The American Antitrust Institute (AAI) is calling on the Department of Justice and Federal Communications Commission (FCC) to be prepared to block any possible merger between Sprint and T-Mobile.
The national wireless market has only four major players (Verizon, AT&T, Sprint, and T-Mobile) and has long been dominated by the Big Two (Verizon and AT&T).
The concentrated national market has meant, among other things, high prices and long-term contracts with large early termination fees, AAI President Bert Foer said.
“To the delight of consumers, the market took a decisive turn for the better in 2013, after the Department of Justice and FCC blocked AT&T’s bid to acquire T-Mobile at the end of 2011,” Foer said. “Since then, T-Mobile, under new leadership, has emerged as a maverick in the market. It has, among other things, ended two-year contracts, built out its 4G network to cover a majority of Americans, slashed or eliminated charges on voice and data use in foreign countries, and started offering biannual phone upgrades.”
In a letter to Assistant Attorney General for the Antitrust Division Bill Baer and FCC Chairman Tom Wheeler, the AAI asks the agencies to ensure that the national wireless market continues to have four independent providers and preserve the pro-consumer rivalry that has broken out over the past year.
“Reports indicate that Softbank plans to follow its acquisition of Sprint by buying T-Mobile in 2014,” Foer wrote. “If this deal does indeed occur, the number of national carriers would decline from four to three. And the dynamics of the market would likely change for the worse. The government has generally opposed consolidation to this extent because it is too easy for three players to collectively monopolize a market. Mobile service is no exception.”
Foer said that T-Mobile has a smaller market share than the other carriers and a greater incentive to be aggressive.
“By reducing its prices and improving service quality, it can attract new subscribers and also capture market share from AT&T, Sprint, and Verizon,” Foer wrote. “If T-Mobile joined with Sprint, would it act in the same manner? It seems improbable. A Sprint/T-Mobile combination would have a much larger market share. With a bigger piece of the national wireless pie, the merged entity may find that maintaining competitive peace with Verizon and AT&T is more profitable than aggressively trying to gain market share from them.”
“As they did in the AT&T/T-Mobile deal in 2011, the DOJ and FCC should seek to block any proposed merger between Sprint and T-Mobile,” Foer wrote. “The two agencies showed then what antitrust law has always assumed: having four national wireless carriers is better for competition and consumers than just three. And government opposition proved correct: the national wireless market is experiencing a new and refreshing bout of vigorous price and service competition. Consumers have been the beneficiaries of this new market landscape. If Sprint and T-Mobile merge, however, this dynamism may end prematurely.” The three remaining national carriers would likely be able to raise prices and slow the introduction of new plans and services.”
Foer said that federal officials would be wise to heed the words of Sprint when it opposed the AT&T/T-Mobile merger: “the alleged consumer benefits are at best illusory and. . .the actual impact of the takeover would be higher prices, less choice and less innovation.”