Can Cable Rescue T-Mobile, Sprint Deal?

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Historically, cable companies have been considered resellers of wireless services they get from carriers like Verizon, not separate competitors. Sprint and T-Mobile are trying to convince regulators to change that.

Historically, cable companies have been considered resellers of wireless services they get from carriers like Verizon, not separate competitors. Sprint and T-Mobile are trying to convince regulators to change that.


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Richard B. Levine/Zuma Press

To win approval for their $26-billion deal, T-Mobile and Sprint are trying to convince regulators that plenty of competition would remain even if they merge. One of the telecommunication companies’ strategies is to redefine the wireless market to show there are actually more than four competitors today—making a merger of the third- and fourth-biggest mobile providers less troublesome. The two telecom giants are hoping this argument gives regulators cover to say that consumers wouldn’t be harmed by the merger.

The new competitors to which T-Mobile is pointing are cable companies, like

Comcast

and Charter, which have begun offering wireless phone service. That service uses networks built by big mobile carriers, however. Historically, regulators haven’t classified companies that don’t own their own networks as being part of the wireless market.

Instead, cable companies are considered resellers of wireless services they get from mobile carriers like Verizon, not separate competitors. After all, Comcast and Charter are unlikely to sell wireless service to someone who isn’t already a Comcast or Charter customer.

This precedent suggests regulators see sufficient competition and won’t be inclined to approve the merger.

On the other hand, regulators can make a reasonable argument that Comcast and Charter are different from other resellers, says Ketan Jhaveri, a former antitrust attorney for the Justice Department’s Telecommunications Task Force.

They aren’t small, mom-and-pop resellers but massive companies with financial resources. They already have relationships with households, which makes customer acquisition—a challenge for traditional resellers—much easier. And they aren’t simply reselling a product but bundling it with other services, which may make consumers more likely to buy wireless service as part of their bundle.

Comcast, the largest cable provider in the U.S., has already signed up more than 780,000 of its customers to its new wireless offering. Charter’s wireless service just launched last month, but analysts expect it to sign around 250,000 subscribers in 2018.

Cable companies’ entry into the wireless business shows “the intensity of current competition in the sector,” T-Mobile said in a filing. Regulators will need some convincing of that. But if the Trump administration is eager to approve the deal for the sake of beating China in the race for 5G cellular technology, expect it to hold its nose and embrace this argument.