| Attorney General Mark R. Herring recently filed a suit to block the proposed merger of telecom giants T-Mobile and Sprint. The complaint, filed by a coalition of states, alleges that the merger of two of the four largest national mobile network operators will drive up prices for mobile phone services and deprive consumers of the benefits of competition. After evaluating the proposed merger, the attorneys general determined that any theoretical benefits would be outweighed by the immediate harm to consumers, including a significant impact on low income customers, likely elimination of wireless retail jobs, and reduced innovation and competition.
“Mobile phones have, in many ways, become a necessity for people who are looking for a job, pursuing their education, or even just trying to coordinate hectic schedules amongst their family,” Herring said. “The cost of mobile phone service has actually dropped significantly in recent years, but this proposed merger would likely lead to increased costs, fewer choices, and less innovation in the market. For many families on a tight budget, a small increase in the cost of their phone plan could be incredibly disruptive and difficult to absorb. We’re going to do what we can to protect Virginians and keep phone bills low.” T-Mobile US Inc., which has more than 79 million subscribers, and Sprint Corporation, which has more than 54 million subscribers, are currently the third and fourth largest mobile wireless networks in the U.S., and are the lower-cost carriers among the “Big Four” — Verizon Wireless and AT&T round out the market. Intense competition, spurred in particular by T-Mobile and Sprint, has meant declining prices, increased coverage, and better quality for all mobile phone subscribers. According to the Labor Department, the average cost of mobile service has fallen by roughly 28 percent over the last decade, while mobile data consumption has grown rapidly. The merger, however, would put an end to that fierce competition, which has delivered a great number of benefits to consumers. Currently, the average U.S. household spends approximately $1,100 annually on mobile phone services, and for many families, especially those with lower incomes, even a small price increase can result in suspension or cancellation of cellphone service. While T-Mobile and Sprint have made promises that their merger would offer lightning-fast speeds and increased capacity, an investigation found that many of the claimed benefits were unverifiable and could only be delivered years into the future, if ever. By contrast, if the merger were to go through, the combined company would immediately have the power and incentive to raise prices, while cutting quality. In short, any theoretical efficiencies that could be realized from the merger would be outweighed by the transaction’s immediate harm to competition and consumers. Before filing suit, the states gave significant consideration to T-Mobile and Sprint’s claims of increased coverage in rural areas. However, T-Mobile has yet to provide plans to build any new cell sites in areas that would not otherwise be served by either T-Mobile or Sprint. And, as stated in the complaint, the U.S. previously won the “race to LTE” as a direct result of vigorous competition among wireless carriers. Finally, continued competition, not concentration, is most likely to spur rapid development of a nationwide 5G network and other innovations. The complaint was filed under seal in United States District Court for the Southern District of New York. In addition to Virginia, the coalition of states includes Colorado, Connecticut, Maryland, Michigan, Mississippi, Wisconsin, and Washington, D.C. |
