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T-Mobile US takes issue with CPUC’s sprint merger conditions

T-Mobile US has asked the California Public Utilities Board to modify some of its conditions on approval of T-Mo’s acquisition of Sprint, zeroing in on the 5G deployment timeline, jobs within the state, and how the combined carriers’ network will be tested.

The CPUC issued a decision on the merger in April which included a number of conditions, but according to T-Mobile US, the decision contains some requirements that exceed either the carrier’s planned timelines or commitments, or the CPUC’s authority.

In a filing with the CPUC (pdf), T-Mobile US says that in its decision, the agency “mistakenly” used 2024 as the deadline for the carrier to extend 5G networks with an average speed of 300 Mbps, instead of the timelines of six years after the merger — which would be 2026 — that the carrier has consistently put forward as a commitment.

“The record evidence demonstrates that the target date for providing average speeds of 300 Mbps to 93% of California is 2026—i.e., six years after the close—not 2024, as mistakenly noted in the Decision,” the carrier said, going on to say later in the filing that “the target of being able to provide 93% of Californians with average speeds of 300 Mbps – much like the target of being able to provide 99% of Californians with average speeds of 100 Mbps … – was tied to the six-year build-out network model.” T-Mobile US executives who testified before the CPUC referenced both 2021 and 2024 data points to illustrate the combined networks’ expected capabilities, as well as a “five-to-six-year build-out model,” according to the filing.

“There is no evidence in the record that the achievement of 93% access to 300 Mbps download speeds at a 4-year post-closing timeframe is feasible,” the carrier argues. T-Mobile US first filed for a merger application with the CPUC in 2018, and it notes that the the six-year timeline may not have been shifted in the CPUC’s documents to account for the actual 2020 closing. “To the contrary, [CTO Neville] Ray’s testimony is clear that T-Mobile expected to be able to provide 43% of Californians with access to average speeds of 300 Mbps three years after close (reflected … as the 2021 targets, but now really a 2023 target based on the close) while the target of providing 300 Mbps to 93% of POPs is six years (reflected in Mr. Ray’s charts as 2024, but now 2026 given the actual close date).”

When the FCC approved the merger, it said that T-Mobile US had promised to deploy 5G service to cover 97% of the American people within the next three years, and to cover 99% of all Americans within the next six years — including 85% of rural Americans within three years and 90% of rural Americans within six years. As far as speeds, New T-Mobile committed to providing 99% of Americans with access to speeds of at least 50 Mbps and 90% of the U.S. population with speeds of at least 100 Mbps. That includes 90% of Americans living in rural areas having at least 50 Mbps speeds and two-thirds of rural Americans having access to speeds of at least 100 Mbps.

The second point that the carrier take issue with is on jobs. In its filing with the CPUC, T-Mobile US said that it “took the unprecedented step of voluntarily committing that there would be at least the same number of T-Mobile employees in California three years after the transaction’s closing as Sprint, Assurance Wireless, and T-Mobile had as of the date of the transaction’s closing,” the carrier noted. But in its decision, T-Mo said, the CPUC “attempts to mandate that T-Mobile must increase, within three years of the transaction’s closing, its net full-time jobs in California by a thousand jobs more than the current full-time jobs of Sprint, Assurance Wireless, and T-Mobile.” (Emphasis T-Mobile US’).

“The Commission simply does not have the authority to require a wireless carrier to hire a particular number of employees in a given time period,” T-Mobile US went on, adding that even if it were permissible for the Commission to impose the jobs condition … that condition should still be modified because of the major consequences the ongoing COVID-19 pandemic has had on the economy and the long-term effects it may have on companies like T-Mobile over the next several years. The current economic crisis makes the imposition of a mandate to create additional jobs infeasible and unwarranted. ”

T-Mobile US has claimed that the merger would be “jobs positive from day one,” but that has not stopped recently announced layoffs, including more than 200 people in Overland Park, Kansas. TechCrunch reported last week that T-Mobile US was eliminating Sprint’s inside sales unit that focuses on small businesses, announcing the news to Sprint employees in a brief phone call with nearly 400 people. However, T-Mobile US VP James Kirby also reportedly told employees that T-Mo would be creating 200 new positions in the wake of the layoffs, and encouraged employees to apply for one of the new jobs.

The merger ruling itself also indicated that the company planned to close around 3,000 redundant retail stores. T-Mobile US has said publicly that it plans to build 600 new retail locations and five new customer service centers that will create about 12,000 more jobs, but has been tighter-lipped about store closures. The impact of the pandemic on T-Mobile US’ projections and job commitments is also still unclear.

T-Mobile US told the court during the merger proceedings that it projected “savings from streamlined advertising, the closing of 3,000 redundant retail stores and reducing the costs and billing and other professional ‘back office’ services, which combine with the network savings for total net cost savings of $43 billion,” Marrero wrote. (Interestingly, the 3,000-store figure was one estimated by Craig Moffett of MoffettNathanson Research back in 2017; at the time, he said that each store closing would mean the loss of five full-time jobs, or an estimated 15,000 retail job losses.)

The third change that T-Mobile US asked of CPUC had to do with network testing, to be conducted on the third and sixth anniversaries of the merger closing. The CPUC’s decision included a requirement that the testing be conducted using the state’s CalSPEED app for network assessment with “drive tests of LTE and 5G service created by CPUC staff” and that T-Mobile US could then challenge the results of that testing. T-Mobile US argued that it has already committed to drive-testing in order to satisfy the FCC’s requirements as well as to testing to satisfy the California Emerging Technologies Fund, which has a memorandum of understanding with T-Mobile US that includes testing (and that testing could include the use of either CalSPEED or an FCC speed test, according to this filing from CETF (pdf)). T-Mobile US said that imposing the use of CalSPEED is “is duplicative and unnecessary, and will inevitably result in regulatory uncertainty and potentially inconsistent testing results (which would raise federal preemption concerns).”

-RCR Wireless

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