Potential Sprint, T-Mobile marriage threatens consumer gains

[Commentary] Sprint Corp and T-Mobile USA, which only weeks ago were arguing that the government should increase competition in the wireless market by allocating new airwaves to smaller companies like them, are switching sides and looking to join the giants through a merger.

Sprint’s plan to buy T-Mobile for $32 billion is aimed at making the combined company a more formidable competitor to giants Verizon Communications and AT&T, which together claim 68 percent of US wireless subscribers, respectively. The purchase of T-Mobile would almost double Sprint’s market share to about 30 percent.

Just recently, T-Mobile and Sprint succeeded in convincing the Federal Communications Commission to ensure that smaller wireless companies had a shot a buying valuable new wireless airwaves by limiting how much Verizon and AT&T can buy at an auction in 2015. Now the rules that Sprint and T-Mobile fought for may come back to hurt them.

Adding T-Mobile’s spectrum holdings with Sprint’s may put the combined company over the limit that bars it from bidding on the reserved portion of spectrum, which comprises prime frequencies that can travel long distances and penetrate buildings. The Sprint purchase of T-Mobile “certainly would impact the combined company's ability to bid,” Matt Wood, policy director at Free Press, an advocacy group in Washington, DC, that supports the spectrum limits, said. Jeff Silva, an independent telecommunications analyst in Washington, DC, agreed that the merger could make Sprint too big to bid on the reserved frequencies. “That means they won’t get as much spectrum,” he said.

The purchase would also eliminate T-Mobile, the one company that has put pressure on carriers to lower prices. In the last year T-Mobile has cut prices, eliminated two-year contracts and roaming charges, and offered to pay early termination fees for customers who switch from a competitor. Since the company began offering the promotions in the second quarter of 2013, the number of its subscribers increased 11 percent to 49 million compared with a 3.2 percent growth to 122 million for Verizon and a 7.5 percent increase to 116 million for AT&T during the same period, according to data compiled by Strategy Analytics, a technology consulting firm.