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In the Senate, T-Mobile and Sprint Chiefs Say Their Proposed Merger is Necessary Because of Global 5G Race With China

in Asia/Senate/Spectrum/Wireless by

WASHINGTON, June 28, 2018 – The CEO of T-Mobile on Wednesday defended his company’s proposed merger with Sprint against skeptical senators, claiming the merger is necessary in order for the U.S. to win the race for 5G wireless service against China.

A Senate subcommittee hearing investigating the competitive effects of the proposed merger on the wireless market echoed other recent hearings on Chinese telecommunications equipment manufacturers Huawei and ZTE.

These conflagrations are amplifying fears that the U.S. is losing the global 5G global race to China. T-Mobile CEO John Legere and Sprint Executive Chairman Marcelo Claure used this battle over 5G to make their case for the proposed merger.

At least when responding to senators, talking about 5G makes the difference

The latest effort at combination is not T-Mobile’s first attempt. In 2011, the Justice Department’s antitrust division blocked AT&T’s proposal to merge with T-Mobile. Also, In 2014, Sprint and its parent company, Softbank, considered a merger with T-Mobile but eventually dropped the deal.

Before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, Sen. Amy Klobuchar, D-Minnesota, asked Legere and Claure what they believed had changed since T-Mobile’s previous 2011 and 2014 attempts at mergers.

“What has changed is 5G opponents,” Claure said. “If the U.S. doesn’t launch 5G, there’s going to be other countries like China that are going to launch 5G ahead of us.”

Meanwhile, AT&T and Verizon “continue to just stick with the minimum of what they’re forced to do,” Legere said, accusing the two players of using their dominant positions in the market to slack off in technological innovation.

Legere argued that T-Mobile and Sprint need to combine their networks in order to develop 5G and keep the U.S. at head of the 5G race. “5G has to be nationwide,” Legere said.

The hype surrounding 5G is driving the passion for broadband wireless opportunities like self-driving cares

The hype surrounding 5G is increasingly hailed as the future of wireless and broadband connectivity. The notion that 5G service will allow for higher speed internet connections and enable breakthrough technology such as internet of things, automated cars, and remote healthcare is increasingly taking hold.

Though 5G is largely projected to primarily utilize the high band spectrum, it is set to eventually utilize mid and low band spectrum as well.

“5G will require access to a combination of low, mid and high band spectrum in order to fulfill the various use cases of 5G,” said Asha Keddy, the witness representing Intel, stressing the importance of making available greater access to wireless radio frequencies in developing 5G.

Legere called the combined assets of T-Mobile and Sprint a “uniquely complementary spectrum.”

“T‐Mobile (but not Sprint) has a decent amount of low‐ band 600 MHz spectrum, which works well over long distances but cannot handle the top speeds or massive data traffic that 5G will demand,” Legere said. On the other hand, Sprint has mid-band spectrum that T-Mobile does not have, he said, while T-Mobile has the high-band spectrum that travels quickly with great capacity and is expected to be used heavily for 5G.

Legere argued that the companies would be able to give 5G access to dense urban areas and extend broadband access to rural areas.

“Only this merger brings these assets together to enable a supercharged, nationwide 5G network,” Legere wrote in his testimony.

Voices critical of the merger also weighed in before the Senate subcommittee

Public Knowledge CEO Gene Kimmelman was much more skeptical of the impact that merger would have on 5G development. Kimmelman was senior advisory to Obama administration antitrust enforcement chief Christine Varney, and was a major player in opposing the 2011 AT&T/T-Mobile merger.

“This issue is not about promises,” Kimmelman said. “This is about law enforcement. This is about what the Clayton Act requires as passed by Congress, the Justice Department.”

In an already highly-concentrated wireless market, the merger would cause the primary national companies to drop to three, and therefore “substantially increase that concentration,” Kimmelman said.

The merger could therefore result in less innovation and inflated prices, Kimmelman warned, for the companies may “not necessarily raise praises, but leave prices higher than a competitive market would bear.”

“5G is important but there are many ways to look at how to get the 5G,” Kimmelman said. “There are other options for these companies.”

(Photo of T-Mobile CEO John Legere at CES in 2014 by fanaticTRX used with permission.)

 

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