Sprint/Cable Deal Likely Would Have Smooth Sailing at FCC, DOJ
A possible deal between Sprint and Charter Communications or Comcast to help the cable operators provide a wireless offering is likely much easier for federal regulators to approve than a Sprint/T-Mobile combination, said industry lawyers and former FCC officials. Vertical deals often raise fewer competitive concerns than horizontal ones between two companies offering the same services. Rather than taking one of the four national wireless carriers out of the market, a Sprint and cable deal potentially would inject new competition, the officials said.
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Sprint Chairman Masayoshi Son and the cable operators signed a two-month, exclusive agreement for discussions through late July, temporarily putting expected talks with T-Mobile on ice, reported The Wall Street Journal. Three years ago, under pressure from then-FCC Chairman Tom Wheeler, Sprint dropped its pursuit of T-Mobile (see 1408070044). AT&T walked away from its proposed buy of T-Mobile in 2011 under pressure from the FCC and then-Chairman Julius Genachowski (see 1112200094). The three companies and the FCC didn't comment.
Sprint could use the resources that Charter and Comcast would offer with their deep pockets, Wells Fargo analyst Jennifer Fritzsche said Tuesday on CNBC. “What Sprint brings to the table is a tremendous spectrum position,” she said. “Think of Sprint as an old house with great bones that needs a lot of work.” Fritzsche predicted the deal would have an easier time with regulators than Sprint/T-Mobile. “A potential wireless/cable deal should have very little regulatory problems as cable is right now not a factor in the wireless market,” said Roger Entner, analyst at Recon Analytics. “The DOJ and FCC will probably look favorably on a more integrated approach especially one that will help to close the urban/rural divide.”
Former FCC officials said a Sprint/cable deal stands a good chance of approval. It “won't necessarily be a walk in the park; the companies will need to present a compelling narrative and solid data,” but it would be “less painful” than going from four to three national wireless carriers, said a former FCC spectrum official. "From an antitrust perspective, cable companies getting into mobile distribution raises few, if any, red flags,” said a former senior FCC official with telecom clients.
Chairman Ajit Pai said publicly many times he wants the FCC to have a smaller role in deal reviews than do the expert antitrust agencies, DOJ and the FTC, former FCC officials noted. It’s premature to handicap the odds of approval, “but it is certainly fair to say that a cable-wireless deal is easier to imagine greenlit than a straight horizontal reduction,” said Doug Brake, telecom policy senior analyst at the Information Technology and Innovation Foundation.
Any transaction could face objections by the same parties that opposed AT&T/T-Mobile and Sprint/T-Mobile. A joint venture with Sprint “creates issues of potential collusion similar to what tripped up” a deal between Verizon and the cable companies that were part of SpectrumCo, said Harold Feld, senior vice president at Public Knowledge. “Allowing the two largest cable operators to co-own Sprint would create very serious concerns.”
A Sprint/cable deal is “is perhaps less objectionable than some of the rumored mergers swirling around right now, but that doesn't make it a good thing,” said Matt Wood, Free Press policy director. “We've never believed that wireless is a perfect substitute for wired broadband, but some people do make the choice to subscribe to one or the other. Bringing these companies under the same roof, even if it's not a full-blown merger, would give a wireless foothold to cable companies that already have a monopoly grip on large swaths of the wired broadband market.” Comcast and Charter don’t appear to be satisfied with their “highly profitable home broadband monopolies, which give them historic profits even as their pay-TV businesses decline,” Wood said.
A deal between Sprint and the cable companies could take a number of forms, wrote BTIG analyst Walter Piecyk. “The cable industry’s fiber footprint could uniquely help Sprint densify to better enable [its] 2.5 GHz spectrum, but the [3.5 GHz shared] band also offers 150 MHz of alternative spectrum,” Piecyk wrote. “We also still question whether there is enough density in Comcast and Charter’s fiber footprint to supply a small cell configuration. Corning claims Verizon is pulling 6-8 strands to EACH small cell.” Piecyk asked if Sprint is really the brand with which cable operators will want to partner: “Sprint has been giving service away for free in order to attract new customers."