In a Tunney Act filing, “Preserving Wholesale/Resale Competition and Reducing Barriers to Future Facilities-Based Competition,” TPI President and Senior Fellow Scott Wallsten, weighs in with more original analysis of the proposed T-Mobile-Sprint Merger.
Testifying before a House Judiciary panel on the combination in March, Wallsten deflated the 4-3 merger arguments deployed by many merger critics, stating that little evidence supported a challenge of the merger. But he raised concerns about the companies’ “outsize shares” in wholesale and resale markets potentially harming low-income customers who tend to prepay for wireless.
The DOJ’s Proposed Final Judgement addressed these and other issues by locking in MVNO agreements, requiring divestment and lowering barriers to entry for DISH to grow as a facility-based provider.
How all of this turns out in the long run depends a lot on how the economics of 5G develops, and if DISH can make an impact in the market. It is on this question that Wallsten’s analysis breaks new ground again:
“If the claim of needing very large scale is correct, then DISH is unlikely to succeed and poses a minimal threat. However, in this case, allowing the merger is the correct policy because neither T-Mobile nor Sprint would be able compete effectively in the 5G world, leaving two major competitors. If their claim is incorrect and scale in 5G provision matters less than the parties believe, then T-Mobile by itself could be competitive and Sprint might survive. Because we cannot know for sure how industry economics will evolve, DOJ’s proposals create a kind of insurance policy: allowing the merger in case such scale is necessary, but reducing entry barriers for DISH in case minimum efficient scale turns out to be less than the parties predict. In other words, the DOJ proposal avoids the possibility of having only two competitors while increasing the possibility of four, depending on how the economics evolve.”
Scott Wallsten is President and Senior Fellow at the Technology Policy Institute and also a senior fellow at the Georgetown Center for Business and Public Policy. He is an economist with expertise in industrial organization and public policy, and his research focuses on competition, regulation, telecommunications, the economics of digitization, and technology policy. He was the economics director for the FCC's National Broadband Plan and has been a lecturer in Stanford University’s public policy program, director of communications policy studies and senior fellow at the Progress & Freedom Foundation, a senior fellow at the AEI – Brookings Joint Center for Regulatory Studies and a resident scholar at the American Enterprise Institute, an economist at The World Bank, a scholar at the Stanford Institute for Economic Policy Research, and a staff economist at the U.S. President’s Council of Economic Advisers. He holds a PhD in economics from Stanford University.
