CPUC, Becerra yet to bless T-Mobile/Sprint deal, as California’s review extends to end of March or later

12 February 2020 by Steve Blum
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Tmobile billboard 2 las vegas 6jan2020

T-Mobile’s proposed takeover of Sprint was approved by federal judge Victor Marrero in New York yesterday. That leaves a separate, and more focused, federal court case in Washington, D.C. and the California Public Utilities Commission’s review as the final regulatory hurdles that the merger must clear.

Yesterday was also the 30-day public review deadline for the CPUC to post a draft decision that could be considered at its 12 March 2020 meeting. That didn’t happen, so the soonest the CPUC could approve or deny the merger will be at its 26 March 2020 meeting, unless 1. the groups supporting and challenging the merger all agree to expedite a vote (highly unlikely) or 2. the CPUC reckons it to be an emergency (even less probable).

T-Mobile’s San Francisco lawyer, Suzanne Toller, emailed Marrero’s decision to Karl Bemesderfer, the CPUC administrative law judge managing the case, and Clifford Rechtschaffen, the commissioner overseeing it. She asked them to issue a proposed decision “as promptly as possible, and no later than February 25, 2020”, so it’ll be on the 26 March 2020 agenda, in time for T-Mobile to close its acquisition of Sprint by 1 April 2020 and bestow all the glorious wonderfulness of the merger on Californians.

California attorney general Xavier Becerra is a wildcard in the CPUC proceeding. California law allows him to weigh in, and so far he’s been a strong opponent of the deal. He was a co-leader in the antitrust lawsuit that was tossed out yesterday, and he issued a statement saying the “coalition [of state attorneys general] is prepared to fight as long as necessary to protect innovation and competitive costs”. That’s not exactly a promise of battle to the death, but it’s a fair bet that he won’t be telling the CPUC that the merger is a fantastic idea and should be approved.

The CPUC isn’t strictly bound by Becerra’s opinion, assuming he provides one. But it can’t ignore it, either, and could deny the merger on that basis or impose mitigation measures that he might recommend. Typically, an opinion from the California attorney general would be privately conveyed to the CPUC, which then publishes and evaluates it in the text of the final decision, taking into account the evidence in the proceeding’s record and the arguments made by all sides.

As of now, the CPUC’s review is in Bemesderfer’s and Rechtschaffen’s hands. Last week, Bemesderfer ordered DISH – the third player in the deal – to answer detailed questions submitted by the CPUC’s public advocates office. That means there’s still work to do, and a draft decision isn’t necessarily imminent. Looking ahead, the CPUC has one voting meeting scheduled in April, on the 16th, and two in May, on the 7th and 28th.

Marrero was unequivocal in his approval of the T-Mobile/Sprint merger, saying it would increase competition in the mobile broadband market by improving T-Mobile’s position versus AT&T and Verizon. He paints Sprint as a failed competitor that’s made poor technology choices and is losing market share and talent.

“Sprint’s financial situation…remains poor and hamstrings any meaningful investment efforts”, the decision said. “The court is thus substantially persuaded that Sprint does not have a sustainable long-term competitive strategy and will in fact cease to be a truly national [mobile network operator]”.

On the other hand, unlike the deal’s Californian opponents, he’s convinced that DISH can add competitive heat to the mobile broadband market.

“The presence of DISH as a new entrant will constitute a substantial incentive to competition in the [mobile broadband market]”, Marrero wrote. “DISH is undeniably well equipped t o enter the market by virtue of its large spectrum portfolio, which is worth roughly $22 billion dollars and rivals Verizon’s in size”.

Concerns that DISH won’t keep its promises are outweighed, in Marerro’s opinion, by the endorsement and presumed future oversight of the federal justice department and the Federal Communications Commission.

Links to arguments and exhibits filed at the CPUC and elsewhere 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.