Colorado Exits State AG Suit Against T-Mobile/Sprint; Other States Persist

Colorado joined Mississippi in dropping out of state attorneys general lawsuit against T-Mobile/Sprint after signing state-specific agreements. New York and Minnesota AGs said they’re moving ahead with litigation that now counts 16 AGs as plaintiffs at U.S. District Court for the Southern District of New York. In addition to the state case, the deal faces a Tunney Act challenge in U.S. District Court for the District of Columbia and opponents are expected to challenge the FCC’s approval order in federal court (see 1910170028). Opponents said the New York challenge is the most likely to derail the transaction.

The Colorado AG office is dropping its lawsuit, “recognizing that substantial benefits may flow to Colorado from the significant promises made by T-Mobile and Sprint to improve 5G coverage in Colorado, particularly in rural areas, and to enable Dish, a Colorado company, to become a substantial competitor,” said the agreement with T-Mobile. Dish would put its wireless headquarters in Littleton, Colorado, and T-Mobile would have rural and low-income commitments.

“The Colorado settlement reflects Colorado-specific issues and priorities that do not remedy the nationwide harms from the merger of T-Mobile and Sprint,” New York AG Letitia James (D) said Monday. The AGs “have continued to develop strong evidence that it is bad for consumers, bad for workers, and bad for innovation. We look forward to proving our case when trial commences on December 9.” New York is “always open to a hearing them out and listening to any new proposals, but they haven’t brought us anything new so we are not negotiating,” James' spokesperson told us.

“Minnesota remains committed to stopping the merger,” AG Keith Ellison (D) said in a statement before Colorado’s announcement. “The remaining states, which still represent over half the U.S. population and include attorneys general from both parties, are moving forward with the litigation. Mississippi’s departure will have no impact on our ability to successfully litigate our case at trial.”

T-Mobile and Sprint are probably "working the remaining states to get deals -- undoubtedly pushing harder with some more than others,” emailed NARUC General Counsel Brad Ramsay. “I’d be surprised if the lawsuit does not proceed.” Companies may “peel off a few more states,” but it seems a tough task to get most to leave, he said. “A few more settling states shouldn’t have much of an impact on the lawsuit going forward and won’t really change arguments on either side.”

State AG plaintiffs from Hawaii, Maryland and Texas declined comment. Other offices didn't respond.

Colorado

Colorado had "concerns about how the merger would affect Coloradans,” said Chief Deputy Attorney General Natalie Hanlon Leh. Monday’s agreements “address those concerns," she said. AG Phil Weiser (D) recused himself from the T-Mobile/Sprint case due to telecom industry consulting he did before he was elected, a spokesperson said.

Dishpromises of 2,000 full-time employees in Colorado, said one agreement. It would be one of the first 10 states to get Dish 5G service by 2023. Dish would face up to $20 million in penalties if it didn’t meet commitments.

New T-Mobile would deploy a 5G network within three years that would give at least 100 Mbps speeds to 68 percent of all Coloradans, and at least 50 Mbps to 76 percent of the population, T-Mobile agreed. In that time, it would cover 60 percent of the rural population with 100 Mbps and 63 percent with 50 Mbps. In six years, T-Mobile would have to expand the statewide figures to 92 percent and 93 percent, respectively, and the rural amounts to 74 percent and 84 percent. For at least five years, T-Mobile would offer low-priced unlimited talk and text plans with 2 GB data for at most $15, and $25 for 5 GB. T-Mobile would face up to $80 million in penalties if it didn’t meet those commitments.

The Colorado pact will “enhance competition,” said Dish Chairman Charlie Ergen. T-Mobile CEO John Legere tweeted applause.

After Mississippi earlier signed a state-specific agreement with T-Mobile (see 1910090065), Wells Fargo’s Washington, D.C., legal contacts said "to contain our enthusiasm,” analyst Jennifer Fritzsche wrote Oct. 10. “While we may even see more states may drop out over the coming weeks, unless a settlement is reached with NY where this originated, there will be a case commencing in December.”

Tunney Act

One problem with a challenge to the FCC order is it could take years to wind its way through the courts, and appeals court judges would be more likely to remand parts of the item to the FCC for further work rather than unravel a transaction that was consummated, industry lawyers said. The Tunney Act case isn’t necessarily a rubber stamp, industry officials said. Federal judges occasionally hold hearings on DOJ consent decrees.

Allen Grunes, antitrust attorney at the Konkurrenz Group and counsel for the Communications Workers of America, told us CWA wouldn’t have filed if it thought seeking review was a “fool’s errand.” Grunes noted other judges have taken a deeper dive.

“While it’s true that Tunney Act proceedings are often a rubber stamp, this merger review has been highly political and highly irregular in several aspects, which might invite more judicial scrutiny,” said Georgetown Law Institute for Technology & Policy's Gigi Sohn. “None of the opponents of this deal are hanging their hats on the Tunney Act review,” she said: The “big action” will be in New York in December.

In 2006, U.S. District Court Judge Emmet Sullivan in Washington held extensive proceedings under the amended Tunney Act to review the consent decree reflecting DOJ approval of SBC‘s buy of AT&T. Sullivan ultimately approved that deal and Verizon’s buy of MCI. The judge said after reviewing arguments for changes to the transactions he decided they were in the public interest.

This year, U.S. District Judge Richard Leon, also in Washington, signed off on the $70 billion deal between CVS and Aetna, after months of scrutinizing the DOJ’s settlement. Leon concluded "the proposed settlement is well 'within the reaches' of the public interest."

The judge examining the T-Mobile/Sprint/Dish Network consent decree is Thomas Kelly, a new member of the court appointed by President Donald Trump and confirmed by the Senate two years ago. The docket is 1:19-cv-02232.

Lawyers involved in the Tunney Act review said it’s difficult to predict what Kelly might do since he’s a new judge with a limited track record. Kelly has presided in a few high profile cases and was the judge who ordered the White House to restore CNN correspondent Jim Acosta's White House media credentials pending trial.

Randy Stutz, American Antitrust Institute vice president-legal advocacy, said the case is more likely than most to get scrutiny from the judge. The SBC/AT&T case came shortly after the Tunney Act was amended, but since “the law has evolved in such a way that it strongly encourages courts not to interfere with prosecutorial discretion exercised by the executive branch,” he said. “Courts have become pretty loathe to try to get involved in restructuring the remedy to go beyond the kind of harm that’s alleged in the government’s complaint.”

There are reasons Kelly may take a closer look, Stutz said. “This is a very important sector,” he said. The government killed another deal that would have reduced the number of national carriers from four to three, when AT&T tried to buy T-Mobile, he said: “There’s sort of a strange departure from the previous logic, which recognized that you need more competitors to have a competitive wireless industry, so there’s a suspicious deviation from past practice, past policy, past statements.” Kelly may also question the behavioral remedy agreed to by DOJ, Stutz said. “The remedy is chockfull of wishful thinking -- it’s banking on Dish growing into a national competitor when it has a long way to go to just ramp up, let alone be competitive,” he said. He noted DOJ made clear it has deep concerns about whether behavioral rather than structural remedies are effective.

There's also state litigation, Stutz said. “The vast majority of time, the only complaint at issue is the DOJ’s complaint,” he said: “Here we’ve got a totally independent complaint that’s already pending." The states suing in New York asked Kelly to delay ruling until after the state case is resolved.

Deal Notebook

A lawyer for T-Mobile spoke with an aide to the FCC's Geoffrey Starks on the commissioners' complaints that financial penalties for noncompliance with the commitments on the transaction would be tax-deductible. “The use of ‘voluntary contributions’ was to allow for higher financial penalties than allowed under the statutory limits of the FCC’s forfeiture authority,” said a filing in docket 18-197, posted Monday: Tax deductions are a matter for the IRS to decide but “contributions equivalent to forfeitures are not considered deductible under current law and past precedent.”

Dish will put out a request for proposals for end-to-end deployment services vendors for its planned 5G network next week, it said Monday. It said it will look at site acquisition services and regulatory and compliance services for construction of wireless communications facilities, construction services and RF installation services for deployment of 5G antennas, remote radio units and hybrid cables. Dish said it will trial 5G services in a market in 2020, and then start a commercial launch later that year, with a national deployment to be done by the first half of 2023. Executive Vice President-Wireless Operations Jeff McSchooler said the company will use existing relationships with deployment vendors from its narrowband IoT buildout "while seeking local, regional and national vendors that can apply their strengths to increase the speed and efficiency of our 5G network deployment." Under T-Mobile/Sprint, Dish will buy some 800 MHz spectrum from Sprint and have access to T-Mobile's wireless network as a cornerstone of its 5G network (see 1907260071).