The determination of whether to allow the merger between T-Mobile and Sprint will largely be based on provable statistics that show how the market has formed, what has contributed to innovation including factors that go above or beyond the degree of concentration as captured by the HHI and other formulaic analysis, where the markets are at and, where substantially supported, where markets are headed and would be impacted as a result of or in absence of the merger.
The issue of whether the merger will improve US competition, increase jobs, or raise or lower the level of innovation are necessarily subjective issues. The primary determination is based on the preponderance of evidence that has shown that concentration of markets leads companies to take advantage of the power over the competitive forces that push companies to innovate, become more efficient, resulting in better goods and services at lower prices.
The wireless industry and broadband Internet industry as whole are more viewed as enablers of job creation rather than the result in and of itself. Many industries that employ relatively few workers are essential to the overall vitality of the economy and broader jobs and wealth creation. In the broad scheme of things, water, power, gas, highways/roads etc. have become essential components of our modern society and have a multiplier effect on wealth and jobs creation.
In the context of this merger consideration, the impact as a jobs creator has more to do with the role that New T-Mobile professes to play in the pushing forward of 5G through a higher level of investment and creative use of technology so that a greater good is achieved in overall jobs and wealth creation in the economy. For the immediate future, due to the time it can be expected to take for the new set of competitors to become more of a force in wireless markets, the focus is driven to how much innovation and heightened investment will be likely to be generated is the merger is allowed versus denied.
The examination of the merger is the topic of an upcoming industry report: “The Regulatory Consideration of the T-Mobile and Sprint Merger”. A follow-on report: “The Structural and Competitive Implications of the Merger Between T-Mobile and Sprint for the ICT Industry”.
Is the Market Healthy or Is A More Potent Market Maverick Needed?
In recent years, the state of US telecommunications marketplace as reported by the FCC:
“Conclusion: …Focusing only on competition in the provision of mobile wireless services, rather than attempting to examine the broader mobile wireless ecosystem, our assessment of various generally accepted metrics of competition in this Twentieth Report indicates that there is effective competition in the marketplace for mobile wireless services…”
The most recent reports have shown an increased level of competition as observed in factors including average prices, degree of coverage of rural areas, and other measures.
The FCC has also taken note of the entry of cable companies into the wireless arena. “in 2016, both Comcast and Charter Communications, the nation’s two largest cable providers, activated MVNO options they held with Verizon Wireless. Comcast launched its wireless service in the spring of 2017 as Xfinity Mobile, and Charter anticipates offering its service in 2018.”
During the past year since that report was published, Comcast has gained considerable early market momentum and Charter has entered the market as mentioned in our recent article. In addition, Sprint has entered joint network development and sharing agreements with Cox and Altair. These efforts have yet to report measurable stand-alone results. However, they may serve and a further template for consideration of participation by the cable industry as the cable and wireless markets converge upon a common or much overlapped set of service offerings. In place of speculation, which the DOJ in particular is known to avoid, has entered what the FCC has acknowledged as an element of increased competition.
This only scratches the surface on the issue of the expansion of the conventional wireless to additional include additional market players.
US FCC, “Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless” FCC, September 27, 2017