California approval with conditions seems most likely, Blum emailed. “Typically, it approves major transactions that are vetted at the federal level, but usually imposes California-specific conditions, such as build out requirements, low income discounts, labor commitments and payments to non-profit organizations for programs.”

Deal opponents cast doubt that conditions will make the deal palatable. Some of the carriers’ plans are so broad and long-term that it would be difficult to monitor and enforce conditions, Mailloux said. New York approved the deal with jobs conditions after deciding it didn’t have jurisdiction over the wireless part of the deal, but the CPUC isn’t as “hamstrung,” she said. Finding conditions sufficient to address anti-competitive concerns is a “high bar to climb,” said Goldman, noting New York never had an evidentiary hearing.

Deal Defense

“We’ve had a lot of great meetings with various regulators and government leaders across the country as we continue to demonstrate why a super-charged Un-carrier is great for American consumers,” Legere said Friday. “We’ve filed more than 24 million pages of documents, detailed plans, data, and analysis,” and 16 of 19 state commissions said yes, he said. “We remain confident that we’re going to see regulatory approval, as planned, in the first half of this year!”

T-Mobile/Sprint means more jobs and lower prices, said Legere, claiming “ulterior motives” by some opponents. “While there are certainly genuine interests and viewpoints by some, we know that the majority of these new-found coalitions have covert funding and hidden agendas.”

The carriers filed additional economic analysis at the FCC, making a case for their combination by economists Mark Israel, Michael Katz and Bryan Keating. “Consumers begin benefitting from network improvements immediately in the first year following the merger close and those benefits only increase each year thereafter,” the companies said in docket 18-197. “During the three-year transition period, New T-Mobile outperforms standalone T-Mobile and Sprint in network capacity and speed. Moreover, the economic analysis … finds that consumer welfare is enhanced in each year.”

The companies promised expanded roaming for Sprint subscribers “soon after” the deal is complete. Parts of the filing were redacted.