Most of these projects were previously designated as “Phase 3 Awardees,” but the FCC will now supply the funds needed to begin construction through the Connect America Fund.

 

 

July 15, 2019

Mr. John C. Rhodes
Chief Executive Officer, NY State Dept. of Public Service
Three Empire State Plaza
Albany, NY 12223-1350

Re: 15-01446/15-M-0388 Settlement Agreement: Joint Petition of Charter Communications and Time Warner Cable for Approval of a Transfer of Control of Subsidiaries and Franchises, Pro Forma Reorganization, and Certain Financing

cc: Hon. Kathleen Burgess

Dear Mr. Rhodes,

We are writing to receive clarification regarding the “Order Adopting 2019 Settlement Agreement and Reconsidering Other Related Actions” (issued and effective July 11, 2019).

On page 28 of that document, the Commission comments on Stop the Cap’s recommendation that Spectrum customers in New York State benefit from an immediate upgrade in download speed to 200 Mbps, which is presently available in approximately half of Charter Communications’ national footprint.

The Commission rejected our recommendation, commenting in response:

“Moreover, its request for internet speed upgrades are also beyond the scope of the 2019 Settlement agreement, but the Commission notes that Charter is already required to increase its network speed to 300 Mbps by the end of 2019.”

That response suggests the Public Service Commission considers Charter’s original merger obligations not yet achieved, because the current speed received by most Spectrum customers is 100 Mbps, not 300 Mbps.

However, Charter Communications considers its speed obligations to New York complete, and ahead of the scheduled deadline, as noted in its May 20, 2019 “Annual Update” to the PSC[1]:

“Moreover, under Condition I.A.2, by December 31, 2018, Charter was required to offer broadband service with download speeds up to 100 Mbps to all customers served in New York (including Columbia County) and speed levels up to 300 Mbps by the end of 2019. Charter has far exceeded these conditions, through its Spectrum Internet Gig service offering, which provides all customers throughout New York access to download speeds of up to 940 Mbps. Accordingly, Charter is pleased to report that its implementation of network modernization and broadband speed increases have been completed ahead of the specified the Merger Condition deadlines.”

We are writing to receive clarification about the Commission’s interpretation of the Merger Order and its definition of “network speed.”

The Commission made it a requirement that Charter “increase its network speed” to 300 Mbps by the end of 2019. We would like to know what the Commission considers “network speed.” Does that refer to speed a cable system is capable of optionally providing customers (that presumably choose to pay more for a premium service tier) or was that to be the defined minimum base speed of Spectrum’s entry-level residential broadband product (excluding Spectrum Internet Assist)?

Charter has interpreted the Merger Order to mean “download speeds up to 100 Mbps” for all customers and “speed levels up to” 300 Mbps, but only optionally, by the end of 2019.

Time Warner Cable operated cable systems in New York City, Central New York, and parts of the Hudson Valley and Capitol District that were already capable of offering customers the option of 300 Mbps service before the merger between Charter and Time Warner Cable was announced[2].

Does the Commission accept Charter’s interpretation of the Merger Order or does it believe Charter has a yet unfinished obligation to raise the base internet speed to all New York customers to at least 300 Mbps by the end of 2019?

We would greatly appreciate receiving clarification on this point, because it is apparent Charter is currently disadvantaging New York broadband customers with broadband service at half the speed offered in other states.

Very truly yours,

Phillip M. Dampier
President and Founder

[1] Charter Communications, Inc. Annual Update 2019, May 20, 2019 p. 3

[2] https://www.businesswire.com/news/home/20150714005039/en/Time-Warner-Cable-Announces-Expansion-%E2%80%98TWC-Maxx%E2%80%99 (July 14, 2015)

The New York Public Service Commission on Thursday approved its final settlement proposal with Charter Communications in a 3-1 vote, allowing Spectrum to continue as the dominant cable operator in New York State.

The Commission rejected all recommended changes from consumer groups (including Stop the Cap!), industry trade associations, and service providers, preferring its own Settlement Agreement.

In July 2018, the PSC voted to rescind approval of the 2016 Merger Order that allowed Charter to assume control of Time Warner Cable franchise areas in New York. The Commission found that Charter had violated a key merger condition requiring the cable operator to expand its service area on a timely basis to reach 145,000 rural homes and businesses that lack broadband service. The Commission found Charter was attempting to count newly constructed condos and multi-dwelling units in the New York City area towards that commitment, which the Commission claimed violated the terms of the agreement. After Charter argued it had the legal standing to define its network buildout more broadly and on its own terms, the Commission held an emergency meeting where it took the unprecedented step of voting to de-certify the merger and throw the cable company out of New York.

The Commission and Charter’s lawyers began private negotiations almost immediately after the vote, signaling the Commission was amenable to settlement talks.

The final settlement approved last week, nearly one year after the vote, narrowly focuses on Charter’s rural broadband commitment, reaffirms and expands it with a new $12 million rural broadband fund paid for by Charter. The cable company also agreed to stop counting addresses in the New York City area towards it broadband expansion commitment, and will deposit a $2,800 payment to escrow for each address where Charter misses its target construction deadline.

“We’re pleased the PSC has approved the agreement, and we look forward to continuing to serve our customers and expanding the availability of high-speed broadband in New York State,” Andrew Russell, Charter spokesman told the (Albany) Times-Union. “We thank the PSC, Chairman Rhodes, the commissioners and staff for working with us throughout this process.”

The settlement details:

• Charter will complete the expansion of its existing network to pass 145,000 addresses entirely in Upstate New York. This expansion will not include New York City addresses, which the company had previously planned to include in an earlier buildout plan. To date, Charter has passed approximately 65,000 of the required 145,000 addresses. To comply with the settlement, the Department estimates that the company will invest more than $600 million, more than double the public benefit value estimated by the Commission in its 2016 merger approval.
• Charter’s expansion will be completed by September 30, 2021, in accordance with a schedule providing frequent interim enforceable milestone requirements, with corresponding reporting and accountability.
• Charter will also pay $12 million for additional broadband expansion projects at locations to be selected by the Department of Public Service and the New York State Broadband Program Office. Of the $12 million payments, $6 million will be administered by the New York State Broadband Program Office and $6 million will be paid into an escrow fund for work that will be completed by Charter at the State’s direction.

In Rochester, Stop the Cap! was disappointed to learn the PSC had rejected recommendations on improving the settlement.

“We feel all New Yorkers have paid a price for this bad merger, including skyrocketing cable bills and a yet to be determined number of rural residents that will fall through the cracks and end up serviced by no one,” said Phillip Dampier, the group’s founder and president. “We applaud the PSC requiring Charter to serve additional rural households, but every customer should get better service from Charter, including the 200 Mbps download speed that customers in many other states receive, and there must be a better solution for low-income residents that don’t qualify for Spectrum’s restrictive Internet Assist program and cannot afford $65 a month for internet access.”

Stop the Cap! today also filed a clarification request with the PSC about Charter’s internet speed commitment.

“There seems to be confusion about exactly what internet speed Spectrum should be offering its New York customers,” Dampier added. “The PSC seems to imply Charter has not yet met its obligation to increase internet speed to 300 Mbps by the end of 2019, while Charter considers the fact it offers gigabit service as evidence it has completed all of its speed obligations to New York State regulators. We want the PSC to clarify if it still expects Charter to offer 300 Mbps as a base speed to customers by the end of this year or whether the mere availability of speeds at or above 300 Mbps (which Time Warner Cable was already offering a significant part of New York a year before the Charter merger) has satisfied this merger condition.”

July 8, 2019

Hon. Kathleen H. Burgess
Secretary to the Commission
New York State Public Service Commission
Three Empire State Plaza
Albany, NY 12223-1350

Re: 15-01446/15-M-0388 Joint Petition of Charter Communications and Time Warner Cable for Approval of a Transfer of Control of Subsidiaries and Franchises, Pro Forma Reorganization, and Certain Financing Arrangements – Settlement Proposal

Dear Secretary Burgess,

Stop the Cap!, a party in this proceeding that has regularly contributed to the record since the original application by Charter Communications to transfer control of cable systems formerly owned and operated by Time Warner Cable, is pleased to provide our comments regarding the April 19, 2019 proposed settlement between the Department of Public Service/Public Service Commission and Charter Communications, Inc.

Our organization and our members remain actively interested and engaged on this transaction and the impact it has had on consumers and businesses in New York State. We believe that all New Yorkers were harmed as a result of Charter’s lack of compliance with the 2016 Merger Order.

Stop the Cap! believes the existing settlement proposal lacks adequate compensation for the millions of New Yorkers that are now paying higher prices for internet service, receiving compromised service in the New York City area due to an ongoing, unsettled strike action, rural residents still waiting for Charter to meet its commitments to expand its network, and those low income New Yorkers that have been disadvantaged by the difficulty of obtaining affordable internet service. At the time of this submission, nearly half of Charter’s national footprint provides twice the internet speed New Yorkers now receive, making a mockery of the claim that Spectrum provides best-in-class service in this state.

Therefore, we believe the current settlement proposal as offered is insufficient and does not provide adequate compensation to New York consumers and businesses.

Cost Concerns and Charter’s Impact on New York’s Digital Divide

Stop the Cap! objected to the 2016 merger because of our fears it would result in higher prices for internet service for consumers in New York, exacerbating the digital divide. We believe there is now strong evidence to back our concerns.

Since the DPS/PSC issued the original 2016 Merger Order, New Yorkers now pay substantially more for internet service than was the case with Time Warner Cable. Although Charter has significantly raised broadband speeds in New York State, it has also reduced the number of budget-priced options ordinary customers have for broadband service.

In 2016, prior to the Merger Order, Time Warner Cable charged customers as follows (rates applicable to customers in Rochester, N.Y.)[1]:

• Everyday Low Price Internet ($14.99)
• Basic Internet ($49.99)
• Standard Internet ($59.99)
• Turbo ($69.99)
• Extreme ($79.99)
• Ultimate ($109.99)

In 2019, Spectrum offers faster speeds than Time Warner Cable, but at a higher cost[2]:

• Spectrum Internet ($65.99)
• Spectrum Ultra ($90.99)
• Spectrum Gig ($125.99)

The broadband options for low-income New Yorkers have been drastically reduced by Spectrum. Faster speed is of little concern to low income residents that cannot afford the service. New Yorkers saw their cable bills rise as a direct result of this merger, as we predicted. The minimum cost for standalone broadband service from Spectrum for the majority of consumers is now $65.99 a month, and the company has become far more reticent about negotiating customer retention deals that discount the cost of service than its predecessor Time Warner Cable. In fact, Charter CEO Thomas Rutledge made a point of promising to end the “Turkish bazaar” of pricing promotions at Time Warner Cable after the merger[3]. Customers are now subjected to “take it or leave it” pricing[4].

Spectrum’s concern for low income customers in New York is dubious. Stop the Cap! recommended, and the PSC adopted a condition in the 2016 Merger Order temporarily extending the availability of Time Warner Cable’s $14.99 “Everyday Low Price Internet” (ELP) tier of service, available on a standalone basis to any consumer without pre-qualification. However, after Spectrum announced its own plans and pricing, the company never significantly marketed the option of ELP service to its New York customers. In fact, while the company heavily promoted its own conditional Spectrum Internet Assist (SIA) package, consumers informed us they could not subscribe to ELP in New York because Charter customer service representatives misinformed them the service was no longer available, or they confused it with SIA and told them they were not qualified for discounted internet service. It is our testimony that only the most persistent and well-informed customers were likely to successfully sign up for the ELP program, often requiring multiple attempts to do so[5].

The differences between ELP and SIA are stark. ELP required no pre-qualification and customers could keep the package as long as they liked. SIA is limited to customers that qualify for the National School Lunch Program (NSLP), the Community Eligibility Provision of the NSLP, or seniors 65 and over that qualify for Supplemental Security Income[6]. Customers must re-qualify at set intervals to continue eligibility, leaving out low income households without school-age children or seniors on limited incomes but lack SSI eligibility. More importantly, Charter protects its revenue stream by denying eligibility to all customers with pre-existing Spectrum internet service. To qualify, a customer would have to disconnect internet service for at least 30 days, have no outstanding debt with Charter within one year prior to applying for service, and once an SIA customer be sure not to have any outstanding debt with Charter subject to Charter’s “ordinary debt collection procedures.”[7] ELP service, in contrast, was available as an option at any time, to anyone.

Charter’s Speed Gap

New York residents do not uniformly benefit from the best in class service available from Charter Communications. Nearly half of Charter’s footprint outside of New York now offers customers entry-level download speeds of 200 Mbps at the same price most New Yorkers pay for 100 Mbps[8].

Failure to Comply With Rural Broadband Buildout Obligations

The PSC’s decision to rescind approval of the 2016 Merger Order between Time Warner Cable and Charter Communications was done after substantial evidence showed Charter had failed to meet the important obligations to rural New Yorkers required of it to make the merger meet the public interest test.

These failures were systemic and have compromised our rural economies by delaying much-needed internet access. It is for this reason that much of the settlement must be focused on correcting these deficiencies and, as a penalty for underperformance, broaden the number of required passings to deliver service to an even greater number of residents and businesses.

We welcome the settlement proposal to target penalties to help fund further broadband expansion. After years of talking to rural New York residents, it is clear New York’s rural broadband problem will continue after the conclusion of the state’s own broadband expansion program. We have heard from New Yorkers that are deeply concerned because the providers originally designated to serve their rural addresses have now refused to offer service or wrongly claim it will be made available by another provider. There is significant confusion and we fear many rural addresses are likely to “fall through the cracks” and end up serviced by no one.

Therefore, guaranteeing that rural New Yorkers have access to 21^st century broadband service should be of the highest priority.

More than 78,000 New Yorkers have been assigned inferior internet access through HughesNet, a satellite internet provider[9]. HughesNet will allow those New Yorkers designated for satellite service through the Broadband Program Office (BPO) to use up to 100 GB of data per month before throttling service speeds to 1-3 Mbps for the balance of the billing period[10]. HughesNet also cannot guarantee to meet the FCC’s minimum speed definition of 25 Mbps and more importantly, provides an inadequate usage allowance[11].

Spectrum does not cap data usage or utilize speed throttles, while HughesNet severely throttles internet speeds of customers exceeding a data allowance we consider paltry. Recent research reports the average U.S. household now consumes 282.1 GB per month in areas where flat-rate internet service is offered. This leaves addresses designated for satellite service at a significant disadvantage[12].

The BPO has indicated that addresses assigned to the HughesNet program came as a result of a lack of suitable bids to service those addresses with traditional wireline service. There is clear evidence that providers are dissuaded from serving these high cost areas as a result of a lack of return on investment. Therefore, incentivizing Charter Communications to consider servicing as many of these addresses as practical is in the best interests of New Yorkers.

It is our view that cable broadband service is far superior to many current wireless, satellite, and copper-based DSL services, and we believe that technological capability should be a factor in considering whether to credit Charter for an overlapping new passing. We strongly recommend that Charter be encouraged in every way possible to extend service to as many customers currently designated for satellite internet service as possible. Although the proposed settlement does not punish Charter for extending service into these areas, it is reasonable to assume that the company would not otherwise extend service to these locations without receiving some direct or indirect financial benefit or subsidy. Therefore, we argue that Charter should be credited for any and all new passings in satellite-designated areas, without limit. However, we also believe the 30,000 minimum passing requirement is too low, as is the allowed designation of “substantial compliance” after passing 28,500 homes.

The exceptional amount of confidentiality surrounding Plans of Record among the different providers, including Charter, is not in the public interest and prevents impacted New Yorkers from fully participating in this important process. Since these areas have been historically underserved or unserved, there is little, if any, competitive risk by divulging the Plans of Record publicly. Charter’s rural buildout plans and progress reports should be publicly available. As it stands today, we remain unclear about how many already-passed or planned-to-be-passed homes are a part of the 30,000 the Commission proposes to count. Having that information is crucial to offering informed views about the proposed settlement.

With respect to wireline service overlap, we believe that consumers should benefit from the best possible service provider. We recognize that with limited funds available, duplicative service should be avoided. However, if Charter overlaps with another provider, and if the broadband speed Spectrum offers is superior to what is available from the incumbent wireline provider, it should receive credit for that passing even if in excess of 9,400 addresses, so long as that area is designated as rural and underserved.

Incremental Build Commitment

Stop the Cap! strongly approves of the settlement recommendation to establish a fund for supplementary broadband expansion beyond the original commitments defined in the 2016 Merger Order.

However, we offer some recommendations that we believe will make the fund’s purpose more practical to address the real-life experiences rural New Yorkers encounter when requesting that Charter extend service to a presently unserved address.

Charter Communications, like all cable companies, has a confidential formula to determine a reasonable return on investment when considering whether or not to expand service to a currently unserved address. Cable operators designate an amount the company is willing to pay out of pocket to cover construction/expansion costs. That number is often different for residential and commercial subscribers.

The proposed ceiling of $10,000 is very low in our opinion. Rural New York residents seeking Spectrum cable service are frequently quoted prices far in excess of this amount to extend service from a nearby served location. We believe this ceiling should be at least doubled to $20,000 and should be separate from the amount of money Charter routinely self-funds for qualified buildouts. For example, if Charter is traditionally willing to self-fund up to $2,500 of the cost of supplying service to a new residential or commercial customer, a project budget up to $22,500 would be acceptable to proceed, with $2,500 in funds coming from Charter and the remaining $20,000 coming from the Incremental Build Account.

We also recommend that any address rejected for consideration for service expansion for cost reasons be formally notified and offered an opportunity to participate in the process and permitted to optionally finance any cost in excess of the ceiling amount. The current proposal lacks any provision for the participation of residents and businesses in this process. At least some might choose to voluntarily participate in a cost-sharing opportunity to extend cable broadband service to their address.

Impact of Ongoing Strike in the New York City Area

For more than two years, at least 1,500 Spectrum employees affiliated with the International Brotherhood of Electrical Workers Local 3 have been on strike in the New York City area. As a result, Spectrum customers have been subjected to a declining level of service as highly-qualified technicians remain off the job[13]. Charter Communications’ merger with Time Warner Cable was only approved in New York if it met a public interest test, and there is significant evidence New York City customers are not getting the level of service they would otherwise receive if there was no strike action[14].

As a result, the PSC should carefully study the impact of the strike on New York City customers and find any means available to compel a fair settlement and end this historically long labor dispute. Customers are caught in the middle, and there is evidence Charter may not be employing an entirely local workforce to service its customers in the New York City area. This strike would likely have not occurred had Time Warner Cable still been the incumbent cable provider.

Stop the Cap!’s Recommendations for a Revised Settlement Between Charter Communications and the Department of Public Service/Public Service Commission

1. In recognition of the fact Charter has exacerbated the digital divide by pricing internet service higher than its predecessor, Charter must agree to further extend the availability of its Everyday Low Price Internet ($14.99/month) service to new customers for an additional five year period, reset existing New York customer pricing for this package to $14.99 for the same period, and publish a regular notice in bill statements about the availability of this tier, including the fact it is available to all customers on a standalone basis.
2. In recognition of the fact Charter places unreasonable restrictions on qualifying for its Spectrum Internet Assist program, the settlement agreement should require that for the next five years Charter remove the restriction preventing New York customers from enrolling in the SIA program if they already have Spectrum internet service.
3. In recognition of the fact Charter is not supplying all New York residents with best-in-class service, Charter must immediately boost the download speed of its basic Spectrum Internet package from the current 100 Mbps to 200 Mbps in all service areas in New York State, which matches the speed offered in nearly half of its national footprint. For a period of not less than five years, Charter must agree to provide New York State customers with access to any other speed improvements or upgrades as soon as they become available in any other state serviced by Charter.
4. In recognition of the fact Charter has failed to meet its obligations to expand service to rural New York locations, the Commission should move forward with the revised buildout plan that includes additional new passings beyond what was specified in the 2016 Merger Order, and establish the proposed Incremental Build requirement and associated Spectrum-funded Build Account of not less than $6 million.
5. In recognition of the fact New York addresses designated to receive HughesNet satellite internet service will be at a substantial disadvantage because of slower internet speeds and a usage allowance of 100 GB, well below the national data consumption average, the DPS/PSC do everything possible to compel and/or encourage Charter Communications to extend its service to overlap satellite-designated areas and receive credit towards its buildout requirement for doing so.
6. In recognition of the fact some wireline providers offer superior internet service over others, any formula counting the number of homes provided overlapping wireline internet coverage from Spectrum and an existing incumbent wireline provider should consider the capabilities of both providers. If Spectrum offers superior internet speeds, it should be counted as a new passing. If the incumbent matches or exceeds Spectrum’s available speeds, Spectrum’s new overlapped passing should not be counted.
7. In recognition of the fact that rural consumers and businesses have been left in the dark about the status of their designated internet provider, Plans of Record from Charter Communications under this settlement, as well as other BPO-fund recipients should be made public, including the name and contact information of the designated provider and estimated date of service availability.
8. In recognition of the fact cable companies designate a maximum amount they are willing to pay out of pocket to establish service at a new address/location, that amount should continue to be paid out of pocket by Charter, with additional expenses above that amount, up to $20,000, covered by the Incremental Build Account if designated as an incremental buildout project. Any address considered for a new passing must be notified in advance if the proposal would otherwise be rejected because the estimated cost to extend service is beyond the $20,000 ceiling and the amount Charter would typically pay out of pocket. That resident or business would then be offered the opportunity to optionally pay the specified excess amount within a reasonable period of time to allow the project to move forward.
9. In recognition of the fact that Charter technicians and employees in the New York City area have been on strike for over two years, potentially impacting the quality of service Spectrum customers receive in the area, the DPS/PSC should study the impact of the strike on service quality and do all it can to encourage Charter to settle the strike at the earliest opportunity.

We appreciate the Commission and its staff’s hard work on this matter, and hope you will seriously consider our input and ideas, demonstrating once again that the New York Public Service Commission takes its obligations to the citizens of New York seriously.

Very truly yours,

Phillip M. Dampier

President and Founder

Stop the Cap!

 

[1] http://stopthecap.com/wp-content/uploads/2019/07/twc-2016-rate-card-rochester.jpg

[2] http://stopthecap.com/wp-content/uploads/2019/07/Charter-Spectrum-2019-Rate-Card-Information.pdf

[3] https://www.fiercevideo.com/cable/charter-s-rutledge-pre-merger-twc-offered-a-turkish-bazaar-promo-offers

[4] https://www.syracuse.com/news/2017/05/thousands_of_time_warner_cable_video_customers_flee_spectrums_higher_prices.html

[5] https://www.reddit.com/r/Spectrum/comments/ab02cu/spectrum_deceiving_customers_about_everyday_low/

[6] https://www.spectrum.com/browse/content/spectrum-internet-assist.html

[7] https://www.spectrum.com/browse/content/spectrum-internet-assist.html

[8] https://newsroom.charter.com/news-views/2018-twas-the-year-of-gig-50-million-locations-and-counting/

[9] https://nysbroadband.ny.gov/new-ny-broadband-program/phase-3-awards

[10] https://www.hughesnet.com/node/102201

[11] http://legal.hughesnet.com/SubAgree-03-16-17.cfm

[12] https://www.telecompetitor.com/report-u-s-household-broadband-data-consumption-hit-268-7-gigabytes-in-2018/

[13] http://amsterdamnews.com/news/2017/aug/10/spectrum-strike-affects-us-all/

[14] https://www.pressconnects.com/story/money/2018/08/08/charter-spectrum-cable-new-york-consumers/898780002/

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.

“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.