The Vergecast - Will the Sprint and T-Mobile merger create competition?

Episode Date: October 22, 2019

This week for our interview series on The Vergecast, host and Verge editor-in-chief Nilay Patel talks to Gigi Sohn, a distinguished fellow at Georgetown Law’s Institute for Technology Law and Policy. We’ve had Gigi on the show before to talk about the ramifications following the repeal of net neutrality. This time, we brought her back to talk about some recent developments in the tech policy world, including lawmakers in states like California introducing net neutrality bills. We also talk to Gigi about the Sprint and T-Mobile merger and the issues surrounding how that merger will seemingly go through unless it’s stopped by a lawsuit from several states. Can Dish become a fourth mobile carrier? Learn more about your ad choices. Visit podcastchoices.com/adchoices

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I'm super excited to have Gigi Sown on again. You might remember her from a previous interview episode. She's great. She's a distinguished fellow at Georgetown Law Institute at Technology and Policy.

She used to work at the FCC under chairman Tom Wheeler. There's just a lot going on in telecom policy right now and tech policy. There's two things they wanted to get into with Gigi.

The first is net neutrality. Obviously, the Ejit Pi, FCC, overturned net neutrality, and they faced a lawsuit challenging their ability to do so. They won that lawsuit. So what happens next? There are net neutrality bills in the states themselves that may or may or not be challenged. It's a really thorny issue about what the future of the internet looks like.

There's no one better than Gigi on this topic. It's so much fun to talk to you about it. And then there's the Sprint and T-Mobile merger, which is a clown show. I'm just going to be honest with you. The way the merger is structured right now, the Department of Justice, filed a complaint saying it was anti-competitive, and then filed a settlement with T-Mobile and Sprint where they're going to construct a fourth carrier out-a-ditch network, which is a satellite company.

It doesn't really make a lot of sense to me. The states are suing to stop that. Gigi walks us through it, explains what all the issues are, and it's really fun to talk about this. So check it out. Gigi Sohn on the Vergecast. Gigi Sohn, welcome to the Vergecast. It's great to be here.

You are a distinguished fellow at Georgetown Laws Institute for Technology Law and Policy, which is very convenient because there's, There's a lot of technology, law, and policy going on. Absolutely. Lately. The last time you were on the show, we spent a lot of time talking to net neutrality. Obviously, the FCC at that time had moved to shift broad main internet, both wireline and wireless, to Title I. There was a court case challenging that.

That court case has been decided. I want to talk about that with you. It seems as though there's a lot of issues inside of that court case to pull apart. and there's a lot of state action around net neutrality. It's worth pulling apart. And then the Sprint T-Mobile merger, it's moving forward. The FCC voted yesterday the day before we're taping to approve it. That was a party-line vote.

There is a state lawsuit that might potentially still stop that merger. There's some other stuff that might stop that merger. So two really big topics to dive into. Let's start with net neutrality. Where do we stand right now? So about two weeks ago now, the U.S. Court of Appeals for the District of Columbia Circuit, a federal appeals court in Washington, D.C., decided the lawsuit that a number of public interest organizations, companies, and states bought against the FCC's

repeal of the net neutrality rule. And it really was a mixed decision for both sides. Anybody who stands out in the street and declares absolute victory either hasn't read the decision or, you know, is just trying to fool you. So what the court said was that because of a Supreme Court decision from 2005 called the Brand X decision, the FCC has a lot of leeway, a lot of discretion to decide whether broadband internet access is an unregulated information service or a regulated telecommunication service. Now, in 2015, when I was at the FCC, we ruled that broadband internet access. was a telecommunications service that was regulated under Title II of the Communications Act, which allowed for regulation of privacy practices of broadband operators, of fraudulent billing, and other unjust and unreasonable practices by broadband operators.

This FCC, the Trump FCC, switched that around, and the court said, well, the law isn't crystal clear as to whether broadband internet access is an information service or a telecommunication service. And the FCC, this FCC says it's an information service, we've got to go with them. You know, unless their theory is completely wacky, or as they say in legal parlance, arbitrary or capricious, arbitrary and capricious, the court feels bound to uphold what the FCC did, and it did in that case. So, you know, this. This is, again, the classification of broadband. Is it regulated under Title II?

Is it not? The court said the FCC's decision was reasonable, and therefore we uphold it. However, so that was a victory for the FCC and for the Internet service providers, without a doubt. But the court went a lot further than that. The court said, firstly, that the FCC's attempt to tell states that they cannot regulate net neutrality, that they cannot regulate broadband internet access is not justified. And in fact, what they said was since the FCC essentially abdicated its oversight over the broadband market, it cannot also tell states that it can't regulate as well. So this again opens the door to state actions, some of which

has already happened. For example, California has a state neutrality law, but a number of states were kind of holding back to see what the court did. So the court rejected the FCC's desire to preempt the states from protecting consumers in competition through state net neutrality rules. The other thing the court said, and this has been really getting short shrift, I think, from everybody, is the court sent back three issues to the FCC to reconsider and said basically they either didn't give a good enough rationale for doing what they did or they didn't consider these issues at all. So here are the three issues. The court said that the FCC didn't even consider the impact of reclassification and elimination of the rules on public safety. And we know already that at least this is the lack of

net neutrality rules, the lack of oversight has impacted public safety in California when Verizon was throttling broadband access that the fire department had in Santa Clara County. So we know from real life this is a thing. Second, the court said that the FCC didn't really give a strong consideration to the impact on what we call pole attachments. So in other words, if you want to provide a broadband service in any city, any town, you've got to attach to a telephone pole. And the court said, well, the FCC really gave short shrift to the state's arguments that if you reclassify, they will no longer have the ability to control polls in their states. The third thing that the FCC sent back, or as we say in the legal parlance, remanded back

to the FCC for consideration, was the impact of reclassification on the Lifeline program. So that's the program that gives subsidies for broadband to poor people. And as I said before, the industry and the FCC kind of likes to sweep this aside and say, well, it's not really that important, except it's super important because all these three issues really go to the core of what the FCC does, right? They protect public safety. They protect competition, and that's what poll attachments are necessary for. And they protect the right of people to get connected.

So the FCC has to reconsider these things. and if they don't or if they do it poorly, their decision could get reversed. So this is not a small thing at all. So as I said before, nobody should be completely delighted with the outcome of this case. Let's talk about the three issues that were remanded.

Walk me through the process here. So the court says, all right, we're bound by the Brand X decision, which is interesting. I think one of the concurrences is all but sort of begged for the Supreme Court to take this up to reconsider Brand X. But we're bound by the Supreme Court precedent, so fine, you can do, you can make this call. But we're remanding these three issues to you.

So what happens next to the three issues that are being remanded? Yeah, if I could just for a minute talk about the concurrence, because the concurrence was joined by two Obama appointees. And it was very, it almost surprised me that they went along with the initial decision. to grant discretion at all. Because what they said was, you know, the Internet and Internet access has changed so much since 2005, since the Brand X case, that if we didn't have, if we didn't have the Brand X case to worry about, we would have decided the other way.

I mean, I'm paraphrasing what they said. But, you know, it was quite clear that had they not felt constrained by Brand X, they would have ruled that broadband Internet access should indeed. be classified as a telecommunication service. But let me talk about the remand a little bit. So several things can happen. The chairman can decide to move forward and have a whole new proceeding on these three issues. Now, he's going to have to come up with a rationale for how public safety won't be affected

or won't be affected negatively by the reclassification and elimination of the rules. How states can, you know, maintain. So let me just explain with poll attachments how it works. It's a little complicated. A state can decide that they want to control the polls in their state. Okay, the states, well, the cities usually control them, but the state has the choice to sort of take jurisdiction over these polls. Or it could choose not to, and in that case, usually what happens is the industry controls the polls.

With the FCC's decision to reclassify broadband Internet access as an information service, it now becomes unclear whether the state's. states can control polls for purposes of access by a broadband provider. And that's a pretty serious problem. So the FCC is going to have to look at, you know, how do we solve the problem of the states still being able to exercise their jurisdiction over polls? I'm actually very excited to talk about poll attachment. It's one of those things that seems very nerdy, but it's so directly connected to your experience of using the internet that it's interesting to talk about. So first of all, the reason it's a problem is a telecommunication service, Title II Telecommunication Service, is highly

regulated. And so it falls into a bundle of regulations that includes we control the polls, the government controls the polls, and because we control the polls, we can say, okay, telecommunication service providers get to attach to your polls, attach their lines to your polls, and bring service to everybody. Correct. That's correct. Okay. So an information service does not have that set of regulations. It's it's almost unregulated. And so the government, the state, whoever, cannot say, yet we require you to bring this regulated service to everybody. Instead, the broadband providers who are now classified as information service have to go make their own deals across the polls. Correct. It basically cuts the states out of controlling their own property. If I have to make the free market argument

here, why is that such a big problem? It's such a big deal because if you were a competitor, and frankly, Google Fiber came up against this. If you're a competitor and you have to rely on the incumbent on AT&T or Verizon or whoever else controls those polls to get access to the polls so that you can provide service, it's never going to happen, right? It's the essence of what you need to start to provide competitive broadband services. The two trades here seem like. One, we would prefer not to have multiple overlapping sets of poles. Correct. That seems like a core thing to understand.

Like, we don't want AT&T and Verizon and Google to put up three poles all next to each other. That seems bad. That's not only bad. It's incredibly resource intensive. And if the community will let you put the polls up, right? So that's another. You can't just, like, go into city streets and start putting up polls.

You've got to get authority from somebody. So there's a, there's a both. administrative or bureaucratic efficiency and then just like an obvious physical efficiency. Correct. And then the trade is if you're Title II, if you're a telecommunication service, yep, you're accepting all of this regulation, but we're going to make sure that we make access to polls efficient and even for everybody. Correct. But let me correct you one thing about that, accepting all this regulation.

I want to remind people that when we reclassified broadband internet access as a as a telecommunications service under Title II in 2015, we forbore or declined to apply 30 of the 47 provisions. Okay. So, you know, Title II could be as regulatory or as unregulatory as one wants to make it be. And in fact, we didn't apply the vast majority of regulations to broadband services that we could have under Title II. And that's kind of the nice thing about the Communications Act.

it gives the flexibility to the regulator to say, look, if some of these older provisions don't make sense anymore, you don't have to apply it to a service. Now, of course, what this FCC did was say, we're not going to apply any of it, including the parts that say, you know, you can't have unjust and unreasonable price terms and conditions. It also said that another provision of the Communications Act, this is Section 706 of the Telecommunications Act of 1996. also didn't give the FCC authority to regulate broadband.

And this is really what makes the 2017 decision so radical was they basically said, we have no authority whatsoever. We have no ability to do oversight of the broadband market. And that is something that neither Republican nor Democratic FCC's have ever said before. And I think people need to understand why that's so radical. And of course, that plays into the state preemption as well, because they gave away or declined to exercise any of their authority that allows the states to come in and say, well, you know, if you're not going to stand up, we're going to stand up.

So if they can't solve the pole attachment issue and they can't solve the, hey, we need a rule that prevents Verizon from throttling firefighters issue and they can't solve the lifeline issue that provides subsidized access to lower income people. Does a whole decision go away or is it just on those pieces? What actually happens there? Well, it could. I mean, it would go back up to the court and the court would have to decide what to do. So that's, yeah, and it could result in the court vacating the entire order. That would be a really remarkable result? I think it's unlikely.

Okay. I think they'll find something now lifeline I worry about, right? Because as we know, now, God, we're going on almost two years ago. the FCC proposed pretty much to destroy Lifeline. I mean, I'm giving shorthand, but for all intents of purposes, that's what the chairman's proposal would have done. I do worry that the chairman will take this opportunity to say, well, you know what, Lifeline only applies to, you know,

to telephone service and doesn't apply to broadband service anymore. So I do worry about, you know, at least that part of the remand, in some ways, backfiring on those that think that Lifeline should be, provided for broadband service. But the firefighters' broadband, it was interesting, the court's decision, the majority opinion, which is unsigned, so it's interesting to me that they couldn't agree on whose name or all of their name should be on it. But this unsigned majority opinion, very specifically sort of declined to say, we're entering the firefighter case into the record, right?

That happened afterwards, like, we know it's bad. Go back and figure this out. But the firefighter case is, I mean, everybody gets it. No one thinks Verizon should throttle the firefighters in the middle of a wildfire, even if the firefighters had bought the wrong plan, which is sort of Verizon's opening loser of an argument and they've been backtracking ever since. I know. They scream at me about that. They're like, it's not a net neutrality issue because, you know, they bought a plan that allows for throttling. And I keep explaining, it's not actually about net neutrality. It's about authority. And when you, you know, when you reclassify and dump your section 706 authority, you have, you know, nobody, the fire department had no place to go. That really is the problem.

It's the same thing with the, you know, with the information, the geolocation information that was sold to bounty hunters. Who are you going to turn to? Well, the expert agency just washed its hands of, you know, of any oversight. And there's not particularly, we're going to And we're going to talk about Team Mobile and Sprint here in a minute. But it seems like there's not enough of a market dynamic for the bad things to impact, you know, their subscriber rates or their prices. So there really is nowhere to go. It's really, it's really worse than that. And let me, I hated this part of the decision.

There are many parts of the decision I hated. But one in particular I hated was that the court took the FCC's argument that one provider in a community, one broadband provider community could be enough because there are spillover effects from communities where that broadband provider might operate where they do have competition. So in other words, the fact that they compete somewhere else would tamp down their anti-competitive behavior in those communities where they're the only provider. I mean, the court didn't find that on its own, but accepted the FCC's argument that that was case, which I just found absolutely remarkable.

You know, for two of the judges who clearly would have preferred but for the brand next case to overturn this case, to go along with an opinion that said that, I just, it was unbelievable. So there was plenty for folks like me not to like in that decision. You brought up Google Fiber earlier. I think I remember very clearly when Google Fiber rolled out in its first initial set of markets. AT&T and Verizon very quickly brought gigabit fiber plans at reasonable prices to those markets. I certainly did not receive the option to buy a gigabit fiber connection because Google fiber was in Kansas City or Austin. It just seems like on its face that's not necessarily true.

I understand the argument, just for the sake of making the argument, is, well, sure, but you're not going to have a region-specific network policy, right? So if you're not, if competition in New Eric City keeps you from throttling Netflix. You're not going to throttle Netflix in Pittsburgh. I don't know if I buy that. That's the argument. I don't know if I buy it. But at least in terms of price per broadband speed, price per gigabit, I certainly didn't

get lower prices because Google Fiber was scaring them in other markets. And that, to me, I didn't buy that argument either. It just seems like that entire majority opinion is trying to do every. at once. I thought it was very oddly written. And I'm wondering if you read anything into the fact that it wasn't actually signed. It read to me like Judge Williams wrote it. And he was the one who, you know, dissented the last time in the, in the Title II case. I mean, just some of the things, because he's an economist, right? And he speaks the economist talk. And just the way it was written and with some of the economists speak, which I found incredible. I kept telling people

before the decision came out, I cannot foresee an opinion written by Judge Williams that one of the other two would join. And I was absolutely completely wrong, which is all to say, even though it was a five-hour oral argument, you can never really determine what the outcome of a case is going to be by sitting an oral argument, even if it's five hours long. And even if they did hammer away on the firefighter's issue and then declined to address it in the opinion. Right. Look, there were some things, right? I mean, they didn't actually addressed the state preemption very much. I think they were just tired. But yes, they hammered away, they hammered away on the firefighters. They also hammered away on whether there was adequate

authority in the Communications Act to adopt the new transparency rule. I thought they could have gone three zero the other way on that issue. And in fact, they upheld the FCC. So yes, there are maybe one or two things that you could have concluded. They were trouble. by and then there were things that were the exact opposite of what you might have thought by the questions. So let's move on to what happens now in the States. So here it looks like there is some conversation about whether this decision will get appealed. I think it is interesting to put the Brand X decision up for review in front of a now conservative majority court and say, hey, Antonin Scalia dissented from this case famously and said we got it wrong in 2005. Do you think he was wrong then or right?

I think that's like just an interesting, if you're like a legal nerd, that's an interesting place to put, like, Chief Justice Roberts, right? But the states now have... I don't love it, but, you know, we know that at least four of the justices would have voted to grant Sir Charari to the Title II decision. That's the U.S. Telecom decision upholding our 2015 open Internet order and would have vacated that U.S. telecom decision. So three of them voted for it. Judge Kavanaugh, Justice Kavanaugh, was recused because he had participated below. The Supreme Court makes me nervous. And I've heard from folks who say, you know what, we're not even going to try. Like, it doesn't seem like the right move.

We're going to move on to the states. So that's the next piece, which is there are already net neutrality laws in the books in various forms in various states. So California passed one, which is actually stricter than some of the Title II provisions at the FCC had passed. There's sort of an executive order type decision in New York, and they're popping up everywhere else. How do you see that playing out? So just to be clear, California agreed not to enforce its net neutrality law until all the appeals have run out. Okay. So that law is not going into effect anytime soon, although, you know, the legislators still stand behind it, what have you.

I do expect to see new laws and hopefully California-type laws starting to pop up not only in states that don't have any laws, but also in states that did sort of the weaker, you know, just the no blocking, no throttling, no paid prioritization, or ones that just did an executive order. Now that the door has been open to state laws, although, as the court points out, you know, the FCC or the industry could go state by state to try to have. have them preempted, I think that's going to be a very, very tough road for them to hoe. I do think the states are feeling a lot less constrained now that the preemption decision was overturned by the court. When do you see the California law going into effect, if at all? When do these appeals run out? It's hard to say. I don't know who's going to appeal. And even if nobody on the net neutrality

proponent's side appeals, the other side may appeal, right? I mean, you know, the, the FCC and the industry are beside themselves that the preemption provisions got overturned because they see a situation similar to what's happening in privacy where you have a bunch of different state net neutrality laws and they would have to pretty much abide by the strongest one, which is California, and they don't want that, right? They don't want any laws, but they would rather have a weak federal framework than have strong state framework. So they may well sue. So, I mean, this could, you know, given the timing they have to seek rehearing. So let me just, I think it might be a good idea if I walk people through what,

what the appeal options are. Yeah. So one option is to go back to the same three judges and seek rehearing. I think unlikely that anybody will do that. It's not impossible, particularly since there are a handful of issues that the court didn't even address. So, for example, the 47,000 or so complaints that the National Hispanic Media Coalition filed with the FCC, in which the FCC didn't even consider, the court really didn't consider the impact either. So I suppose on some very narrow issues, you could go back to the original panel, but, I mean, as it was, it took a really long time to come up with a consensus, and as you said, unsigned decision, you really think they're going to, you know, reconsider it? I think it's a long shot. The other option is what they call rehearing

on Bonk, which means it's reheard by the entire court. Now, the decision to grant rehearing on Bonk, you need six judges, and a judge like Judge Williams, who is technically a retired judge, doesn't get to participate. However, if the court does grant rehearing on Bonk, then Judge Williams does get to sit and rehear the case on Bonk. So that's another option. And then the third option, and this could either happen after rehearing is sought and denied or before, is to go straight to the Supreme Court and seek surcharide. So depending on whether the parties seek either the two rehearing options or go straight to the Supreme Court, that obviously will, you know, if the court decides to grant rehearing on Bonk, it could be six months before they come out with a

decision. And then that decision could get further appeal. And then that decision. So we could be talking on the really long end, we could be talking 18 months to two years. So the last time you were on the redcast, we talked about the fact that, you know, the ISPs weren't really pushing it because they were awaiting this decision. They knew the states were passing these laws. Sort of all the bad practices weren't really happening yet.

They've been happening. Yes. It's not that they're not doing it. They're just being a little bit more subtle than they would otherwise. But we're now at a place where they've won the first decision. California in particular agreed to put it on hold. And sort of the streaming wars consolidation moment is here. Like AT&T has a lot of incentives right now to say, look, CNN Streaming.

for free on the AT&T network and Fox News is not. Do you expect that the ISPs are going to start turning that dial up a little bit? I think they'll turn it up, as you said before, subtly, right? And particularly when it comes to, you know, some of the zero rating issues, right? Which, you know, when I was at the FCC, we did not determine that those were flat out illegal. We determined that if they were discriminatory, we'd look at it under the general conduct standard, which said basically, you know, no unreasonable discrimination. So, yeah, I do expect them to ratchet it up slowly, maybe in a way that, you know, not everybody understands to be a violation

of net neutrality. But what I do continue to, I do believe that we're going to continue to see are the results of lack of oversight, even though they're not necessarily net neutrality related. They may be privacy related. They may be price related. But I do expect to see the ISPs. In fact, I may be wrong about this, but didn't I see somewhere in the news how, you know, Comcast just jacked up their prices enormously. So, you know, these are things that an FCC would have the ability to look at if somebody filed a complaint. And now they don't. So I'm not sure their actions are going to be as net neutrality related, although, you know, there's now been several studies by North Northeastern University, showing that the mobile carriers are throttling back Netflix and other

video, online video services when the networks are not congested. I do think they're going to be more related to some related issues that are not necessarily blocking throttling or paid prioritization. Support for this show comes from Shopify. Starting something new isn't just hard. It can be really scary too. So much work goes into this thing that you're not entirely sure will even work. But here's a better thought. What if it did all work? What if your instincts were actually right all along? Shopify wants to help you get there. They're the commerce platform behind millions of businesses worldwide and nearly 10% of all e-commerce in the U.S. from established brands like Allbirds and Heinz to companies just getting started. Their design tools make it simple to create the

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With Grammarly, you never will. Download Grammarly for free at Grammarly.com. That's grammarly.com. So you brought up mobile carriers. I think that's a good time to shift our attention to sprint and T-Mobile. Okay. I mean, in my mind, this is all one big issue. They're actually separate issues, but in my mind, the lack of competition is what drove the net neutrality moment.

Everybody could feel it. That's why we want to regulate. There's not enough competition for the market to provide options and choice and fairness. So here, we have net neutrality has gone, saved the states, and potentially some appeals. And then on the other hand, you have the market consolidating, which seems like the whole reason that you'd want the regulatory scheme. They've now gotten approval from the FCC for this, well, describe the scheme. Let's start at the start. This is, in my mind, a very complicated scheme to somehow preserve four wireless carriers.

Describe the plan. So this plan came from the Department of Justice. Let me just ratchet back because the whole process to getting where we got yesterday has been so weird and so opaque that I think people need to understand what kind of gymnastics this administration has been doing in order to grant a four to three merger. And this is all in the same context where we're talking about breaking up Google and Facebook, right? You know, antitrust is being revived, which I think is fantastic. It's about time, right? But we're talking about Republicans and Democrats talking about, you know, the need to break up companies that are too powerful.

And while this is happening, we're going from a four mobile carrier market to three, despite overwhelming evidence, I mean overwhelming, that it would diminish competition and raise prices. So I think it's important, again, to talk about, you know, the machin. nations here. In late May of this of this year, 2019, Chairman Pye announced via a statement that he was going to circulate soon, the next couple weeks, circulate in order to his colleagues approving the Sprintee Mobile merger. Okay. And this was before there was any conversation about a fourth carrier, that it would be good for 5G deployment, which is, of course, the universal excuse for

all deregulation. And it would be good for rural deployment. getting capacity, getting deployment to rural areas, which is a nonsensical argument, but I won't address that now. Surely thereafter, like within hours, Commissioner Carr said, Me too, this is without seeing an order. There's no order, right, because he's going to circulate in a couple weeks. And I think the next day or two days, Commissioner O'Reilly, the other Republican says, me too.

So already they've all prejudged an order they've never seen. Never saw anything like that in my life. two months later, the Department of Justice says, you know what, four to three is anti-competitive, or at least in this case, it's anti-competitive and illegal. So therefore, we're going to create what I call a mobile Frankenstein, which is DISH Network. We're going to basically create the conditions under which in seven years Dish Network will be able to provide service. Now, you don't need to be genius to figure out that a lot can go wrong in seven years, particularly because, Because this mobile Frankenstein can only operate at the behest of T-Mobile.

So for the first seven years, DISH Network, which would get 9 million prepaid customers, okay. So they would get Boost Mobile, which is one of the, you know, you pay ahead of time, prepaid services that poor people use are people that don't have good credit ratings use. So they get 9 million customers, again compared to Verizon's 130, Sprint T-Mobile is 100 million. They get 9 million customers, and they can start to build a business using T-Mobile's network. Now, tell me what incentive T-Mobile has to make that easy for Dish to do. So this is what the Justice Department, again, this is a conservative Republican assistant attorney general who has said a million times that behavioral conditions don't work, you know, creating, essentially creating out of whole cloth a new fourth competitor.

And I'm saying that in quotation marks. All right. So that was end of July. Wait, can you just really quickly just explain what you mean by behavioral conditions? Okay. So behavioral conditions are, for example, T-Mobile must let DISH use its network to provide service. So a structural condition is, okay, Sprint must spin-off boost, must sell boost, to dish, right? So that's where basically you take a part of your business and you sell it to someone

else or you give it to someone else. That's where we're actually, you know, reworking the structure of a company. A behavioral condition is one where you're saying, okay, company, you must be nice by doing X, right? So you must be nice. So the FCC's decision yesterday, which we haven't seen yet, is going to say something along these lines. You know, the new SprintyMobil promises, to serve, you know, X number of rural people in five years and plans to deploy 5G in 97% of communities in, you know, five years or seven years. That's a behavioral condition where you're depending on the company that's merging to behave. Now, why are those not, why do Republicans, and frankly, I'm not a Republican, but I don't like them either. Why are they not really favored by

antitrust authorities, because the government has to make them do it. And usually those companies have a hell of a lot more resources to lawyer the living daylights out of those conditions than the government does. And they often never come to fruition. So you've got, you've got Macon Delrahim, the Assistant Attorney General for antitrust, who gave speech after speech over the last several years saying how behavioral conditions don't work, creating this new entity, mostly, out of behavioral conditions. Again, the, you know, the spin-off of boost and the nine million, only nine million. And again, it's like one-tenth of what everybody else has. And they're prepaid customers, which, by the way, is like having zero customers, right? Because a

prepaid customer can walk away any time. So, you know, you're really, the implementation risks for DISH to get up and running and compete in any way, shape, or form in seven years are enormous. Is there any spectrum transfer to DISH? Yes, but not really spectrum that they need. In fact, so they're transferring a bunch of the old Nextel, so Sprintboard Nextel years back, for those that don't. Another wild success story of consolidation. A horrible lack of success, and yes, they have the, Dish has the option to buy it. They don't even have to buy it. So that'll tell you how valuable it is if they don't even have to buy it. We've always known Dish has plenty spectrum. That's not the issue. What they don't have as a network, right? So the idea here is,

you know, let them use T-Mobile's network for seven years and then let them cobble together their own. Let them get the backhaul, let them get the antennas, you know, let them get, let them build their own network in the next seven years. Now, my question is, well, you know, if Sprint so desperately wants to get out of the market, why doesn't you just sell its network to dish? Why are we doing this thing where we allow, you know, these two entities to merge and then pray and hope that DISH can build a network. So here's the argument I've heard on that. And I hear it from our readers quite a bit because I also think this merger is a little bit silly. And I definitely tend to agree on sort of the behavioral realm. Like the part where DISH is going to be an MVNO on T-Mobile

and then will somehow undercut T-Mobile on price to provide competition, like just the math doesn't work out. Like that, that just straightforwardly does not seem like an equation that can be resolved. But, I mean, you're buying homes wholesale from T-Mobile and selling at retail. There's no way you're going to subsidize that to a consumer. But what I hear from our readers all the time, and I actually completely understand it, is we like T-Mobile. T-Mobile is great. They came into the market. John Ledger is a firebrand. He took on the big carriers. He makes a product, a service that we like. The offering is, you know, more straightforward in their pricing. The big competitors have had to react to him and they have in certain ways. Why wouldn't we want to strengthen T-Mobile by

letting them run Sprint and getting Sprint Spectrum and making them as big as AT&T? Why wouldn't we want this company that we like to be an even better competitor to the big companies that we don't? Well, I like T-Mobile too, and I'm a very satisfied T-Mobile customer. However, when you go from four to three, the incentives change. Yes, it is definitely true. And by the way, I testified against the AT&T T-Mobile merger, which led to T-Mobile becoming what it is today. So I feel like I'm partly responsible.

But when you have four, you had a situation where T-Mobile was not only competing with AT&T and Verizon and changing their behavior, it was also competing with Sprint and Sprint with it for the low-value customer. Once you shrink that to three evenly sized companies, the incentive to go after the low-value customer goes away because you've gotten rid of Sprint, who is keeping your prices down. And the incentive becomes, and we've seen this in many markets in Europe, the incentives becomes more to act more like AT&T and Verizon and raise prices and not have as family-friendly plans. And in fact, as I said before, the record at the FCC shows that that's exactly what would happen. The prices would go up. Now, the companies say, yeah, well, you're right, prices will go up, but you'll get more for your money.

But where does that leave the value-conscious customers? Right. It leads them, maybe they don't want to pay $15 more a month or whatever. I think it said between 15 and 21% more a month. Maybe they don't want that super speedy service. So what happens to them? Again, the problem is, is we've seen over and over again in four to three markets, prices go up and people are left out in the cold.

Well, presumably they go to dish. I mean, isn't that sort of the argument here is that it's not four to three? It's four to three for a minute and then four to four and seven years. For a minute? I think seven years is much longer than a minute. Well, in the meantime, they get to resell team. I'm trying to make the argument. I'm not saying that I believe it or I can make it without laughing.

But that is the argument, right? We've cobbled together an interim solution where T-Mobile is even like running the infrastructure of the network and like the administrative part of the network for DISH until DISH is up and running in seven years. Like I said, I think the better solution, the cleaner solution is have Sprint sell its assets. And it's not only the DISH that's interested, right? So the news reports were also that Charter was trying to become that fourth competitor as well. So they're interested. There may be other cable companies interested in buying Sprint's assets.

I just think, you know, if Sprint sells its assets to a company like DISH or a company like Charter or somebody else, then a network will definitely be run and it will be run right away. But, you know, you're asking this company that has never run a mobile network, it runs a satellite video network, which is very different, to start with one-tenth of the customers, none of them post-paid, and become a competitor in seven years and build a network? I mean, you know, you're assuming that they can get the back hole and that they can get the antennas

and that they can actually build this thing. I just think, again, that kind of risk, particularly when there's another option that's better, should not fall on consumers. And by the way, T-Mobile's kicking butt. I mean, T-Mobile is taking customers away, mostly from Sprint, but also from a T-T-Mobile. T&T and Verizon.

So they're actually growing the way you should by competing. But the argument that T-Mobile wants Sprint is, well, they've got a lot of great spectrum that we want, right? We want to build this mid-band 5G network. We think the ultra-high-band stuff that 18-T and Verizon are doing, the millimeter-wave stuff is bad. We want to build this mid-band thing that's going to be really great. We need that spectrum.

Okay, so here's my response. My response is, A, they already have a lot of mid-band spectrum, but B, there's going to be a lot more mid-band spectrum coming to market. Okay, part of the, including the C-band stuff, which is the satellite spectrum, which the chairman just had to testify about today, that is prime real estate. That's coming to market, and T-Mobile wants it. And part of the problem with both the DOJ's analysis, and I assume the FCC's analysis, is it doesn't take into account spectrum that T-Mobile will get.

They will get more mid-band spectrum. It doesn't necessarily have to be sprint-s. spectrum. So you think the argument, and the other argument that I've heard is, well, T-Mobile has pretty good spectrum. They could get more, but what they really have is great executive leadership. Sprint has pretty good spectrum, and what they have is bad executive leadership. Right.

There's no, like, you have a little bit of a guarantee here that T-Mobile will make a better use of their network. They're already quite good at it as has been proven. You could let, let Chatter buy it. You could let, I don't know, somebody else buy it. But there's no guarantee they're going to be as good as T-Mobile. Is that an acceptable risk, consumers? I don't think John Ledger is there forever.

In fact, I don't think he's there even for that much longer. I forget the gentleman there grooming under him. Is it Neville Ray? No, it's somebody else, actually. But whoever it is, they're grooming him to take over. So, you know, this kind of, it's baked in our DNA, and John Ledger is a savior. John Ledger's not going to be there forever. You may not even be there for the full seven years before Dish comes

on board, I just don't see it. Like I said, I think Team Mobile is doing, you know, doing well by, you know, helping customers and providing great service and they'll continue to do that. They don't need necessarily to have Sprint to continue to do that. And there will be lots of other spectrum in the market. I give this credit to Ajit Pai, even if I may not agree with exactly how he's going to get that satellite spectrum out to the market. He's getting spectrum out to the market so people can compete. Let's go back to where you and I live, which is the wonky legal proceedings that follow us. There are two things happening. I just wrote up a paper from a group of seven economists who say, we should block this thing, we should

stop it. That is part of what I believe is a court proceeding called the, it's a tonny act procedure. I've never heard of this before. Please help me understand it. But the court has to approve all this in the end anyway. So now people are filing arguments. saying pro and con. Yeah. And then there's another lawsuit from the states seeking to block it. Yes. So there were, as you said, there's two separate proceedings.

Any and all mergers that are approved by the Department of Justice need to be approved by a court, okay, a single judge. And that's called the Tunniak proceeding. And there's been a bunch of filings. The economist won, rightfully, has gotten a lot of attention. And it does focus a lot on what we talked about before, about why the dish arrangement will not work. And the judge has to decide whether or not the DOJ essentially comply with the antitrust laws, whether the combination is in the public interest. Now that, even if he, I believe it is a

male judge, I forget the name of the judge, even if he says so, you still have the case in front of Judge Marrero in the Southern District of New York bought by the states. So the states have the ability under the antitrust laws to sue, to block mergers they think are not in the interests of their constituents. And you now have 17 states, one did drop out, Mississippi, that are suing to block this deal. And that trial is going to start in December. I think some may be asking the judge in the Tunniak case to basically hold off until the southern district of New York, Judge Morero makes a decision there, but it doesn't really much matter. Okay. This judge can sign off and say, okay, the Justice Department complied and this is in the public interest.

It really doesn't have much impact on what happens in New York. So which one of these is more likely to succeed or fail? I've been covering this for a long time. This is the first I've ever heard of it, Tonyak proceeding. Maybe it's just the antitrust interest in activity is ramping up. So now we're all just, we're all trying new buttons to push. It seems like a very novel way of approaching stopping the merger. Is that correct or is it just we haven't talked about it a lot?

No, you're correct. I think that's not where you place all your cards, although, you know, recently, in fact, it was the same thing. It was Judge Leon, if I recall correctly, you know, actually did invite, you know, parties to file in a Tunniak proceeding because he was very concerned that a particular merger. I don't remember what merger it was. It wasn't in the telecom and media field. It was a pharmaceutical one, I think. The pharmaceutical, right. So that was like the first time the Tunniak proceeding had any meaning whatsoever.

But I don't think, and I do think we have a really strong case here, particularly given the way this has come down, the process and the politics, the way this came down. I think there's a chance the judge might, you know, might say it violates the antitrust laws. But that's not where, and I'm glad that the filings are being made, but I think the show is going to be in New York at the trial, the state's trial. And I think we've got a really good chance. I think the states have a very, very good chance of winning there, particularly because, now again, I need to condition my comments on the fact that we actually haven't seen the FCC's decision yet. Okay.

But what I expected to say is that four to three is fine and that the creation of dishes of fourth, competitor is icing on the cake. Well, that's really conflicts what the DOJ said, which said, no, here, four to three is not fine. It's anti-competitive. It's illegal. So you're going to have somewhat conflicting agency rulings. I'm not even sure the judge will care very much what the FCC says if it doesn't do some sort of competition analysis. So, you know, it's, I don't think the company's case is very, very strong in the state's trial. One thing that I don't think I quite understand, and I certainly, as I hear from our listeners and our readers, is not necessarily clear.

We're not really evaluating whether combining T-Mobile and Sprint is good, right? And it seems like there's just a lot of people who think, yep, that's good. Like, we like T-Mobile, let them go. Like, let them run. The real evaluation is, is this market competitive if there's only three competitors? editors, and is this dish plan sufficient to keep us at four? Like, that's actually the action, correct? Yeah.

Yes. The judge is not going to look at whether people like T-Mobile. That's just really not the issue. We're not going to get to run some uncarrier ads in the trial. Or whether John Ledger is a swell guy. And he is, by the way. I met him when I testified. He's a really nice guy.

But that's not what the court's looking at. the court is looking at, you know, under the, under the Clayton Act, which is the applicable antitrust law, is this a significant reduction in competition? And, you know, you look at, for one, you certainly look at whether prices will go up. You look at some other factors as well. And whether DISH can replace Sprint, you know, whether there's actually, there's actually a good opportunity, a good chance that it could succeed. And so what's interesting, to me is that T-Mobile is in a really strange position. You know, just listening to to Ledger and the rest of the executives and their earnings

call after the DOJ settlement was announced, they don't want to say anything about Tish Network. Right? They're like, that's their company. Like, we're happy to abide by our obligations. Like, hopefully they'll succeed. You'll have to talk to them. We're going to do our thing.

We're excited about 5G. But to get what they want, everyone has to convince the courts. that DISH network is going to succeed. That seems like a very difficult place to operate from for T-Mobile. Yes, absolutely. And that's why, as we discussed before, I don't think that T-Mobile is going to make it easy for DISH to succeed when it, you know, when it's using as a network. But I think what's interesting is when the states filed, initially filed the lawsuit in the Southern District of New York, there were a bunch of redacted, emails from T-Mobile executives, which basically said, you know, we need to get to three in the

market because, you know, that will allow us to raise prices and do other things that are, you know, not the most competitive. I mean, obviously I haven't seen those emails, but that's my understanding what those emails said. The fact of the matter is they wanted to go to four or three. They don't want it to be four. And that they think that's the way for them to increase their revenues. So yeah, they're kind of in a pickle, you know, on the one hand, you know, I don't think they want this to succeed. On the other hand, if they make that too obvious, the court's going to see that. So when I wrote up the economist's letter in the Tunniac proceeding, a filing, a letter, a comment, this is all so new. I don't even know what it was specifically

it's formally called. It's a filing. A filing. Their document, their dot doc file. When I wrote it up, I noted that they had said several times, and I think most people believe this is true, that Dish has all the spectrum. They've had it for a long time. They've been accused of hoarding it. They haven't built anything with it. And now they're making some promises that they're going to build a network. And their argument is, why would Dish keep their promises now?

So I wrote this up, I published it. I got a note from Dish PR saying, we've never missed a buildout deadline. They were very unhappy about this characterization. What do you think about it? Do you think Dish is actually going to keep their promises here? Well, you know, I don't know. I think the history of them, you know, maybe they didn't miss a deadline, but they kept pushing back deadlines. They kept getting allowances from the FCC to push back deadlines.

The fact of the matter is, is they've had a lot of spectrum for many years and they haven't built their network. One of the economists on that filing, a guy named Hal Singer, who, while we disagree on net neutrality, he and I have become real buddies, particularly over this. he feels like, you know, he believes that DISH has gotten really great terms to, you know, to use this, to use the T-MOMO network. You know, they'll run a business for seven years and then, you know, they'll never build the network. They'll just sell their spectrum after, you know, five or seven years. So he doesn't even think they're ever going to build the network because, you know, they'll write on these really great terms that they got for the MV&O and then just say, you know, screw it and sell all their spectrum. So their history is not great here. And it's not just about missing buildout deadlines. There are other promises that they haven't kept. You know, look,

I've known Dish for, I've worked with Dish for a long time. I know Charlie Ergen. He's always beaten the odds. But I just think here, the climb is just too steep. And I'll remind people Again, the problem is, is if it fails, then consumers lose. The risk here is squarely on the back of consumers, and there is a better way to keep this market at fourth for competitors. And it's not by creating a mobile Frankenstein out of whole cloth. It's by having Sprintzellus network to dish or charter or somebody else who wants to run a mobile network.

And not just ride on the back of T-Mobile's favorable MV&O terms. Not just ride on the back of T-Mobile. and and beg them to, you know, to treat them nicely. Look, I think we learned lessons from the late 90s and early aughts when the telephone companies were required to open up their networks to competitors, even though ultimately it was very, very successful in a lot of places. What happened a lot of times was the bell companies wouldn't allow competitors to use their bathrooms, right? I mean, they would make life miserable for them. So here, for example, the agreement says that T-Mobile, the combined entity, when they decommission antennas and they decommission stores,

have to make them available to dish. Do you really think they're going to make the best antennas and the best stores available to dish? It's going to be a fire sale, right? It's going to be a second-hand sale. They're not going to help them compete because ultimately they don't want them to compete. And the best possible outcome for T-Mobile is they get this merger through and DISH just doesn't make it for whatever reason. That's really what they would like. And you can understand it, right? I understand it. But that as a consumer advocate, I hate it. It is true. It's always very interesting when you can understand this sort of cold business logic, especially from executives that, again, and people really like.

I hear it from our readers and listeners all the time. They really like this company. You want to see them be a little ruthless and win. Like they are good at that. But at the same time, the sort of knock on effect is, oh, well, we're all going to be paying higher prices. Like, the good guys might win, but we might potentially lose. That seems, again, like just a very difficult messaging problem for T-Mobile

in this moment when this next set of scrutiny is going to arrive. I just think, look, you and I, We're telecom policy elites, right? Oh, wow. That's like the best compliment I've ever received my entire life. Are you kidding me? All right. So if my bill goes up another $10 a month, I'll just eat it, right?

I do think we keep forgetting about, you know, people that live more on the margins and for who an extra $10 a month is a really big deal. And they don't necessarily want super fast 5G. You know, they, you know, they could live just fine. with the 4G they have now in the lower price. And that's what really concerns me, is not like people like us or people who love John Ledger. I'm going to assume that most people who live hand to mouth,

but really need a cell phone, don't even know who the hell John Ledger is. But they'll know who he is when their bill goes up by $10 a month, and they have to decide whether they're going to put food on the table. And I think that conversation really gets lost in this conversation about whether we love the man who wears a magenta shirt. So you brought up 5G there. That is sort of the other argument that's made a little less loudly,

but it's there, which is you let us buy Sprint. We'll win the race to 5G, and we need to win the race to 5G because it's, I don't know, national security. First of all, is, I don't know if you. Is 5G race? And if so, why? I ask everybody this question. And two, do you buy that argument?

So I don't really know why we have to win the race to 5G. You know, as my former boss, you know, former FCC chairman, Tom Wheeler has written, there's actually some advantages to being the second to market because you learn from the mistakes of the person that's first to market. So I'm not convinced, I think it's a made-up race by companies that, you know, want as much spectrum as they can grab onto, who want deregulation, who want, you know, consolidation. I don't know why we're in a race and I'm not sure we want to be number one. In fact, we were not number one in 4G. So I don't see the benefit of it.

For national security, excuse me. And these are the companies that got the FCC out of the business of setting any cybersecurity rules for networks at all that seem to have some sort of breach of their network or data breach like, you know, every other week. I don't think national security plays into this at all. I mean, you know, we can have a separate conversation about Huawei equipment and all that kind of jazz. But I don't see the rationale for having to be first for 5G. And frankly, we don't even have a definition of what 5G is. Like if you ask each of the carriers, they're all doing something different. One carrier is doing, you know, fixed wireless, another is just doing enterprise.

Another is doing retail. So we didn't even have a common definition of 5G. So I think we better slow down in the race before we know we're actually. building and then let me say one other thing as well I talked to a policy public policy person for a company that will remain nameless that wants to provide broadband service particularly in rural areas and he said to me Gigi all the spectrum policy of the FCC right now is being made for three companies AT&T Verizon and T-Mobile and you know what we want to get mid-band spectrum out there

and that's important you know what about folks that actually might want to compete There's an increasingly robust, although it's not robust yet, satellite sector that wants to provide these services, but all the decisions around Spectrum are being made for these three companies. And I find that very, again, in the race to be first to 5G. And I think maybe we need to slow down a little bit because 5G is being built. And that's the other thing, right? I mean, oh, we need this merger, you know, so we can be first to 5G. everybody's already building 5G networks.

But I do think we need to slow down and say, okay, is every little last slice of spectrum should just go to three companies? And what about unlicensed spectrum? What about that? So I just think that the whole 5G race meme has really been overhyped, made up to accomplish, you know, the goals of three companies. I keep asking people what happens to we come in second. And that's the one that really trips everyone up.

Well, Gigi, I could talk to you about this stuff for hours and hours and hours. Thank you for giving me so much time. It seems like there's a lot more to come. What should people be looking at for next? Well, obviously, again, you know, getting back to net neutrality, we'll see what the appeals bring. We'll see in Sprinty Mobile what the December trial brings. I think those are two very, very big things.

You know, still waiting on a privacy bill. We're on Riden, put one out today, actually. Yeah, I know. But I'm talking about one that, you know, has some bipartisan consensus. That's a little bit frustrating. And also, I am very interested in seeing, you know, what is Pye going to do aside from Spectrum next? I mean, we're getting close to the election.

Is he going to hand, is he even going to do these remands? Was he going to leave it to the next FCC chair? If he does them really late in the game and the administration changes, those remands, can be left open for another FCC to basically overturn the whole restoring Internet freedom decision, the 2017 decision. That's kind of what Pai did in a couple of places where we had made decisions very late in the game. Somebody filed a reconsideration petition at the agency, and he just flipped the script. So I'm curious to see what he's going to do about Lifeline. as I said before, that proposal's been hanging out for two years.

And if he's going to do anything other than spectrum, you know, spectrum type work, or whether he's going to maybe start to slow down a little bit and not take on some of the really controversial issues. All right. Where can people find you to keep up with this stuff? GigiSone.com. Got all my speeches, all my press hits, all my media appearances. Please go. All right, Gigi, and we'll have you back here on the Verstack soon.

Thank you so much. All right. Thanks a lot. All right, my thanks to Gigi Sown for joining us on the Vergecast. It is always a delight to talk to her. And I will be forever grateful that she called me a tech policy elite, even though she said it to point out of touch with everybody else. But she still said it and you heard it.

I love hearing from you, tweet at me, I'm at Reckless. Tell me who you want me to talk to, what you want me to dig into. I really value that feedback. It's been really fun. We got the chat show coming up later this week on Friday, then an interview episode. And then on the 31st, we're doing a live Vergecast in San Francisco. We're going to have Instagram's director of product, Robbie Stein,

and the product manager for the Google Pixel camera, Isaac Reynolds, on stage together with me and Dieter and Ashley, to talk about how platforms in the photos we share affects the camera, and the camera affects the platforms. If you've been listening to Vurchast, you know this is something I'm really interested in. That is live in San Francisco on the 31st. You can check out the website for tickets, or just wait a minute, we'll put it in the feed. But I'm very excited from it.

That's coming up later this month. We'll talk to you then.