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Chairman Nadler Opening Statement for the Subcommittee Hearing on “The State of Competition in the Wireless Market: Examining the Impact of the Proposed Merger of T-Mobile and Sprint on Consumers, Workers, and the Internet” 

Washington, DC, March 12, 2019
Tags: Antitrust

Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening remarks during a Subcommittee on Antitrust, Commercial, and Administrative Law hearing on the impact of the proposed merger of T-Mobile and Sprint on consumers, workers, and the Internet:

“Thank you, Mr. Chairman. I appreciate this opportunity to consider carefully the impact of the proposed merger of Sprint and T-Mobile on competition, consumers, and workers. While I do not prejudge the merits of any proposed merger, it is clear that this transaction, if approved by regulators, would usher in significant changes to the market for mobile wireless services.  Given the fact that 95% of American adults own a cellphone, and 20% use a mobile device as their primary means of accessing the Internet, it is critical that we closely analyze any proposed merger with such a wide-reaching impact. 

“As independent companies, Sprint and T-Mobile have each brought competitive and innovative products to market.  These products have not only benefited their customers, but have also benefited the customers of other wireless carriers, whose own carriers have had to compete with both companies. 

“For example, Sprint and T-Mobile’s re-introduction of unlimited data plans in 2016 resulted in lower monthly bills and better Internet access for millions of consumers.  These companies have also provided important services, such as competitive prepaid mobile wireless plans, to some of our most underserved communities.  These prepaid plans offer certain customers the ability to purchase wireless broadband and wireless cellular services without passing a credit check.

“I applaud both companies for their competitive efforts, for their ingenuity, and for serving consumers in every market.  In considering their proposed merger, however, we must determine whether this proposed new combined company, with a larger share of the marketplace, would have less incentive to innovate and to compete with other companies.

“I am concerned about any merger that would significantly increase the concentration in a market that is already highly concentrated.  There are only 4 national wireless carriers today: AT&T, Verizon, T-Mobile, and Sprint.  As a result of this transaction, there would only be 3, each of which would control about a third of the marketplace, thereby dramatically altering the competitive landscape.

“Consequently, the combined Sprint and T-Mobile may no longer have any market-based incentive to lower prices and to offer pro-consumer policies once it becomes as large as the other two carriers.  This, in turn, would harm other carriers’ customers, who have indirectly benefited from Sprint and T-Mobile’s competition over the past decade.

“Concerns have been raised about the merger’s impact on low income consumers who often must rely on cheaper, prepaid phones for their wireless service.  Because the proposed transaction would also consolidate the market for these services, it may have disproportionately negative effects on low-income households. This would be particularly harmful in major cities with large populations of middle and low income people, such as New York, which may experience even higher levels of concentration in the market for prepaid phones than in other regions.

“For their part, Sprint and T-Mobile offer a variety of justifications in support of this merger.  They argue that the transaction would enable New T-Mobile, as the company would be called, to ‘supercharge’ the market for wireless competition.  Its increased scale, they argue, would lead to better quality of its network, and would enable the development of innovative new products at dramatically faster speeds.  Moreover, they believe that the merged company would be in a better position to compete with the other wireless giants, and would push the other companies to offer better services to their customers.

“They also anticipate that the new company would expand its workforce and would invest up to $40 billion in the first 3 years after the merger.  This may lead to the creation of more jobs, better policies for consumers, and new competition in the broadband marketplace, thanks to the faster deployment of a nationwide fifth generation, or 5G, wireless network.

“These claimed benefits of the merger would be welcome developments for millions of employees and consumers.  They should be viewed with a healthy skepticism, however, in light of numerous mergers we have seen in recent years that have made economic promises that were ultimately not borne out. That is one reason why I introduced the “Restoring and Improving Merger Enforcement Act,” legislation designed to prohibit the consideration of spurious, unverifiable economic efficiencies to justify anticompetitive mergers.

“Merging parties routinely justify anticompetitive mergers under the guise of corporate restructuring, and other so-called efficiencies, which are generally code words for widespread layoffs and reduced wages and benefits for employees. Rather than create more efficient markets, waves of consolidation throughout the economy, over the past several decades, have imperiled the financial security of American workers and consumers.

“As a result, employers have immense power to reduce the wages, benefits, and economic mobility of workers, while consumers routinely pay higher prices for goods and services than they would in a competitive economy. When combined with the precipitous decline of collective bargaining, this massive consolidation has shrunk the middle class and has increased income inequality through stagnant wages and less economic opportunity.

“Needless to say, I am pleased that state and federal regulators are closely scrutinizing this transaction to determine what impact it may have on consumers and employees. And I appreciate Chairman Cicilline holding this hearing today so that Members of this Subcommittee may also examine the important questions that the proposed merger raises.  I look forward to hearing from our large panel of expert witnesses, including the CEOs of both Sprint and T-Mobile, and I thank them for their participation, who have rearranged their schedules on several occasions to accommodate congressional conflicts that have arisen. I yield back the balance of my time.”