As you may have heard over the weekend, T-Mobile and Sprint have finally finished their years-long courtship and agreed to tie the knot. The two companies are hoping to make things official within the next six months, which is why T-Mobile’s leadership is currently in Washington, kowtowing with government officials and politicians to try to get approval for the deal.
Industry watchers are split on whether or not the deal will get through without a legal fight. On the one hand, it might help accelerate the rollout of 5G, something that the current administration is very worried about; on the other hand, merging the two cheapest wireless carriers is a perfect recipe for decreased competition and raising prices. To see what a worst-case scenario looks like, we just have to poke our noses north of the border, where anaemic competition and a weak regulator have generated some of the highest prices for mobile data in the world.
Earlier this year, the Canadian Radio-television and Telecommunications Commission, Canada’s equivalent to the FCC, noted a lack of low-cost data-only plans, and asked the three national wireless carriers to submit proposals to fix it. What they came back with was embarrassing, and harrowing for anyone considering a future in the US with just three wireless carriers.
Bell, Telus, and Rogers all pitched pathetically small bundles of data for $30 a month. Bell’s offering was 500MB a month for $30, while Telus suggested 600MB, and Rogers said 400MB. You’ll notice that not only are the prices outrageously high for a terrifyingly small amount of data ($30 a month can easily get you 5GB of data, plus calls and texts in the US), but they’re also very consistent. Sure, it’s possible that it’s just a huge coincidence that all three carriers independently came up with virtually the same offer, or it could be a sign that companies are implicitly colluding on price (not a hard thing to do when there are only three players in the market).
As part of the material it put together on the merger, T-Mobile and Sprint claim that merging their two companies won’t matter so much in the grand scheme of things, because they compete against more than just AT&T and Verizon. “This isn’t a case of going from 4 to 3 wireless companies–there are now at least 7 or 8 big competitors in this converging market. And in 5G, we’ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G,” said Legere. “We’re confident that, once regulators see the compelling benefits, they’ll agree this is the right move at the right time for consumers and the country.”
The only problem is that new T-Mobile will only have two real competitors that own nationwide mobile networks: Verizon and AT&T. The other companies are regional carriers, like US Cellular, or nationwide MVNOs like Xfinity Mobile. Just a few months ago during its last earnings call, Legere put some of his so-called competitors on blast.
“[Xfinity Mobile] is very irrelevant, and I would assume Charter will be irrelevant squared,” Legere said. “I would say the furthest thing from my mind is any concern about the impact of cable.”
“First of all, I think they’re incompetent and they don’t belong in wireless without having owner economics. 500 stores across the country, telling people in Manhattan your closest store is in Long Island is crazy. An MVNO that doesn’t work. Wi-Fi is not a way to play this game.”
“So that — no, I don’t see any impact to us at all,” he finished.
With Legere himself saying just a few months ago that MVNOs and cable companies aren’t competitors, and with the results of three equal carriers all too plain to see in Canada, this is one merger that should have consumers (and hopefully the regulators!) extremely concerned.
