Showing 9 of 320 Publications in Telecommunications & Regulated Utilities

Comments of ICLE, re: Tunney Act Review of the Sprint-T-Mobile Merger

Regulatory Comments ICLE filed a letter summarizing its analysis of the relevant empirical literature on mobile carrier mergers as part of the Tunney Act review process.

The central question of a merger review is the likely effect that the transaction will have on consumers. The DOJ’s complaint against the Sprint-T-Mobile merger is built upon the allegation that the proposed transaction represents a reduction from four to three national facilities-based mobile network operators (a so-called “4-to-3 merger”), and that such a transaction would reduce competition and result in “higher prices, reduced innovation, reduced quality and fewer choices” in the marketplace. This is an empirical question that has been studied by numerous scholars in recent years.

The upshot of the empirical literature is that, in fact, such mergers appear to increase, not decrease, innovation. Moreover, the research is, at best, inconclusive with respect to the price effects of such mergers. Based on these findings, we believe that the DOJ was correct to approve the transaction, and that this is so regardless of the expected competitive effects of the Final Judgment’s Divestiture Package, which is likely unnecessary to ensure that the market remains competitive.

ICLE filed a letter summarizing its analysis of the relevant empirical literature on mobile carrier mergers as part of the Tunney Act review process.

The letter and attached analysis can be read here. 

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Antitrust & Consumer Protection

A Review of the Empirical Evidence on the Effects of Market Concentration and Mergers in the Wireless Telecommunications Industry

ICLE White Paper The merger between T-Mobile and Sprint has been characterized as a “4-to-3 merger” because after the merger there will be 3 national mobile network operators. . . .

The merger between T-Mobile and Sprint has been characterized as a “4-to-3 merger” because after the merger there will be 3 national mobile network operators. Concerns have been raised regarding the effects of such mergers on competition and consumer welfare. Seeking to understand and evaluate the basis for these concerns, the International Center for Law and Economics (ICLE) undertook a comprehensive review of the economic effects of mergers and other factors affecting market concentration in the wireless telecommunications industry. The review found:

  1. In general, wireless mergers resulted in increased investment both by individual companies and by the industry as a whole. This finding suggests that such mergers have consumer benefits, due to the improvements in quality of service — including availability and speed — that result from such investments. 
  2. Levels of investment were highest in markets with three firms (although levels of investment in markets with four firms were not significantly lower).  
  3. While the effects of market concentration on prices were “conclusively inconclusive,” when mergers result in more symmetrical competition (i.e. the resultant firms are of more equal size), competition is enhanced and consumers benefit both from improvements in quality of service and price.
  4. There is no universal rule regarding the “optimal” number of mobile operators. But for a geographically large market like the U.S., with relatively low population density, it might well be three (and there is no good reason to believe that it is four).

When evaluating the merits of a merger, authorities are charged with identifying the effects on the welfare of consumers. On the basis of the studies that we review, “4-to-3 mergers” appear to generate net benefits to consumer welfare in the form of increased investment, while the effects on price are inconclusive.

Click here to download the report.

Click here to download the appendices.

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Antitrust & Consumer Protection

Municipal Revenue Extraction Should Not Stand in the Way of Next Generation Broadband

TOTM Advanced broadband networks are hot topics, but little attention is paid to the critical investments in infrastructure necessary to make these networks a reality. The FCC’s proposed 621 Order is an important measure to help providers deploy high speed broadband across a fragmented municipal regulatory environment.

Advanced broadband networks, including 5G, fiber, and high speed cable, are hot topics, but little attention is paid to the critical investments in infrastructure necessary to make these networks a reality. Each type of network has its own unique set of challenges to solve, both technically and legally. Advanced broadband delivered over cable systems, for example, not only has to incorporate support and upgrades for the physical infrastructure that facilitates modern high-definition television signals and high-speed Internet service, but also needs to be deployed within a regulatory environment that is fragmented across the many thousands of municipalities in the US. Oftentimes, the complexity of managing such a regulatory environment can be just as difficult as managing the actual provision of service.

Read the full piece here.

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Telecommunications & Regulated Utilities

T-Mobile Sprints to the Finish Line: States Demand a Do-Over

TOTM T-Mobile/Sprint merger cleared with conditions, but some states keep pressing an unconvincing theory to block the merger. Why not view it as making a viable third national competitor which will benefit consumers across the country?

The Department of Justice announced it has approved the $26 billion T-Mobile/Sprint merger. Once completed, the deal will create a mobile carrier with around 136 million customers in the U.S., putting it just behind Verizon (158 million) and AT&T (156 million).

Read the full piece here.

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Antitrust & Consumer Protection

The Unconstitutionality of the FCC’s Leased Access Rules

Regulatory Comments ICLE submitted comments to the FCC on the First Amendment implications of the leased access rules. Associate Director, Legal Research Ben Sperry argued the changes in the video marketplace towards competition undercut the justification for subjecting regulation of cable operators' speech to only intermediate scrutiny.

ICLE submitted comments to the FCC on the First Amendment implications of the leased access rules. Associate Director, Legal Research Ben Sperry argued the changes in the video marketplace towards competition undercut the justification for subjecting regulation of cable operators’ speech to only intermediate scrutiny. As a result, the leased access rules should be reviewed as compelled speech under strict scrutiny. The leased access rules are not narrowly tailored to a compelling government interest and therefore would fail under the strict scrutiny standard.

Click here to read the full comments.

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Telecommunications & Regulated Utilities

ICLE Comments on Implementation of Section 621(a)(1) of the Cable Communications Policy Act of 1984

Regulatory Comments In this ex parte letter, ICLE analyzes the law and economics of both the underlying statute and the FCC's proposed rulemaking that would affect the interpretation of cable franchise fees. For a variety of reasons set forth in the letter, we believe that the Commission is on firm legal and economic footing to adopt its proposed Order.  Congress intentionally enacted the five percent revenue cap to prevent LFAs from relying on cable franchise fees as an unlimited general revenue source. In order to maintain the proper incentives for network buildout — which are ever more-critical as our economy increasingly relies on high-speed broadband networks — the Commission should adopt the proposed Order.

Introduction

Congress passed the 1984 Cable Act in order to create a unified national framework for regulating networks for cable networks involving municipalities, cable operators, and the FCC.  As described by its primary sponsor, Sen. Barry Goldwater of Arizona, the Cable Act was drafted in order to reduce barriers standing in the way of the adoption of cable technology.

The Act was passed and later amended in a way that carefully drew lines around the acceptable scope of local franchising authorities’ de facto monopoly power in granting cable franchises. The thrust of the Act was to encourage competition and build-out by discouraging franchising authorities from viewing cable providers as a captive source of unlimited revenue. It did this while also giving franchising authorities the tools necessary to support public, educational, and governmental (“PEG”) programming and enabling them to be fairly compensated for use of the public rights of way. Unfortunately, since the 1984 Cable Act was passed, an increasing number of local and state franchising authorities (collectively, “LFAs”) have attempted to work around the Act’s careful balance. In particular, these efforts have created two main problems:

First, LFAs frequently attempt to evade the Act’s limitation on franchise fees to five percent of cable revenues by seeking a variety of in-kind contributions from cable operators that impose costs over and above the five percent limit. LFAs do this despite the plain language of the statute defining franchise fees quite broadly as including any “tax, fee, or assessment of any kind imposed by a franchising authority or any other governmental entity.”

Although not nominally “fees,” such requirements are indisputably “assessments,” and the costs of such obligations are equivalent to the marginal cost of a cable operator providing those “free” services and facilities, as well as the opportunity cost (i.e., the foregone revenue) of using its fixed assets in the absence of a state or local franchise obligation. Any such costs will, to some extent, be passed on to customers as higher subscription prices, reduced quality, or both. By carefully limiting the ability of LFAs to abuse their bargaining position, Congress ensured that they could not extract disproportionate rents from cable operators (and, ultimately, their subscribers).

Second, LFAs also attempt to circumvent the franchise fee cap of five percent of gross cable revenues by seeking additional fees for non-cable services provided over mixed use networks (i.e. imposing additional franchise fees on the provision of broadband and other non-cable services over cable networks). But the statute is similarly clear that LFAs or other governmental entities cannot regulate non-cable services provided via franchised cable systems.

In this ex parte letter, ICLE analyzes the law and economics of both the underlying statute and the FCC’s proposed rulemaking that would affect the interpretation of cable franchise fees. For a variety of reasons set forth in the letter, we believe that the Commission is on firm legal and economic footing to adopt its proposed Order.  It should be unavailing – and legally irrelevant – to argue, as many LFAs have, that declining cable franchise revenue leaves municipalities with an insufficient source of funds to finance their activities, and thus that recourse to these other sources is required. Congress intentionally enacted the five percent revenue cap to prevent LFAs from relying on cable franchise fees as an unlimited general revenue source. In order to maintain the proper incentives for network buildout — which are ever more-critical as our economy increasingly relies on high-speed broadband networks — the Commission should adopt the proposed Order.

Click here to read the full ex parte letter.

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Telecommunications & Regulated Utilities

Telecom regulators: Don’t get rolled by Rewheel

TOTM Will the merger between T-Mobile and Sprint make consumers better or worse off? A central question in the review of this merger—as it is in all merger reviews—is the likely effects that the transaction will have on consumers.

Will the merger between T-Mobile and Sprint make consumers better or worse off? A central question in the review of this merger—as it is in all merger reviews—is the likely effects that the transaction will have on consumers. In this post, we look at one study that opponents of the merger have been using to support their claim that the merger will harm consumers.

Read the full piece here.

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Telecommunications & Regulated Utilities

ICLE Letter on The proposed T-Mobile/Sprint merger and the state of the relevant economic literature

Regulatory Comments We write to address a crucial question relevant to your upcoming, March 12 hearing on “The State of Competition in the Wireless Market: Examining the Impact of the Proposed Merger of T-Mobile and Sprint on Consumers, Workers, and the Internet.”

Introduction

The International Center for Law and Economics (ICLE) is a nonprofit, nonpartisan research center whose work promotes the use of law & economics methodologies to inform public policy debates. We believe that intellectually rigorous, data-driven analysis will lead to efficient policy solutions that promote consumer welfare and global economic growth.

We write to address a crucial question relevant to your upcoming, March 12 hearing on “The State of Competition in the Wireless Market: Examining the Impact of the Proposed Merger of T-Mobile and Sprint on Consumers, Workers, and the Internet”: the likely effects on consumer welfare that a “4-to-3” merger among the largest US mobile carriers would have. We are currently working on a comprehensive literature review of economic studies looking at such mergers in other developed countries. Although that review is not yet completed, this letter shares several notable preliminary conclusions for consideration by the Subcommittee.

Click here to read the full letter.

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Telecommunications & Regulated Utilities

Federal Trade Commission v. Qualcomm Incorporated: Post-Mortem

Presentations & Interviews Geoffrey Manne joins Olivier Blanchard on the Federalist Society teleforum to discuss the potential impact of the Federal Trade Commission v. Qualcomm Incorporated decision.

This teleforum will investigate the potential impact of the pending decision in the FTC’s controversial Section 5 lawsuit against Qualcomm, brought days before the change in administration two years ago, with the incoming acting chair writing an unusual and biting dissent. Among other things, the FTC is seeking to permanently enjoin Qualcomm from engaging in certain industry-wide patent licensing practices, which the FTC alleges impair competition in violation of the antitrust laws. However, it has been argued that the FTC’s novel theory fails to meet the burden of proof by showing actual evidence of harm, as clarified recently by the US Supreme Court in Ohio v. American Express Co. The consequences of FTC’s legal theory, if upheld by the court, could reach well-beyond patent licensing arrangements.  Indeed, some experts fear that changes to Qualcomm’s business model will undermine U.S. national security interests and cede American leadership in the 5G race to a foreign adversary—the same concerns echoed last year by the Committee on Foreign Investment in the United States (CFIUS) when it recommended that the President permanently prohibit Broadcom from acquiring Qualcomm.

Featuring: 

Olivier Blanchard, Senior Analyst, Futurum Research

Geoffrey A. Manne, President and Founder, International Center for Law & Economics

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Antitrust & Consumer Protection