Beyond this week’s headlines of the prospect of another government shutdown, there is a duo of Congressional hearings examining possible impacts of the proposed merger between two cell phone service providers, T-Mobile and Sprint. The House Energy and Commerce Subcommittee on Communications and Technology will hold their hearing tomorrow, February 13th, followed by the House Judiciary Subcommittee on Antitrust, on Thursday February 14th. We hope lawmakers will approach their lines of questioning in a thoughtful and judicious manner, while also drawing attention to the notable benefits this merger could have on consumers and taxpayers.
NTU has weighed in on the issue of aT-Mobile-Sprint merger on numerous occasions over the past year. Most recently, NTU filed comments to the Federal Communications Commission, outlining how the merger will shake up the mobile market for the betterment of American consumers and taxpayers. We believed then, as we do now, that this merger will bring more competition to the top-tier mobile carriers, spurring investment and innovation as well as increased deployment of next generation of 5G cell technology.
From our FCC filing, we note, “The Commission must examine the costs and benefits this merger would have on the wireless industry, on consumers, and the entire competitive economic environment. After your comprehensive review, we hope you come to the same conclusion that we have come to: that approving this merger will yield impressive consumer, taxpayer, and economic benefits.”
At the upcoming committee hearings, majority party members are likely to observe the national necessity for rural broadband and a nationwide 5G network. Closing the digital divide is a laudable goal that all support, but achieving this goal need not result in more burdens on taxpayers to finance government programs. In fact, the federal government’s only role in 5G deployment should be to reduce regulations, establish rules encouraging private sector investment, and boosting spectrum into the private marketplace. For too long, taxpayers have been on the hook for subsidies and federal programs with the hopes of boosting connectivity, but in many cases these programs have failed to yield their intended outcomes. Indeed, faster private sector 5G deployment can allow governments to deliver services ranging from trash collection to traffic management to first responder communications more efficiently.
One of the better market-based approaches to unleashing 5G would be to advocate in support of a combined T-Mobile-Sprint company, which has committed to major investment in 5G technology. Sprint and T-Mobile have stated that combining their assets will allow them to expand 5G networks at a faster pace than either company’s potential would allow individually. The combined company intends to invest almost $40 billion between 2019 and 2021 to construct its 5G network, three times as much as T-Mobile could have invested by itself. By allowing Sprint and T-Mobile to integrate their respective strengths to achieve the economies of scale needed to be a legitimate contender in the 5G race, consumers will have more choices.
We are also sure to hear the typical jargon from merger skeptics about market concentration in the telecom industry. They will likely note that approval of the merger will reduce the number of providers from four to three and result in fewer choices and higher prices for consumers. No matter how many times these talking points are used, it is still detached from fact that the number of market participants is far less important than the number of consumers served by each provider.
Looking at data, Verizon serves 154 million consumers, AT&T 150 million, T-Mobile 77 million, and Sprint 53 million. So if the T-Mobile-Sprint Merger should be approved, it would still leave three major players with roughly the same number of customers. With three major players, no single entity has market power to raise prices. In fact, with only a few major players, providers have an incentive to keep prices low to attract new customers and customers away from other carriers. To that end, streamlining efficiencies and eliminating duplicate departments will result in lower corporate costs which are likely to be passed down to consumers through lower, or stagnant prices.
Time and time again consumers have experienced the successes of light-touch government regulation, and we remain hopeful that committee members will share that sentiment and focus on the many benefits consumers and taxpayers could share in.