Can a merger help close the digital divide?

That question is at the heart of the pending merger of T-Mobile and Sprint. The merging parties argue yes – that by combining their assets they will be better able to deploy 5G, a service that holds considerable promise for delivering affordable mobile broadband ubiquitously across urban and rural areas alike. Others in the “yes” camp include the Federal Communications Commission (FCC), U.S. Department of Justice (DOJ), and the vast majority of states that evaluated and approved the deal.

On the other hand, those still opposed to the transaction – a shrinking but feisty group that includes a cadre of state Attorneys General suing to stop the merger – argue that combining the two firms will widen the divide by reducing the number of competitors in the wireless marketplace. This, in their view, will automatically lead to higher prices. There are also concerns about the extent to which Dish will be able to serve as a viable mobile broadband competitor (per a settlement with the DOJ, New T-Mobile will spin off its low-cost brands and make available other resources to Dish in order to facilitate the satellite company’s entrance into the wireless market).

The Future Ain’t What It Used To Be

Many of the arguments against the T-Mobile merger echo those made during the review of previous transactions involving major telecom and media companies. Indeed, there are few original arguments being put forward against this tie-up. As such, the ongoing review of the merger has doubled as collective primal scream therapy for those who wish to freeze the structure of the telecom market in place, notwithstanding the fact that its competitive contours continue to evolve in ways that benefit consumers.

To appreciate just how profoundly the marketplace has changed, consider what the sector looked like the last time two of the four major wireless carriers attempted to merge. When AT&T tried to buy T-Mobile in 2011, the mobile market was dominated by the four major carriers: Verizon, AT&T, Sprint, and T-Mobile. The Obama DOJ sued to stop the merger, making many of the same competition arguments put forward by state AGs in their lawsuit against T-Mobile. But what’s different now is the availability of numerous competitive alternatives capable of providing consumers with 4G – and eventually 5G – service.

The most significant development since 2011, other than the steady downfall of Sprint, has been the proliferation of alternative wireless offerings. In particular, cable has emerged in just the last few years as a disruptive force. Comcast’s Xfinity mobile doubled its subscribers in the last year; it now has over 1.5 million customers. Charter’s Spectrum Mobile also continues to grow at a healthy pace; it has over 500,00 subscribers. Altice recently launched its own mobile offering. Each company offers competitive pricing and innovative service plans. Consumers can also choose from low-cost Wi-Fi-based mobile options like Republic Wireless and Google Fi, neither of which existed when AT&T tried to buy T-Mobile.

Dish will join this mix as a result of New T-Mobile’s settlement with the DOJ. There are good reasons to be skeptical of Dish’s commitment to following through on its 5G plans. Starting in 2011, the company repeatedly explored launching a mobile broadband network, only to pull back. All the while, it continued to stockpile spectrum, creating a “treasure trove” of assets that it sat on. That Dish has committed to finally using its spectrum as part of the DOJ settlement is a good thing. That it has put that commitment in writing, backed by penalties for non-performance, is a great thing. Indeed, the DOJ settlement includes specific build-out requirements and other criteria that aim to guide Dish toward deploying its own 5G network over the next seven years (in the meantime, it will offer service via New T-Mobile’s 5G network). If Dish fails, it would be on the hook for penalties in excess of $2 billion.

Detractors view this arrangement as inadequate and likely to flop. But analysts predict that Dish will be well positioned to deliver to consumers a much more robust and cost-effective wireless alternative than anything that Sprint would have been able to deploy. Sprint’s financial struggles and general strategic ineptitude over the last few years are key points in favor of the merger, because, but for the transaction, Sprint likely would be unable to remain a viable competitor in the already fierce 5G race.

Digital Divide Optimism

What does all of this mean for the digital divide?

At a minimum, the lengthy review of the T-Mobile-Sprint merger has helped to raise the profile of 5G and its ability to bring more people online and deliver critical services to those who need them most. As digital divide expert Nicol Turner Lee observed, these benefits will accrue most immediately and profoundly in communities of color, where wireless has become an essential internet on-ramp.

The transaction is also a reminder that digital divide commitments made during merger proceedings can be transformative. Two examples are illustrative. First, as part of its acquisition of NBCUniversal, Comcast committed to deploying a low-cost broadband program. Dubbed Internet Essentials (IE), the initiative offered qualifying customers an internet connection for $9.95/month and access to low-cost computing devices. Since its launch in 2011, Comcast has continuously tweaked and expanded IE. As of August 2019, IE had connected eight million low-income households to the internet, a staggering sum.

The second example stemmed from AT&T’s acquisition of DirecTV. As part of its 2015 deal, AT&T committed to deploying fiber to an additional 12.5 million customer locations by July 2019. By June of this year, AT&T’s fiber deployment reached 14.5 million locations. This commitment contributed significantly to “rapid fiber growth” in the U.S. over the last few years.

These successes, coupled with T-Mobile’s proven track-record as a disruptive force for good in the wireless space, augur well for New T-Mobile’s digital divide commitments, which will impact millions of Americans. Via enforceable promises made to the FCC, New T-Mobile will “cover 99% of the United States population with speeds faster than 50 Mbps within six years,” a commitment that the Commission recognized as key to “help[ing] to ensure that 5G will close the digital divide.” Recently, New T-Mobile bolstered this focus when it announced that it will provide free mobile broadband access to 10 million qualifying low-income households over the next five years in an effort to help close the “homework gap,” the part of the digital divide that impacts households with school-age children.

These are significant commitments that will go a long way toward helping to close the digital divide. Work remains to be done – a single merger cannot “solve” the digital divide any more than an individual program can – but a transaction the size and scale of T-Mobile-Sprint can surely move the needle in a real way.

Unfortunately, the legal challenge brought by a small group of state Attorneys General will further delay the closing of this deal, and, by extension, postpone implementation of business plans and service offerings that will bring more people online. This is a bad outcome for consumers. A handful of individual state AGs have settled with the companies, but about a dozen remain involved in the lawsuit. If the remaining AGs choose not to settle, then the best consumers can hope for is a swift trial that resolves itself in a way that will allow New T-Mobile and Dish to start making good on their promises.

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