Ten Democratic state attorneys general on Tuesday sued to block T-Mobile’s merger with Sprint, and the timing was no coincidence. The Justice Department will soon make its decision on the merger, and Democrats, unions and big business are lining up to defeat it at the expense of America’s leadership in 5G telecom networks.
The state AGs say the merger “would eliminate Sprint as a competitor and reduce the number of (mobile network operators) with nationwide networks in the United States from four to three.” But a market of three strong wireless players would be more competitive than a de facto duopoly led by AT&T and Verizon. T-Mobile has 79 million customers while Sprint boasts 54 million compared to Verizon (118 million) and AT&T (94 million). The Big Two need a strong competitor, not two weaklings that may not survive for long.
For years, T-Mobile and Sprint have been slashing prices to compete with the Big Two. As the state AGs note, the average cost per megabyte of data declined by between 72% and 83% between 2013 and 2017. The problem is that all of the carriers have piled up debt that could retard their 5G build-out.
While AT&T and Verizon have begun to roll out 5G service in some markets, T-Mobile and Sprint lack the complementary spectrum and capital to compete nationwide. So there’s less impetus for AT&T and Verizon to accelerate their 5G plans, improve efficiency or redirect misallocated capital from more glamorous media plays.
The Democratic AGs claim to be standing for competition, but in opposing the T-Mobile-Sprint merger they’re entrenching the Big Two. It’s worth recalling that competition from Sprint and MCI is what finally broke AT&T’s monopoly on long-distance service in the 1980s. Long-distance prices fell rapidly.
Sprint and T-Mobile have already committed to deploying a 5G network that would cover 97% of the U.S. population within three years including 85% of rural Americans. They have also agreed to maintain current prices for at least three years, which is three years longer than either Verizon or AT&T. The AG warnings about price increases are false.
As ever, there’s a union-Democratic Party merger here. The Communications Workers of America, who represent AT&T and Verizon workers, oppose the tie between the nonunion Sprint and T-Mobile. The last thing they want is a stronger nonunion competitor. The union is a big financier of Democrats, and it endorsed the AGs in coordinated fashion on Tuesday.
While the media obsess about Big Tech and antitrust, the T-Mobile-Sprint merger may be more consequential for America’s future. More of the world economy is becoming digital every day, and 5G is essential to capturing the benefits of artificial intelligence and much more. The U.S. can’t afford to fall behind by depending on a unionized duopoly. While Democratic AGs and unions may not care if 5G plods along, anyone who wants to preserve America’s global competitiveness should.