The potential merger between T-Mobile and Sprint has had the entire wireless and broadcasting industries in an uproar since it was first announced months ago. A merger of this size would upend both of these industries to such a degree that the United States Department of Justice (DOJ) had to way in on whether it was legal or night. Now, many experts think that the DOJ got it wrong. Let’s take a closer look at the DOJ decision and why many people believe that this merger is bad for business and the consumer.
The main concern the DOJ has with this merger is that if it goes through it will bring the number of major wireless carriers in the U.S. from four to three. In that situation the remaining carriers could arbitrarily raise their rates and consumers wouldn’t have any recourse. To solve that issue, the DOJ turned to DISH Network.
The DOJ gave its approval of the T-Mobile/Sprint merger as long as their specific conditions were met. Those conditions are designed to basically make DISH Network a fourth wireless carrier that can compete with the other three almost overnight. Under the DOJ terms DISH will inherit Sprints Boost customers and T-Mobile will allow DISH access to its wireless network for seven years. During those years DISH will be building out its own 5G infrastructure. If that network is not completed by 2023, DISH will face a steep $2.3 billion fine.
On the surface that sounds like a great deal, however many experts still have reservations. One major sticking point is that seven year timeframe when DISH customers will be getting what is essentially just a rebranded T-Mobile service. That’s not true competition; which this deal was designed to create.
Furthermore, there is no guarantee that DISH will ever actually build that network out. Yes, the company would face a hefty fine, but a lot goes into building a truly effective wireless infrastructure. There is a reason there are only four major players in this space. Even if we concede that DISH does create that infrastructure, there is no reason to expect that it will ever provide real competition to the likes of AT&T, Verizon and Sprint.
A group of seven respected economists and antitrust experts came together to create a new filing calling on the courts to reject the DOJ proposal. Hal Singer, an economist at Georgetown University and one of the authors of the paper spoke with The Verge about this filing.
“What is so remarkable about this case is that DOJ’s complaint doesn’t pull any punches on the competitive harms” of reducing the number of carriers from four to three, Singer says. “That puts a huge burden on the DOJ’s settlement.”
The outcome of this merger will have a profound affect not just on the future of DISH Network, but on the wireless industry as a whole. If you are interested in this space at all, this is an important story to follow.