Ground hog’s day: Sprint purchase of T-Mobile would be consumer disaster

If a merger is allowed, prepare for the end of aggressive, consumer-friendly pitches like this.
If a merger is allowed, prepare for the end of aggressive, consumer-friendly pitches like this.

Noooooo.  Once again I will invoke the spirit of Teddy Roosevelt, the TrustBuster.  Cell phone carrier Sprint is said to be on the verge of a deal to acquire T-Mobile.  That would shrink the number of large U.S. carriers from four to three. American cell phone service is already too expensive and unreliable. Giving AT&T and Verizon even less incentive to compete is the worst possible idea.

It’s especially stinging, however, because T-Mobile has been refreshingly disruptive in the past 24 months, offering consumer-friendly products that put a real dent in bad industry practices like enormous early termination fees. T-Mobile might be the fourth in a four-horse race, but its presence has kept the other carriers honest, and it’s forced Verizon and AT&T to change business models.  That’s how competition works.  Allowing T-Mobile to vanish would be terrible for consumers.

If all this sounds familiar, it should.  AT&T tried to buy T-Mobile three years ago, but in an upset, the deal was blocked by regulators as anti-competitive.  They were right. T-Mobile’s consumer-friendly offerings were a direct result of the blocked merger.  Yes, trustbusting (and trust prevention) works.   Regulators were right then, and they’d be right now to prevent a Sprint- T-Mobile marriage.

Back in 2011, Sprint CEO Dan Hesse pulled no punches when standing against the AT&T-T-mobile deal.

“If… the DOJ and FCC decide to permit the takeover, the wireless industry would regress toward a 1980s-style duopoly.” he said. “(If) the transaction is blocked, wireless competition will thrive and competition, in turn, will continue to drive investment, innovation, consumer choice, and U.S. global leadership in wireless communications.”

Listen to Hesse — 2011 Hesse, that is.  Duopolies, tri-opolies, whatever you’d like to call them, are always terrible for consumers — at least as terrible as enormous early termination fees and oppressive contracts that prevent consumers from shopping around.  We don’t need cell phone firms that are Too Big to Fail.  The Justice Department and the FCC has already been over this: they must not allow mergers that shrink the marketplace.

We are getting ahead of ourselves, of course. There’s nothing for the DOJ to consider, yet. But the firms wouldn’t have floated this very public trial balloon if they didn’t believe, as the Wall Street Journal explains, that the regulatory environment has changed, and the merger has a chance.  Both firms have been told by someone it’s worth a shot.  Someone else should stand up quickly and tell the two carriers they’re not even allowed to date.

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About Bob Sullivan 1600 Articles
BOB SULLIVAN is a veteran journalist and the author of four books, including the 2008 New York Times Best-Seller, Gotcha Capitalism, and the 2010 New York Times Best Seller, Stop Getting Ripped Off! His latest, The Plateau Effect, was published in 2013, and as a paperback, called Getting Unstuck in 2014. He has won the Society of Professional Journalists prestigious Public Service award, a Peabody award, and The Consumer Federation of America Betty Furness award, and been given Consumer Action’s Consumer Excellence Award.