The Federal Communications Commission has officially laid out the conditions which the New T-Mobile US must meet as part of its approval of the merger of Sprint and T-Mobile US, with the three commissioners who voted to support the merger all citing its impact on 5G deployment as their major consideration.
The merger was approved in mid-October after a 3-2 party-line vote, and the FCC this week released the final order documents.
The FCC said that the merger “will help close the digital divide and advance United States leadership in 5G,” citing the New T-Mobile’s commitment to extending mobile broadband speeds of between 50-100 Mbps to most of the U.S. in the next three to six years.
Specifically, the FCC said that the carrier has promised to deploy 5G service to cover 97% of the American people within the next three years, and to cover 99% of all Americans within the next six years — including 85% of rural Americans within three years and 90% of rural Americans within six years. As far as speeds, New T-Mobile committed to providing 99% of Americans with access to speeds of at least 50 Mbps and 90% of the U.S. population with speeds of at least 100 Mbps. That includes 90% of Americans living in rural areas having at least 50 Mbps speeds and two-thirds of rural Americans having access to speeds of at least 100 Mbps.
The agency added that there will be”rigorous drive-testing, overseen by an independent third party and subject to Commission oversight” to make sure the service commitments are being met, and that the New T-Mobile US will be required to make payments of up to $2 billion if it does not meet the conditions within six years — with additional payments to be made until those commitments are met.
FCC Chairman Ajit Pai called the review process “lengthy and painstaking” and said that “A vote against this transaction is a vote against ensuring that rural Americans are beneficiaries, as opposed to spectators, of the 5G innovation to come.”
Among the benefits that Pai cited as rationale for approving the merger, he also added that “this merger will put critical mid-band spectrum to much more productive use for 5G deployment. New T-Mobile will be far better positioned to deploy Sprint’s extensive 2.5 GHz spectrum holdings than would Sprint standing alone, given that company’s financial situation.”
Commissioner Michael O’Rielly also referenced Sprint’s struggle to compete in his remarks on the merger approval.
“Most rational market onlookers, from the Wall Street experts to individual users to the casual observer, will agree that some type of major transaction involving Sprint was inevitable. For a multitude of reasons, Sprint has struggled to keep pace with its competitors, and the record contains strong evidence that, going forward, Sprint would have been extremely unlikely to be able to compete on its own,” O’Rielly said, going on to add that, “I am amazed by how people speculate about the health and viability of a company for years, but, when an actual transaction comes to fruition, the company is suddenly made out to be some sort of industry juggernaut without which the vibrant and competitive marketplace as we know it will cease to exist.”
“Advancing 5G in the United States has been a leading focus of this Commission,” said Commissioner Brendan Starks in his remarks on the merger approval. “Fundamentally, our job at the FCC is to see clearly the generational upgrade in communications that is taking place before us. We have to grasp how 5G will challenge every part of the communications industry, how it will reshape competition. … Put simply, our decision must understand and encourage 5G competition. Verizon and AT&T have built the leading national wireless networks. They have dominant coverage and capacity in many rural and urban markets; they generate almost all of the industry’s profits. In the coming converged market for 5G connectivity, they are well positioned to take on new competitors from cable and elsewhere, and they are most able to meet 5G’s data demand. T-Mobile has been successful in a 4G industry but is running out of room to grow and is impaired by structural disadvantages to the market leaders. Sprint is a flailing firm whose future is in doubt absent this merger. What Sprint does have is a trove of mid-band spectrum that is extraordinarily useful for 5G, but no ability to put it to use outside a handful of cities. By approving this merger, a true third national competitor can be created, pressing the two market leaders in wireless like they have not been pressed before. And it prepares the wireless industry to advance not two but three contenders in the battle with other companies from other industries to serve Americans’ connectivity needs.”
Commissioner Geoffrey Starks voted against the merger with fellow Democratic Commissioner Jessica Rosenworcel.
“T-Mobile and Sprint’s promises of 5G leadership sound tempting but, as this order concedes, the facts tell a different story,” Starks said in a statement. “The proposed transaction is exactly the type of merger that the Justice Department and the Commission have discouraged and rejected in the past: one that would harm competition and result in higher prices and poorer service, particularly for the most vulnerable consumers.” Starks criticized the FCC’s process as well, saying that the proceeding “has been characterized by unprecedented procedural irregularities. We’ve departed from agency practice by failing to solicit public comment on two rounds of significant changes to one of the largest wireless transactions in FCC history.”
Rosenworcel said that the merger “will end a golden age in wireless that helped bring to market lower prices and more innovative services. … It will mean an end to the competitive rivalry that reduced prices by 28 percent during the last decade. Similarly, the pressure to support unlimited data plans and free international roaming will fade. Offers to pay early termination fees to help families switch to plans that fit their lives will fall by the wayside. And the network improvements that will bring us the next generation of wireless service, known as 5G, will proceed more slowly and yield fewer jobs without the fuel of competitive pressure.
“Our existing wireless market will devolve into a cozy oligopoly dominated by just three carriers,” she said, going on to say that the coverage promises of the New T-Mobile US “do little more than camouflage the competitive problems with this transaction. They do nothing to reign in the merged company’s market power, which is what really counts.”
