States allege cell phone merger will drive-up prices for consumers
Wisconsin Attorney General Josh Kaul joined 8 states and the District of Columbia today in filing a multi-state lawsuit to halt the proposed merger of telecom giants T-Mobile and Sprint. The complaint, filed in New York federal court in coordination with California, Colorado, Connecticut, Maryland, Michigan, Mississippi, New York, Virginia, and Washington, D.C., alleges that the merger of two of the four national mobile network operators would deprive consumers of the benefits of competition and drive up prices for cellphone services.
“Maintaining strong competition helps keep prices low,” said Wisconsin Attorney General Josh Kaul. “If this proposed merger happens, many Wisconsinites will see increased prices for their cell-phone plans.”
T-Mobile US Inc. and Sprint Corp. are the third and fourth largest mobile wireless networks in the U.S., respectively, and are the lower-cost carriers among the “Big Four.” Verizon Wireless and AT&T — the two largest wireless networks — 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. Since 2009, the average cost of mobile service has fallen by roughly 28 percent, according to the Labor Department, while mobile data consumption has grown rapidly. But the merger would put an end to that fierce competition, which has delivered so many benefits to consumers.
Currently, the average U.S. household spends approximately $1,100 annually on cellphone 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, the Attorneys General 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.
Additionally, the merger would harm thousands of hard-working mobile wireless independent dealers across the nation. The nine states and DC are concerned that further consolidation at the carrier level would lead to a substantial loss of retail jobs, as well as lower pay for these workers in the near future.
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 in United States District Court for the Southern District of New York.
T-Mobile currently has more than 79 million subscribers and is a majority-owned subsidiary of Deutsche Telekom AG. Sprint Corp. currently has more than 54 million subscribers, and is a majority-owned subsidiary of SoftBank Group Corp.