Despite repeatedly promising the public and regulators that a merger of T-Mobile and Sprint would create thousands of new jobs, this week hundreds of Sprint employees are learning their old jobs are gone.

In a brief six minute conference call Monday hosted by T-Mobile vice president James Kirby, almost 400 people on the call learned their jobs with Sprint’s inside sales division were being eliminated and their last day of employment will be Aug. 17. It was just one of several conference calls announcing layoffs for Sprint’s sales teams, according to Techcrunch, notably those working on business and commercial sales. Other jobs targeted for cuts included national retail account executives, and indirect sales-affiliated account managers and executives.

So far, the pattern of layoffs is clearly favoring T-Mobile, with only a handful of top Sprint executives remaining with the company. In 2018, Sprint disclosed it had about 6,000 employees working in its headquarters city — Overland Park, Kan. T-Mobile has already made it clear it was slimming down Sprint’s operations there. A year ago, Sprint sold its headquarters campus to Wichita-based Occidental Management in a sale-leaseback deal, which freed up cash for Sprint, while allowing the company to continue renting the same office space. Consolidation is expected to reduce the number of buildings leased by the wireless carrier from 11 to just four.

According to employee messaging forum, thelayoff.com, many independent Sprint retailers are also being notified by T-Mobile their contracts to sell Sprint devices are being terminated in 120 days, which may result in store closures and additional job losses.

The job losses come despite repeated promises from former T-Mobile CEO John Legere to regulators and employees that the merger would result in job growth. Check the signs you were forced to quit your job to know if you are a victim of employment discrimination.

“In total, New T-Mobile will have more than 11,000 additional employees on our payroll by 2024 compared to what the combined standalone companies would have,” Legere claimed in an open letter last April.

Milken in the 1980s (Image: The Gentleman’s Journal)

President Donald Trump granted clemency on Tuesday to Michael Milken, the so-called “junk bond king” who violated scores of securities and insider trading laws and was instrumental in helping finance the creation of America’s cable monopoly.

Milken used his position at the now-defunct Drexel Burnham Lambert to run its “high-yield bond unit.” More commonly known as “junk bonds,” these high-risk securities are typically issued by companies to finance mergers and acquisitions, often to strip assets or put competing companies out of business.

As a result, a new era of media and telecommunications tycoons emerged. Many successfully gained control of other companies and consolidated them into business empires, significantly reducing or eliminating serious competitors. Most of those companies still hold dominant positions today or have since merged with even larger companies. President Trump credited Milken for helping “create entire industries, such as wireless communications and cable television.”

By the late 1980s, Milken had advised scores of firms to rely on leveraged junk bond financing of corporate takeovers, a practice that endures to this day. Milken financed Rupert Murdoch’s ambitions to turn what was once a small newspaper chain into News Corp., which today still dominates in broadcasting, cable news channels like Fox News, and newspapers including the Wall Street Journal.

Milken also helped arrange financing for Craig McCaw, an early pioneer in cellular communications that leveraged cellular licenses McCaw borrowed heavily to obtain into one of the country’s first major wireless companies. But McCaw found bigger riches buying and selling mobile companies, first acquiring MCI’s cellular division in 1986 and selling his family’s cable operations to what would later become Comcast. By 1990, McCaw was the country’s highest paid CEO. Four years later, he sold McCaw Cellular to AT&T for $11.5 billion. AT&T sold that wireless company to Cingular in 2004 and then acquired Cingular itself some years later. McCaw would later plow $1.1 billion of family and borrowed money to take control of Nextel in 1995, only to sell it 11 years later to Sprint for $6.5 billion.

Malone

The country’s first cable giant, Tele-Communications, Inc. (TCI) would not have been possible without Milken’s junk bond financing scheme. Cable tycoon John Malone acquired hundreds of regional cable operators to create a cable empire that was often loathed by subscribers. TCI leveraged its position as a de facto monopoly, scaring off competitors, raising prices, and often delivering horrendous service. Vice President Al Gore would later characterize the Milken-financed emerging cable industry as a “cable Cosa Nostra,” and Malone himself as “Darth Vader.”

Time Warner’s cable division was also created as a result of a wave of consolidation that snapped up countless locally owned cable operators and smaller operators run by various media companies. Ted Turner also depended on Milken’s junk bond financing to create Turner Broadcasting, turning what was originally a single UHF independent TV station in Atlanta, Ga., into a superstation seen around the country and the launch of Cable News Network, better known as CNN.

Sometimes Milken’s clients benefited from his advice, sometimes they became targets themselves. Years after Turner Broadcasting was a major powerhouse in the cable programming business, Time Warner relied on a similar acquisition strategy to acquire Turner Broadcasting itself. Milken reportedly received a $50 million bonus for “advising” on the transaction, despite being in jail at the time. Years later, TBS founder Ted Turner would regret the buyout, which took CNN and TNT out of his hands.

Turner

Other household names from the past and present that expanded as a result of Milken’s financial advice include Viacom (now a part of CBS), MCI (embroiled in one of the country’s largest fraud schemes before being quietly sold off to Verizon), Telemundo (now effectively owned by Comcast), and Metromedia (which sold its network of popular independent TV stations to News Corp., which rechristened them FOX television network affiliates).

Milken quickly attracted the attention of the Securities and Exchange Commission, which took years to build a case against the Wall Street star. It took arbitrageur Ivan Boesky to help bring Milken down after pleading guilty to securities fraud and insider trading. He ‘ratted out’ Milken, which prompted a major investigation of him and the investment firm he worked for.

Milken was eventually indicted for racketeering and securities fraud in 1989 and through a plea bargain, pleaded guilty to securities and reporting violations, which won him a reduced sentence. He was supposed to serve 10 years in jail, but was released after just 22 months for good behavior. He was also fined $600 million (later apparently reduced to $200 million), a fraction of his reported net worth of nearly $4 billion. Although Milken was permanently barred from the securities industry, he still received compensation from certain transactions after that ban, which raised eyebrows.

Critics claim Milken’s legacy emboldened Wall Street to engage in riskier behavior and to innovate new leveraging schemes. Some claim that eventually helped create the conditions leading to the 2008 Great Recession.

The president offered nothing but praise for Milken in his pardoning statement and claimed prosecutors were overzealous in pursuing Milken. The president received an earful of advice in favor of a presidential pardon from his Treasury Secretary, Steve Mnuchin, who is a close person friend of Milken and has flown on his private plane. Many Trump allies, including conservative powerhouse donors Sheldon and Miriam Adelson and property developer Richard LeFrak also lobbied the president on Milken’s behalf. So did the president’s personal lawyer Rudy Giuliani, who ironically helped prosecute Milken in the 1980s. Some benefactors of Milken’s financial advice were also in favor of a pardon, including Rupert Murdoch.

Milken’s fans have been persistently seeking pardon relief for years. They failed to win a presidential pardon from former president Bill Clinton in 2001, after a joint letter strenuously objecting to the idea was sent from the SEC and U.S. attorney’s office in the Southern District of New York. The letter said pardoning Milken would “send the wrong message to Wall Street.”

The era of fierce competition among live streamed video providers that has fueled cord-cutting will face new challenges as providers cope with rising programming costs and some may exit the business.

Last week, Sony’s PlayStation Vue announced it was planning to cease service in early 2020 because it was not profitable for the game console manufacturer. But Cowen analyst Gregory Williams believes it won’t be the last to close its doors.

Williams told Multichannel News that despite the growing phenomenon of cord-cutting, new streaming subscriptions are slowing down as subscribers choose between a half-dozen major services that are all raising prices, including AT&T TV Now, fuboTV, Hulu Live TV, Philo, Sling TV, and YouTube TV. Williams called the current marketplace for streaming services irrational in the business sense, because providers are at the mercy of programmers that are continuing to raise wholesale prices.

Another serious problem is price disparity. Programmers offer huge volume discounts to large cable, satellite, and telco TV providers, charging smaller streaming services considerably more. That could eventually bring streaming subscription prices to parity with the same traditional cable and satellite providers many consumers left looking for a better deal. Exploring fun options like slot gacor gampang menang can offer a rewarding break from these rising costs.

Most streaming TV providers have built business models on slimmed-down packages of channels, rejecting the difficult-to-negotiate a-la-carte “choose your own channels” model many customers have been asking for since the days of 100 channel cable TV lineups. As a result, consumers are still paying for lots of channels they do not watch or want, and as subscription costs advance beyond the $50 a month many services are now charging for a healthy package of most popular cable and broadcast networks, some subscribers may end up going back to their old providers.

Ironically, one of the few a-la-carte providers available is a very large cable company you may already know. Charter’s Spectrum has been quietly selling TV Choice, a package of 10 ‘you-pick’ networks (mostly a part of Spectrum’s Standard TV package) combined with C-SPAN, public, educational, and government access channels, home shopping, and local over-the-air stations, to its internet-only customers for $24.95 a month (not including a $6/mo Broadcast TV Fee and an extra $4.95 a month for a cloud-based DVR service). The resulting bill of around $35-40 a month is at least $10 less than many streaming service providers that may not offer the exact channel lineup you are looking for.

The closest alternative is Sling TV, which has very slim packages of networks in three different configurations, ranging from $15-25 a month. But chances are, some channels you watch won’t be included.

Williams predicts that just three to five services will survive the consolidation wave or exit that is expected to be triggered by Sony’s decision to leave the marketplace. The services most vulnerable are likely those lacking a deep-pocketed, healthy corporate backer or those with the least market share.

An executive for one of PlayStation Vue’s rivals told Multichannel News Sony faced platform costs that “were simply too high.” Sony paid broadcast retransmission consent fees to local stations in every market the service was offered and also licensed popular, but very expensive regional sports channels. Sony also outsourced its streaming technology to Disney-owned BAMTech, among the more expensive platform providers.

United States Circuit Judge Thomas L. Ambro has sat on the United States Court of Appeals for the Third Circuit hearing countless legal challenges of federal government rules, regulations, and laws since 2000. In fact, he has heard so many cases it might have worried petitioners when he opened his majority-held ruling with the words “Here we are again.”

Ambro (from the court’s decision):

“Here we are again. After our last encounter with the periodic review by the Federal Communications Commission (the “FCC” or the “Commission”) of its broadcast ownership rules and diversity initiatives, the Commission has taken a series of actions that, cumulatively, have substantially changed its approach to regulation of broadcast media ownership. First, it issued an order that retained almost all of its existing rules in their current form, effectively abandoning its long-running efforts to change those rules going back to the first round of this litigation. Then it changed course, granting petitions for rehearing and repealing or otherwise scaling back most of those same rules. It also created a new “incubator” program designed to help new entrants into the broadcast industry. The Commission, in short, has been busy. Its actions unsurprisingly aroused opposition from many of the same groups that have battled it over the past fifteen years, and that opposition has brought the parties back to us.”

FCC Chairman Ajit Pai is presiding over a sweeping deregulatory agenda that critics fear will further consolidate an already corporate dominated media landscape that has given a handful of companies approval to own and operate hundreds of radio and television stations, many in the same profitable media markets. One corporate owner can already own several local radio and TV stations and the FCC is working to further ease already relaxed ownership limits that could allow companies like Sinclair, Nexstar, and iHeartMedia to buy even more radio and TV stations.

The History of Broadcast Deregulation (1996-2019)

Judge Ambro

Deregulators targeting media ownership limits have been on a tear since the mid-1990s, with the first major changes in decades ushered in by the Clinton Administration’s 1996 Telecommunications Act, which required the FCC to conduct a review of media ownership rules every two years. The 1996 law required the FCC to determine “whether any of such rules are necessary in the public interest as the result of competition.” If not, the Commission is required by law to “repeal or modify any regulation it determines to be no longer in the public interest.”

What is in the “public interest” has historically been in the eye of the beholder. Democrats on the FCC have been wary of media consolidation and take a skeptical view of arguments that consolidation enhances competition and improves the efficiency of radio and television stations that can share resources. Democrats worry about the loss of diversity, cost-cutting, and consolidated control over news gathering operations. Republicans have been traditionally friendly to the argument that consolidation has allowed marginal stations to sell operations to a better funded corporate owner, with healthier broadcast competition the result. Republicans also argue regulation is unnecessary in a diverse media market where consumers have a choice of traditional broadcasters, satellite radio, cable television, internet streaming, etc. That makes strict ownership limits no longer necessary.

Neither side can argue with the fact that as a result of the 1996 Telecommunications Act, over 4,000 local radio stations were purchased from independent and small corporate owners and merged under the umbrella of a handful of giant corporate media companies. Although proponents of the 1996 Act claimed it would increase competition, in fact it did the exact opposite. With many stations now under the ownership of a handful of companies, corporate owners frequently programmed each station with a different format specifically to avoid head-to-head competition. While some listeners felt this increased the diversity of music formats heard on the air, many also noticed local voices began disappearing from those stations, replaced with automation or voices that originated in other cities. Some corporate owners cut costs by hiring a small team of announcers to program dozens of radio stations around the country. Local news coverage was also often among the first things to be cut.

Another consequence of the 1996 Act was a steep decline in minority ownership of stations. In particular, minority ownership of TV stations dropped to an all-time low since the federal government began tracking such data in 1990.

The consolidation wave did some corporate owners no favors either. Clear Channel Communications (now iHeartMedia), became a ripe target for a leveraged buyout after successfully acquiring hundreds of local stations. In 2008, Bain Capital and Thomas H. Lee Partners launched a successful takeover of Clear Channel for $24 billion, largely financed with debt that Bain and THL Partners put on Clear Channel’s books. Over 2,440 employee layoffs and cost cutting quickly followed, while the new owners leveraged the stations it now owned to maintain adequate financing to cover interest payments on its enormous debts. As The Great Recession took hold, advertising revenue diminished and credit markets became stingy and unforgiving. By 2010, the company faced bankruptcy and debt holders were growing impatient. Over the next several years, several debt restructuring efforts were undertaken to help the company pay down its debts, but debt holders finally had enough in 2018, forcing what is now known as iHeartMedia into bankruptcy reorganization.

The FCC itself later admitted that the consolidation frenzy caused negative effects that should be addressed. But the incoming George W. Bush Administration initially had other ideas and under the leadership of FCC Chairman Michael Powell, the majority of Republicans on the Commission supported further relaxation of ownership rules. In early 2003, the FCC held a single public hearing on the matter, which sparked outrage among many Americans concerned about the impact media consolidation had already had on their local stations. By June of that year, nearly two million letters from the public opposing further media consolidation had arrived at the FCC. The Commission, despite the public outcry, ultimately voted 3-2 to repeal a long-standing ban prohibiting a local newspaper from also owning a local television station (or vice versa) and also relaxed other ownership rules, claiming they were no longer necessary to protect competition, localism, or ownership diversity.

Among the changes:

• Any one company could now own up to 45% of local stations in a market (it was 25% in 1985, relaxed to 35% in the 1990s).
• The newspaper/TV station cross-ownership ban was eliminated.
• Alternative forms of media and their popularity would now be considered when determining whether a company owned or controlled too much of a local media market. The FCC would now also consider magazines, cable channels, and internet services to decide if one owner had become too dominant.
• License renewals no longer considered whether a station was adequately serving in the “public interest.”

Community Activists Strike Back at Corporate Consolidation and Media Homogenization

The FCC’s ability to ram through the rules changes, despite public opposition, was immediately met with a formidable 2003 court challenge by the Prometheus Radio Project, a non-profit advocacy and community organizing group that opposed corporate consolidation of radio stations and supported the low-power (LPFM) radio movement, which sought low-cost licensing of community radio stations to preserve localism and provide diverse radio programming.

Prometheus Radio Project v. FCC garnered support from several independent broadcasters and community groups like the Consumer Federation of America, the National Council of Churches of Christ, and the Media Alliance. In 2004, the same U.S. Third Circuit Court of Appeals that heard the most recent case against the FCC’s deregulation efforts ruled 2-1 in favor of Prometheus. The decision was written by the same Judge Ambro that remarked ‘here we are again’ this week. The ruling required the FCC to re-examine its media ownership rules and found the FCC’s justifications for the changes to be inadequate and in one case relied on “irrational assumptions and inconsistencies.” The Supreme Court later affirmed the Court of Appeals’ decision, frustrating the efforts of deregulators.

Media consolidation was once again a priority item on the FCC’s agenda after the election of President Donald Trump. Republican FCC Chairman Ajit Pai once again took aim at the already-relaxed media ownership rules to relax them even further. In a Republican-dominated 3-2 decision in November, 2017, the FCC once again eliminated the newspaper/TV station cross-ownership ban and would now permit one company to own two of the four largest television stations in a market, instead of just one.

Those changes were the ones struck down this week by the Court of Appeals.

FCC and Its Allies: Since You Don’t Stand to Make Millions from Consolidation, You Should Have No Say

An exasperated Judge Ambro repeatedly took the FCC (and indirectly Ajit Pai, the current chairman) to task for ignoring the Court’s instructions on formulating media ownership policies that would survive court challenges.

But first, Ambro’s decision eviscerated attempts by the FCC and interest groups allied with its deregulation policies to undercut public and opposition participation in the debate. First, both argued that the opposition lacked standing to sue the FCC in court over its new deregulation policy because they do not have any business interests at risk and cannot be harmed directly by the decision to deregulate. When the opposition filed legal briefs to prove standing, the FCC and its allies argued it was too late to submit proof and it should not be considered by the court.

Ambro’s decision rejected those arguments, noting “the same parties have been litigating before us for a decade and a half. It was not unreasonable […] to assume that their qualification to continue in the case was readily apparent.”

Ambro also took issue with the FCC’s argument that those in opposition to its new rules were only speculating it would lead to consolidation.

“The problem is that encouraging consolidation is a primary purpose of the new rules. This is made clear throughout the Reconsideration Order, see, e.g., 32 F.C.C.R. at 9811, 9836,” Ambro wrote. “The Government cannot adopt a policy expressly designed to have a certain effect and then, when the policy is challenged in court by those who would be harmed by that effect, respond that the policy’s consequences are entirely speculative.”

But it did not stop the FCC from trying.

The FCC also argued that opponents were worrying too much about the impact of the new rules. FCC lawyers reminded the court the agency would still carefully consider any new merger proposals put before it. Judge Ambro found that argument “immaterial.”

“The point is that, under the new rules, it will approve mergers that it would have rejected previously, with the rule changes in the Reconsideration Order the key factor causing those grants of approval,” Ambro wrote.

“We emerge from the bramble to hold that Regulatory Petitioners have standing,” Ambro concluded, signaling his irritation with attempts to stymie the lawsuit against the FCC.

Why the Top-Four Station Limit Matters

One of the groups allied with the FCC attempted to argue that the “top-four rule” that forbids any one company from owning or controlling more than one of the top-four television stations in a major local market is arbitrary, irrational, and indefensible.

But the court ruling explained why the rule exists and why it matters.

“The basic logic of the top-four rule, as we recognized in 2004, is that while consolidation may offer efficiency gains in general, mergers between the largest stations in a market pose a unique threat to competition. Although there might be other more tailored, and more complex, ways to identify those problematic mergers, the simplest is to declare, as the Commission has done, that mergers between two or more of the largest X stations in a market are not permitted. The choice of X must be somewhat arbitrary: each market’s contours will be slightly different, and no single bright-line rule can capture all this complexity. But the television industry does generally feature a distinct top-four, corresponding to the four major national networks, and four is therefore a sensible number to pick. And this is exactly the kind of line-drawing, where any line drawn may not be perfect, to which courts are the most deferential.

“[…]The Commission has the discretion to adopt a blunt instrument such as the top-four rule if it chooses. Indeed we confronted, and rejected, this exact argument—that treating all top-four stations the same wrongly ignored the variation in market structures—in Prometheus I. Id. at 417–18.

“Nor is it improper that the FCC’s justification for this rule is the same as it was in the 2002 review cycle. Section 202(h) requires only that the Commission think about whether its rules remain necessary every four years. It does not imply that the policy justifications for each regulation have a shelf-life of only four years, after which they expire and must be replaced.”

The fear is that if one company owns the local NBC and CBS affiliate in a large city, that company automatically will control a much larger percentage of the TV audience than any other station in the market. That can directly impact advertising rates charged by those stations, force other stations to consider similar mergers to maintain their market share, and leave many cities with two owners controlling the ABC, CBS, FOX, and NBC stations in a market. That would also put independent stations at a marked disadvantage, unable to attract advertisers that will expect the audience numbers combined stations would get.

The group opposed to this rule also claimed that the FCC must reaffirm and defend the very existence of this rule during each regulatory review period, an argument that was also rejected by the court decision. A FCC hostile to the rule would likely not mount much of a defense to justify it.

The FCC’s Newest Loophole: Alleged Diversity

One FCC proposal that partly escaped criticism from the court was a new radio “incubator” program that would relax ownership limits for radio station owners participating in the project. The incubator program is designed to “support new and diverse entrants in the radio broadcasting industry by encouraging larger, experienced broadcasters to assist small, aspiring or struggling broadcasters that otherwise lack the financing or operational expertise necessary to own and operate a full-service radio station.”

Critics contend the incubator program is a giant ownership limit loophole waiting to be exploited by large corporate station owners. Although initially protecting the new station’s independence for at least two years, the large corporate owner “helping” the new station become established can later buy the station, or manage the station’s programming and advertising inventory as soon as two years after the station gets on the air. Further, the corporate owner that will receive a waiver on station ownership limits for participating can ‘cash in’ that voucher in any market of “a similar proportion” to the one where the new station is launching. Most assumed that meant a market similar in size to population. But in fact it was defined as a market with a similar number of licensed radio stations.

The “market size” epic loophole would allow a corporate entity to set up a station in a relatively small sized city with a lot of licensed radio stations, such as Wilkes-Barre, Pa., which has 45, and take the resulting ownership waiver and “cash it in” by buying up a sixth extraordinarily valuable FM station in New York City, which has around 40 licensed stations on a very crowded radio dial.

The FCC attempted to place some limits on obvious loophole exploitation, like finding a front person to participate in the incubation program but allow the corporate “helper” to silently and secretly operate the station. But there are no obvious limits on allowing family members of corporate entities to participate. A similar loophole allowed Sinclair Broadcasting to acquire a significant number of additional TV stations above ownership caps by claiming they were in fact run independently by a family member of the CEO. There are multiple ways to abuse or exploit the program, but the court found the FCC gave adequate notice of the scope and rules of the project. The program’s impact on minority ownership was another matter, and the incubation program was put on hold as well because the FCC did not provide enough evidence of how the program would impact minority station ownership.

Judge Calls FCC’s Analysis Skills Insubstantial

“Problems abound with the FCC’s analysis,” Ambro wrote regarding the impact the FCC’s rules changes would have on minority ownership. “Most glaring is that, although we instructed it to consider the effect of any rule changes on female as well as minority ownership, the Commission cited no evidence whatsoever regarding gender diversity. It does not contest this. Instead it notes that ‘no data on female ownership was available’ and argues that it ‘reasonably relied on the data that was available and was not required to fund new studies.'”

Judge Ambro warned courts have frequently found certain FCC rules that were introduced without careful consideration of their impact are “arbitrary and capricious” and subject to be overturned at any time.

Ambro told the FCC it must do better.

“The only ‘consideration’ the FCC gave to the question of how its rules would affect female ownership was the conclusion there would be no effect. That was not sufficient, and this alone is enough to justify remand,” Ambro wrote. “Even just focusing on the evidence with regard to ownership by racial minorities, however, the FCC’s analysis is so insubstantial that it would receive a failing grade in any introductory statistics class.”

Ambro called the FCC’s analysis “woefully simplistic” because it attempted to use disparate data from two different federal agencies to measure minority ownership of broadcast stations, but the two entities asked different questions and used different methodologies.

“Attempting to draw a trendline between the [one agency’s data with another’s] is plainly an exercise in comparing apples to oranges, and the Commission does not seem to have recognized that problem or taken any effort to fix it,” Ambro complained.

Ambro also noted the FCC did not bother to estimate the number of minority-owned stations that would theoretically exist if the agency never changed its ownership rules.

Come Back to the Court With Your Homework… Finished

Judge Scirica

Ambro predicted an inevitable appeal of the court decision and additional litigation surrounding this week’s ruling. He warned the FCC that using the current majority to ram new rules through is not adequate and the FCC must prove the merits of its arguments if it wants to survive a court challenge. Ambro “remanded” or sent the proposed new rules back to the FCC to review and revise.

“On remand the Commission must ascertain on record evidence the likely effect of any rule changes it proposes and whatever ‘eligible entity’ definition it adopts on ownership by women and minorities, whether through new empirical research or an in depth theoretical analysis. If it finds that a proposed rule change would likely have an adverse effect on ownership diversity but nonetheless believes that rule in the public interest all things considered, it must say so and explain its reasoning,” Ambro wrote. “If it finds that its proposed definition for eligible entities will not meaningfully advance ownership diversity, it must explain why it could not adopt an alternate definition that would do so. Once again we do not prejudge the outcome of any of this, but the Commission must provide a substantial basis and justification for its actions whatever it ultimately decides.”

FCC Chairman Ajit Pai blasted the court decision and vowed an appeal, citing the partial dissent of Judge Anthony Joseph Scirica, who has consistently supported a number of the FCC’s deregulation efforts.

“For more than twenty years, Congress has instructed the Federal Communications Commission to review its media ownership regulations and revise or repeal those rules that are no longer necessary,” Pai said. “But for the last 15 years, a majority of the same Third Circuit panel has taken that authority for themselves, blocking any attempt to modernize these regulations to match the obvious realities of the modern media marketplace. It’s become quite clear that there is no evidence or reasoning — newspapers going out of business, broadcast radio struggling, broadcast TV facing stiffer competition than ever — that will persuade them to change their minds. We intend to seek further review of today’s decision and are optimistic that the views set forth today in Judge Scirica’s well-reasoned opinion ultimately will carry the day.”

 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.