FCC Clears T-Mobile/Sprint 3-2; Another Court Challenge Could Be Coming

FCC Commissioners Jessica Rosenworcel and Geoffrey Starks voted against the T-Mobile/Sprint/Dish Network deal, circulated by Chairman Ajit Pai two months ago (see 1908140052). Officials confirmed Pai and Commissioners Mike O’Rielly and Brendan Carr previously voted yes, and Carr in an interview defended the process amid his Democratic colleagues' concerns. Deal opponents told reporters they will consider challenging the order in court but must see it first. State attorneys general are suing the carriers in U.S. District Court for the Southern District of New York (see 1909030060).

“We’ve all seen what happens when markets become more concentrated after a merger like this one,” Rosenworcel said Wednesday: “In the airline industry, it brought us baggage fees and smaller seats. In the pharmaceutical industry, it led to a handful of drug companies raising the prices of lifesaving medications. There’s no reason to think this time will be different.”

“You don’t need to be an expert to know that going from four wireless carriers to three will hurt competition,” Starks said: “This merger takes a bad situation and makes it worse. Higher prices and fewer options across the country will inevitably result. Quite simply, the effects of this ill-conceived merger will hit low-income and rural communities hardest of all.” The FCC didn’t comment.

Under must-vote rules, the two Democrats were required to vote by the end of Oct. 9, but they asked for and received one-week extensions, industry and FCC officials said. The regulator is expected to release the order shortly, after all the commissioner statements have been submitted. Must vote is triggered when an item sent internally to commissioners on circulation has sat for 21 days and has a quorum.

Rural Wireless Association Counsel Carri Bennet told us in August that if the FCC failed to seek comment as the deal was modified, it could create grounds for a legal challenge based on the Administrative Procedure Act (see 1908070059). The transaction itself isn’t subject to the APA, but the Dish license transfers and extensions in the larger deal are.

“We want to see the order before we take any action,” but an appeal “is on the table,” Bennet told journalists Wednesday.

Public Knowledge Policy Director Phillip Berenbroick questioned whether the conditions negotiated with Dish and revised conditions proposed by T-Mobile “pose an APA problem for the FCC.” The Dish conditions “dramatically impact the competitive issues in the merger” and “were never put out for comment.” It appears T-Mobile “kept going in helping to rewrite the item,” he said: “Everything is on the table as far as potential challenges to the order.”

“We have to see where the order comes out, and then we’ll make a decision” on an appeal, said Communications Workers of America Telecom Policy Director Debbie Goldman.

Carr told us he sees the future of wireless as brighter than the industry’s past. The view of the minority commissioners “skates where the puck has been and not where the puck is going,” Carr said: “It highlights two fundamentally different views of technology and wireless.”

“If you look at where we are with 5G today and where we’re going to be with 5G tomorrow, that’s a disruptive new competitive force,” Carr said. “Rather than maintaining the status quo on wireless … I think the best is yet to come.” Carr emphasized that any party with concerns on the item has had two months to seek a meeting. “The process that we’ve run here tracks the commission’s routine processes,” he said. “Everyone has had a fair and free opportunity to engage and express their views.”

The transaction's fate “likely lies with the district court,” New Street’s Blair Levin told us. “The question, then, is how will the FCC decision affect the court’s thinking. The combination of the two dissents and the DOJ complaint against the deal [since] endorsed by the three commissioners voting yes suggests the court will not rely heavily on the FCC majority’s analysis, but we should wait until we can read it to come to a more confident judgment.”

The vote is” the culmination of one of the most irregular and opaque processes in FCC history,” said Georgetown Law Institute for Technology & Policy Distinguished Fellow Gigi Sohn. The deal is far from done, given the state lawsuit, she said: “States are standing up for consumers when the federal government has refused to do so.”

“We appreciate the diligent evaluation, time and attention the @FCC commissioners took to assess our transaction,” T-Mobile CEO John Legere tweeted.

Starks noted process concerns. “Where there is a fundamental change in the structure of a proposed merger, it must be set out for public comment,” he said.

“Overwhelming evidence demonstrates that the T-Mobile-Sprint merger will reduce competition, raise prices, lower quality, and slow innovation,” Rosenworcel said Wednesday. She questioned the process that led to approval. “Three of my colleagues agreed to this transaction months ago without having any legal, engineering, or economic analysis from the agency before us,” she said: “Consumers deserve better from the Washington authorities charged with reviewing this transaction.”

A coalition of civil rights groups signed a memorandum with T-Mobile, which agreed to “expand on its existing nationally-recognized diversity initiatives in a wide range of areas following the closing of its planned acquisition of Sprint.” The groups include the National Urban League, the National Action Network, Asian Americans Advancing Justice, Asian Pacific American Advocates and the League of United Latin American Citizens. T-Mobile filed the memo in FCC docket 18-197.