T-Mobile/Sprint Inching Towards Final OK
Friday, November 8, 2019
T-Mobile/Sprint Inching Towards Final OK
You’re reading the Benton Institute for Broadband & Society’s Weekly Digest, a recap of the biggest (or most overlooked) broadband stories of the week. The digest is delivered via e-mail each Friday.
Round-Up for the Week of November 4-8, 2019
On November 5, the Federal Communications Commission gave its final OK, approving—with conditions—the transfer of control applications filed by T-Mobile and Sprint. T-Mobile's acquisition of Sprint was first announced April 29, 2018, touting the capacity to rapidly create a nationwide 5G network while offering lower prices, better quality, unmatched value, and greater competition. Is that where we've ended up?
In approving the transaction, the FCC found that the transaction will help close the digital divide and advance United States leadership in 5G, the next generation of wireless service. The new T-Mobile says it will:
- Deploy high-speed, mid-band 5G service to cover 88% of Americans by 2025;
- Deploy, within three years, 5G service to cover 97% of the American people, and within six years to reach 99% of all Americans.
- Deploy 5G service to cover 85% of rural Americans within three years and 90% of rural Americans within six years;
- Within six years, provide access to mobile service with speeds of at least 100 Mbps to 90% of Americans;
- Offer a new, fixed residential broadband service at 25 Mbps/3 Mbps speeds; and
- Offer rate plans available as of February 4, 2019 for three years or until better plans that offer a lower price or more data are made available.
Even though the U.S. wireless marketplace is losing an established competitor in Sprint, the FCC concluded that the transaction will not harm competition, finding instead that the transaction would enhance competition in rural, home broadband, and enterprise markets.
The FCC conditioned its approval of the transaction on T-Mobile fulfilling its 5G deployment commitments. Compliance with these commitments will be verified by drive-testing, overseen by an independent third party and subject to FCC oversight, to ensure that the service Americans receive will be what the parties have promised. And in order to ensure that these commitments are met, the new T-Mobile will be required to make payments that could reach over two billion dollars if it does not meet the commitments within six years. Moreover, the company will be required to make additional payments until it has fulfilled its commitments.
Specifically, within three years of the merger’s closing, the rural 5G network conditions require that 66.7% of the rural population will have access to download speeds of at least 50 Mbps and 55% will have access to download speeds of at least 100 Mbps. In addition, the conditions require that within six years of the merger’s closing, 90% of the rural population will have access to download speeds of at least 50 Mbps and 66.7% will have access to download speeds of at least 100 Mbps.
To address the potential for lost price competition, the FCC is requiring Sprint to divest its prepaid brand, Boost Mobile. After divestiture, Boost Mobile will have 1) low-cost, wholesale network access on terms superior to typical carriers that lease access from T-Mobile, 2) the financial incentive to provide robust competition from the moment of divestiture, and 3) the ability to build its own facilities over time.
As mandated by the U.S. Department of Justice, DISH Network has agreed to purchase the divested Boost Mobile, as well as other assets, to effectuate DISH’s expansion into facilities-based competition. The FCC concludes that significant public interest benefits would flow from DISH’s deployment of 5G broadband services over its spectrum holdings, which for many years have been underutilized, and that the acquisition of Boost Mobile will help DISH achieve that deployment. DISH has committed to provide 5G mobile broadband services and deploy a nationwide network, and is subject to significant financial consequences, in addition to potential forfeiture, should it fail to satisfy its buildout obligations. DISH commits to:
- Deploying 5G service over its AWS-4, Lower 700 MHz E Block, and AWS H Block licenses to at least 20% of the United States population by June 14, 2022;
- Deploying 5G service to at least 70% of the United States population by June 14, 2023, providing download speeds of at least 35 Mbps to at least 70% of the United States population;
- Deploying at least 15,000 5G sites;
- Deploying at least 30 megahertz of downlink 5G spectrum averaged over all DISH 5G sites deployed nationwide;
- Deploying 5G service on each of its 600 MHz licenses by June 14, 2023;
- Offering 5G service using its 600 MHz licenses to at least 70% of the U.S. population no later than June 14, 2023.
DISH is seeking an extension of time on its original committment to construct facilities for its AWS-4, Lower 700 MHz E Block, and AWS H Block licenses. This week's order directs the FCC's Wireless Telecommunications Bureau to make a final public-interest determination on these issues.
DISH committed to make significant payments to the U.S. Treasury if it does not meet its commitments. If DISH fails to meet the conditions of the FCC approval, it must make the payments required. In addition, DISH continues to be subject to all of the FCC’s other enforcement and regulatory powers, including the loss of part or all of any of its licenses for failing to meet its build-out requirements. If DISH fails to provide 5G broadband service to at least 20% of the United States population and has not deployed a core network by June 14, 2022, using its AWS-4, Lower 700 MHz E Block, and AWS H Block licenses, then with regard to each frequency band, if it misses the population goal by 25% or less (i.e., 4% of the U.S. population or less), then DISH shall pay $16 million. Thus, for example, if DISH is capable of providing service to 21% of the U.S. population using its AWS-4 licenses, but only 19% of the population using its Lower 700 MHz E Block and AWS H Block licenses, then DISH would be required to pay $32 million to the U.S. Treasury.
DISH is also required, by June 14, 2023, to provide to at least 70% of the U.S. population download speeds of at least 35 Mbps, as verified by a drive test; to deploy at least 15,000 5G sites; and to deploy at least 30 megahertz of DISH’s downlink 5G spectrum averaged over 15,000 5G sites. If it misses these commitments, for each of the three commitments, DISH is required to pay $10 million for each percent missed, rounded to the nearest tenth of a percent, but with a total limit of $1 billion with respect to these three commitments.For example, if DISH meets its other commitments, but builds only 10,000 cell sites, it has failed to meet one-third of its commitment on this element, and would be required to pay $333 million to the U.S. Treasury. DISH has also committed to building out its network and offering service to at least 70% of the U.S. population by June 14, 2023, on each of the bands —the AWS-4 band, the Lower 700 MHz E Block band, and the AWS H Block band, and has committed to making significant payments if it fails to do so. Specifically, DISH has committed to pay $6 million for each percent (rounded to the nearest tenth of a percent) by which it misses its commitment for the AWS-4 band; $2 million for each percent (rounded to the nearest tenth of a percent) by which it misses its commitment for the Lower 700 MHz E Block band; and $2 million for each percent (rounded to the nearest tenth of a percent) by which it misses its commitment for the AWS H Block band. The total maximum payment related to these three band-specific commitments is $1 billion.
FCC Chairman Ajit Pai was joined by fellow-Commissioners Michael O'Rielly and Brendan Carr to support the FCC approval. In separate statements, they touted the deal's impact on 5G deployment and competition in rural areas. But Commissioners Jessica Rosenworcel and Geoffrey Starks came to opposite conclusions.
Commissioner Rosenworcel said the deal is anticompetitive and will result in just three wireless providers controling 99 percent of the wireless market. "[O]ur existing wireless market will devolve into a cozy oligopoly dominated by just three carriers. This will do nothing to make it easier for Americans to stay connected," she said. "I dissent to the FCC’s decision to consolidate the wireless market in the hands of three companies. I dissent to the process the agency used to reach this result, which hid too much of the negotiations and this decision out of view from the public. And I dissent to the remedies the FCC adopts that gamble our 5G future on a new wireless entrant and put all the risk of this merger on the backs of American consumers."
On the process point, Commissioner Rosenworcel noted that the FCC majority agreed to approve the transaction months ago without having any legal, engineering, or economic analysis from the agency before us. They agreed to the transaction before the Department of Justice could finish its review, ending a longstanding practice of coordinating efforts between the agencies. And they agreed to approve the deal without seeking additional public comment after T-Mobile's agreement with the Department of Justice altered the deal.
Commissioner Starks voiced similar objections saying, "The vague promise of 5G does not change what was true when this deal was first proposed and what remains true today—the benefits of this merger, if any, simply do not outweigh the harms." Like Rosenworcel, Commissioner Starks also points to revelations that Sprint alledgedly collected Lifeline Program support for 885,000 ineligible accounts—if true, this would represent the misuse of nearly 10 percent of the funds for the entire program. Commissioner Starks previously asked for suspension of the merger review until the Sprint investigation ran its course, but the majority rejected his request.
Although T-Mobile's acquisition of Sprint has gotten approval from both the U.S. Department of Justice and the FCC, the deal isn't done yet. Over a dozen states are challenging the deal in court. State attorneys general fear the merger would hurt competition, raise prices for cell service, result in a loss of retail jobs and lower wages for the employees who remain. New York, California, Texas, Pennsylvania, Connecticut, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, Oregon, Virginia, Wisconsin and the District of Columbia are all attempting to block the deal. (Colorado, home of DISH, and Mississippi were part of the suit but have since dropped out.)
The suit goes to trial in December.
On November 7, T-Mobile announced three "Supercharged New T-Mobile Un-carrier Moves" the company says are dependent on the closing of the deal with Sprint:
- Connecting Heroes Initiative, a 10-year commitment to provide free 5G access — unlimited talk, text and smartphone data — to every first responder at every public and non-profit state and local police, fire and mergency medical services agency across the entire U.S.;
- Project 10Million, offering free service and hotspots and reduced cost devices to 10 million households around the U.S. over five years; and
- T-Mobile Connect, a prepaid 2GB service offering at $15 per month available to everyone, especially lower-income consumers.
All this, the company says, only if the deal closes.
Writing in The Verge, Dieter Bohn called the announcement "a publicity stunt meant to drum up support for the merger with Sprint." He continued, "T-Mobile is now engaged in a no-holds-barred campaign to win support for the merger from constituencies that might put pressure on those attorneys general to settle their case."
Bohn posits that now if you are against the merger, you will be vulnerable to accusations that you are not supporting our heroic first responders, not doing enough to connect low-income consumers, not helping kids. But he asks us to look at the fine print:
- The “heroes” are limited to 1GB a month, and it’s $15 to get 20GB.
- T-Mobile Connect only offers 2GB per month — which you could burn through in less than a day watching YouTube.
- The kids are limited to 100GB/year, which is not very much data at all.
To follow the T-Mobile/Sprint story and get all your broadband news, check out Benton's Headlines.
- Tom Steyer Proposes $135 Billion for Rural Broadband (Multichannel News)
- Digital divide persists in North Carolina despite broadband availability (WRAL)
- Broadband for America’s Future: A Vision for the 2020s Gives A Comprehensive Overview of a Problem That We Can Solve (Next Century Cities)
- Sen Kyrsten Sinema, the Only Anti-Net Neutrality Democrat, Linked to Super PAC Run by a Comcast Lobbyist (The American Prospect)
- Sen Kennedy, President Trump Talk 5G Airwaves (Politico)
Weekend Reads (resist tl;dr)
- FCC Commissioner Starks Proposes Data-Driven 10 Year Look-Back of High Cost Program (FCC)
- Under President Trump, Millions of Poor Lose Access to Cell Phones (Center for Public Integrity)
- The Broadband Imperative III: Driving Connectivity, Access and Student Success (State Educational Technology Directors Association)
- Vint Cerf, a ‘father of the internet’, still isn’t completely sold on 5G (Fast Company)
- Internet freedom declines in US for third consecutive year (Freedom House)
ICYMI from Benton
- Connecting the Challenges to Our Democracy (Michael Copps)
- Jonathan Sallet on the Need to Reset U.S. Broadband Policy (Kevin Taglang)
Nov 13 -- Southern New Mexico Rural Broadband Workshop – Truth or Consequences (NTIA)
Nov 14 -- Northern New Mexico Rural Broadband Workshop – Albuquerque (NTIA)
Nov 20 -- Opportunities for Rural Appalachian Ohio (Buckeye Hills Regional Council)
Nov 20 -- Building Digital Workforce Skills at the Local Level (NTIA)
Nov 21 -- Bring Competitive Broadband to Your City – For Free (National League of Cities)
Nov 22 -- November 2019 Open Meeting (FCC)
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