Nothing is Normal About the T-Mobile-Sprint Merger Review

Benton Foundation

Tuesday, June 18, 2019

Digital Beat

Nothing is Normal About the T-Mobile-Sprint Merger Review

Gigi Sohn

Last week, ten state attorneys general filed a lawsuit challenging the merger of T-Mobile and Sprint in a federal district court in New York. While it might not seem unusual for state officials tasked with enforcing antitrust and consumer protection laws to seek to halt the 4-to-3 horizontal merger of two of the nation’s mobile wireless companies, that the Antitrust Division of the Department of Justice did not join the lawsuit was extraordinary.

But the norms that govern oversight of the communications industries have been crashing down a lot recently. Last month, Federal Communications Commission Chairman Ajit Pai, quickly followed by two of his Republican colleagues, announced that he was supporting the merger subject to a handful of behavioral conditions, almost identical in nature to those strongly opposed by Pai in previous years. What made this announcement even more suspicious was the fact that there was no concurrent announcement by the Justice Department that it, too, was approving the transaction.

For the FCC to “go it alone” was unprecedented. When the FCC and the Antitrust Division are both charged with reviewing mergers in the media and telecommunications industries, the two agencies will announce a decision to grant a merger almost simultaneously. In the nearly four weeks since Pai gave his blessing to the transaction, the Antitrust Division and the Assistant Attorney General who leads it, Makan Delrahim, have made no official announcement. There have only been news reports that Delrahim is not satisfied with the Pai’s decision and instead is trying to create a new, viable, fourth national mobile wireless carrier by requiring the merging parties to divest spectrum and other assets, a task that few believe is possible.

Why did Chairman Pai get so far ahead of his Justice Department colleague? Many observers believe it was to put political pressure on Delrahim to approve the deal, against the reported wishes of the career staff of the Antitrust Division. In addition, Fox Business has reported that senior White House officials have also voiced their support for the merger, though it is unclear whether they have spoken directly to Delrahim.

As the state AG’s complaint and the FCC’s public record on the merger unequivocally demonstrate, the combination of T-Mobile and Sprint will raise prices and reduce competition, and the promises the companies made to rapidly rollout next generation 5G wireless services and serve large swaths of rural America are speculative, unsubstantiated and unenforceable. But Pai and some in the Trump Administration are so desperate to declare victory in the so-called “race to 5G”  that they will overlook those inconvenient facts.

That leaves the ultimate decision with Delrahim. While the states and the FCC moving forward without the Justice Department was exceptional, political pressure from the White House and others in the Administration is not. In 1981, at the beginning of the Reagan Administration, the Justice Department was in the middle of an antitrust lawsuit against the monopoly telephone company, AT&T. As described in Steve Coll’s 1986 book “Deal of the Century,” powerful figures in the Administration -- including Secretary of Defense Caspar Weinberger, Secretary of Commerce Malcom Baldridge, and Counselor to the President Ed Meese -- wanted the Justice Department to drop the case, and they did everything in their power to convince the new Assistant Attorney General for Antitrust, Bill Baxter, to do so.

The pressure that Weinberger and Baldridge put on Baxter went far further than what Pai has done here. Among other things, Weinberger sent a letter to Attorney General William French Smith to drop the case (Smith was recused, so he never saw the letter) and testified in a closed hearing before the Senate Armed Services Committee that the case should be dismissed for national security reasons. When the secret testimony was leaked by the Wall Street Journal, Baxter held a fiery press conference in which he pledged to “litigate [the case] to the eyeballs.” 

Weinberger, Baldridge and Meese then decided to take the matter directly to President Reagan. At a meeting of a cabinet-level working group on commerce and trade, Baxter engaged the Cabinet secretaries in a lengthy debate over whether the case should be dismissed. In the end, the President did not weigh in on either side. That meeting put an end to the pressure on Baxter to drop the AT&T case, and the rest is history – AT&T agreed to be broken up and, among other things, that decision moved the telecommunications industry into the Internet age. 

Assistant Attorney General Delrahim is a great admirer of Baxter, referring to the former AAG in no fewer than five speeches since his confirmation in late 2017. In one of those speeches, he favorably quotes Baxter’s admonition that while mergers can be “an important and extremely valuable market phenomenon,” they are “subject, of course, to the very important limitation that where a merger threatens significantly to lessen competition, it should be halted.”

Today, Delrahim has the opportunity to emulate his predecessor and push back against political pressure coming from the FCC Chairman and the White House. The merger of T-Mobile and Sprint threatens to significantly lessen competition. Delrahim and the Justice Department should join the states’ effort to block it.

Gigi B. Sohn is a Distinguished Fellow, Georgetown Law Institute for Technology Law & Policy and Benton Senior Fellow and Public Advocate. She is one of the nation’s leading public advocates for open, affordable and democratic communications networks. For nearly thirty years, she has worked across the country to defend and preserve the fundamental competition and innovation policies that have made broadband Internet access more ubiquitous, competitive, affordable, open and protective of user privacy.

Benton, a non-profit, operating foundation, believes that communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities to bridge our divides. Our goal is to bring open, affordable, high-capacity broadband to all people in the U.S. to ensure a thriving democracy.

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By Gigi Sohn.