Cicilline Chairs Antitrust Hearing on Proposed Sprint/T-Mobile Merger

Mar 12, 2019

WASHINGTON – House Antitrust Subcommittee Chairman David N. Cicilline (RI-01) held a hearing today to examine the possible impacts on the wireless market caused by the proposed merger between Sprint and T-Mobile. The following is footage and a transcript of Chairman Cicilline’s opening remarks:

 

 

 

---------

 

 

Chairman David N. Cicilline (RI-01)

Opening Remarks as Delivered

March 12, 2019

 

Today’s hearing is an important opportunity to examine the state of competition in the wireless industry and the competitive effects of the proposed merger of T-Mobile and Sprint.

 

Over the past century, the telecommunications industry in the United States has demonstrated the harms that result from monopoly power.

By 1940, AT&T’s dominance was so entrenched that it was widely considered to be a lawful monopoly. Over the next forty years, it grew to become the largest corporation in the world, controlling more than 80% of the market. It earned more than $53 billion in annual revenue and was the second largest employer in the United States, behind only the federal government.  

But in 1982, the Justice Department successfully concluded its landmark anti-monopoly case against AT&T for blocking competition in the telephone service and equipment market. As a result, the Bell System was broken into separate telephone companies, while AT&T’s long-distance services was structurally separated from its device manufacturing services.

The importance of the breakup of the Bell System cannot be overstated. It facilitated an explosion of competition in long-distance markets, significantly lowered prices for consumers, improved products and services, and spurred the creation of new jobs. 

 

Perhaps most importantly for purposes of today’s hearing, the competitive pressure resulting from robust enforcement also led to the deployment of fiber across the country, particularly much of the Internet’s infrastructure.

 

Anne Bingaman, the Assistant Attorney General of the Antitrust Division, testified before the Subcommittee in 1994 that AT&T “had copper wires across the country until competition entered that market, and when it did, Sprint and MCI laid fiber-optic coast to coast and AT&T, spurred by competition, followed them.”

 

As she noted then, there was no question that the speed of building the infrastructure for the nationwide Internet was “years and years ahead” of where it would have been in the absence of the breakup of AT&T.

 

And when coupled with some of the pro-competitive reforms of the Telecommunications Act of 1996—such as phone number portability—consumers and small businesses saved billions of dollars each year while maverick competitors were incentivized to enter the market to offer better services and more choice.

 

 But due largely to a retreat from aggressive antitrust enforcement over the past several decades, there are only four national carriers today.

 

The proposed merger of T-Mobile and Sprint would shrink this market to just three national wireless carriers, resulting in the combined company controlling nearly a third of the wireless market.

 

The merging parties claim that the transaction is necessary to deploy the next generation of broadband internet across the country, and to compete more vigorously with the two largest carriers, AT&T and Verizon. To their credit, both Sprint and T-Mobile have aggressively competed with the larger carriers over the past decade, resulting in lower prices and better policies for consumers.

 

But I am deeply skeptical that consolidation is the path forward to lowering prices, increasing opportunity, or unleashing competition in places around the country there is none today.

 

First, the competition that has been driven by Sprint and T-Mobile over the past decade has occurred in the absence of consolidation, not because of it.

 

Second, nearly a century of experience with telephone monopolies has taught us that the pressure of competition is critical to building out the nation’s internet infrastructure and improving quality for consumers.

 

And finally, there is mounting evidence that additional consolidation in this market would likely give the combined company the incentive and ability to raise prices, lower wages, and abandon the policies that have benefited consumers over the past decade.

 

Under both longstanding Supreme Court precedent and the Horizonal Merger Guidelines, mergers that significantly increase concentration in highly concentrated markets are presumed to be illegal.

 

It is beyond dispute that this transaction will significantly increase concentration in the wireless market far beyond the level that the antitrust agencies consider to be “likely to enhance market power.”  And because of this reality, the only thing preventing the merging parties from raising prices, lowering quality, and depressing wages are promises for a limited period of time.

 

Today’s hearing is also an opportunity to examine concerns related to the current state of merger enforcement.

           

It has been nearly a year since the Federal Trade Commission last challenged a merger in court. And since the beginning of the Trump Administration, the Justice Department’s Antitrust Division has only challenged one significant merger: AT&T’s acquisition of Time Warner.

 

Not only did the Antitrust Division lose this challenge, but this case has been mired in controversy from day one due to the President’s shameful attempts to interfere in antitrust enforcement. Last week, Jane Mayer of The New Yorker reported that the President instructed senior White House officials to “get this lawsuit filed” against the AT&T-Time Warner merger following a series of reports suggesting that the president seeks to wield the antitrust laws as a political weapon to reward friends and punish perceived enemies.

 

In response to this explosive report, Chairman Nadler and I are seeking the production of every communication and document related to this case. We must to get to the bottom of whether the White House has weaponized our antitrust laws to punish enemies or reward friends. And we will.

 

But most importantly for purposes of today’s hearing, the proposed merger of T-Mobile and Sprint is really a critical test: is the Antitrust Division genuinely dedicated to promoting competition, or does it only oppose mergers when the White House tells it to do so?

 

Finally, this proposed merger does not occur in a vacuum—working families across the country are struggling to make ends meet.

 

Parents lie awake at night wondering how they will be able to afford their child’s insulin. People work double and triple shifts just to afford their health insurance deductibles and copays for prescription drugs. And for too many families, having as much as an extra fifty dollars in the bank can be the difference between scraping by to the next paycheck or having the heat turned off in the middle of a cold winter.

 

Decades of consolidation throughout the economy has wiped out countless small businesses and hollowed out the middle class, resulting in record levels of inequality that have undermined social mobility in our country significantly.

 

And during this period, corporations have converted monopoly rents into higher compensation for executives, and in the process, driven down wages and made life unaffordable for many people. 

 

As Nobel prize winning economist Joseph Stiglitz has warned, “We have become a rent-seeking society, dominated by market power of large corporations, unchecked by countervailing powers. And the power of workers has been weakened, if not eviscerated.”

 

It’s every stagnant paycheck, every surprise medical bill, every overpriced and over-crowded flight with hidden fees, every trip to the hospital where patients are forced to wait for hours and risk personal bankruptcy to receive medical care, and every astronomical telephone and cable bill that is accompanied by a forced arbitration clause and horrible customer service.

 

These are all reminders that America’s monopoly problem has fundamentally broken our economy and destroyed the American Dream.

 

We read stories of billionaires buying yachts that are furnished like palaces and as large as some elementary schools while the brave men and women in uniform who fought for our country do not have access to affordable healthcare.

 

The economic nightmare is exactly why Democrats promised Americans that we would crack down on corporate monopolies through a better deal on competition. Ending this moral crisis is a top priority for me as Chairman the Antitrust Subcommittee, and a top priority for House Democrats to keep our promise to work for the people to prevent big mergers that would harm consumers, workers, and competition.

 

In closing, I thank our esteemed panel of witnesses for appearing before us today, and I very much look forward to all of your testimony.