Ten state attorneys general, including New York and California, are suing in an effort to stop the merger of T-Mobile US and Sprint.
A formal complaint was filed in New York federal court, and revealed today, claiming that a merger of the third and fourth largest cellular networks in the United States would damage competition and raise bills and prices for millions of Americans.
The lawsuit [PDF] follows a statement last month by Ajit Pai, the chairman of the Federal Communications Commission (FCC), in which he said he was planning to approve the $26bn merger thanks to new "commitments" made by the two companies about 5G deployment and rural wireless access.
That statement was met with heavy criticism, with telecoms experts questioning the value of the commitments – which were not made public – and noting that Pai appeared to be ignoring advice from antitrust experts at the Department of Justice who were opposed to the deal, despite having previously indicated that he would stand by any DoJ determination.
In addition to New York and California, the states attorneys general of Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin have joined the lawsuit.
"This is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent," New York's Attorney General Letitia James said in a statement, adding: "When it comes to corporate power, bigger isn’t always better."
As for the new commitments flagged by Pai as sufficient to approve the merger, the state attorneys general are notably unimpressed: "Before filing suit, the states gave significant consideration to T-Mobile and Sprint’s claims of increased coverage in rural areas," their statement notes, adding: "However, T-Mobile has yet to provide plans to build any new cell sites in areas that would not otherwise be served by either T-Mobile or Sprint.
"As stated in the complaint, the US previously won the 'race to LTE' as a direct result of vigorous competition among wireless carriers. Finally, continued competition, not concentration, is most likely to spur rapid development of a nationwide 5G network and other innovations."
Which is pretty much what every telecoms industry expert said after Pai unexpectedly announced he would approve the merger: faster rollout of new mobile technology comes as a result of competition, not the other way around.
The lawsuit says bluntly: "The proposed commitments Sprint and T-Mobile made to the FCC do not resolve the harms to competition that will result if the merger proceeds."
And reiterating that point, the general counsel for the Rural Wireless Association, Carri Bennet, said in a statement: "This merger is bad for competition, and it is bad for consumers, especially those living in or traveling through rural areas, who will experience fewer choices, price increases, and substandard service."
There are two pages of the 45-page lawsuit dedicated to questioning the value of these commitments, highlighting each specific commitment and stating plainly that it does not resolve the larger competition issue.
The average cost of mobile service has fallen 28 percent over the last decade, while data consumption has rocketed. The merger would "put an end to that fierce competition," the AGs argue.
In fact the lawsuit quotes the majority shareholder of T-Mobile US, Germany's Deutsche Telekom, as saying in a document that reducing the number of large mobile operators in the United States would result in a "more '********; market by reducing competition and enabling it to earn a greater return on its investment."
And no, you didn't read that wrong, the text from the Deutsche Telekom document that the lawsuit quotes has, very unusually, been redacted.
The same thing happens again later: "Internal documents reveal that for several years, Deutsche Telekom AG and T-Mobile have believed that moving from four national carriers to three would be '********* ,' and facilitate a '*************.'"
Which is all a bit odd. But it does show that the state AGs are taking the issue seriously, and we can expect a serious fight over the merger approval. As yet, the FCC has not formally approved the deal: the watchdog's chairman, Ajit Pai, only put out a statement indicating that he would put it forward for a vote and vote in favor.
Although the Department of Justice has yet to make a statement of official determination on the merger, a number of leaks have made it plain that antitrust officials are opposed to the deal and offended by the effort by the FCC to ram it through. ®