The future, if you want to call it that, of traditional, linear subscription television services will depend on customers who don’t understand, and consequently fear, online video services. Martin Peers, a reporter for The Information, looked at his mother-in-law’s Comcast bill and discovered a stack of add on fees and increasing monthly rates for services that can be had for less money via over-the-top video platforms.
The reason she’s writing unnecessarily high checks each month? “She’s nervous of changing what she’s got”, Peers writes, and that fear is at the base of the profit-maximising strategies adopted by Comcast, Charter Communications, DirecTv and DISH…
[Comcast chief financial officer Michael] Cavanagh acknowledged that recent price rises imposed by Comcast will drive an increased rate of subscriber losses this year. Comcast’s average customer bill rose 3.6% this year, a little more than last year…
Comcast is not alone in focusing more on customers willing to pony up for cable and letting others in search of budget solutions cancel. DirecTV’s owner, AT&T, has had fewer price promotions for the satellite TV service as it focuses on high-value customers. Charter, the third biggest cable service, has a similar philosophy. Comcast, Charter, DirecTV and Dish lost a combined 5.1 million subscribers in 2019, 71% higher than the losses of 2018.
It’s a classic case of haves and have nots. Consumers who feel comfortable navigating the online world can take advantage of competitive video pricing. Those who don’t share that awareness – a group that disproportionately includes low income and elderly people – get soaked for high monthly subscription fees that include a raft of services they don’t need or use.
That strategy is the driving motivation behind the scorched earth tactics cable companies use to defend their grasp on low income communities. Maintaining effective monopolies isn’t just about blocking competitive broadband providers. It’s also about keeping vulnerable customers fenced in.
While the California Public Utilities Commission drafts its decision on whether to allow the T-Mobile/Sprint merger, any outsider’s opinion on what the verdict will be is pure speculation.
So I’ll speculate.
If the CPUC follows past practice, it will allow the merger to go ahead but will impose requirements that T-Mobile will have to meet in the coming years. Those conditions might end up being the “voluntary commitments” and other plans that T-Mobile has presented to the CPUC without formally and enforceably promising to fulfil them.
A simple solution would be for the CPUC to take yes for an answer and order T-Mobile to do what it say it will do. Or maybe even do better. And add real teeth to enforcement provisions.
Those blessings include kinda saturating California with moderately high bandwidth 5G service on mid-band frequencies, as depicted in their proposed coverage maps. I say kinda because if you live in, say, Big Sur or on the eastern slope of the Sierra Nevada you’ll have to drive quite a way to get yourself saturated.
T-Mobile is also voluntarily offering to not raise consumer service prices for three years after the merger closes and to “commit to achieve” speed levels of up to 300 Mbps via its upgrade 5G cell sites. If the weasel words and time limits were removed, that might go a long way towards easing fears that T-Mobile will join AT&T and Verizon in a comfortable and highly profitable market oligopoly and jack up prices and crank up the marketing hype while laughing off any suggestion that it invest capital anywhere except where customers and revenue are densest.
Like AT&T does with its wireline broadband service.
Without waiting for responses from opponents, administrative law judge Karl Bemesderfer denied motions made by T-Mobile and Sprint in an attempt to speed up the California Public Utilities Commission’s review of their proposed merger yesterday. His decision was short and to the point…
After considering the motions I have determined that all of them should be denied.
No reason was given, but on the other hand T-Mobile (and junior partner Sprint) didn’t offer any new facts or arguments in making the requests. They filed four motions (links below) on Tuesday which asked for exceptions to various CPUC rules and procedures that, in aggregate, would have resulted in the commission voting on whether or not to allow the merger on 26 March 2020, instead of on 16 April 2020 as currently scheduled. The companies want to close the transaction on 1 April 2020.
CPUC procedures allow either commissioners or an administrative law judge (ALJ) to rule on motions. T-Mobile’s requests were, as customary, addressed to commissioners. Typically – I would say always, but I’d bet there are exceptions in the CPUC’s century-plus history – it’s the ALJ who rules on motions when a case is still in progress.
The motions and Bemesderfer’s denial could open a path for T-Mobile to ask a state or federal court to intervene in the CPUC’s review. Appeals of regulatory agency decisions are usually only allowed after all of the agency’s procedural steps have been completed. Filing a motion for reconsideration of Bemesderfer’s schedule appears to tick that box.
A stack of motions from T-Mobile (and Sprint, but it’s T-Mobile leading the parade) landed at the California Public Utilities Commission on Tuesday. On the face of it, the four filings (links below) ask the CPUC to wrap up its review of the T-Mobile/Sprint merger in time for the deal to close on 1 April 2020. As it stands, the CPUC is running on a schedule that has a final vote set for 16 April 2020, following publication of a proposed decision by 13 March 2020.
The motions set the stage for T-Mobile to either ask a state or federal court to clear the path for the merger, or to simply ignore the CPUC and close the transaction without its blessing. Typically, judges won’t intervene in a regulatory agency’s business until administrative options – such as asking for reconsideration of a decision – have played out.
The arguments presented are the same as those made to CPUC commissioners earlier in a lobbying blitz by T-Mobile, the California Emerging Technology Fund (CETF), which flipped from opposing the merger to actively working on T-Mobile’s behalf after extracting a $35 million payoff, and DISH, which similarly switched sides when it got a piece of the action. It would be an extraordinary step for commissioners to reverse a ruling made by an administrative law judge while a decision is being drafted. It’s even more unlikely that they would do so on the basis of rehashed rhetoric. The four motions tick the exhaust all administrative remedies box, but do little else.
T-Mobile also reiterated its position that it doesn’t need CPUC permission to take over Sprint’s mobile business, and that the relatively trivial matter of transferring Sprint’s California wireline certification isn’t controversial enough to warrant all the regulatory attention it’s getting…
The Commission has explicitly exempted wireless carriers from obtaining preapproval for transfers of control under [California public utilities law] and otherwise lacks jurisdiction to require such preapproval. Moreover, there is no real dispute that the wireline transfer application clearly satisfies the standard for wireline transfers of control.
There’s no requirement for commissioners or Karl Bemesderfer, the administrative law judge managing the case, to respond to T-Mobile’s request in any particular timeframe or, indeed, at all.
Responses from two key third party players – California attorney general Xavier Becerra and DISH – look like the final, and decisive, pieces of the puzzle as the California Public Utilities Commission wraps up its review of the proposed T-Mobile/Sprint merger. Both responses should address the impact the deal will have on the mobile broadband marketplace in California.
Because of confidentiality practices, it’s likely that we won’t know what Becerra and DISH have to say until a proposed decision is posted by Karl Bemesderfer, the CPUC administrative law judge managing the case. According to the schedule he published two days ago, that should happen by 13 March 2020.
T-Mobile’s claim that its acquisition of Sprint won’t harm mobile broadband competition is based on two arguments: its experts say it won’t, and even so DISH will fill the gap. It’s now up to DISH to convince the CPUC that it is a credible 5G competitor.
My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary. Take it for what it’s worth.
Bemesderfer’s order overruled DISH’s objections and the limitations it wants to put on the information it delivers. Although the order doesn’t say so, one might be forgiven for thinking Bemesderfer and the CPUC commissioner in overall charge of the review, Clifford Rechtschaffen, are interested in knowing the answers too.
The procedural path forward isn’t clear, but its a safe assumption that Bemesderfer will have to be satisfied with DISH’s response before he publishes a draft decision approving or blocking the T-Mobile/Sprint deal. He might also give the PAO and others time to review the answers.
The PAO’s questions mostly try to drill down on the vague and weasel worded promises DISH made in written and oral testimony about where in California it plans to build its breathtakingly stupendous 5G network and offer its awesomely fabulous 5G service. Among other things, the ruling will require DISH to provide details, some very specific, about…
Whether DISH plans to offer Lifeline service.
Details of other service plans.
The experience its staff (mostly satellite guys) has with mobile telecoms.
Where in rural California it intends to build cellular facilities.
How much capital it’ll invest in California infrastructure.
What spectrum assets it has now in California, what frequencies it’ll get from T-Mobile if the deal is approved, and how all that will be used.
The location of stores it will acquire from Sprint and the number of employees at each.
In its first and second responses, DISH blew off most of the questions. Its responses included such gems as “DISH continues to analyse and finalise its business and deployment plans”, “DISH anticipates providing a variety of consumer-friendly mobile wireless service plans” and my favorite “DISH objects to this Request as vague, overbroad, and unduly burdensome, and not proportional to the needs of this matter”.
Not very helpful.
There’s no real deadline for a final CPUC decision. It can come as soon as 30 days after Bemesderfer posts his draft, and that doesn’t seem likely to happen for a few more weeks.
T-Mobile wants to set up DISH as a new mobile network competitor, to ease anti-trust problems with its proposed merger with Sprint. The California Public Utilities Commission has to decide whether or not that’s a credible ambition. Initial briefs in what should be the closing round of arguments in the CPUC’s merger review were filed on Friday (links below). With DISH declining to say much on its own behalf, T-Mobile (and Sprint, but it’s the junior partner in this game) had to to make the case.
Opponents took their shots, too.
The Communications Workers of America, California’s principal telecoms union, said in its brief that DISH can’t be trusted to keep hard commitments, let alone vague ones…
DISH has a long history of speculative warehousing of spectrum and failing to meet FCC-imposed deadlines. As T-Mobile commented in a March 2019 letter to the FCC, “DISH stands out for its efforts to game the regulatory system” and “has little interest in actually delivering real 5G service“…In fact, DISH has failed to put any of its extensive spectrum holdings to use. Now, DISH seeks approval from the FCC to further extend its construction deadlines to 2025 (16 years after its initial spectrum acquisition). With this track record, “the Commission should view with enormous skepticism the DISH commitments to build a facilities-based wireless network”…
DISH has also misused a government program designed to incentivize wireless competition via new entrants and independent small businesses…In a hearing before the Senate Appropriations Subcommittee on Financial Services and General Government, then-FCC Commissioner Ajit Pai stated that DISH had made “a mockery of the small business program.”
Even if DISH finds the billions of dollars it needs and builds a nationwide 5G network, it must rapidly gain enough customers to be a competitive force in the market. The CPUC’s public advocates office argued that would be an impossible task – “whacky”, according to T-Mobile…
The only customers available to DISH would come from industry-wide wireless market growth, currently below 5% annually, and from customer churn from other established MNOs and MVNOs. During cross examination, T-Mobile’s Chief Technology Officer Neville Ray himself expressed doubt as to DISH’s ability to capture anything close to the 41.8 million customers currently being served by Sprint. When it was suggested that DISH might acquire 40-million customers over a two year period, Ray testified that “there hasn’t been that much wireless [growth] throughout the industry in any given year for the last decade.” Ray dismissed the notion of growth of that magnitude as “whacky hypotheticals.”
Although time is getting tighter, the CPUC’s inquiry is still on a schedule that could lead to a decision in February. It won’t take much, though, to bump that to March or later.
Briefs regarding the T-Mobile/Sprint merger, filed at the CPUC on 20 December 2019
Arguments for and against the proposed T-Mobile/Sprint merger were filed at the California Public Utilities Commission on Friday (links are below), which was also the last day of testimony in the federal anti-trust trial launched by California’s attorney general and others opposed to the deal. Closing court arguments are scheduled for 15 January 2020. The CPUC’s review will run at least into February, and possibly longer.
T-Mobile and Sprint (but it’s T-Mobile running the show) said, as they have all along, that the deal will produce nothing but wonderfulness for California, and adding DISH to the mix just makes it super awesome. They also reiterated their position that the CPUC has no authority to approve or block the merger of two mobile carriers, or to impose conditions on it.
These latest briefs, like the hearings a couple of weeks ago, focus on a narrow set of questions relating to the proposed spin off of people, stores, cell sites and spectrum to DISH. One question is whether losing those assets will degrade T-Mobile’s service or hamper its plans in California. T-Mobile says no…
The DISH Divestiture, and the services to be provided to DISH, will have no adverse impact on New T-Mobile’s network plan…the capacity of the New T-Mobile network for the combined companies will be far greater than what is currently available or what is projected to be available from the merging companies on a standalone basis.
Another key question is whether DISH can and will be a competitive counterweight to AT&T, Verizon and the new, bulked up T-Mobile. DISH didn’t address that question in its own brief, choosing instead to respond narrowly to criticism of its ability to protect consumer privacy. So T-Mobile did the heavy rhetorical lifting. Most of its arguments were aimed at the can half of that question. DISH owns a considerable amount of spectrum and if – if – it raises the $10 billion (it thinks) or more (some analysts think) it’ll cost to build and staff a new, nationwide mobile network, then it probably can.
It’s the will that’s unknown. Only DISH can answer that. T-Mobile’s brief focused on the possible penalties DISH would suffer if it doesn’t hit particular targets. But there’s a gap between those targets and the infrastructure and retail presence needed to compete on an even footing with three big, mature companies with a national footprint and huge customer base. And many of the penalties that T-Mobile points to are empty threats such as losing spectrum rights in counties it chooses not to serve, or consequences DISH faces anyway, like forfeiting spectrum licenses it already owns but hasn’t done anything with yet.
As the Communications Workers of America – the major telecoms union in California – points out in the brief it filed…
While DISH may face financial penalties if it does not honor its commitments, the financial incentives to walk away from its commitments for the right price heavily outweigh any penalties. One analyst wrote, “[w]e also cannot discount that Dish pulls out at the last moment and sells its spectrum. Its spectrum is worth much more—with some estimates around $30 billion—than the $3.6 billion that it paid for the Sprint prepaid business and the fine to the government.”
DISH will do what it’s always done and what any successful company does: maximise shareholder value. Restrictions on DISH selling out to AT&T or Verizon, or selling back to T-Mobile expire in seven years, which is an eye blink compared to the lifespans of telecoms monopolies, which, on the available evidence, are measured in centuries.
Possible penalties might or might not be less than the cost of pushing ahead. Building a physical network could turn out to be a losing proposition for DISH.
Charlie Ergen, its CEO, won’t hesitate to fold a losing hand. There is no guarantee DISH will do much of anything. Or that the U.S. mobile telecoms market won’t contract from four to three players.
Briefs regarding the T-Mobile/Sprint merger, filed at the CPUC on 20 December 2019
Topic number one for the hearing was “does the agreement with DISH substantially alleviate any competitive harms of the proposed merger?” In the long run, the answer depends on whether DISH invests enough money – it says $10 billion, others say a lot more – to build a 5G mobile broadband network that will directly compete with those operated by AT&T, Verizon and the combined T-Mobile/Sprint. But DISH’s network won’t have to completely cover California.
An important bit of jargon is “partial economic area” (PEA). The Federal Communications Commission sliced up states and territories into 416 PEAs that represent regional markets. It assigns some mobile broadband spectrum, including the frequencies in the 600 MHz range purchased by DISH, on a PEA by PEA basis. Assuming the merger goes through as is, DISH has until 2025 to build sufficient infrastructure to reach 75% of the population in each of those PEAs.
When pressed about DISH’s plans for rural California, Blum first said that DISH would have to serve all of the state’s 58 counties, or it would face billion dollar fines and/or forfeitures. But further cross examination showed that to be false. He clarified that DISH has 600 MHz spectrum in PEAs that cover all California counties, but its build out obligation is on a PEA, not county, level. Which gives DISH two options for walking away from any given California county or rural community.
First, PEAs typically encompass several counties and cross state lines, as the map below illustrates. One county that got particular attention during Blum’s cross examination – because T-Mobile made a big deal of it – is Kings, in the San Joaquin Valley. It shares a PEA with Fresno, Tulare and Madera counties. DISH could ignore Kings and Madera counties completely, along with a few low income Fresno and Tulare communities, and still easily meet its 75% population coverage requirement.
Click for the big picture.
Del Norte County is in an even more precarious position. It’s the sole California county in a PEA that includes six Oregon counties and it’s home to only 3% of the total population.
Second, DISH could redline an entire PEA if serving it isn’t sufficiently profitable. “If we fail to build in one PEA then we lose that PEA”, Blum said.
Right. Losing responsibility for a service area that you don’t want to serve is a blessing, not a mortal blow.
Blum also outlined a third option: DISH could, in effect, lease frequencies to small local wireless operators. In “a very, very rural area, for example…we see an opportunity to partner with them”, he said. In other words, they’ve thought this through.
DISH’s plans, or lack thereof, for serving rural communities might not matter. Its worth as a competitive counterweight in the mobile broadband marketplace will be determined in urban counties. It would be replacing Sprint, which doesn’t provide credible rural service in California anyway and whose competitive value comes from the heat it generates in urban and suburban communities with denser and richer populations.
Going by the current schedule for the CPUC’s review of the T-Mobile/Sprint/DISH ménage, the next step is for the companies and opponents of the deal to file their arguments one way or the other. Assuming no surprises, that’ll happen on 20 December 2019, which will set the stage for a final CPUC vote as early as February.
Jeff Blum is not my dad. My dad was Geoff Blum. My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary, but I like to think I’m good looking too. My dad was amused by that. Take it for what it’s worth.
Executives from T-Mobile, Sprint and, particularly, DISH will be cross examined tomorrow morning, as two days of hearings kick off at the California Public Utilities Commission in San Francisco. Witnesses from the CPUC’s public advocates office will also be on the stand. They’ll all have to explain written testimony they submitted about the wonderfulness, or lack thereof, of T-Mobile’s proposed takeover of Sprint, and asset and people spinoff to DISH.
It’s DISH’s intended role as a new, nationwide mobile telecoms competitor that’s likely to get the sharpest attention. Only one DISH representative will attend, chief D.C. staff lobbyist Jeff Blum. So far, he hasn’t been very forthcoming about DISH’s plan for California, and the CPUC administrative law judge managing the merger review, Karl Bemesderfer, indicated he will drill down on it. During a pre-hearing conference call, Bemesderfer said “I want to hear how DISH is going to do what it says it’s going to do”.
The initial line-up, which could change, has T-Mobile’s executives and a hired economist testifying tomorrow, as well as PAO staff and its hired economist. Blum is due to take the stand on Friday.
Meanwhile, Sprint’s Lifeline billing problem just got a little bit bigger. According to a Wall Street Journal story, Sprint was getting subsidies from the Federal Communications Commission and, presumably, the California Public Utilities Commission for low income customers who weren’t really customers. Weren’t even alive.
Sprint also made mistakes in tallying how many subscribers were using their Lifeline service in 2013 and 2014. Because of an error in how it counted usage at the time, spam texts could keep dormant accounts live and allow Sprint to continue to collect subsidies for those customers, the documents show. In one case, the phone of an Oregon woman who died months earlier was still deemed active.
Living and dead, Sprint was collecting on at least 4,600 dormant customers just in Oregon.
My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary. Take it for what it’s worth.