The blockbuster T-Mobile / Sprint merger was approved by the Ministry of Justice in July, along with a complex set of conditions to make Dish Network a national wireless network provider. Instead of blocking the merger and maintaining all four major wireless providers, the government is essentially trying to produce a fourth carrier to replace Sprint, by requiring T-Mobile to provide a new Dish Network brand wireless service for seven years while Dish has its own network that will ultimately compete with T-Mobile. If Dish does not build that network by 2023, it must pay a fine of $ 2.2 billion.
If that sounds like a complicated schedule that doesn't make sense, you're not the only one. In a new application, a group of seven economists and antitrust experts say the court should reject the DOJ's proposed solution by calling it "doom … to failure" and "a remedy that does not meet the standard for recovery of the competition that Sprint currently offers. "
Over the next seven years, anyone who buys Dish's service will simply receive a new T-Mobile service, which is no real competition. Apart from that, it is not certain that Dish will ever build its own network, and even if it is, it is almost certain that the network will not reach as many people as Sprint.
The filing is intended to convince the court to block the Ministry of Justice merger before it comes into effect – technically, the DOJ filed a complaint with the court to block the merger and at the same time filed the settlement with the deal with T -Mobile and Dish in. This arrangement still has to be approved by the federal court and serves the public interest. If the court is not convinced that the deal restores the competition, it can be rejected, so that T-Mobile may remain in first place.
Hal Singer, an economist at Georgetown University and one of the newspaper's authors, says he thinks there is a strong reason to block the deal. "What's so remarkable about this case is that DOJ's complaint has no impact on competition damage" of reducing the number of carriers from four to three, Singer says. "That puts a huge burden on the DOJ scheme" to prove that the complex requirements for T-Mobile and Dish will actually retain competition.
The submission, which is remarkably legible for a legal argument from a bunch of academics, says that gambling on Dish to compete is fundamentally wishful thinking. Dish "would try what no company has ever done before – to build and operate a nationwide wireless network, at a cost of at least $ 10 billion, from scratch, and in a short number of years."
And Singer just doesn't think this is going to happen because the business logic just isn't there. "Any rational company in Dish's position would rather milk the soft access arrangement, pay the fines for not building up and then roll back the spectrum to an established carrier before the huge investment costs are incurred to build," he says.
Since Dish has broken promises in the past to build a network with the spectrum it already has, the chances of the DOJ plan are even smaller, the authors say. "This important venture exceeds what Dish has previously promised, but has not delivered again and again," they write. "The DOJ's ambition to create a new competitor in these circumstances is fraught with a risk that it will certainly fail."
“The DOJ has accepted an authorization decree with Sprint / T-Mobile whereby Dish – a company with no history or presence in this industry – will try to compete in the near future as an MVNO reseller without a network and in the less near future can acquire sufficient assets and develop to become a fully-fledged wireless network provider, "write the authors. "But for that to happen, Dish will have to rely on the vague and non-credible promises of T-Mobile to act against its economic incentives."
To solve the problem that T-Mobile must support its own new competitor, the deal contains a long list of things T-Mobile must do, including specific traffic management requirements, operational support and three years of billing and customer support, but the authors say that list "implicitly reveals the enormous difficulties that arise when having one company that assists its direct competitor."
The government traditionally prefers & # 39; structural & # 39; solutions for merger problems, or simply selling assets and businesses without further supervision, while the DOJ plan a & # 39; behavioral & # 39; The remedy is that Dish and T-Mobile are trying to tell how to do business under the supervision of regulators. And that offers many opportunities for funny things, the authors say. "The extreme dependence of Dish on the good grace of New T-Mobile offers ample opportunities for … strategic prices, delay in supply, change of conditions or quality of assets and services," write the authors.
The authors also point out that the deal does not require Dish to build a nationwide network – the coverage target in the deal is 70 percent of the population, not 70 percent of the country. "It is clear that certain parts of the country will lose," the authors write. "[Dish can] cover 50 percent of the population by targeting only 15 percent of the most metropolitan areas in the US. Even if Dish achieves that 70 percent goal, the resulting network is unlikely to fully cover Sprint's ubiquitous national network replaced, leaving nearly 100 million Americans with fewer carrier-based facilities. "
The deposit, along with other comments about the proposed merger agreement, will first be submitted to the DOJ, who will then post it publicly and submit it to the court. There is still no timeline when the court makes a decision, but the government will have to respond – and figure out how to prove that making T-Mobile to have Dish Network build a network is somehow less complicated than anyone else To buy Sprint.