T-Mobile and Sprint are trying to merge. But would it mean the death of healthy competition in the industry?
An FKD Feature exclusive

While T-Mobile and Sprint have been chatting about it for awhile now, they are officially trying the knot. They want to become Facebook official, and they have even planned a trip to meet each other’s parents. All this is to say, Sprint and T-Mobile will be attempting to merge their companies into one blissful union (okay, I’ll stop with the marriage jokes).

If the deal is approved, it would mean the two companies would combine to form the second biggest wireless-carrier in the United States. Second only to the behemoth Verizon. Sprint and T-Mobile’s conglomeration would mean they would be the wireless provider, altogether, of roughly 100 million customers.

But wait, because it might not happen

While Sprint and T-Mobile are pretty revved up about this whole merger thing, some are decidedly not. And this not-ness is the reason that the deal is not a sure thing yet. Many policymakers, upset with the concept of the industry becoming further centralized, and fearing a growth of that concentration of power, may work to stymie the merger. After all, what does this level of hyper-concentration of resources mean for healthy democratic competition? And here is another valid concern: What does it mean for your pocketbook as the consumer if Sprint and T-Mobile end up merging and forming mega-Sprint-Mobile?

What’s the big idea, you two?

So, Sprint and T-Mobile are making the claim that if they combine forces (like Darth Vader and Luke) they will be in a “better position to take on the incumbents, AT&T and Verizon.” The deal would eliminate duplicate spending, as well as allow the newly formed company to collect revenue from one customer base. And mega-Sprint-Mobile? That was a lie. Because they would actually go by T-Mobile (quite uninspired a name, if you ask me).

But this merger might have some serious implications. So who cares if Sprint and T-Mobile really, really like each other (like like, that is)? The expanded scale might mean a lot for the wallets of the consumers. Meanwhile, the whole cellular industry is rushing to deploy a new data technology called 5G, and the merger might influence this new technology’s emergence in some ways.

T-Mobile’s chief executive, John Legere, has said that the merger will mean lower prices for the customers on both sides, and even claimed that customers of other providers — think AT&T, Verizon, and Comcast – would see price cuts, too. The latter claim was made based on the idea that these aforementioned companies would rush to respond to business moves of the newly formed T-Mobile, thus forcing their hand.

Can we trust T-Mobile and Sprint though?

T-Mobile does have a massive and storied reputation for undercutting the competition. They call themselves the “Uncarrier,” in fact, precisely because of this reputation. They transformed the typical manner by which consumers normally received their wireless services. T-Mobile did away with long-term contracts that locked the customer into a provider. Also, T-Mobile has introduced unlimited data plans. And because other cell service companies rushed to offer similar packages to keep up, T-mobile, in this way, managed to transform the entire industry.

So, we can trust them then?

But, here’s where it gets tricky. One: The proposed deal would eliminate a provider: Sprint, that has, itself, always been an aggressive competitor on price in their own right. Two: What’s to stop Legere of T-Mobile from reneging on this promise of low, low prices once the merger goes through? That’s exactly what Blair Levin, a policy adviser for New Street Research says might happen. Namely, a reduction in competition could lead to higher prices because well, who is going to stop them from turning to the dark side and price-gouging us all?

How’s this thing going to be decided?

The regulators at the Justice Department, policymakers, and the Federal Communications Commission will convene to discuss the possible merger. They will turn the idea inside and out, and likely, the question of whether prices will go up or down will be a key focus of the conference.

And in the meantime?

For now, a new roaming agreement will allow Sprint customers to use the T-Mobile network in places that would normally be “no-fly zones” for Sprint (that is, in areas that Sprint users would normally see restricted or zero internet access and/or wireless service). Other than that, it is business as usual. If and when the two merge, they will be making their bigger moves, of course.

OK, so what’s 5G?

It stands for fifth generation (by now, I think, we all know that), and it refers to a technology that will allow mobile devices to surf the web at a speed that is comparable to the fastest in-home internet connections today. Reliability is also supposed to improve with 5G: It can support smart, high-tech, devices like these freakin’ self-driving cars that everybody has been talking about (terrifying!). But it’s costly, and Sprint and T-Mobile both say that only together will there be enough monetary resources to create a worldwide 5G network that could compete with AT&T and Verizon (obviously they did a huddle up, and got their story straight together, in the alleyway behind Sprint’s house).

Takeaway

Who knows if the deal will really go through?  What we do know is that the magical number of four wireless cell providers has been a thing for a long time now (AT&T, Sprint, T-Mobile and Verizon). After all, in 2011 AT&T made its own jump for T-mobile, but regulators blocked that from happening because they said the elimination of a rival would harm competition. Sprint tried to buy T-Mobile in 2014, too. The idea is that the number four is ideal to sustain a healthy democratic level of competition in the industry. And the industry’s operation in the decade or so has borne out the truth of the regulator’s theory. Only time will tell what number the regulators will decide is safe for healthy competition in the cell service industry. Can we stand to lose another competitor? We’ll see.

 

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Posted 05.10.2018 - 12:00 pm EDT