Earlier this year, T-Mobile and Sprint finally ended years of awkward flirting and made their union official. If regulators sign off, the US’s two smallest networks will merge, taking us down to three big nationwide carriers. The networks say that the deal will improve competition by making New T-Mobile a bigger player, enable a faster 5G rollout, add jobs to the economy, and generally spout rainbows and unicorns across every state.
Peter Adderton is the founder of Boost Mobile, a wireless reseller now owned by Sprint. He’s a rare find: someone who intimately understands the US wireless market, particularly the competitive lower-income segment, but is happy to talk about it without angering any corporate overlords. Adderton has been waging a public campaign against an unconditional merger, including launching a public information website, and he spoke to BGR to explain where T-Mobile and Sprint aren’t explaining the whole truth — or, in some cases, any truth at all.
One of Adderton’s biggest concerns with the merger is that it will destroy MVNOs, wireless resellers like Mint or FreedomPop that serve low-income communities. “The first thing to remember is that the MVNO literally is a slave to the mothership,” Adderton said. “Clearly, not having a network restricts you in a lot of ways. The network carriers are very very clear and precise in what area you can play in, and what role you can play. If you look at the relationship between small MVNOs and carriers, the carriers are quite happy for the MVNOs to use their network, as long as they aren’t directly competing with them on the retail side.”
The effects of the merger may be disproportionately felt by already-marginalized communities as a result, Adderton suggests.
“The carriers control everything, even though they don’t say that they control everything. They control the pricing, they control the distribution, they control everything right across the board. So the term ‘independent MVNO’ is a very very loose term in my opinion — the carriers have them under their control. They build the network, and they want to make sure whoever comes onto it doesn’t undersell them.”
As Adderton points out, the merger is particularly perilous for MVNOs because of the dominance that T-Mobile and Sprint have in the MVNO market. “Of the 46 million or so MVNO customers, the lion’s share of those sit between T-Mobile and Sprint. If you look at Verizon, they’ve not really been very forthcoming with MVNOs, and then you look at AT&T — they’ll kind of do it, but they’re not jumping up and down. But then look at Sprint, and there’s not an MVNO in the world that Sprint has met that it hasn’t fallen in love with.”
“So when you eliminate Sprint from the marketplace, you haven’t gone from four [MVNO-friendly] carriers to three; you’ve gone from three to two, since Verizon doesn’t play in that space. Once the merger goes through, most of the MVNOs are on rolling 12 months agreements, so after 12 months, all your deals will be gone, and that’s the single biggest issue with the MVNOs. There’s no regulation around the carriers, no way of assuring that the MVNOs are protected.”
It’s not just the effects of the merger, either. Adderton says in no uncertain terms that T-Mobile and Sprint are saying whatever regulators want to hear right now, regardless of the truth. “They’ve got a pattern. There is a constant pattern between the former CEO of Sprint, Marcelo Claure, and [T-Mobile CEO] John Legere. They constantly change the story based on the person who is listening. Six months ago, when the merger was off, they were both saying that ‘our networks can survive, we can do 5G, we’re going to be a 5G pioneer, we’re going to be the leader in 5G.’ Six months later, they’re saying they can’t make it without each other.”
“It’s just a consistent pattern of telling the regulators, the DOJ, the Senators whatever they want to hear in order to get their story across. It’s time that we start to have a real good look at this particular case, because you can’t erase the history. You guys said this; we know why you’re changing it now, because this is purely a bailout. This is a bailout of a Japanese company that doesn’t want Sprint anymore, and they’ll come up with whatever story they can to make that happen.”
But although Adderton thinks that neither company is being honest, he’s not against the merger. “I’m pro the merger, just because I know that Sprint isn’t going to survive. At some point, we’re going to go from four [carriers] to three.” Rather than shutting the merger down, he wants regulators to impose conditions, particularly to do with prepaid customers. “At this point, we absolutely do have an opportunity here. First, they should have to divest of somewhere between 10 and 15 million customers. When I talk about selling the Boost brand, or the MetroPCS brand, that’s what I mean: selling 15 million customers.”
“What does that give you? It gives you scale. It gives you the ability to negotiate incredibly good deals. It allows you to keep nine thousand independent dealers together, and allows you to keep all of those people employed. So that’s the first thing they should have to do. They should also have to divest some spectrum, to enable a fourth network — not a nationwide network, but at least allow some kind of inner-city 5G hotspot.”
“The third thing is that there needs to be some price protection of MVNOs, to ensure that they’re protected over the next five years, until we really find out what’s next. I think those are the three things they really need to happen, and if they don’t, then the merger should be dead in the water.”
With Verizon and AT&T publicly saying that they don’t care about the merger at all, a decidedly pro-industry FCC, and lawmakers that have yet to get involved, Adderton has emerged as the only serious voice speaking out against the merger so far. The Department of Justice is still licking its wounds from a historic defeat in court against AT&T while challenging its merger with Time Warner, so the appetite to sue T-Mobile to prevent the merger may be lacking. What Adderton is proposing is a compromise solution that might preserve a little competition and keep prices friendly at the bottom of the market; whether there’s any regulatory interest in enforcing his suggestions remains to be seen.