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Dish Nears Deal to Acquire Boost Mobile, Clearing Path for T-Mobile/Sprint Merger

Dish Network Corporation is in the final stages of talks to acquire assets that include valuable wireless spectrum and Sprint’s Boost Mobile brand for an estimated $6 billion, according to a report quoting anonymous sources published by Bloomberg News, clearing the way for the Department of Justice to approve the merger of T-Mobile and Sprint.

Dish could announce a deal as soon as this week, but sources caution the talks are still ongoing and a deal might still fall apart. A spinoff of Boost is reportedly essential for the Antitrust Division at the DoJ to approve the merger, because the regulator reportedly wants to preserve four national wireless carriers to protect wireless competition in the United States.

Dish has already warehoused extensive wireless spectrum, much of it potentially valuable for the future deployment of 5G wireless networks, but Dish has historically held its spectrum without launching any significant wireless operations. If Dish does acquire Boost, the deal will come with a pre-existing contract allowing the prepaid Mobile Virtual Network Operator (MVNO) to continue to use Sprint’s network to service its customers. Dish would also receive a portion of spectrum held by T-Mobile and/or Sprint with which it could build its own wireless network, but that would require billions in new investments from a satellite TV provider already under financial stress from the impact of cord-cutting.

At worst, the transaction could allow Dish to increase its spectrum holdings while running Boost’s existing prepaid wireless operation as-is, dependent entirely on Sprint for connectivity. If the merger is successful, T-Mobile plans to mothball a significant portion of Sprint’s CDMA wireless network, which could eventually force Boost to find a new host for its wireless services.

Wall Street analyst MoffettNathanson remains skeptical about the T-Mobile/Sprint merger and is even more puzzled by Dish’s reported involvement. The analyst firm released a research note to its clients warning the future of Boost may be bleak:

We’re not sure why that deal is sensible for anyone involved. Dish, remember, already has more spectrum than they know what to do with; what they lack is money and ground facilities, and the deal described on Friday wouldn’t deliver either one. Instead, it would make both problems worse. And while Boost would help provide a baseline revenue stream in return for an upfront purchase price, the fit between Boost and Dish is, at best, superficial. Yes Boost serves a budget conscious consumer, as does Dish Network’s satellite business, but Boost is a mostly urban brand and Dish’s satellite business is an increasingly rural one.

And, more urgently, Boost’s distribution poses a huge problem. Historically, Boost was heavily dependent on Walmart for retail gross additions, but they’ve since lost that distribution channel. They would also, presumably, lose distribution through Sprint-branded stores (and even if, as a condition of the deal, they didn’t, does anyone think that Sprint/T-Mobile store employees would direct any volume to a spun off Boost brand?) That would leave Dish with the brand that has a churn rate as high as 5% per month to be spun off with an inadequate distribution front end, and with no realistic path to replace that front end before the subscriber base was, well, gone.

BTIG’s Walter Piecyk appeared on CNBC Monday to warn investors they are being too optimistic about the T-Mobile/Sprint merger’s chances of being approved. He puts those chances at “less than 50-50.” (5:38)

In contrast, Dade Hayes, contributing editor at Deadline, believes the deal will ultimately win approval from the Department of Justice. He talks to Cheddar about what T-Mobile and Sprint are doing to win over regulators. (8:14)

Suddenlink Putting Its Lines Anywhere It Wants, Drooping in Yards and Roadways

Phillip Dampier June 17, 2019 Altice USA, Consumer News, Public Policy & Gov't No Comments

Suddenlink is taking full advantage of a lax approach to regulatory oversight in Texas by laying its cables just about anywhere it pleases, and without talking to local officials about exactly what the cable system is doing.

Huntington residents have been complaining to city officials about Suddenlink’s ongoing expansion of its cable system in the city, reporting the cable company is putting cables just about anywhere it wants, often leaving them drooping in yards and roadways. The Altice-owned cable company’s ultimate plans are a complete mystery to the city, because the cable company has said nothing specific about its expansion plans or where exactly the company’s crews are working.

The Lufkin Daily News reports Huntington City Manager Bill Stewart has been hearing second hand about Suddenlink’s expansion since March 2016, but the company has never approached the city formally to share details.

“For the most part, when they finally decided to do it they just started laying lines,” Stewart told the newspaper.

The quality of the construction work is what bothers residents, who complain Suddenlink’s lines are hanging low across yards and even across city streets, with no sign of repair crews willing to fix the problem.

“If they’re going to come in and do something, we expect it will be done right and will be taken care of correctly,” Stewart said. “We want to have a positive relationship with them. But things just need to be done differently if you’re going to come and do something like that. You need to fulfill what you say, and at this point a lot of people are upset because that’s not been done.”

Suddenlink’s response was a general statement:

“Since launching our Suddenlink by Altice broadband, TV, and phone services in Huntington earlier this year, we have seen great demand from residents and have been bringing additional resources to the area to ensure a positive experience for all of our new customers,” Suddenlink media representative Lindsey Angioletti said. “We thank our customers for their support and look forward to serving them with advanced products and services for many years to come.”

Charter Guilty of Sending “Untrue and Improper” Letters Inferring Windstream’s Days Were Numbered

The federal judge handling Windstream’s Chapter 11 bankruptcy reorganization has found Charter Communications culpable for mailing “untrue and improper” advertisements to Windstream customers implying the company was going out of business and abandoning its customers.

Bankruptcy Court Judge Robert Drain ruled in favor of a preliminary injunction forbidding Charter from sending any further letters of this type and requiring Charter to pay Windstream to mail clarification letters to all Windstream customers who received the false advertisements from Spectrum.

Judge Drain also ruled:

  • Charter must pay all costs to restore Windstream service for former customers who switched to Spectrum based on their understanding that Windstream was discontinuing service.
  • Charter may not imply Windstream is going out of business in any future solicitations, or suggest that its current financial difficulties will have any negative impact on service.
  • Charter is forbidden from using advertising messages including “Goodbye, Windstream, Hello Spectrum,” or “Windstream Customer, Don’t Risk Losing your TV and Internet Service” in either direct mail or door-to-door marketing campaigns.

Windstream complained to the bankruptcy court about Charter’s mailings, which it claimed were designed to mislead customers into thinking Windstream’s days were numbered.

N.Y. and California Head 10-State Lawsuit to Block T-Mobile/Sprint Merger

 James

New York Attorney General Letitia James and California Attorney General Xavier Becerra today filed an unusual multi-state lawsuit, along with eight other State Attorneys General to halt the proposed merger of telecom giants T-Mobile and Sprint, deciding not to wait for a decision from the Department of Justice, which is also reviewing the merger. The complaint, filed in the federal Southern District of New York court in coordination with Colorado, Connecticut, the District of Columbia, Maryland, Michigan, Mississippi, Virginia, and Wisconsin alleges that the merger of two of the four largest national mobile network operators would deprive consumers of the benefits of competition and drive up prices for cellphone services.

“When it comes to corporate power, bigger isn’t always better,” said Attorney General Letitia James. “The T-Mobile and Sprint merger would not only cause irreparable harm to mobile subscribers nationwide by cutting access to affordable, reliable wireless service for millions of Americans, but would particularly affect lower-income and minority communities here in New York and in urban areas across the country. That’s why we are going to court to stop this merger and protect our consumers, because this is exactly the sort of consumer-harming, job-killing megamerger our antitrust laws were designed to prevent.”

“Although T-Mobile and Sprint may be promising faster, better, and cheaper service with this merger, the evidence weighs against it,” said Attorney General Xavier Becerra. “This merger would hurt the most vulnerable Californians and result in a compressed market with fewer choices and higher prices. Today, along with New York and eight other partner states, we’ve filed a lawsuit to block this merger and protect the residents of our state.”

The states departed from traditional courtesies in the case, deciding to launch a pre-emptive legal challenge to the transaction without providing Justice Department officials advance notice of their decision to sue. That decision may have come after FCC Chairman Ajit Pai gave his full support for the merger, with indications the Republican majority on the FCC would also vote in favor of approving the deal. Staffers in the Antitrust Division of the Justice Department object to the merger, and are recommending it be rejected. But the Justice Department’s unpredictability, and its poor track record trying to block the AT&T-Time Warner (Entertainment) merger in court may have pushed the state attorneys general to also act on their own.

T-Mobile USA and Sprint are the third and fourth largest mobile wireless networks in the U.S., and are the lower-cost carriers among the “Big Four” — with market leaders Verizon Wireless and AT&T controlling the larest share of the wireless market. Intense competition, spurred in particular by T-Mobile and Sprint, has delivered declining prices, increased coverage, and better quality for all mobile phone subscribers. According to the Labor Department, the average cost of mobile service has fallen by roughly 28 percent over the last decade, while mobile data consumption has grown rapidly. The merger, however, would put an end to that fierce competition, argue the attorneys general, which has delivered a great number of benefits to consumers.

States with large urban poor communities are particularly sensitive to the merger, because both T-Mobile and Sprint focus their coverage on urban areas. With the average U.S. household spending $1,100 annually on wireless phone service, even small rate increases can dramatically increase service suspensions or disconnections due to late or non-payment.

“Low-and moderate-income (LMI) New Yorkers put a greater share of their household income toward their phone bill, and when you are looking at a budget that is already stretched thin, every dollar counts,” said Mae Grote, CEO of the Financial Clinic. “Cellphones now not only give us the ability to communicate with friends and family, here and abroad, but are increasingly the way we engage with many critical services. Our customers use cellphone apps to access public information, send and receive money, manage their SNAP benefits, look for a job, and even communicate with their doctors, and maintaining competition in the market for this critical service ensures LMI consumers have the same access to quality, affordable service as the more financially secure. The Clinic is proud to advocate on behalf of the communities we serve to protect their inclusion in the modern economy.”

The attorneys general investigation laid bare many of the alleged merger benefits offered by T-Mobile and Sprint to win approval of the merger. The group found many of the claimed benefits were completely unverifiable and were likely to be delivered years into the future, if ever. But within weeks of approving such a merger, the companies would have an immediate incentive to raise prices and reduce service quality. Sprint’s network, in particular, was scheduled to be largely mothballed as a result of the merger, even though Sprint provides coverage in some areas that T-Mobile does not. Although the two companies could identify several self-serving deal efficiencies that would reduce their costs and staffing needs, there is no evidence the merger would deliver consumers lower prices and were outweighed by the merger’s immediate harm to competition and consumers.

Additionally, the merger would harm thousands of hard-working mobile wireless independent dealers in New York and across the nation. The ten states are concerned that further consolidation at the carrier level would lead to a substantial loss of retail jobs, as well as lower pay for these workers in the near future.

Becerra

“CWA applauds the Attorneys General and especially General Letitia James’ leadership in taking decisive action today to prevent T-Mobile and Sprint from gaining anti-competitive power at the expense of workers, customers, and communities,” added Chris Shelton, president of the Communications Workers of America (CWA). “Reducing the number of national wireless carriers from four to three would mean higher prices for consumers, job loss for retail wireless workers, and downward pressure on all wireless workers’ wages. The states’ action today is a welcome development for American workers and consumers, and a reminder that regulators must take labor market concerns seriously when evaluating mergers.”

Before filing suit, the states gave significant consideration to T-Mobile and Sprint’s claims of increased coverage in rural areas. 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 U.S. 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.

“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,” stated Carri Bennet, general counsel for the Rural Wireless Association. “We are pleased that the New York Attorney General, along with nine states have filed their lawsuit to block the merger. The process at the FCC has not been transparent and the FCC appears to be blindly accepting New T-Mobile’s words as truth.”

The complaint was filed under seal, because it contains unredacted confidential information, in United States District Court for the Southern District of New York.  A redacted copy of the lawsuit is likely to be made available later.

T-Mobile currently has more than 79 million subscribers, and is a majority-owned subsidiary of Germany’s Deutsche Telekom AG. Sprint Corp. currently has more than 54 million subscribers, and is a majority-owned subsidiary of Japan’s SoftBank Group Corp.

Supreme Court Will Hear Comcast Appeal Over Accusations Its Channel Lineup is Racially Biased

WASHINGTON (Reuters) – The U.S. Supreme Court on Monday agreed to hear cable television operator Comcast Corp’s bid to throw out comedian and producer Byron Allen’s racial bias lawsuit accusing the company of discriminating against black-owned channels.

The justices will review a decision by the San Francisco-based 9th U.S. Circuit Court of Appeals that cleared the way for a $20 billion civil rights lawsuit against Comcast to proceed. At issue in the litigation is the refusal by Comcast to carry channels operated by Entertainment Studios Networks, owned by Byron Allen, who is black.

The justices did not act on a similar appeal by Charter Communications involving claims by Allen after the company also declined to carry his channels. That case likely will be guided by the outcome in Comcast’s appeal.

Comcast and Charter have said their business decisions were based on capacity constraints, not race, and that Allen’s channels, including JusticeCentral.TV, Cars.TV, Pets.TV and Comedy.TV, did not show sufficient promise or customer demand to merit distribution. Other television distributors, including Verizon, AT&T and DirecTV, carry some of Allen’s programming, court papers said.

“Comcast has an outstanding record of supporting and fostering diverse programming, including programming from African-American owned channels, two more of which we launched earlier this year,” the company said in a statement, adding that it hopes the Supreme Court will bring the case to an end.

Allen

Allen disputed the statement, saying the channels Comcast mentioned are not wholly owned by African Americans. Comcast, Allen said, “will continue to lose this case, and the American people who stand against racial discrimination will win.”

Entertainment Studios Networks sued in Los Angeles federal court, accusing the cable companies of violating the Civil Rights Act of 1866, a post-Civil War law that forbids racial discrimination in business contracts.

The suits brought by Allen pinned the rejections primarily on racial discrimination, accusing cable executives of giving insincere or invalid excuses and granting contracts to carry white-owned networks during the same period.

The lawsuits also alleged that the companies’ commitments to diversity are a sham and that they have used outside civil rights groups, such as Reverend Al Sharpton’s National Action Network, to provide cover for empty promises. Comcast called those accusations “outlandish.”

Both Comcast and Charter called the lawsuits a “scam” and sought to have the cases dismissed. But the 9th Circuit last year allowed the litigation to proceed.

At the heart of the case is the question of whether individuals who are refused a business contract can sue under the civil rights law without ruling out reasons other than discrimination for the denial. The 9th Circuit said lawsuits can proceed to trial if plaintiffs can show that discriminatory intent was one factor among others in the denial of a contract.

Reporting by Andrew Chung; Editing by Will Dunham

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