Tag Archives: t-mobile

California attorney general’s opposition to T-Mobile/Sprint deal will be the deciding factor in CPUC’s review

by Steve Blum • , , , ,

Tmobile san francisco 18may2019

Advice from California’s attorney general hasn’t played much of a role in the California Public Utilities Commission’s review of major telecoms mergers in recent years, but T-Mobile’s proposed takeover of Sprint will be different. Attorney general Xavier Becerra’s forceful opposition to the merger will, all but certainly, figure prominently in whatever decision the CPUC makes.

When evaluating major transactions involving regulated utilities, state law requires the CPUC to “request an advisory opinion from the attorney general regarding whether competition will be adversely affected and what mitigation measures could be adopted”.

Mere advice or not, the AG’s office expects the CPUC to listen. Or at least it did in 2015 when it gave a green light to the Frontier’ purchase of Verizon’s wireline telephone systems. The opinion from then-attorney general Kamala Harris warned that even though California law considers it “as advisory” and does not require the commission to defer to it, “the attorney general’s advice is entitled to the weight commonly accorded an attorney general’s opinion” and “attorney general opinions are generally accorded great weight”.

Three big telecoms deals have been reviewed by the CPUC in the past five years – Frontier’s takeover of Verizon’s territories, Comcast’s three-way purchase and market consolidation deal with Charter Communications and Time Warner Cable and, after that was killed by federal antitrust enforcers, Charter’s takeover of Time Warner.

I’ve looked through the records of those three cases, and a formal opinion from the California AG appears in only one – Frontier/Verizon. It found that allowing Frontier to take over operation of Verizon’s decaying copper lines would “not adversely impact competition”, since the two companies didn’t compete directly with each other and the deal wouldn’t block new market entrants. That finding was cited among the many reasons the CPUC approved the transaction, albeit with a long list of conditions.

No mention was made, though, of AG opinions in the course of the CPUC’s review of the two cable transactions. It’s worth noting that the same logic might be applied – like telcos, cable companies don’t directly compete with each other in local markets.

That’s not true of T-Mobile and Sprint. They’re fierce competitors, particularly at the lower end of the mobile broadband and voice market, and approval of their merger depends on whether DISH can plausibly replace the competitive heat that would be lost if they combine. That’s a far more complicated question to answer. I think it’s a safe bet that the AG’s office will respond to the CPUC’s pro forma request for advice, and it won’t be ignored.

What Becerra will tell the CPUC about T-Mobile/Sprint merger

by Steve Blum • , , , ,

Tmobile billboard las vegas 6jan2020

California’s attorney general has more than one roadblock he can try to throw into T-Mobile’s path to a takeover of Sprint. The antitrust suit that Xavier Becerra and other state attorneys general filed in a New York federal court is one possibility. Closing arguments were made in that case last week – the judge hearing it didn’t ask any questions, so there are no clues about what he’s thinking. His decision is expected in the late February/early March time frame. Maybe.

Becerra’s other option lies with the California Public Utilities Commission, which is also reviewing the deal. Assuming it’s treated as a major merger (i.e. involves a utility company under CPUC jurisdiction with at least $500 million of annual Californian revenue – that’s one of many points lawyers are wrangling), California law says

Before authorizing the merger, acquisition, or control of any…telephone corporation organized and doing business in this state…the commission shall find that the proposal not adversely affect competition. In making this finding, the commission shall request an advisory opinion from the Attorney General regarding whether competition will be adversely affected and what mitigation measures could be adopted to avoid this result.

That opinion is requested and delivered privately, and typically doesn’t become public until the CPUC publishes a proposed decision. But it’s not hard to guess what Becerra will say. After the New York hearing wrapped up, Becerra put out a statement saying…

There should be no question now: this attempted megamerger would thwart competition in the telecom market and harm consumers from California to New York, and everywhere in between…At trial, we have repeatedly demonstrated the dramatically increased market concentration that would result if T-Mobile and Sprint were to merge.

Right now, Sprint and T-Mobile compete intensely with each other on price, features and quality. That’s competition we can’t afford to lose.

As you might expect in the middle of litigation, Becerra didn’t publicly suggest any “mitigation measures” – his stated solution is to not allow the merger at all. If that’s the advice he’s offering privately, then the CPUC will either have to try to block it (whether it can or not is another billing bonanza for the lawyers), or reach into the evidence presented and demonstrate why Becerra is wrong.

It’s one thing to sort out the arguments made by litigating parties – in this case it’s the CPUC’s public advocates office, the Communications Workers of America, consumer advocacy groups versus T-Mobile, Sprint and, following megabuck payoffs to buy their support, DISH and the California Emerging Technology Fund. It’s quite another for the CPUC to argue T-Mobile’s case against the California attorney general.

“Fleas of a thousand dogs” add gravitas to T-Mobile/Sprint merger as court challenge wraps up

by Steve Blum • , , , ,

Dog scratch

T-Mobile and Sprint square off today against a coalition of state attorneys general in a federal courtroom in New York, during closing arguments in a trial to determine whether their proposed merger violates antitrust laws. It’s one of the last hurdles for the deal, which has been under regulatory review since 2018.

Approval (or not) by the California Public Utilities Commission is also pending, as is a separate, more technical federal court review in Washington, D.C.

“We are desperately waiting for the outcome of our merger activities”, Jan Geldmacher, president of Sprint’s business to business division said at CES in Las Vegas last week. Nonetheless, he believes “a positive end is near”.

He backed his optimism up with a New Year’s greeting, perhaps in the hope of persuading opponents of the righteousness of his cause. “May the fleas of a thousand dogs infest the arse of anyone who fucks up your new year”, he said. “And may their arms be too short to scratch it”.

The AGs and the deal’s Californian opponents will risk that itch, but the federal justice department won’t. It urged federal judge Victor Marrero to defer to its wisdom and approve the deal. In arguments filed last week, the AGs said they have a say in the matter and, particularly, so does the judge…

The States have a special role in enforcing the antitrust laws on behalf of the public. TheSupreme Court has made clear that neither the States nor this Court need defer to the federal government’s approval of a merger. The States are independent enforcers of the antitrust laws, and it is the role of the Court—not any federal agency—to decide the lawfulness of the merger.

The AG’s latest (last?) filing laid out their case for blocking the deal. It boils down to two points: 1. going from four national mobile broadband companies will concentrate market power to the point that prices will rise and service will fall, and 2. there’s reason to believe DISH can add meaningful competition, even if it keeps its build out promises. The AGs doubt it will.

California’s review of T-Mobile/Sprint merger could turn into March madness

by Steve Blum • , , , ,

Tmobile arena

The CPUC’s review of the T-Mobile/Sprint merger is likely to run for two or three more months. The briefs filed last week were the last item on the schedule set in October, but that’s not necessarily the end of the road. Rebuttals might be allowed. Other kinds of requests that might result in a delay are possible, although T-Mobile seems to have put aside the sandbagging and stonewalling tactics that cost it at least a couple of months of extra time earlier this year.

California attorney general Xavier Becerra also has a role to play, and he’s yet to appear on the CPUC’s stage. The commission is obligated to ask for his opinion in certain circumstances, and he’s not likely to offer it until the anti-trust lawsuit he filed, along with other state attorneys general, to block the merger is decided in federal court. Testimony in that case ended in New York last Friday, and closing arguments are scheduled for 15 January 2020.

Once that’s all done, administrative law judge Karl Bemesderfer and commissioner Clifford Rechtschaffen have to draft a proposed decision. That’s a process that sometimes, but not always, takes several weeks. The job falls mostly to Bemesderfer, and he has a track record of producing complex decisions relatively quickly.

Once a draft decision is published, there’s a mandatory 30 day public review period before the full commission can vote on it. T-Mobile is demanding that a draft be posted by the first Tuesday of the new year, so it can can be heard at the commission’s 6 February meeting. Anything is possible, but I would bet against it. My guess is that the CPUC will wait for Becerra to weigh in, and I don’t think that will happen until there’s a verdict in his federal court challenge. That could happen in time for a draft to be published and make it onto the commission’s 27 February 2020 agenda, but that’s optimistic. A March decision seems more likely.

DISH can’t and won’t be a competitor in California’s mobile marketplace, T-Mobile/Sprint merger opponents say

by Steve Blum • , , , ,

Dish kangaroos ces 5jan2015

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

For:
T-Mobile and Sprint, aka “joint applicants”
DISH
California Emerging Technology Fund

Against
CPUC public advocates office
Communications Workers of America
TURN and Greenlining Institute, aka “joint consumers”

Links to the stack of arguments and exhibits everyone has filed are here.

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.

T-Mobile hypes California benefits of Sprint merger, defends DISH in CPUC filing

by Steve Blum • , , , ,

Tmobile sf civic plaza 5dec2019

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

For:
T-Mobile and Sprint, aka “joint applicants”
DISH
California Emerging Technology Fund

Against
CPUC public advocates office
Communications Workers of America
TURN and Greenlining Institute, aka “joint consumers”

Links to the stack of arguments and exhibits everyone has filed are here.

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.

DISH might build out 5G in rural California, but don’t bet the ranch

by Steve Blum • , , , ,

Dish neponset

DISH won’t have to build its own 5G network everywhere in California, or even in every county, if the T-Mobile/Sprint merger is approved. Jeff Blum, DISH’s chief Washington, D.C. staff lobbyist, testified at a California Public Utilities Commission hearing on Friday. He ducked and dodged questions about DISH’s exact intentions for the California assets and people that T-Mobile would spin off, under an antitrust settlement reached with the federal justice department, saying plans were still being made, data was still being analysed, decisions were in the hands of other companies and, well, so on.

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.

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.

There are other examples. If you want to run the numbers, my spreadsheet is here.

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.

Links to the stack of arguments and exhibits everyone has filed are here.

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.

Approval of T-Mobile/Sprint deal could depend on DISH’s testimony at CPUC hearing

by Steve Blum • , , , ,

Tmobile san francisco 18may2019

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.

As the Benton Institute for Broadband and Society thumbnail of the WSJ story puts it…

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.

DISH will be grilled on mobile plans for California at CPUC hearing

by Steve Blum • , , , ,

Dish kangaroos ces 5jan2015

DISH is the sole focus of a California Public Utilities Commission hearing next week. Administrative law judge Karl Bemesderfer decided yesterday that there’s enough evidence in hand for the CPUC to evaluate nearly all of the issues surrounding the proposed merger of T-Mobile and Sprint.

Nearly.

In his ruling, Bemesderfer mused…

What then do we need to hear testimony about? The significant change in the terms of the proposed merger that has occurred over the past months is the addition of DISH as a proposed fourth facilities-based wireless carrier, replacing Sprint. The hearings will focus on the impacts of this change on California consumers and the potential competitive harms of the proposed merger.

He didn’t say who would have to testify, but some of the questions he posed are clearly for DISH, such as how the deal to spin off T-Mobile and Sprint customers, employees and assets to DISH will “affect customer service, consumer protections and privacy rights of California consumers” and what happens to “pre-paid customers with incompatible handsets when they are divested to DISH”.

Other issues involve all three companies, such as the continued availability of low income plans and Lifeline subsidies.

But the number one question is whether or not the new and improved DISH will “substantially alleviate any competitive harms of the proposed merger”. That brings in a wide range of possible witnesses, including from an economist hired by the CPUC’s public advocates office, Lee Selwyn, who is not a fan. The squishy role assigned to DISH and its ability to fulfil it “offers no assurance that its presence will work to discipline its larger rivals to any significant degree”, he said in testimony filed last week.

The hearing is scheduled for next Thursday and Friday in San Francisco. Assuming there are no surprises, and particularly no new document dumps, the CPUC’s review of the T-Mobile/Sprint merger is still on track for a commission vote, one way or the other, sometime in February.

Cross-examination of T-Mobile testimony ordered by CPUC, as DISH’s competitive credibility challenged

by Steve Blum • , , , ,

Perry mason cross exam

T-Mobile and, perhaps, Sprint and DISH executives will be cross-examined next week, as the California Public Utilities Commission’s review of the T-Mobile/Sprint merger continues. Karl Bemesderfer, the administrative law judge managing the case, ruled yesterday that an evidentiary hearing next week is necessary, with the exact topics likely determined later today.

A key question raised by opponents of the deal is whether the federal anti-trust settlement that calls for T-Mobile to spin off spectrum, facilities, customers and employees to DISH will create an effective fourth competitor in California’s mobile marketplace. The answer depends on whether DISH can and will fulfil its end of the bargain and build out a 5G network that can provide competitive pressure on the combined T-Mobile/Sprint company, as well as AT&T and Verizon.

Lee Selwyn, an economist hired by the CPUC’s public advocates office, which opposes the merger, said in testimony filed last week that DISH can’t…

Throughout this proceeding, the Joint Applicants have repeatedly claimed that neither Sprint nor T-Mobile, each standing alone, possesses the resources necessary to construct a robust nationwide 5G wireless network, yet DISH is and will be far smaller than either of these two stand-alone companies…

A larger scale of operations enables the service provider to spread its fixed costs over successively larger numbers of customers, thereby achieving successively lower average costs and, as a result, increasing the firm’s competitiveness overall. DISH’s scale of operations will necessarily be far smaller than either that of pre-merger Sprint or T-Mobile, making it all the more difficult for this newly-minted fourth wireless [mobile network operator] to compete with the three substantially larger incumbents. Sprint is a far stronger competitor in a four-firm market than DISH can possibly become…

This is by no means to suggest that DISH’s late entry into this well-established market cannot be profitable for DISH. DISH has some 12-million DBS and streaming TV subscribers, and may be able to leverage those relationships into a profitable business…But DISH’s ability to profitably address a small fraction (less than 3%) of the national wireless services market offers no assurance that its presence will work to discipline its larger rivals to any significant degree.

DISH CEO Charlie Ergen has a long history of economically rational behavior. It’s how he grew a small store in Tennessee into a media distribution giant worth billions of dollars. So far, DISH’s legal team has resisted offering any hard details about future plans. Next week’s hearing is an opportunity to fix that problem.