The Competitive Effects of the Proposed T-Mobile/UScellular Transaction
Executive Summary
The proposed transaction between T-Mobile US Inc. (T-Mobile) and United States Cellular Corporation (UScellular) does not appear to present any significant competitive harms and carries the potential of significant consumer benefits via increased competition among wireless providers. Thus, based on current publicly available information, the Federal Communications Commission (FCC) and the U.S. Justice Department (DOJ) should approve the transaction in its entirety for the following reasons:
- UScellular is a struggling regional carrier with significant structural disadvantages compared to national carriers like AT&T, Verizon, and T-Mobile. UScellular currently covers approximately 10% of the U.S. population and accounts for about 1% of wireless connections nationwide. Its disadvantages include a lack of economies of scale and density, high operational costs, and limited resources to keep up with the capital expenditures required for 5G deployment and other critical network upgrades. As a result of these disadvantages, UScellular has experienced declining subscriber numbers, share of subscribers, and revenue.
- UScellular provides no meaningful competitive constraints on T-Mobile. T-Mobile sets its plan prices nationally and does not adjust them based on local competition, including UScellular’s presence, pricing, or service offerings and quality. Given its small size, limited footprint, and uncompetitive pricing, UScellular plays no role as a “maverick” disrupting the market and is unlikely to do so in the foreseeable future.
- Post-transaction, T-Mobile will continue to face robust competition from national wireless carriers and cable providers. T-Mobile is currently in a heated race with national wireless providers AT&T, Verizon, and EchoStar, along with cable wireless providers for subscribers across the United States. In addition, the rapid growth of cable-wireless providers—particularly Xfinity Mobile and Spectrum Mobile—is expected to exert significant competitive pressure on “traditional” wireless carriers. Cable-wireless providers leverage their existing cable infrastructure and bundled service offerings to attract customers, often at lower prices.
I. Introduction
T-Mobile in May 2024 announced its intention to enter into a transaction with UScellular.[1] The deal would include the acquisition of UScellular’s wireless operations, including its wireless customers and stores, as well as select spectrum assets.[2] As part of the deal, T-Mobile would enter into a long-term agreement to lease space on more than 2,000 UScellular towers. The transaction is valued at approximately $4.4 billion in cash and assumed debt.
The transaction would combine the assets of one of the three largest national wireless carriers (T-Mobile) with a regional provider (UScellular) that has faced challenges due to its lack of scale and density. UScellular currently covers approximately 10% of the U.S. population and accounts for about 1% of wireless connections nationwide. The parties claim the transaction would strengthen T-Mobile’s position in the rural and less densely populated areas where UScellular has focused its operations. After the transaction, T-Mobile will acquire about 30% of UScellular’s spectrum holdings in the 600 MHz, 700 MHz A Block, PCS, AWS, and 2.5 GHz bands, which could help to improve T-Mobile’s network capacity and coverage in certain areas.
The transaction will require approval from regulatory bodies, including the Federal Communications Commission (FCC) and the U.S. Justice Department (DOJ), who will assess its potential impact on competition in the wireless market. While there has been limited public opposition to the transaction, a July 2024 letter from several U.S. senators to the DOJ and FCC urged the regulators to scrutinize the acquisition in light of previous wireless mergers.[3] The letter argued that the acquisition would further consolidate an already highly concentrated market, reducing competition and potentially leading to higher prices and fewer choices for consumers.
The senators pointed to negative effects following T-Mobile’s previous acquisition of Sprint, including allegedly slower price declines and some recent price increases after the expiration of several merger commitments. The letter claims the transaction would eliminate potential competition between T-Mobile and UScellular in rural markets, where network expansion was anticipated. In addition, the letter claims the transaction would further concentrate spectrum holdings among the largest carriers, potentially hindering competition from smaller firms.
The senators’ letter, however, overlooks a major factor driving both T-Mobile’s previous acquisition of Sprint, which was cleared by the courts in 2020, and its proposed transaction of UScellular. Much as with Sprint, T-Mobile is seeking to acquire certain assets of a “weakened competitor”[4] in order to employ its assets in a more productive manner.
In a sense, this is a potential example of what the late Henry Manne called the “market for corporate control.”[5] T-Mobile believes it can take over a subset of UScellular’s assets and use them more efficiently. Indeed, UScellular appears to be in an even worse competitive position than Sprint, as UScellular is only a regional competitor with a very small market share and few competitive prospects outside of this proposed transaction.[6] T-Mobile has shown itself to be an innovator in the wireless space and could continue to enhance its ability to compete with Verizon and AT&T in rural markets with the addition of UScellular’s spectrum and its presence in those markets.
While the transaction will eliminate UScellular from some aspects of the wireless services market, it has the potential to generate significant consumer benefits and, contrary to the concerns raised in the senators’ letter, enhance competition in the mobile wireless market.
This issue brief evaluates some of the key issues surrounding the transaction from the perspective of law and economics. It is crucial to consider the current dynamics of the mobile-wireless market. Criticisms of the deal to date have overlooked the growing competition that market leaders face from EchoStar, cable/cable wireless, and other wireless providers. The transaction would allow T-Mobile to better compete against these new entrants and other large incumbents, potentially driving innovation and improved services.
In addition, the transaction would likely yield substantial consumer benefits, particularly in those rural areas where UScellular has a strong consumer presence but lags competitors in deploying the latest technology. Notably, T-Mobile’s resources and technology could accelerate the deployment of 5G networks in these underserved regions, helping to bridge the digital divide. Moreover, the transaction could also lead to more efficient use of scarce spectrum resources. T-Mobile’s expertise in network optimization could enhance the use of the acquired spectrum holdings, improving overall network capacity and performance.
II. Market Definition and Competitive Landscape
Today’s U.S. wireless markets are competitive and dynamic. In recent years, more consumers have obtained a mobile device and have more options for carriers, and they have experienced vast improvements in performance.
Pew reports that 98% of Americans now have mobile phones and 91% have smartphones.[7] Just five years earlier, only 77% of Americans had a smartphone.[8] As of 2017, “cable wireless” (mobile service offered by cable providers) was virtually unknown.[9] Today, cable wireless accounts for nearly 4% of subscribers (Table 1). 5G technology was first rolled out in 2018; today, 77% of operator locations have 5G.[10] Consumers in nearly every local market in the country can choose from among three or more providers as of 2022.[11]
Table 1: Mobile Subscribers by Provider
Source: Companies; Statista[12]
In comments to the FCC regarding the T-Mobile/Sprint merger, ICLE concluded:
[T]he merger of T-Mobile and Sprint would plausibly create a third truly national competitor in this market. In other words, in the market for nationwide 5G networks, this transaction amounts to a 2-to-3 merger, resulting in the creation of a viable, new market entrant….[13]
That conclusion was correct. Today, T-Mobile operates in all 50 states, has approximately 79,300 towers (owned and leased),[14] and about 120,000 cell sites.[15] Because of its coverage, the FCC characterizes T-Mobile as one of the three “nationwide service providers” in the United States with a network that is “truly ubiquitous.”[16]
UScellular operates in parts of 21 states, owns 4,388 towers, and operates 6,990 cell sites in service.[17] Because its coverage does not span the entire country and is not contiguous (Figure 1), the FCC has characterized UScellular as a “multi-regional service provider,” rather than a “nationwide service provider.”[18]
FIGURE 1: T-Mobile and UScellular Coverage
Note: Red circles indicate areas where UScellular has coverage, but T-Mobile does not.
Source: Compare Cellular[19]
The population across UScellular’s coverage footprint totals 32 million people or less than 10% of the U.S. population. At 4.5 million subscribers, the company accounts for approximately 1% of U.S. wireless subscribers (Table 1). In 2021, UScellular President and CEO Laurent Therivel indicated the company had a market share of “high 30% to low 40%” in Iowa and Wisconsin and “around the teens” across the rest of its footprint.[20]
Despite T-Mobile’s nationwide coverage, some spots served by UScellular are not well served by T-Mobile, as shown in Figure 1. These include much of Nebraska; portions of Wisconsin, Iowa, Kansas, Oklahoma; and much of Appalachia. These are areas in which the transaction would not reduce the number of competing firms, as T-Mobile would simply replace UScellular in areas where T-Mobile lacks coverage or combine assets to create even more effective competition against other providers.
T-Mobile’s network performance across the UScellular footprint generally lags behind T-Mobile’s national averages. T-Mobile claims these limitations have inhibited its ability to deliver a customer experience in these areas comparable to that enjoyed in the rest of the nation. Due in part to these shortcomings, T-Mobile estimates the postpaid customer share within UScellular’s footprint is well below its share nationwide.
A. Cable Wireless as a Competitive Alternative
Any antitrust review by regulators must first define the acquisition’s relevant product market. There are several compelling reasons why cable wireless providers such as Xfinity Mobile and Spectrum Mobile should be included within the market defined as relevant to the T-Mobile/UScellular transaction.
In less than a decade, cable-wireless providers have rapidly evolved from nascent entrants to significant competitive forces in the mobile-telecommunications market (Table 1). Their market share has grown substantially, with recent estimates indicating they’ve captured more than half of new subscribers.[21] This growth demonstrates that consumers view cable-wireless offerings as viable substitutes for traditional wireless services. Moreover, cable-wireless providers now cover a significant portion of the population, including within UScellular’s footprint.[22] This indicates that their services are widely available, and they compete directly with traditional carriers in many local markets.
Cable-wireless providers exhibit unique competitive characteristics that exert substantial pressure on traditional carriers. This includes their ability to bundle wireless services with home internet and television-channel packages;[23] leverage extensive Wi-Fi networks for traffic offloading;[24] and market to existing customer bases[25] in ways that grant them distinct advantages in pricing and service offerings. These providers have demonstrated the capacity to influence market prices and force traditional carriers to respond competitively.[26]
Including cable-wireless providers in the relevant market would offer a more accurate picture of the competitive landscape that the entity would face after the transaction. It would reflect the reality that consumers have an expanding array of choices for their wireless services beyond just traditional national carriers. Their inclusion would also likely result in a more nuanced assessment of market concentration and competitive effects. Further, regulators should consider not only the current market shares of cable-wireless providers, but also their trajectory and potential for future growth.
B. UScellular’s Competitive Disadvantages
UScellular suffers from numerous competitive disadvantages, as summarized by the company’s CEO:
Nationwide wireless providers enjoy scale, density, and cost advantages that UScellular lacks, enabling them to realize lower per-subscriber operating expenditures, amortize greater capital investments over their covered populations, and achieve higher profitability despite sometimes offering lower prices. The structural disadvantages we face manifest across every part of our business, ranging from spectrum and network costs to non-network expenses like advertising and distribution.[27]
Some of UScellular’s disadvantages stem from fundamental factors, such as the company’s relatively small and discontinuous network. These disadvantages inhibit UScellular’s ability to achieve scale economies, leading to higher operating costs and reduced quality of service. Combined, these factors have negatively affected the company’s financial condition, further hindering UScellular’s competitiveness.
1. A mostly rural footprint is a fundamental disadvantage
Approximately 40% of UScellular’s covered population is rural.[28] The company’s CEO identifies several factors that increase the costs of deploying to rural and other less-densely populated areas, such as:[29]
- Longer distances between populated locations;
- More hills, mountains, and stone-covered areas, requiring more extensive surveys, as well as deeper and more robust tower foundations and trenching for power and backhaul; and
- Fewer highways and easy access points to preferred tower locations, requiring construction of longer access roads.
Because of these higher costs, establishing cell towers in rural and less-densely populated areas may be unprofitable, thus leading to lower cell-tower density.[30] As a result, consumers are more likely to experience inconsistent cell reception and less-reliable cell-phone signals.[31] Therivel has indicated that UScellular’s network quality is “falling behind” its competitors and that “customers often leave because of poor network performance.”[32]
2. Insufficient size and footprint to achieve economies of scale
UScellular operates in parts of 21 states (Figure 1) and accounts for about 1% of U.S. wireless subscribers (Table 1). It has about one-third fewer subscribers than each of the next three largest providers—Spectrum Mobile, Xfinity Mobile, and DISH Boost. Since 2020, UScellular has lost 10% of its subscribers (500,000) and is expected to continue to lose market share into the foreseeable future.[33] With its smaller size, UScellular does not benefit from the economies of scale that its larger competitors have.
Economies of scale are a well-known phenomenon that occur when the average cost of production (e.g., cost per-subscriber) decreases as output (e.g., number of subscribers) increases.[34] One source of economies of scale is fixed costs that do not vary with output. As output expands, these fixed costs are spread across more units of production and the average fixed cost per-unit declines. The FCC’s notes “[r]elatively high fixed costs in relation to the number of customers may limit the number of firms that can enter and survive in a market.”[35]
Figure 2: Illustration of Economies of Scale in Wireless Subscribers
SOURCE: Therivel Declaration
Volume discounts on inputs are another source of economies of scale. Therivel explained that UScellular’s relatively small size does not allow the company to achieve the same economies of scale as its competitors (Figure 2):
It costs UScellular more to operate our network and create network capacity compared to the nationwide wireless providers. For example, UScellular’s average cost of service per subscriber per month ($13.53) is nearly twice that of T-Mobile’s ($7.39 when excluding Sprint merger-related costs). In addition, our fixed costs are spread across 4.5 million subscribers compared to the 100 million-plus subscribers for each of the larger nationwide carriers. … We also cannot negotiate at scale to get lower prices for some products like equipment. And our rural and more sparsely populated footprint is costlier to serve than denser areas (because costs are averaged across geographies, we have a disadvantageous average relative to our rivals).[36]
UScellular appears to be stuck in a vicious circle in which its inability to benefit from scale economies hinders its ability to attract and retain customers which, in turn, further stifles its ability to achieve scale economies, as noted in a letter from T-Mobile and UScellular to the FCC:
In other words, fewer subscribers mean less revenue to spend on network improvements and the customer experience; that spend is further decreased by the need to pay back debt; and the resulting network experience in turn leads to even fewer subscribers.[37]
UScellular identifies several consequences of its limited scale:
- Reduced ability to make footprint-wide fixed-cost investments, such as building the network core or a digital-services platform;[38]
- Reduced ability to obtain volume discounts on inputs;[39]
- Reduced ability to acquire additional spectrum;[40]
- Reduced ability to compete on price;[41]
- Limited ability to partner with mobile virtual-network operators (MVNOs);[42]
- More costly and less-effective provision of customer care and staffing of call centers;[43]
- Reduced retail distribution through company-owned stores, agents, and national retailers;[44] and
- Reduced cost-effectiveness of advertising.[45]
3. Insufficient resources to invest in deployment and improvements
UScellular’s scale disadvantage extends from its inability to attract and retain customers due to its diminished financial condition. For example, in its effort to compete by modernizing its network, UScellular acquired C-band spectrum in 2021 and 3.45 GHz spectrum in 2022. To finance these acquisitions, the company’s long-term debt doubled from $1.5 billion to $3.0 billion.[46] In 2023, the interest expense of that additional debt amounted to $130 million, or about 3% of the company’s revenue.[47]
Because of its higher costs and shrinking revenues, UScellular’s operating cash flows are “considerably below” the margins of nationwide carriers.[48] This limits its ability either to invest in its network or to compete on price.[49]
III. Efficiencies and Consumer Benefits
The U.S. Supreme Court has repeatedly cautioned that “[t]he antitrust laws … were enacted for the ‘protection of competition, not competitors.’”[50] Across decades of decisions, the Court has consistently recognized that this is the very “purpose of the antitrust laws.”[51] The 9th U.S. Circuit Court of Appeals recently observed that there is a difference “between anticompetitive behavior, which is illegal under federal antitrust law, and hypercompetitive behavior, which is not.”[52] The 9th Circuit also noted that a firm that exercises “market dominance” may, nevertheless, “play[] a powerful and disruptive role in those markets.”[53]
For more than a decade, T-Mobile has positioned itself in just such a disruptive role with its “Un-carrier” approach.[54] T-Mobile’s transaction with UScellular will generate efficiencies that can be translated to consumer benefits through lower prices, expanded coverage, and improved services.
A. Potential for Improved Rural-Broadband Access
T-Mobile’s transaction with UScellular would improve rural-broadband access by providing the combined firm with more resources and infrastructure to bolster its network in rural areas. The acquired UScellular spectrum would also provide T-Mobile with a substantial increase in low-band spectrum, a critical component to deliver broadband services in rural areas. T-Mobile’s current low-band spectrum holdings in UScellular’s footprint are reportedly 20% lower than in other areas.[55] The transaction would allow T-Mobile to address this deficiency by acquiring spectrum in the 600 MHz and 700 MHz A Block bands.[56]
The added spectrum would also help T-Mobile to improve network speeds and capacity, particularly in areas where its network is currently weak.[57] Under the deal, T-Mobile would lease space on more than 2,000 UScellular towers, enabling it to densify its network in rural areas.[58] This increased density would result in enhanced coverage, improved signal strength, and faster data speeds for consumers in these areas.[59]
T-Mobile plans to leverage the increased capacity from the acquired spectrum and network densification to expand its 5G Home Internet service in UScellular’s footprint.[60] This expansion would provide a competitive alternative to traditional broadband providers in rural areas. The transaction would allow T-Mobile to expand the number of households eligible for its Home Internet service by more than 1 million, and would support a significantly larger number of households than UScellular currently can.[61]
Following the transaction, T-Mobile has expressed plans to prioritize network improvements in rural areas.[62] They aim to rapidly operationalize network enhancements and bring benefits like lower prices and value-added services to customers in these regions.[63] Additionally, T-Mobile will inherit UScellular’s existing rural-customer base, increasing the economic incentive for them to invest in network coverage and quality in these less-densely populated locations.[64]
B. Synergies in Spectrum Utilization and Network Deployment
The transaction is primarily motivated by a strategic objective to enhance its network capabilities, particularly in areas where UScellular currently holds a stronger position. The transaction would provide T-Mobile with access to UScellular’s spectrum assets, allowing for aggregation and more efficient spectrum utilization.[65] UScellular currently faces limitations in spectrum aggregation due to its holding fewer contiguous blocks of spectrum.[66] This fragmentation reduces spectral efficiency (i.e., the optimal use of spectrum such that the maximum amount of data can be transmitted with the fewest transmission errors), requiring a denser network deployment to achieve comparable download speeds. By acquiring and combining certain of these fragmented blocks with their existing holdings, T-Mobile could create larger contiguous channels, enhancing spectral efficiency and enabling higher data-transmission rates using the same amount of spectrum.[67]
The acquired UScellular spectrum holdings would be a complement T-Mobile’s holdings. UScellular possesses valuable low-band spectrum in the 600 MHz and 700 MHz A Block bands, which are essential for wider coverage, particularly in rural areas.[68] T-Mobile’s existing network would be significantly strengthened by incorporating these low-band assets. Additionally, UScellular’s mid-band spectrum in the PCS, AWS, and 2.5 GHz bands would further bolster T-Mobile’s 5G-deployment capabilities.[69]
As noted above, the transaction would also grant T-Mobile access to lease space on more than 2,000 UScellular towers. This access is crucial for T-Mobile to densify its network, particularly in areas where its infrastructure is currently limited.[70] By using UScellular’s existing towers, T-Mobile could expand its coverage and capacity without incurring the costs of building new cell sites.
The integration of UScellular’s spectrum assets into T-Mobile’s network is anticipated to be a swift and cost-effective process.[71] Since the acquired spectrum falls within bands already supported by T-Mobile’s existing network equipment, activation can be achieved through software reconfiguration.[72] This method allows for almost-instantaneous deployment in most cases, leading to a near-immediate realization of network synergies.
The network integration process would be accelerated through T-Mobile’s planned deployment of Multi-Operator Core Network (MOCN) technology immediately following the transaction’s close.[73] MOCN would enable seamless interoperability between T-Mobile and UScellular networks, allowing customers of both carriers to automatically connect to whichever network provides superior service.[74] This integration approach is particularly efficient since nearly all UScellular consumer devices are already compatible with T-Mobile’s network infrastructure, enabling migration through over-the-air software updates without requiring hardware replacements.[75] The MOCN implementation would permit immediate unification of the radio access networks, ensuring uninterrupted service for UScellular customers during the transition period while facilitating rapid realization of network synergies.[76]
By leveraging UScellular’s existing infrastructure and readily integrable spectrum assets, T-Mobile could significantly reduce its capital expenditure on network deployment.[77] The cost savings would stem from using UScellular’s existing towers, efficient spectrum integration through software reconfiguration, and the ability to deploy a larger, more efficient network.
T-Mobile has a demonstrated history of successfully integrating acquired companies and quickly realizing network synergies. Following its combination with MetroPCS in 2013, T-Mobile completed network integration and realized target synergies a year ahead of schedule, also achieving 40 percent higher synergies than initially planned.[78] This integration involved a market-by-market refarming of spectrum from MetroPCS’s CDMA network to T-Mobile’s LTE network.[79] T-Mobile’s 2020 merger with Sprint also resulted in a greatly improved network.[80] T-Mobile’s network strategy is to rapidly implement improved network performance to further its “Un-carrier” approach.[81] The company expects that most UScellular customers will be able to migrate to the T-Mobile network via an over-the-air software update, with no need for new handsets or SIM cards.[82]
As noted above, the integration of the UScellular network will use the T-Mobile network as the anchor, with increased density and coverage achieved by integrating UScellular base stations and spectrum. The spectrum acquired from UScellular is in bands already supported on the T-Mobile network, allowing for rapid deployment via software reconfiguration. The integration of leased UScellular base stations with T-Mobile radios is projected to be completed within 18 to 24 months, with some geographies completed within the first few months after closing. This experience with integrating networks, particularly the rapid integration after the MetroPCS transaction, indicates that T-Mobile has the capability to swiftly realize the network synergies expected from the UScellular transaction.
C. Increased Investment
We reviewed the empirical literature on the effects of wireless mergers and market concentration on pricing, investment, and innovation.[83] The literature indicates that increased concentration—particularly in markets with three facilities-based operators—is associated with higher levels of long-term investment and potentially greater dynamic benefits. These benefits include faster and more reliable cellular service, reflecting improvements in dynamic-welfare effects. The evidence also suggests that mergers resulting in markets with more symmetrical structures (i.e., where providers have roughly equal market shares) may further strengthen these positive investment effects.
A recently published retrospective of T-Mobile’s acquisition Sprint found that both the merged companies and overall industry investment increased relative to pre-merger investment:
The 2018–2021 investment profile for US mobile networks shows that T-Mobile more than offset any decline in reported capital spending from the elimination of Sprint: the national US wireless carriers invested $63.5 billion in the two-year period 2020–2021, up from $58.9 billion in the two-year period 2018–2019. T-Mobile, alone, increased its capital spending from $5.9 billion in 2019 to $12.1 billion in 2021 (following the merger). The wireless industry’s share of total U.S. corporate capital expenditure (adjusting for inflation as well as other macroeconomic trends) did not decline, but rather rose slightly, from 0.66 percent in 2018–2019 to 0.68 percent in 2020–2021, according to UBS Investment Research.[84]
As discussed above, as a small regional carrier, UScellular faces significant financial and structural disadvantages relative to national carriers like T-Mobile. These disadvantages include a lack of scale and density in its footprint, higher operational costs, and an inability to keep pace with the capital expenditures required for network upgrades and 5G deployment. Indeed, much of UScellular’s current network is 3G or 4G LTE, rather than 5G, as noted by one analyst:
Essentially, folks in Iowa and Wisconsin have a decent chance of finding U.S. Cellular 5G coverage in their backyard; meanwhile, folks in Nebraska, Illinois, and Missouri will just have to cross their fingers and hope that they live in a 5G-covered zone. Other than that, U.S. Cellular has small, dot-sized pockets of 5G coverage in the other states.[85]
UScellular Chief Technology Officer Michael Irizarry reports that the company’s “5G deployment has lagged behind that of our competitors due to limited capital, which… places us at a competitive disadvantage in terms of network quality.”[86]
UScellular’s inability to maintain or increase its investments has led to a decline in the company’s network quality relative to national carriers, which has resulted in reduced customer satisfaction. The company’s reduced revenues combined with its higher cost structure has forced it to prioritize short-term cost-cutting measures over long-term investments.[87] The transaction would effectively address these investment constraints by integrating the acquired UScellular assets into its financially stronger and more scalable national operations.
T-Mobile’s network performance within UScellular’s footprint generally lags its national averages, hindering its ability to compete effectively in those areas. This lag is primarily attributed to T-Mobile’s lack of spectrum depth and less-dense network infrastructure relative to competitors like AT&T and Verizon. Recognizing this weakness, T-Mobile sees the transaction as an opportunity to bolster its investment in these underserved areas. By acquiring certain UScellular spectrum assets and leveraging its existing tower infrastructure, T-Mobile can cost-effectively enhance its network capacity, coverage, and service quality in these regions.
The enhanced network capacity and 5G capabilities resulting from the transaction would create opportunities for innovation and service improvements. For instance, T-Mobile plans to expand its 5G Home Internet service within UScellular’s footprint, particularly in rural areas.[88] This expansion aligns with T-Mobile’s strategic objective of leveraging its 5G network to disrupt the in-home broadband market and offer a competitive alternative to traditional fixed-line providers, in line with the company’s “Un-carrier” approach.[89]
[1] Press Release, T-Mobile to Acquire UScellular Wireless Operations and Deliver Exceptional Value, a Superior 5G Experience and Unparalleled Benefits to Millions of Customers, T-Mobile (May 28, 2024), https://www.t-mobile.com/news/business/uscellular-acquisition-operations-assets.
[2] Applications of T-Mobile US Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 ¶ 31 (Sep. 13, 2024), https://www.fcc.gov/ecfs/search/search-filings/filing/109132166915081 [hereinafter “Applications”].
[3] Letter from Elizabeth Warren, Amy Klobuchar, Christopher Murphy & Bernard Sanders, U.S. Senators to Jonathan Kanter, Assistant Attorney General, Dept. of Justice & Jessica Rosenworcel, Chair, FCC (Jul. 22, 2024), available at https://www.warren.senate.gov/imo/media/doc/final_-_warren_letter_to_doj_and_fcc_re_t-mobile_uscellular_merger.pdf.
[4] Cf. New York v. Deutsche Telekom AG, 439 F. Supp. 3d 179, 224 (S.D.N.Y. 2020) (finding that the “weight of the evidence at trial establishes that Sprint is caught in a vicious cycle caused by its inability to finance meaningful network investment, which perpetuates a low-quality network that drives away customers and limits Sprint’s ability to generate the cash necessary to reduce its financial constraints… and Sprint’s ability to improve that product is hindered by substantial hurdles in financing network development.”)
[5] Henry Manne, Mergers and the Market for Corporate Control, 73 J. Pol. Econ. 110 (1965).
[6] See Notice of Ex Parte Presentation, Applications of T-Mobile US Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286, at 2-3 (Oct. 3, 2024), available at https://www.fcc.gov/ecfs/document/100352474704/1.
[7] Mobile Fact Sheet, Pew Research Ctr. (Nov. 13, 2024), https://www.pewresearch.org/internet/fact-sheet/mobile/.
[8] Id.
[9] Press Release, Comcast Introduces Xfinity Mobile, Comcast (Apr. 6, 2017), https://corporate.comcast.com/news-information/news-feed/comcast-xfinity-mobile.
[10] 5G in America, CTIA (2024), https://www.ctia.org/the-wireless-industry/5g-in-america; 5G in the U.S.—Additional Mid-band Spectrum Driving Performance Gains, Ookla (Jun. 24, 2024), https://www.ookla.com/articles/5g-in-the-us-q1-2024.
[11] 2022 Communications Marketplace Report, In the Matter of Communications Marketplace Report, GN Docket No. 22-203 (Dec. 30, 2022) ¶ 64 [hereinafter 2022 Communications Marketplace Report].
[12] Number of T-Mobile Customers in the United States from 2010 to 2024, by Quarter and Contract Type, Statista (Apr. 2024), https://www.statista.com/statistics/219564/total-contract-customers-of-t-mobile-usa-by-quarter; AT&T Wireless Subscribers and Connections from 1st Quarter 2017 to 1st Quarter 2024, Statista (Jul. 2024), https://www.statista.com/statistics/1125140/total-mobility-subscribers-connections; Financial and Operating Information as of June 30, 2024, Verizon (Jul. 20, 2024), https://www.verizon.com/about/file/71961/download?token=zvOuCYvo; Who We Are, Charter Communications (2024), https://corporate.charter.com/about-charter; EchoStar Resets Boost Mobile Brand, Mobile World Live (Jul. 18, 2024), https://www.mobileworldlive.com/dish-network/echostar-resets-boost-mobile-brand; Press Release, Xfinity Mobile & Comcast Business Mobile Surpass 7 Million Lines, Comcast (Sep. 9, 2024), https://corporate.comcast.com/stories/xfinity-mobile-seven-million; Press Release, UScellular Reports First Quarter 2024 Results, UScellular (May 3, 2024), https://investors.uscellular.com/news/news-details/2024/UScellular-reports-first-quarter-2024-results/default.aspx.
[13] Comments of the International Center for Law and Economics in Opposition to Petitions to Deny, In the Matter of Applications of T-Mobile US, Inc. and Sprint Corporation for Consent to Transfer Control of Licenses and Authorizations, WT Docket No. 18-197 (Sep. 17, 2018), available at https://laweconcenter.org/wp-content/uploads/2018/09/ICLE-Comments-TMobile-Sprint-Merger.pdf.
[14] Ex Parte Presentation, Applications for the Transfer of Control of Mint Mobile, LLC and UVNV, Inc. from Ka’ena Corporation to T-Mobile US, Inc., GN Docket No. 23-171 (May 17, 2024), 31, https://www.fcc.gov/ecfs/document/105200428121304/2.
[15] What Is a Cell Site? How Do Cell Sites Work?, Tower Genius (May 2024), https://www.towergenius.com/cell-site.
[16] 2022 Communications Marketplace Report, supra note 11, ¶ 64.
[17] Quarterly Report (Form 10-Q), UScellular (Aug. 2, 2024), available at https://d18rn0p25nwr6d.cloudfront.net/CIK-0000821130/7ec3a639-4d10-468b-b1d0-cc66357b1746.pdf.
[18] 2022 Communications Marketplace Report, supra note 11, ¶ 64.
[19] Marisa Crane, U.S. Cellular Coverage Map: How U.S. Cellular Compares to AT&T, Verizon, T-Mobile, and Sprint, Compare Cellular (Mar. 20, 2020), https://www.comparecellular.com/coverage-maps/us-cellular-coverage-map.
[20] Bevin Fletcher, UScellular Expects to Nab Market Share in 2021, Fierce Network (Jan. 8, 2021), https://www.fierce-network.com/operators/uscellular-ceo-expect-pivot-to-growth-2021.
[21] Jeff Baumgartner, Cable’s Wireless Blitz Picks up More Steam, LightReading (Aug. 16, 2024), https://www.lightreading.com/wireless/cable-s-wireless-blitz-picks-up-more-steam.
[22] Decl. of Laurent Therivel, Applications of T-Mobile US, Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 ¶ 31 (Sep. 13, 2024), https://www.fcc.gov/ecfs/document/109132166915081/5 [hereinafter “Therivel Declaration”] (reporting cable wireless has more than 1.3 million handset subscribers in UScellular’s footprint); see also, Mike Dano, Cable MVNOs Are Beginning to Hurt U.S. Cellular, LightReading (Aug. 6, 2019), https://www.lightreading.com/mobile-core/cable-mvnos-are-beginning-to-hurt-u-s-cellular (reporting about 45% of UScellular’s footprint overlapped with Charter, Comcast, or Altice in 2019).
[23] Therivel Declaration, supra note 22, ¶ 19.
[24] Id. ¶ 18 (“According to their own data, cable wireless providers offload approximately 90 percent of their traffic to Wi-Fi, versus up to 80 percent for wireless providers like UScellular. In other words, cable wireless customers use a full 50 percent less cellular network capacity than our customers do.”); see also, Jack Reid, Comcast and Charter Are in a Better Position Than Smaller Cable Companies To Resist Fixed Wireless Competition, S&P Global Ratings Says, Yahoo Finance (Jun. 5, 2024), https://finance.yahoo.com/news/comcast-charter-better-position-smaller-212413329.html.
[25] Decl. of Jonathan Orszag, Applications of T-Mobile US, Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 ¶ 90 (Sep. 13, 2024), https://www.fcc.gov/ecfs/document/109132166915081/7 [hereinafter “Orszag Declaration”].
[26] Decl. of Michael Katz, Applications of T-Mobile US, Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 ¶17 (Sep. 13, 2024), https://www.fcc.gov/ecfs/document/109132166915081/3 [hereinafter “Katz Declaration].
[27] Therivel Declaration, supra note 22, ¶ 6.
[28] Decl. of Michael S. Irizarry, Applications of T-Mobile US, Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 ¶ 17 (Sep. 13, 2024), https://www.fcc.gov/ecfs/document/109132166915081/6 [hereinafter “Irizarry Declaration”].
[29] Therivel Declaration, supra note 22, ¶ 24.
[30] Rural Area Cell Phone Booster: A Comprehensive Guide, KING (Jul. 10, 2023), https://kingconnect.com/blog/rural-area-cell-phone-booster-a-comprehensive-guide.
[31] Id.
[32] Therivel Declaration, supra note 22, ¶ 10.
[33] Irizarry Declaration, supra note 28, ¶ 19.
[34] See Paul Krugman & Robin Wells, Economics (4th ed., 2015) 348.
[35] Twentieth Report, In the Matter of Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993 Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No. 17-69 (Sep. 27, 2017), at 22, available at https://docs.fcc.gov/public/attachments/FCC-17-126A1.pdf, citing John Sutton, Sunk Costs and Market Structure (1991); Luis Cabral, Introduction to Industrial Organization, Ch. 14 (2000); Dennis W. Carlton & Jeffrey M. Perloff, Modern Industrial Organization (4th ed., 2005), at 41 (2005); George S. Ford, Thomas M. Koutsky, & Lawerence J. Spiwak, Competition after Unbundling: Entry, Industry Structure, and Convergence, 59 Fed. Comm. L. J. 331 (Mar. 2007), at 332, 337.
[36] Therivel Declaration, supra note 22, ¶ 9.
[37] Notice of Ex Parte Presentation, Applications of T-Mobile US, Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 (Oct. 3, 2024), https://www.fcc.gov/ecfs/document/100352474704/1.
[38] Id. (“[F]ootprint-wide fixed-cost investments, such as building the network core or a digital service platform, must meet higher return thresholds for us to consider them.”).
[39] Id. (“We also cannot negotiate at scale to get lower prices for some products like equipment.”); Irizarry Declaration, supra note 28, ¶ 16 (Sep. 13, 2024), (“We purchase smaller volumes of equipment and services than our nationwide competitors, which I expect leads to our paying higher prices as a result.”).
[40] Irizarry Declaration, supra note 28, ¶ 22 (“[W]e face disadvantages acquiring spectrum relative to our competitors. Our footprint often only covers parts of a FCC spectrum licensed area (e.g., a Partial Economic Area), making the purchase of spectrum economically inefficient for us relative to our nationwide competitors. For example, in recent auctions that involve geographic licensing based on PEAs—which are smaller auction regions than the FCC has used in other auctions—portions of Northern California (specifically, Alpine, Inyo, Lassen, Mono, Plumas, and Sierra counties) are included in PEA 76 (Reno, NV), which also includes most of Nevada. We operate in Northern California, and therefore having a spectrum license there is desirable. But because we do not operate in Nevada, that spectrum license is too costly for us. Indeed, we did not bid on this PEA in recent spectrum auctions. Rather, our competitors, who could utilize it more broadly and spread the cost among more subscribers, ultimately won licenses for this PEA in these auctions.”).
[41] Therivel Declaration, supra note 22, ¶ 33 (“However, given that our operating cash flow (“OCF”) margins are already considerably below the large nationwide carriers due to our relative cost position and lack of scale … coupled with the advantaged economics of cable wireless, that differentiator can’t be a low-price strategy. A low- price strategy would not overcome these challenges or create the necessary cash flows required for investment in the network. Indeed, while we engaged in aggressive device and service discounts in 2022, those efforts were not successful and we continued to lose subscribers….”).
[42] Id. ¶ 15 (“[U]nlike nationwide wireless providers, UScellular’s limited footprint means that it cannot offer a comprehensive nationwide network at wholesale, meaning that an MVNO or cable provider using UScellular’s network must either be limited to the UScellular footprint or partner with one or more additional carriers.”).
[43] Id. ¶ 13 (“Our smaller scale also affects our cost to operate call centers. For example, to cover hours of operation in queues with lower call volume, we need to staff not to volume but to ensure resource coverage for the hours the call center is open.”).
[44] Id. ¶ 12 (“Scale also challenges us when it comes to attracting third-party agents and national retail partners to market and sell our services. … Our nationwide competitors also have the scale to attract multiple national retailers to distribute their services, whereas we only work with Walmart and are not invited to do so in every store located in our footprint. Other national retailers will not work with us because we do not cover enough of their footprint—whereas having the ability to partner with another national retailer could be valuable to us because there are some rural areas where we cannot attract an agent or locate a company-owned store because it is not profitable.”).
[45] Id. ¶ 11 (“Due to the geographically dispersed nature of our footprint covering portions of 21 states, it is impractical and not cost- effective to make use of the cheapest forms of advertising in terms of cost per impressions served: national and mass market print, radio, or television advertising. For example, advertising spots are sold nationally per Designated Market Area (“DMA”). .. [I]n at least out of 62 DMAs, our footprint only partially overlaps with DMA boundaries. As a result, UScellular cannot realistically buy the kind of advertising that nationwide carriers are able to employ for less cost and with substantially greater efficiency, which makes us less competitive and increases the cost of customer acquisition.”).
[46] Irizarry Declaration, supra note 28, ¶ 12.
[47] Therivel Declaration, supra note 22, ¶ 22; Orszag Declaration, supra note 25, Fig. 7.
[48] Irizarry Declaration, supra note 28, ¶ 33; see also Orszag Declaration, supra note 25, ¶ 64.
[49] Therivel Declaration, supra note 22, ¶¶ 22, 33, 42, 47.
[50] Brunswick Corp. v. Pueblo Bowl-O-Mat Inc., 429 U.S. 477, 488 (1977) (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320 (1962)).
[51] Leegin Creative Leather Prods. Inc. v. PSKS Inc., 551 U.S. 877, 906 (2007). See also United States v. Phila. Nat’l Bank, 374 U.S. 321, 367 n.43 (1963) (quoting Brown Shoe, 370 U.S. at 320); Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 767, n.14 (1984), (quoting Brunswick, 429 U.S. at 488); Cargill Inc. v. Monfort of Colo. Inc., 479 U.S. 104, 110 (1986), (quoting Brunswick, 429 U.S. at 488); Atl. Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 338 (1990), (quoting Brown Shoe, 370 U.S. at 320); Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (1993) (quoting Brown Shoe, 370 U.S. at 320).
[52] FTC v. Qualcomm Inc., 969 F.3d 974, 982 (9th Cir. 2020).
[53] Id. at 1005.
[54] Alexandra Withrow, T-Mobile: Becoming the Un-carrier Case Study Application and Teaching Note, (W. Wash. U., May 15, 2015), https://cedar.wwu.edu/scholwk/2015/Day_two/22/ (“In late 2012, T-Mobile and newly appointed CEO John Legere found a new way to play the game, and set out to change T-Mobile’s reputation as a second-rate phone carrier and become the Un-Carrier. This meant no service contracts, inexpensive upgrades and flexible plans.”).
[55] Decl. of Ankur Kapoor, Applications of T-Mobile US, Inc. and United States Cellular Corporation for Consent to Transfer Control of Licenses and Authorizations, GN Docket No. 24-286 ¶ 3 (Sep. 13, 2024), https://www.fcc.gov/ecfs/document/109132166915081/4 [hereinafter “Kapoor Declaration”].
[56] Id. ¶ 6.
[57] Id. ¶ 3.
[58] Id. ¶ 2.
[59] Id. ¶¶ 6-7.
[60] Id. ¶ 19; Katz Declaration, supra note 26, ¶ 9.
[61] Kapoor Declaration, supra note 55, ¶ 19 (“T-Mobile estimates that we will be able to increase the number of households eligible for Home Internet services in the Footprint by over [redacted] million and increase the number of households that can be supported by the service by [redacted].”).
[62] Katz Declaration, supra note 26, ¶ 12.
[63] Id. ¶ 10.
[64] Kapoor Declaration, supra note 55, ¶¶ 21-22.
[65] Id. ¶¶ 6, 10.
[66] Therivel Declaration, supra note 22, ¶ 8.
[67] Kapoor Declaration, supra note 55, ¶ 12.
[68] Id. ¶¶ 6-7.
[69] Id.
[70] Id. ¶¶ 2-3, 13.
[71] Id. ¶¶ 25-26.
[72] Id. ¶ 24.
[73] Applications, supra note 2 at 29-30.
[74] Id.
[75] Id.
[76] Id.
[77] Id. ¶ 17.
[78] Kapoor Declaration, supra note 55, ¶ 28.
[79] Id.
[80] Katz Declaration, supra note 26, ¶¶ 5, 10.
[81] Id.
[82] Kapoor Declaration, supra note 55, ¶ 24.
[83] Eric Fruits, Justin (Gus) Hurwitz, Geoffrey A. Manne, Julian Morris, & Alec Stapp, Static and Dynamic Effects of Mergers: A Review of the Empirical Evidence in the Wireless Telecommunications Industry, OECD, DAF/COMP/GF(2019)13 (Sep. 4, 2020), available at https://one.oecd.org/document/DAF/COMP/GF(2019)13/en/pdf.
[84] Thomas W. Hazlett & Robert W. Crandall, No “Cozy Triopoly,” 47 Regulation 8, 11 (Sum. 2024), available at https://laweconcenter.org/wp-content/uploads/2024/07/regulation-v47n2-2.pdf.
[85] Tyler Abbott, U.S. Cellular Coverage Map: How It Compares to The Big 3, WhistleOut (Jun. 18, 2024), https://www.whistleout.com/CellPhones/Guides/us-cellular-coverage-map.
[86] Irizarry Declaration, supra note 28, ¶ 6.
[87] Therivel Declaration, supra note 22, ¶ 47.
[88] Katz Declaration, supra note 26, ¶ 9; Kapoor Declaration, supra note 55, ¶ 19.
[89] Katz Declaration, supra note 26, ¶ 5.