Tag Archives: monopoly

T-Mobile, CETF slammed for $35 million deal to win approval of Sprint merger

by Steve Blum • , , , ,

Your winnings sir

A $35 million payoff that, um, inspired the California Emerging Technology Fund (CETF) to “enthusiastically and wholeheartedly support” T-Mobile’s acquisition of Sprint was lambasted yesterday by organisations that still oppose it. The California Public Utilities Commission’s Public Advocates Office (PAO) and two advocacy organisations, TURN and the Greenlining Institute, filed objections to the agreement.

One issue in dispute is whether it is a formal settlement, which has to be negotiated and reviewed under CPUC rules, or something else. Which is what T-Mobile and CETF seem to think it is, because they didn’t follow those rules, according to the filings.

But the substance of the deal also came under fire. The objections noted, as I did last week, that T-Mobile’s promises of good behavior and grand public benefits were either recycled (in a somewhat melted form) from earlier statements or were so vague and subject to T-Mobile’s discretion as to be no promise at all.

The single significant new commitment in the agreement was $35 million, to be paid to CETF over five years by T-Mobile. The money is supposed to go towards what the contract calls “digital inclusion policy and programs”, with $22 million earmarked for various non-profits and public agencies, in a manner to be determined by CETF and T-Mobile. CETF keeps the remaining $13 million to spend on its ongoing operations.

The PAO asked the commission to reject the deal. Noting that CETF “receives a disproportional amount of funding” that “exceeds any commission approved operating costs percentage”, the PAO said it…

…has determined that the agreement is not in the public interest or reasonable on its face…

The Agreement requires New T-Mobile to provide $35 million over 5 years to CETF’s “Digital Inclusion Policy and Programs” projects without any basis in the record to evaluate, verify, and monitor these programs to ensure that the amount of $35 million is appropriate. While the Public Advocates Office strongly supports efforts to close the digital divide, as described above, additional hearings are necessary to investigate these proposals. The record does not sufficiently describe what these programs do, the amount of money necessary to properly fund them, who operates them, or any other details about them.

CETF and T-Mobile have ten days to respond. One possible outcome is that the administrative law judge managing the CPUC’s review could order new hearings to delve into the details of the agreement. That has the potential to further delay an inquiry that has been extended by at least a couple of months because of earlier cheap lawyer tricks by T-Mobile.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile are here.

T-Mobile, Sprint scramble to keep merger deal alive in California

by Steve Blum • , , , ,

The odds of T-Mobile getting permission from federal and California regulators to buy Sprint are getting longer. The Wall Street Journal is reporting that the federal justice department is reluctant to approve the deal in its current form. That has a familiar ring to it – it was the same kind of antitrust concerns that led to the justice department and Federal Communications Commission killing Comcast’s bid to take over Time Warner’s cable systems and do market consolidating swaps with Charter in 2015.

T-Mobile seems to be trying to pick up the pieces in California. Its lawyers filed a notice yesterday saying that company representatives will meet with California Public Utilities Commission commissioner Martha Guzman Aceves next week. They didn’t say what they planned to talk about, but it’s not much of a reach to suppose they’ll try to divert attention away from the microeconomic, antitrust harm the deal will do to all Californians, and towards the special benefits that a few have managed to extract for themselves.

Those megabuck spiffs will evaporate if the deal collapses. The CPUC is reviewing it, with a long list of issues to address. A decision is at least two months away, and likely more.

The Journal’s story also kicked off a new round of damage control by the companies and speculation on what a deal that would satisfy anti-trust concerns would look like. A story in Investor’s Business Daily speculated that some kind of hybrid wholesale model, where both companies retail service via a consolidated network, might fly.

The CEOs of T-Mobile and Sprint jumped on Twitter to make what amount to non-denials.

John Legere, T-Mobile’s chief, issued a tightly spun response in which he objected to “the premise of this story, as summarised in the first paragraph”. Translation: the facts reported in paragraph two, three, four and more are true. Marcelo Claure, CEO of Sprint, simply said the article “is not accurate”. As in, I wouldn’t have put it quite that way.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile are here.

With a $35 million side deal, CETF tells CPUC it backs T-Mobile’s takeover of Sprint

by Steve Blum • , , , ,

T-Mobile is getting a little help from a new Californian friend. In addition to a steady trickle of support letters sent to the California Public Utilities Commission by groups that are not well known for broadband advocacy or telecoms expertise, T-Mobile now has the California Emerging Technology Fund (CETF) on its side as it tries to gain approval for its takeover of Sprint.

CETF will leave its seat on the opposition side of the table and “enthusiastically and wholeheartedly support” the merger. In exchange, T-Mobile will pay CETF $35 million over five years “to sustain its core mission to close the digital divide in California and to promote digital inclusion policy and programs”. $22 million of that is earmarked for grants to schools, non-profit organisations and local governments to run various “digital inclusion” programs. The remaining $13 million – better than $2.5 million a year – goes into CETF’s “core” budget – if the T-Mobile-Sprint merger is eventually completed.

There’s more to the deal, but once it’s boiled down, it’s not a lot more. In the contract, T-Mobile repeats commitments already made to the Federal Communications Commission, the CPUC and, it seems, “other intervenors in the CPUC” review of the merger. Other deal points, such as continuing Sprint’s lifeline program for low income households and spending a modest amount advertising it, sound a lot like business as usual for a mobile carrier.

There are a few spiffs, like a wooly promise to add 5G capability at ten county fairgrounds around the state and to make “good faith efforts” toward a “goal” of signing up hundreds of low income households to broadband and telephone service. For the most part, though, the final say in when, where and how anything will be done rests with T-Mobile. They’ll mostly have to “consult” with CETF and others, and file periodic reports that, mostly, won’t be made public.

This kind of agreement is a common feature of CPUC telecoms merger reviews. CETF raised objections to Charter’s takeover of Time Warner Cable’s systems and Frontier’s acquisition of Verizon’s wireline territory in California, and reached megabuck settlements. The Frontier agreement had similarly vague language, leading to a public spat with CETF, which was eventually ironed out.

Whether CETF’s support and T-Mobile’s cash will make any difference to the CPUC is not a sure thing. Much of the ongoing review has focused on the microeconomic impact of reducing mobile broadband competition in California, which this agreement doesn’t address.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile are here.

California extends review of T-Mobile-Sprint merger to maybe July, maybe August

by Steve Blum • , , , ,

Caltrans slow

T-Mobile and Sprint lawyered themselves into a four week delay in California’s regulatory review of their merger deal. Yesterday, a California Public Utilities Commission administrative law judge (ALJ) granted a request from staff to force the companies to turn over additional information, and extended the deadline for opening briefs to 26 April 2019, and for rebuttals to 10 May 2019.

Under normal circumstances, it would usually take about a month after that for ALJ Karl Bemesderfer to draft a proposed decision and, absent extraordinary circumstances, state law requires another month for public review and comment before commissioners vote on it. Bemesderfer is well versed in telecoms issues and has produced draft decisions quickly in the past, so it might not take him that long. But it could, and there’s still the possible of further delays, particularly if T-Mobile continues to alternate last minute document dumps with scorched earth stonewalling. Only one commission meeting is scheduled for July, on the 11th, so even adding just a week to the schedule could knock a final decision into August.

The CPUC’s public advocates office (aka Cal Advocates) wants the deal killed “because of the irreparable damage to competition in the wireless market and the low-income customer market” it would cause. A few days before hearings began at the CPUC last month, T-Mobile dumped thousands of pages of evidence, testimony and analysis on Cal Advocates and others opposing the merger. As a result, Cal Advocates asked for more time to review the information and prepare its case. Bemesderfer gave them four extra weeks.

Cal Advocates then asked T-Mobile and Sprint to produce additional information to back up the claims made in the earlier document dump, as CPUC procedures allow. In yesterday’s ruling, Bemesderfer said T-Mobile didn’t cooperate as it should have…

Cal Advocates served the referenced data requests on T-Mobile, but received only objections to the data requests without substantive responses. On March 5 and 6, 2019, Cal Advocates and T-Mobile representatives met and conferred regarding the data requests. In those meetings, T-Mobile representatives asserted their belief that my February 26 Ruling limited Cal Advocates to using information already in its possession when preparing its briefs in this matter. Cal Advocates contends that my February 26 Ruling [granting four extra weeks for review] permits inquiry into matters raised in T-Mobile’s rebuttal testimony. I listed those matters in the February 26 Ruling…

It is self-evident that the information sought would be of value to Cal Advocates in preparing its briefs…

In light of my earlier ruing granting Cal Advocates’ motion to amend and supplement its testimony in response to the rebuttal testimony submitted by T-Mobile, I find that…T-Mobile is required to produce responses to [the data requests].

T-Mobile has been pushing hard for a fast decision from the CPUC, even going as far as sending a letter to the commissioner overseeing the review, Clifford Rechtschaffen.

It didn’t seem to have the desired effect. Perhaps this time they’ll learn that, in California, cooperation is usually faster than litigation.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile are here.

T-Mobile plays daddy says no, go ask mommy game at CPUC

by Steve Blum • , , , ,

Brady bunch

Instead of playing nice with the other kids, T-Mobile is asking for parental intervention as the California Public Utilities Commission reviews its proposed deal to takeover Sprint. Possibly afraid its document dumping and foot dragging tactics are going to backfire and cause even more delays at the CPUC, T-Mobile sent a joint letter to commissioner Clifford Rechtschaffen yesterday, telling him don’t tap the brakes, you need to step on the gas dude

The Commission’s timely review will help ensure that Californians benefit from the broad range of benefits documented in the extensive evidence we have submitted to the Commission. Conversely, any action that could delay consummation of the merger would slow the build-out of New T-Mobile’s robust, 5G network in California, thereby delaying New T- Mobile’s ability to provide all consumers in California the benefits of that network—such as increased speeds and expanded coverage, lower prices, and a bona fide wireless alternative to traditional in-home broadband service.

The problem is that T-Mobile, which is walking point at the CPUC for both companies, keeps turning up the volume on both its claims of wonderfulness and the amount of paperwork its shovelling as it attempts to convince regulators that the deal won’t do more harm to consumers than good.

The FCC paused its review of the deal for at least three weeks, because T-Mobile’s latest filings “contain substantial new material and reach conclusions about the effects of the transaction that were not previously in the record”. The CPUC administrative law judge (ALJ) managing the case, Karl Bemesderfer, added four weeks to his review because T-Mobile similarly introduced thousands of pages of new evidence to shore up its arguments that its takeover of Sprint would benefit Californians, rather than killing a competitive market for mobile broadband services.

Rechtschaffen is the commissioner assigned to oversee the T-Mobile/Sprint review. It would be procedurally and politically dicey, to say the least, if he intervened. Similar pleas have been made in high profile telecoms mergers in the past to no apparent effect, particularly on Bemesderfer who rates as one of the keenest and most telecoms savvy ALJs at the commission.

Right now, he’s considering a request from the CPUC’s public advocates office to force T-Mobile to handover supporting documents that were requested weeks ago. T-Mobile’s response is expected tomorrow. We’ll find out whether they think a cooperative attitude will help speed up the process.

T-Mobile stalls CPUC, FCC reviews of Sprint merger with cheap lawyer tricks

by Steve Blum • , , , ,

Getting a fast approval of its proposed takeover of Sprint from federal and state regulators is supposedly T-Mobile’s goal, but it’s not helping itself. Last week, its habit of stonewalling and waiting until the last minute to provide information to regulators reviewing the merger resulted in a three week (minimum) hold at the Federal Communications Commission and a demand from California Public Utilities Commission staff to turn over stacks of documents previously requested. That demand could also lead to a further delay in getting California’s blessing for the deal.

According to an FCC notice, the agency needs time to review new claims about the wonderfulness of the merger made by T-Mobile and get public feedback…

On February 21, 2019, and March 6, 2019, the Applicants filed significant additional information regarding their network integration plans for 2019–2021, an extension of their previously filed merger simulation analysis to cover the years 2019–2021, and additional information regarding their claims related to fixed wireless broadband services. These filings contain substantial new material and reach conclusions about the effects of the transaction that were not previously in the record.

As a result, the FCC added at least three weeks to its review, pausing its informal 180-day shot clock at 121 days, with a restart not scheduled until 4 April 2019 at the earliest.

One problem is that a key filing describing T-Mobile’s plans to offer in-home service is marked confidential, so the FCC won’t be getting much public comment on it.

The CPUC’s public advocates office (PAO) asked the administrative law judge (ALJ) managing the case to force T-Mobile to produce more data, to back up the claims made in a similar avalanche of data ahead of hearings last month. That dump and T-Mobile’s introduction of new claims, resulted in a four week delay. The PAO says that “in response to the Public Advocates Office’s Data Requests to T-Mobile…T-Mobile provided only objections and no substantively responsive answers. T-Mobile’s objections are unfounded and inappropriate”.

The back and forth argument over evidence is eating up the extra time added to the schedule by the ALJ. If that causes the problem, the obvious solution is to add even more time, something T-Mobile claims it doesn’t want to happen.

Alternating last minute data dumps with lawyerly foot dragging seems like a bad way of getting a quick decision from the CPUC and the FCC. If T-Mobile is really in the hurry it claims to be to get the Sprint deal approved, it needs to start playing nice with the other kids.

Collected documents, dumped and otherwise, from the CPUC’s review of the proposed merger of Sprint and T-Mobile are here.

AT&T has an odd way of turning anti-trust victory into market domination

by Steve Blum • , , , ,

In the wake of a federal appeals court victory, AT&T moved quickly to consolidate control over the Time-Warner media companies it now owns. The apparent strategy is to meet Netflix head on as a content competitor. The initial signs are not encouraging.

As well reported by Jessica Toonkel in The Information, the top executives of HBO and Turner, two of the three Time Warner divisions acquired by AT&T (the third is the Warner Bros. studio), are gone. According to Toonkel’s article, AT&T wants to crank up the content production pace…

HBO is one of Time Warner’s crown jewels, the top ranked premium cable channel long known for hit shows ranging from “The Sopranos” to “Game of Thrones.” But the growth of Netflix has spotlight how little HBO has evolved in recent years. The company makes a handful of shows, compared to the hundreds made by Netflix. It resisted small changes, such as putting all episodes of its shows on the air at once, unlike Netflix. Shortly after the AT&T takeover, AT&T executives began signalling they wanted HBO to make more shows.

I worked with HBO in the mid-nineties, as the company I was working for – U.S. Satellite Broadcasting – was launching what eventually became DirecTv, another AT&T acquisition.

HBO has evolved over the past 25 years, but its core remains unchanged: it’s a video packaging and distribution company that produces a relative handful of marquee jewels, but relies on the broader industry for most of its content. The same might be said of Netflix, except that its hand is a lot bigger and its tolerance for imperfect gems is a lot higher.

Netflix produces excellent films and series, but that’s fuelled by a blockbuster budget – $13 billion in 2018 by one estimate – that’s higher than any mainstream studio. It also has a reputation for giving producers and directors a free hand, with little interference from the suits.

Money and creative freedom are two of three essential ingredients to success in Hollywood. The third is personal relationships, something the old HBO excelled at building and maintaining. The business doesn’t work like a car factory. You can’t just add a second shift and send in the bean counters. With neither the budget or the corporate culture to match Netflix, AT&T is taking a huge risk by disrupting those relationships.

T-Mobile, Sprint sandbag themselves as California’s merger review is bumped a month

by Steve Blum • , , , ,

Sandbags

A document dump by T-Mobile and Sprint backfired at the California Public Utilities Commission. The administrative law judge managing the commission’s review of the proposed merger of the two companies gave opponents four extra weeks to digest and rebut thousands of pages of material submitted shortly before hearings were held earlier this month.

In his ruling, ALJ Karl Bemesderfer rejected a request by the CPUC’s public advocates office (PAO] for a second round of hearings, but acknowledged that T-Mobile and Sprint did not leave enough time to review all the documents they dropped on the CPUC…

Regardless of whether Joint Applicants’ rebuttal testimony contains new evidence and arguments, the sheer volume of the material together with the complexity of the subject matter has worked a disadvantage to [the PAO] that requires a remedy…

Accordingly, the schedule in this proceeding will be adjusted by moving the date for submission of opening briefs to March 29, 2019 and the date for submission of reply briefs to April 12, 2019. The anticipated date for a proposed decision remains unchanged; consequently, I find that the revised schedule does not work a hardship on Joint Applicants.

Originally, opening briefs were supposed to be submitted this Friday, 1 March 2019. Bemesderfer is arguably correct in saying that the timeline hasn’t changed, but that’s because it was vague. The final schedule set by the commissioner overseeing the inquiry, Clifford Rechtschaffen, called for publishing a proposed decision in “2nd Quarter 2019”. So long as the CPUC’s proposed decision is posted before the end of June, that schedule will be met. But four more weeks is four more weeks, and the two companies are not happy about it.

Commission rules require a 30 day public review period before a vote can be taken, which means the proposed decision might not come before the commission until sometime in July or even August. That said, it wouldn’t be a surprise if Bemesderfer finishes his draft decision by mid-May, which would leave enough time for a final decision to be reached in June.

Collected documents, dumped and otherwise, from the CPUC’s review of the proposed merger of Sprint and T-Mobile are here.

FCC makes flabby broadband victory claims in a thin press release

by Steve Blum • , ,

Sumo suits

In a press release heavy on spin and very light on data, the Federal Communications Commission claimed broadband “is being deployed on a reasonable and timely basis” because the number of people without access to service at a minimum of 25 Mbps download and 3 Mbps upload speeds decreased by 25% in 2017. The reason for this stunning achievement? “FCC reforms”.

But a closer look at the cherrypicked data in the release shows that this feat isn’t so amazing after all.

The “more than 25% drop in Americans lacking access to fixed broadband” claim doesn’t mean that the percentage of unserved dropped from, say, 50% to 25%. The way the press release states it kinda makes you think that’s the case, but when you crunch the numbers you realise that the 6.5 million people who gained access represents about 2% of the population – overall, the number of unserved people dropped from 8% of the U.S. population to 6%.

That’s if you take the FCC’s numbers at face value. Which isn’t a smart thing to do. Yet. The full report, with supporting data, hasn’t been released. Commissioner Jessica Rosenworcel, a democrat, has seen it, though. Her tweeted response is “I beg to differ”.

One key question is where did the data come from?

If, as is likely, it comes directly from the availability reports filed by providers, it might represent increased reporting, rather than increased availability. The number of existing providers filing FCC availability reports – particularly fixed wireless operators of dubious performance – has increased over the past few years, and incumbent wireline operators have become more creative in their claims.

Another bit of manifest nonsense is that policies adopted by the republican majority on the FCC have much to do with actual improvements. The FCC’s claims are based on data that is current as of December 2017, less than a year after the Trump administration was sworn in, and the same month that the republican majority approved its first major policy change, the repeal of network neutrality regulations. For nearly all of 2017, the broadband industry played by Obama era rules.

A 2% increase in the number of people with access to moderately fast broadband would be a notable achievement. We won’t know if that number is legitimate until the FCC publishes all the data its claim is based on. According to the press release, that’s expected “in the coming weeks”.

T-Mobile’s merger with Sprint could get even closer scrutiny in California

by Steve Blum • , , , ,

Californian opponents of T-Mobile’s proposed takeover of Sprint want more hearings and another round of written evidence and rebuttals, before the California Public Utilities Commission moves ahead with approving or rejecting it. Prior to last week’s hearings, the CPUC in-house consumer advocacy unit – the public advocates office (PAO) – asked the administrative law judge hearing the case to, in effect, slow the proceeding down to give them time to review four thousand pages of testimony and evidence that T-Mobile and Sprint dropped on them. The PAO is recommending that the CPUC not allow the merger to take place.

After the hearings, other opponents – two private consumer advocacy groups, TURN and the Greenlining Institute, and the Communications Workers of America (CWA), a telecoms labor union – endorsed the request for more testimony and hearings. As CWA put it

Justifying an application for the first time with 4,000 pages of “rebuttal testimony” is entirely improper and violates intervenors’ due process rights. The Commission has held that “[p]roviding the basic justification in rebuttal is unfair, since parties are not generally given the opportunity to respond to rebuttal with testimony of their own.”

Sprint and T-Mobile naturally don’t agree. They submitted more than 250 pages of additional material that argues that there was nothing in the 4,000 pages that was particularly new or didn’t directly respond to points previously made by opponents to the deal. The companies particularly object to adding more hearings and filings because doing so “would substantially disrupt the schedule adopted by the Commission – adding at least six weeks of unjustified delay”.

The Federal Communications Commission is also reviewing the proposed merger. Assuming there isn’t another federal government shutdown, it’s scheduled to reach a decision by the end of May. Even if the CPUC’s review remains on its original track, it could run even longer than that.

Collected documents from the CPUC’s review of the proposed merger of Sprint and T-Mobile.