tv House Judiciary Subcommittee on T- Mobile Sprint Proposed Merger CSPAN March 12, 2019 2:58pm-5:31pm EDT
moved all of the enterprise control functions. so for example, a finance team, the risk team, the human resources team, the compliance team and so on, that used to be part of our business lines, we moved them out of the business units. so what i get today, what we get today is leadership -- what our board sees is a about the e betd balance in terms of when there's an issue that occurs, we have a review from one of the enterprise risk and control functions to be able to provide the right check and balance and to be able to provide information in a much different way. that's a fundamental change in our company. when i look across -- >> recesses of the committee at any time. we welcome everyone to today's 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. i recognize myself for an opening statement. today's hear is an opportunity to exam the state of competition in the wireless industry and the competitive affects of the proposed merger of t-mobile and sprint. over the past center rishseseni they have show how monopoly damages. it grew to become the largest corporation in the world, controlling more than 80% of the market. it earned more than $53 billion in ren knvenue. the justice department stopped at&t from blocking service. as a result, the bell system was broken into separate telephone companies. at&t's long distance services was separated from its device and manufacturing services.
the importance of the break of the bell system cannot be overstated. it facilitated an explosion of competition in long distance markets, lowered prices for consumers, improved products and services and spread creation of new jobs. for today's hearing, the competitive pressure from enforcement led to the deployment of fiber across the country, particularly the internet's infrastructure. at&t had copper wires across the country until competition entered that market and when it did, sprint and mci laid fiber-optic and at&t, spurred by competition, followed. there was no question that the speed of building the infrastructure for the internet was years and years ahead of where it would have been in the absence of the breakup of at&t. when coupled with some of the pro-competitive reforms, such as
phone number portability, consumers and small businesses saves billions of dollars each year while competitors were incentivized to enter the market to offer better services and more choice. due 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 to three, resulting in the combined company controlling nearly a third of the wireless market. they claim it's necessary to deploy the next generation of broadband internet across the country and to compete with the two largest carriers, at&t and verizon. to their credit, sprint and t-mobile have competed with a larger carrier over the past decade resulting in lower prices and better policies for consumers. but i'm skeptical that consolidation is the path forward to lowering prices, increasing opportunity or unleashing competition in places around the country there is none
today. the competition that has been driven over the past decade occurred in the absence of consolidation, not because of it. second, nearly a century of experience with telephone mop n monopolies taught us competition is critical. there's mounting evidence that additional consolidation in this market would likely give the combined company the ability to wage prices and abandon the policies that have benefitted consumers. under both longstanding supreme court precedence, merges that significantly increase concentration in highly concentrated markets are presumed to be illegal. it's beyond dispute that this transaction will significantly increase concentration in the b likely to enhance market power. the only thing preventing them from raising prices, lowering
quality and depressing wages are promises for a limited period of time. today's hearing is an opportunity to examine concerns. it's been nearly a year since the federal trade commission challenged a merger in court. since the trump administration, the justice department's antitrust division has challenged one significant merger. at&t's acquisition of time warner. not only did the antitrust division lose this challenge, but this has been mired in controversy due to the president's shameful attempt to interfee. . the president instructed senior white house officials to get this filed against the at&t and time warner merger following a series of reports suggesting the president seeks to wield the antitrust laws to reward friends and punish perceived enemies.
we are seeking documents related to the case. we must get to the bottom of this. we will. most importantly for purposes of today's hear, the proposed merger of t-mobile and sprint is really a critical test. is the antitrust division dedicated to promoting competition or does it only oppose mergers when the white house tells it to do so? this proposed merger does not occur in a vacuum. working families across the country are struggling to make ends meet. parents lie awake wondering how they will afford their child's insulin. they work double and triple shifts. too many families having an extra $50 in the bank can be the difference between scrapping 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 small businesses and hallowed out the middle class
resulting in record levels of inequality that have undermined social mobility. during this period, corporations have converted monopoly rents into higher econocompensation f executi executives. we have become a rent seeking society, dominated by market power of large corporations unchecked by countervailing powers. it's every stagnant paycheck, every surprise medical bill, every overpriced and overcrowded 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 telephone and cable bill that is accompanied by a forced arbitration clause and horrible customer service.
we read stories of billionaires buying yachts while the brave men and women who fought for our country don't have health care. we promised we would crack down on monopolies. entering this is a priority for me and a top priority for house democrats to keep our promise to work for the people to prevent big mergers that would harm consumers. in closing, i thank our panel of witnesses for appearing before us today. i very much look forward to all of your testimony. you have the privilege of recognizing the distinguished gentleman from wisconsin for his opening statement. >> thank you very much, mr. chairman. i welcome the witnesses to today's hearing. which will examine the proposed t-mobile and sprint merger and its impact on the market and consumers. let me say in the beginning that
i am disappointed to hear the chairman put a partisan spin on this proposal even before we hear the testimony from the witnesses. i certainly have not made up my mind on whether this is in the public interest or not. this hearing will shed light on it. i do want to say that i don't think that antitrust questions should be partisan in nature whatsoever. i've been on this committee for 40 years. there are very few of these proposals that the committee has examined where republicans and democrats have been divide from the get go. on march 29, 2018, t-mobile and sprint announced a merger agreement that will change the telecommunications landscape. if approved, this $26.5 billion deal would combine the third and
fourth largest wireless providers. eliminating a competitor, the merger could put companies in a stronger position to take on at&t and verizon, which have dominated the marketplace. if combined t-mobile and sprint hope to improve service, innovate and expand their network into underserved and rural areas. like forward to hearing from both ceos on the implication of this merger as on the employment -- deployment of 5g. it's key to improving service with greater coverage, higher speed and increased data capacity. ensuring that we are at the forefront of this technology will provide untold benefits to american consumers and the american economy and is important to many members of the committee. we will hear today from witnesses who will outline a very different picture. one that parents this merger as negatively impacting low income consumers and rural communities.
many wireless competitors and consumer advocates believe that a more concentrated wireless industry will reduce competition, raise prices and result in job losses. under the communications act of 1934, the federal communications commission is reviewing the merger to ensure it promotes public interest, convenience and necessity. u.s. department of justice and state attorney general are also reviewing a transaction pursuant to their respective authorities. while congress has no formal role in the doj or fcc merger review process, hearings like this provide an opportunity to ask and debate questions which are of great importance to american consumers. i look forward to the testimony of the witnesses and debate among members of the committee. in the end, wise decisions by doj and fcc that ensure
competitive future for wireless communications in america. i yield back the remainder of my time. >> thank you, ranking member. the chair recognizes the gentleman from new york, mr. nadler, for his opening statement. >> thank you, mr. chairman. i appreciate this opportunity to consider carefully the impact of the proposed merger of sprin t d and t-mobile. it is clear that this transaction, if approved by regulators, would usher in significant changes to the market for mobile wireless services. given the fact that 95% of american adults own a cellphone and 20% use a mobile device as their primary means of accessing the internet, it's critical that we closely analyze any proposed merger with such a wide ranging impact. as independent companies sprint and t-mobile have each brought a
competitive and innovative products to market. they have not only benefitted their customers, but have benefitted the customers of other wireless carriers who own carriers have had to compete with both companies. for example, sprint and t-mobile's reintroduction of unlimited data in 2016 resulted in lower monthly bills and better internet access for millions of consumers. these companies have provided important services such as competitive prepaid mobile wireless plans to some of our most underserved communities. these prepaid plans offer certain customers the ability to purchase wireless broadband and wireless cellular services without passing a credit check. i applaud both companies for their competitive efforts, for their ingenuity. in considering their proposed merger, we must determine whether this proposed new combined company, with a larger share of the marketplace, would have less incentive to innovate and to compete with other companies. i am concerned about any merger
that would significantly increase the concentration in the market that is already highly concentrated. there are only four national wireless carriers today. at&t, verizon, t-mobile and sprint. as a result of this transaction, there would be only three. each of which would control about a third of the marketplace, dramatically altering the competitive landscape. consequently, the combined sprint and t-mobile may no longer have any market basin sensitive to lower prices and to offer pro consumer policies. the transaction would consolidate the market for services.
it may have negative affects on low income households. this would be particularly harmful in major cities with large populations of middle and low income people, such as new york, which may experience even higher levels of concentration in the market for prepaid phones than in other regions. for their part, sprint and t-mobile offer a variety of justifications in support of the merger. theying ing oargue it would en t-mobile to super charge the market for wireless competition. its increased scale would lead to better quality of its network and would enable the development of new products at dramatically faster speeds. they believe that the merged company would be in a better position to compete with the other wireless giants and would push the other companies to offer better services to their customers. they anticipate that the new company would expand its work force and would invest up to $40 billion in the first three years after the merger. this may lead to the creation of
more jobs, better policies for consumers and new competition in the broadband marketplace thanks to the faster deployment of a nationwide fifth generation or 5g wireless network. these claimed benefits of the merger would be welcome developments for millions of employees and consumers. they should be viewed with a healthy skepticism, however, in light of numerous mergers we have seen in recent years that have made economic promised that were ultimately not borne out. that's w merging parties routinely justify anti-competitive mergers under the guise of corporate restructuring and so-called efficiencies which are code words for layoffs and reduced wages and benefits for employees. rather than create more efficient markets, waves of
consolidation throughout the economy over the past several decades have imperialed the financial security of workers and consumers. employers have power to reduce the wages, benefits and economic mobility of workers. consumers pay higher prices for goods and services than they would in a more competitive economy. when combined with the decline of collective bargaining, this massive consolidation has shrunk the middle class and has increased income inequality through stag manant wages and l economic opportunity. i am pleased state and federal regulators are scrutinizing this to determine what impact it may have on employers -- i'm sorry, on consumers and employees. i appreciate the chairman holding this hearing today so that members of the subcommittee may examine the important questions the merger raises. i look forward to hearing from
our expert witnesses, including the ceos of sprint and t-mobile. i thank them for their participation. in particular, those who have rearranged their schedules on several occasions to accommodate congressional conflict. >> i now recognize the ranking member. >> i asked consent to put in the record the statement by the ranking member of the full committee, the gentleman from georgia. >> without objection. >> it's must pleasure to introduce today's witnesses. our first witness is john ledger, the chief executive officer of t-mobile. he has been named a top ceo and was granted the leadership award by yale's chief executive leadership. he was head of corporate strategy and business development at at&t. he received a bachelor's degree in business administration from
the university of massachusetts, a master's degree in science at the massachusetts institute of technology and he received his master's of business administration degree from harley dickinson university and completed harvard's management development program. mr. claray was chief's chief executive officer. he is ceo of softbank international. he was name aid young global leader by the young economic forum as well as one of 42 individuals selected as part of the great immigrants, the pride of america initiative. he received his bs in finance and ra degree from bentley university. our third witness is the president of communication workers of america, christopher shelton. he worked with cwa since 1968 when elected a shop steward while working for new york telephone. mr. shelton joined cwa's
national staff in 1988 and has served in multiple positions representing locals throughout morning, new jersey and new england. mr. shelton was elected president of cwa at their 75th convention in 2015.mr. shelton president of cwa at their 75th convention in 2015.england. mr. shelton was elected president of cwa at their 75th convention in 2015. >> for 30 years, miss sohn has worked to promote competition that have made the internet more open and competitive. she was counsel to tom wheeler during his tenure. she received her bs from boston university and her jd from the university of pennsylvania law school. our fifth witness is carmen scurato. she was vice-president of policy as well as general counsel at the national hispanic media coalition and as a project supervisor with the office of legislative affairs at the department of justice. she received her ba from new york university and her jd from
the villanova university school of law. our sixth witness is carrie bennett, general counsel. since 1987, she represented rural wireless carriers, telephone companies apy ies andr carriers. she's a member of the federal communications bar association and american bar association. she received her ba from north carolina state university and her jd from the columbus school of law at catholic university. scott rawlston is our seventh witness. an economist, his research focuses on competition, regulation, telecommunications and technology policy. he is a senior fellow at the georgetown center for business and public policy. he received his ba from washington university and his ph.d. from stanford university. our final witness is christopher
yu, professor at the center for technology, innovation and competition as well as a john chestnut professor of law communication science at the university of pennsylvania law school. his research focuses on regulatory law, in relation to technology, innovation and the internet. he taught at vanderbilt university school of law where he was the founding director of the technology and enter ittaint law program. we welcome all of our incredibly distinguished witnesses and thank you for participating in today's hearing. if you would please rise. i will begin by swearing you in. raise your right hands. do you swear or affirm under penalty of perjury that the testimony you are about to give is true and accurate to the best of your knowledge, information and belief, so help you god? let the record show that the witnesses answered in the affirmative. thank you. you may be seated. note that each of your witness statements will be entered into
the record in its entirety accordingly, i ask you summarize your testimony in five minutes. to help you stay within that time, there's a light on the table. when the light switches to yellow, you have a minute to conclude your testimony. when the light turns red, it signals your five minutes has expired. keep that in mind. >> thank you, chairman nadler, ranking members and other members of the subcommittee for inviting the panel here today. i appreciate the opportunity to tell you about the tremendous benefits of the proposed t-mobile and sprint merger and the progress we're making towards making it a reality. first, what will the merger deliver? it will deliver a super charged carrier which can ensure u.s. leadership in 5g, increase competition and create american jobs. first and foremost, the new t-mobile will make sure america wins the global 5g race. it's this so important.
it will fuel innovation and job creation well beyond anything we have seen so far. 5g will transform the way americans live, work, travel and play. 5g means downloading a movie in second, instant language translation. nearly every american business will be able to use 5g to revolutionize how they create and deliver goods and services. best of all, with this transaction the benefits of 5g won't just flow to big cities. combining sprint and t-mobile will produce a faster, broader, deeper network that is truly nationwide. it will benefit consumers and businesses everywhere, including in rural america. neither company could do this on its own. second, the new t-mobile have the capital, scale and network to super charge competition, unleashing benefits for all consumers, including keeping prices low. the combined company will continue the t-mobile tradition
of disrupting the wireless space. and we will disrupt in-home broadband with the new wireless mobile and in-home broadband speeds. creating a new broadband option for millions of americans who have none. freeing millions from the strangle hold of big cable. budget conscious customers use the most data. that means they have the most to gain when data costs less. new t-mobile will offer a new bridge across the digital divide. our opponents are wrong when they claim the merger will lead to higher prices. in fact, the opposite is true. the massive increase in our network capacity and reductions in our costs to deliver our services will enable the new t-mobile to win customers through lower prices and better
services. it's in my business plan do that. i'm so confident that this merger will lower prices, that we committed to the regulators that we will make available the same or better rate plans as those offered by t-mobile and sprint for the next three years. third, this merger will be a tremendous job creator at new t-mobile. our merger will be jobs positive from day one and going forward. in the first year, we will have thousands more employees than the standalone companies combined. we will have 11,000 more employees. our correctic i critics are wro. i they do not make sense and they ignore the facts. they don't account for any areas where jobs will grow, like new customer experience centers, enterprise services, broadband and media and network build and integration. we have heard the story before. they said we would cut 10,000 jobs when t-mobile merged with metro pcs. in fact, we expanded jobs by
tens of thousands. let me say this to every t-mobile and sprint employee working in one of our stores today. each of you will be offered a job with the new t-mobile. opponents of the transaction are fear mongering about job losses and price increases in a desperate effort to maintain the status quo. they know that blocking this transaction will only entrench the big two wireless carriers and big cable. that's their goal. opponents and their backers are terrified the competition. many have recognized this transaction. 16 of 19 state regulatory commissions have completed their reviews and found the transaction to be in the public interest. over 200 organizations, companies, government officials and community leaders publically support the transaction. i'm honored that congressman
long and 11 other members have signed a letter of support. to those that doubt us i would say this. we are the uncarrier. my management team and i believe in delivering on our promises. we know if we do not, we will lose the credibility and trust of our customers and employees. i can promise the new t-mobile will deliver for consumers, american workers and for our country. thank you and i look forward to answering your questions. >> thank you. >> thank you. chairman, ranking members and members of the committee, it's truly an honer to be here. i'm grateful for the opportunity to speak to you. i would like to take this opportunity to explain why sprint's proposed merger with t-mobile will be great for the american consumers, will be great for sprint employees and more importantly, is going to be great for our country. before i go into detail, i want to tell you about me. first, i'm an immigrant. i came from bolivia.
i had little money. i went to a small but great university in boston. i received a priceless education. i'm a entrepreneur. i founded a company called bright start. i started selling phones out of my car. i grew it into the largest supply chain company in the world. we grew to over $10 billion in sales. we had thousands of employees all over the world. i'm most proud we made bright start the larger hispanic owned company in history. i sold my business so softbank. after that, i became sprint's ceo. at that time, sprint was near financial ruin. in 2013, the company had lost over $5 billion and in previous ten years, sprint had last over $25 billion. we had approximately $31 billion in debt. a great committee with tens of thousands of jobs across the u.s. was at risk. beginning in 2014, we undertook
a massive and painful transformation. we worked hard from the ground up. we reduced our expenses by close to $6 billion, through cost reduction, employee layoff and some unwanted transfer of jobs overseas. we didn't want to but we had to do that to save sprint. today, sprint no longer in financial dire straits. we face serious challenges. despite our success, we were unable to fix our main challenge, the quality of our network. we could not because of our poor financial situation and our lack of low band spectrum. sprint struggles to attract customers. and many live at a faster pace than our competitors. customers are not willing to sacrifice quality. today, the u.s. wireless market is a duopoly. they control over 93% of the
cash flow in our industry. as a result, there's no way that we can invest and be able to compete at the same level. today, over the next few years, 5g, a new standard of connectivity, will change the way we connect. if sprint doesn't have the resources to build a nationwide 5g network to provide the competition against the at&t and verizon doupuopoly. we need 20 to $25 million to have 5g in our limited area. the only way would be to raise more debt and pay for that would have to raise our prices. we could no longer be the price leader. the only company that can build the world's best 5g network is a combination of sprint and t-mobile. we can do this if this merger is approved. as a combined company, we're committed to invest nearly $40 billion over the next three
years to build the world's best 5g network. how can we do this together? it's the marriage of two necessary and complimentary 5g pieces. sprint has high capacity spectrum which they have acqu e acquired. t-mobile has broad coverage. it will allow us to build the most advanced network covering every network -- every corner of america in urban and suburban and rural areas. sprint cannot do this alone. and t-mobile cannot do it either. we need each other. we cannot take lightly the fact that america needs to lead the world in 5g. china made it a priority. they are investing billions of dollars. when a country has the best network with the latest technology, it brings massive economic stimulus, explosive job growth and a new wave of entrepreneurs. america is a land of innovators. let's keep it this way. my story validates this.
letting another country take 5g leadership away from the u.s. is going to cause damage. in addition, as you heard john, we're committed to lower prices. when we merge our two companies, we will create eight times the network capacity on our own. we will have to beat at&t and verizon on prices to fill this new capacity. this makes financial sense. it's good for business. but more importantly, it is our commitment. lastly, it's true that most mergers do not create jobs. this mermger is t emerger is th. it will create new jobs, blue collar and white collar, jobs in urban, suburban and rural america. i can't thank you enough for allowing me to speak today. as i mentioned, i'm grateful to this country and as an american entrepreneur, i hope the merger
is approved. i look forward to answering your questions. thank you. >> thank you. mr. shelton is recognized for five minutes. >> chairman, ranking member, chairman, ranking member collins, members of the committee, i'm the president of the communication workers of america. we represent 700,000 employees and telecommunications and other industries, including more than 45,000 in the wireless industry. let's tell it like it is. this merger would kill american jobs, depress wages and raise prices on american consumers to enrich two foreign companies. deutsche telekom and softbank. members of the committee, that is economic treason. these are two of the worst companies in the united states when it comes to the treatment of workers. they ship jobs overseas and in recent years t-mobile has been
charged with more labor law violations per worker than even walmart. let's talk numbers. this merger would kill american jobs. we estimate that 30,000 americans would lose their job if this merger is approved. the wall street firm moffitt estimates this merger would kill 20,000 jobs. whether you take their number or ours, you should understand that t-mobile's job creation promises are sheer fantasy. sprint and t-mobile compete with each other for the same type of customers. often, low income households which is why their stores are located near each other. sometimes right across the street. if the companies merge, chances are they would shut down one of the two neighboring stores and most of those workers would be out of a job. what about the people lucky enough to stay employed? the merger would drive down wages for all wireless retail
work workers, in some cases by as much as $3,000 per year. employers compete for skilled labor with wages and benefits. take away competition and the remaining companies can throttle down employees' compensation while jacking up prices on consumers. both are symptoms of the same disease, too much market power. that leads me to something i hope the subcommittee will support. we need to include the wage and job impacts when analyzing whether a merger is anti-competitive. we need to consider the impact of collective bargaining on jobs and wages. for the last 40 years, we have seen more and more mega mergers. productivity is going up and executive compensation has skyrocketed. workers' wages have not kept up. they have stagnated.
highly concentrated markets and lack of competition are part of the reason. the weakening of unions as a force to protect workers' jobs and wages is another reason for wage stagnation. as companies have gained market power through consolidation, workers have gotten weaker as a result of the war on labor. in antitrust terms, workers have lost power. together, these two factors go far to explain why wages and living standards have stagnated for u.s. workers. they help explain the dramatic increase in income inequality in the u.s. the top 5% of americans control two-thirds of our nation's wealth. the good news is that america can do something about it. first, we can say no to mergers like the t-mobile and sprint transaction and preserve competition in consumer and
labor markets. we can bring back collective bargaining as a way to protect workers. i have yet to hear either of these two corporate ceos say they would remain neutral to allow their employees to decide whether to unionize, free from t-mobile and sprint's usual bullying tactics, intimidation and anti-union propaganda. they don't want workers to have a say. if antitrust enforcement agencies and the courts can take into account the consumer price impacts of a merger, they should be able to consider the impact of collective bargaining as a way to address anti-competitive affects in relevant labor markets. finally, this merger is not only bad for workers, it's a disaster for consumers. t-mobile and sprint are each other's rivals, competing in particular for lower income customers and persons of color.
by eliminating this competition, economy i haists estimate a pril go up by 15%. while these companies trumpet the alleged benefits for rural america, their own fcc filing shows that even six years after the merger, 46 million americans, largely in rural areas, would not receive the benefits of its 5g network. thank you. and i look forward to answering your questions. >> thank you. >> chairman, ranking member, members of the subcommittee, thank you for inviting me to testify today. when i was working for chairman wheeler in 2014, executives from t-mobile, sprint and softbank visited the fcc several times to get his thoughts on a possible merger between t-mobile and sprint. chairman wheeler didn't disco h
discourage them but he was clear they would have a tough time showing it won't be anti-competitive. a pioneer in the wireless industry, wheeler had seen consolidation from 2003 to 2013, eight mobile wireless care yeri shrunk to four. he believed it would harm consumers through higher prices and less innovation. bill bearaer agreed. later that year, after the parties abandoned the deal, wheeler said, four national wireless providers are good for american consumers, sprint now has an opportunity to focus their efforts on robust competition. nothing in the intervening five years has altered the previous nal s analysis. t-mobile and sprint occupy vital roles in today's national wireless market.
both are marvericks. t-mobile was the first to eliminate two-year contracts and provide unlimited data. the first to allow subscribers to unlock their phones. both fought to match at&t and verizon in coverage, speed and reliability. they compete with each other to the benefit of the consumer. this dynamic will change if the companies are allowed to merge. with the market share similar to at&t and verizon, new t-mobile would have reduced incentive to engage in competition. as well as greater unseiincenti raise prices. one analysis found that consumer price increases from this transaction could be as much as 15%. the merging parties don't dispute prices will rise but argue improvements to the service quality, no matter how small, will be worth the extra cost. that's a dicey proposition for consumers that are attracted to t-mobile and sprint because of
their cheaper post-paid and innovative pre-paid services. they te this mermmerger would result in t-mobile owning more. the merging parties argue that low income consumers will accept the prices because they, and i quote, heavily rely on their smartphone for their communication and media consumption. that's a remarkable thing to say about consumers for whom an extra $10 a month would be an unwelcome hardship. one of the remaini ining carrie was a t-mobile affiliate. in the u.s., concerns over higher prices and the elimination of competition moved the doj to block the at&t and
t-mobile merger in 2011. faced with evidence that this particular merger will lead to higher prices, t-mobile hand twice promised the fcc not to raise prices for three years. the mere fact that t-mobile believes it must make this price commitment is an admission that post-merger, there would not be enough competition in the wireless market to constrain price increases. it also undermines the party's insistence the merged entity would have so much capacity that it wouldn't raise prices. regardless, the pricing commitment is riddled with ambiguity and loopholes. my written testimony argues that the purported benefits of this merger, faster 5g rollout, increases rural rollout and more jobs are speculative. it wouldn't outweigh the harms. i will add, i would tllove to s
more competition. in addition to being too far in the future to be relevant to antitrust scrutiny, this promises nothing to do with the market that is the subject of this merger, for mobile wireless services. i'm a proud t-mobile customer and a fan of its ceo and its government relations team. i'm not a fan of this merger. because the harms to consumers who value low cost and innovative service plans outweigh the supposed benefits. thank you. i look forward to your questions. >> thank you. >> chairman, ranking member, chairman and subcommittee members, thank you for having me. i'm a senior policy counsel at free press with 1.4 members. we strongly oppose this merger. free press' research shows the
harms it would cause to low income communities and people of color who are more likely to be on the wrong side of the digital divi divide. while my organization signed protective orders to assess the data and claims, i am not a signatory. that means everything i say today is based on publically available data. let me be clear. no matter where we look, nothing about this deal's benefits, all of which are speculative and un unenforceab unenforceable, offset its harm. they are the providers for low income people. more than 30% of metro and boost subscribers report yearly income of $25,000 or less. due to structural racism, people are disproposal ll lly --
disproportionately represented. 56% of t-mobile subscribers identified as people of color. as did 45% of sprint's. the reason that members of these communities choose sprint and t mobile is very clear. their plans cost less. as our research consumers, they compete with one another. they serve price-conscious customers. both t-mobile and sprint have been mavericks, taking customers from each other and from the big two carriers as well, after the government rejected horizontal mergers like this one. my full testimony touches on t-mobile's inflated 5g efficiency claims. i will focus my time on three facts illustrating the harms to these most impacted communities. no matter how antitrust enforcers define the product
markets, this deal would consolidate already highly concentrated markets. it would eliminate choice for customers who want or need to pay less for essential communication services. our fcc filings document how t-mobile and sprint's prepaid and post-paid brands compete. t-mobile and sprint both offer lower priced options than their larger rivals. don't believe the funny math suggesting having fewer competitors strengthens competition. this is a merger nationally. it would reduce choice for all lower priced plans that don't require customers to pass credit checks or finance through the carrier. the merger would increase prices. in their filings, sprint and t-mobile don't hide the likelihood prices would go up for their customers. that's right. their own economic models say prices would go up.
t-mobile's price pledge is riddled with loopholes. t-mobile announced legacy plans would continue and i quote for three years or until better plans that offer a lower price or more data are made available. this mockery of a promise is meaningless. prices will stay the same unless t-mobile decides to raise them. just as t-mobile did its attempts to hide this face, the kar carrier decides if a more expensive plan is better for you, even it offers more than many want, need or be able to afford. this merger would mean massive consolidation in the wholesale wireless market. reducing while sale supply would raise costs passed along to customers. wholesale is used by carriers without their own networks, including most life line carriers to offer service at resale. throughout my career, have i been a strong defender of life line because it helps the most
vulnerable to stay connected, providing $9.25 to defray the high cost. life line is dependent on a well functioning wholesale market. in sum, you should closely st l scrutinize the too good to be true claims. you should consider the real world impact on communities that struggle with high price and find themselves on the wrong side of the digital divide. thank you and i look forward to your questions. >> thank you very much. the chair recognizes ms. bennett for five minutes. >> chairman and ranking member and members of the subcommittee, i'm here on behalf of the rural wireless association. thank you for this country to testify today on the impact the proposed t-mobile and sprint merger will have on rural americans. rwa opposes this. this merger is bad for
competition. it's bad for consumers, especially in rural areas who will experience fewer choices, price increases and substandard service. it should be denied. t-mobile has had more than 20 years to build out in rural america. let's face it, t-mobile is making a lot of promises about lou it will expand coverage and improve service for these americans. based on its track record, we have no reason to believe that it will do so. roaming arrangements are important. roping keeps urban, suburban and rural americans connected. sprint has historically worked with rural carriers to ensure rural americans have robust wireless service. t-mobile has not. according to our members, t-mobile's roaming romaming rat% higher than sprint. t-mobile will enter into agreements under which a rural
carrier's subscriber can roam with no possible of t-mobile roaming. they have chosen to deprive their customers of coverage in rural areas. rather than pay the rural carrier for network access. this means that in those tomers basically off the grid. do we really want new t-mobile's 100 million plus subscribers to be denied service in rural america? second, 5g buildout. t-mobile's repeated claims about new t-mobile's future 5g buildout are unfounded. when it comes to 5g and some of the potential rural applications, like precision agriculture and remote health care, low latency is a must. the facilities needed for 5g cannot rely on satellite and
microwave due to their high latency. fiber must be deployed. deploying fiber takes time and money. neither t-mobile nor sprint have resources build out fiber in rural america. without a commitment to lay fiber in these undeveloped areas, their claims of building out future 5 g broadband networks. with 5g or in-home broadband. disallowing the merger will enable hundreds of rural broadband providers across america to work with both sprint and t-mobile to more quickly build out broadband. third, rural call completion. less than a year ago, the fcc found that t-mobile failed to correct ongoing problems with delivery of calls to rural consumers. in fact, t-mobile admittedly inserted false ring tones into these calls so that the caller believed the call was ringing on the other end when it wasn't.
aside from blatantly breaking the law, t-mobile severely hindered rural consumers from running their businesses, communicating critical information to family and friends, and reaching emergency service personnel. this callous behavior, in an effort to save money, has harmed rural americans and we believe that t-mobile's destructive behavior will continue, perhaps even more aggressively once the rival, sprint, is eliminated. finally, false broadband mapping claims. our members have serious concerns about t-mobile's broadband maps submitted in the fcc's mobility fund proceeding. that fund was created to provide $4.5 billion to mobile carriers to help better connect rural americans. to make sure it knows where the money is needed the most, the fcc asked wireless carriers to submit maps indicating where each carrier offers qualifying 4g broadband coverage. according to testing done by our
members, when t-mobile submitted its data, they vastly overstated rural coverage to make the reach seem bigger than it is. when rural carries went to test t-mobile's claims, 95.8% of the tests showed speeds below the threshold demanded by the fcc, or no 4g broadband service at all. in many places where t-mobile certified it had coverage, cell sites had not been put into operation. if not corrected, funding will not be able in these rural areas. as part of its public interest review, the fcc must determine where t-mobile has been honest in its dealings with the fcc. our members drive test strongly suggest that it is not. in some, a string of broken promises does not bode well for rural americans, and this deal should be denied. thank you, and i'll look forward to your questions. >> miss wallston is now recognized for five minutes. >> members of the subcommittee,
thank you for the opportunity to testify on the pending merger between t-mobile and sprint. my name is scott wallston. i'm an economist and president and senior fellow at the technology policy institute. tpi is a nonprofit, nonpartisan think tank that focusing on innovation, technological change and related regulation. tpi takes no institutional position, so this testimony reflects only my views. the key question when reviewing the pending merger is whether the expected efficiencies gained combining the third and fourth largest wireless firms outweigh the possibility the combined firm could harm competition. to address this question, i make four points. first, this merger involves more than the usual level of uncertainty, because it involves a nascent technology just beginning to be deployed. because we know so little about 5g, claims regarding optimal market structure are speculative active and difficult to evaluate. second, the empirical literature evaluating the wireless mergers is inconclusive. some studies find the prices
decrease, some increases, and some prices did not change. third, the uncertainty about new technology and the lack of evidence that four to three mergers necessarily lead to competitive harms mean the government has little basis for blocking the merger. fourth, because t-mobile and sprint may serve more than 50% of wholesale and low-income consumers, antitrust authorities should consider the effects on those groups. t-mobile and sprint argue that combining their resources, particularly spectrum, will allow them to build a higher quality, more robust 5g network. opponents contest this assertion. evaluating this claim and whether it would benefit consumers if true is difficult, because we know little about 5g supply and almost nothing about demand. a market with more firms experimenting with different technological approaches and business models may yield social outcomes. however, given the likelihood of
making mistakes, a market with fewer but stronger firms may yield better social outcomes. real world evidence of the four to three wireless mergers finds with the current technology, mergers did not consistently lead to one particular outcome. one paper that reviewed 13 studies found no consistent effect on prices. in short, real-world experience provides little reason to believe one outcome is more likely than the other. that also means we did not have consistent evidence that the merger would necessarily harm consumers or competition overall. and without such evidence, the government has little reason to block the merger. opponents, however, have also raised concerns about low-income and wholesale consumers, and the horizontal merger guidelines note the government should consider how a merger might affect different groups of customers. while t-mobile and sprint serve about 30% of all subscribers, available public data suggests they serve far larger shares of wholesale and low-income subscribers. wholesale and low-income service overlap but are not identical. facilities based providers sell
access to other companies who resell under their own brands. resellers offer traditional wireless services, often prepaid, and internet of things connectivity. estimates suggest that t-mobile and sprint currently provide more than half of all wholesale connections and wholesale subscribers. low-income subscribers rely disproportionately on prepaid plans but not all prepaid plans rely on all wholesale networks and not all wholesale-based plans are prepaid. low-income and wholesale services are therefore related, but different. one survey suggests that t-mobile and sprint directly serve almost half of consumers with annual incomes of less than $50,000. the true number is probably higher when also considering wholesale. a combined t-mobile sprint holding more than 50% of subscribers in these segments is not necessarily a problem. whether it is depends on whether they could raise prices without encouraging more entry by at&t, verizon and others. antitrust authorities who presumably have access to the actual data, proprietary data,
should study segments carefully and evaluate whether conditions may be necessary. the government can do a lot to promote competition. the fcc and ntia should make spectrum available. the fcc should continue removing obstacles like low-earth orbit satellite broadband companies, spacex and iot wholesaler low gatto. we do not know what the 5g world will look like. that's the nature of innovation. but without evidence that the merger is likely to lead to bad outcomes, there is little evidence for the government to oppose it. thank you for your time. i'm happy to answer questions. >> thank you. i now recognize mr. yu for five minutes. >> mr. chairman, ranking member sensenbrenner, and members of the subcommittee. i'm grateful to testify here today. my remarks will focus on the impact on rural customers. the key to my analysis is the growth and demand for wireless broadband and resulting increase
and the need for wireless spectrum. spectrum can be divided into three basic types. low band, mid band and high band. each of which operates in a different frequency band and each one serves a different role. low band spectrum is typically defined as those bands falling below 1 gigahertz. low band signals propagate very well, typically reaching a distance of 18 miles. in addition, low band spectrum is more able to penetrate buildings than other types of spectrum and does not require direct line of sight. mid band spectrum consists of bands ranging from 1 to 6 gigahertz. the signals cover a radius of four miles, and mid band spectrum typically requires line of sight transmission but can penetrate buildings. high-band spectrum includes frequencies higher than 20 gig hertz that had long been regarded as unusable but now are locked by improvements to technology. the range of high-band spectrum is quite limited, typically propagating roughly half a mile. in addition, high-band spectrum requires both line of sight and does not penetrate buildings
well. although higher frequencies do provide more bandwidth. the engineer community has long recognized the deployment of 5g will depend on a mix of both low-band and mid-band and high-band macro cells and high-band and mid-band micro cells. this is particularly important in rural areas. the 14-mile service range and good propagation characteristics makes it ideal for supporting basic coverage for rural areas. the problem is that because low-band spectrum covers such large areas, the bandwidth that it provides can be quickly exhausted. although these shortages can be addressed by adding more low-band spectrum, because the additional bandwidth would be needed only in population clusters within rural areas, much of that additional low-band spectrum would be wasted. the generally accepted technical solution is to meet the growing demand for bandwidth by adding smaller cells that rely on higher-band spectrum in those areas where they are needed. the four-mile service range of mid-band spectrum allows it to
be targeted efficiently at those areas that need additional bandwidth the most. not only does the addition of these micro cells expand the band available in the population clusters within rural areas, using micro cells to satisfy the demand generated by those clusters freeze up macro cell capacity for the most remote customers for whom macro cell service is the only available option. the foregoing underscores the reality that successful deployment of 5g depends upon having a mix of low-band and higher band sub spectrum. sprint lacks the low-band spectrum to be able to provide 5g in rural areas as a stand-alone company. sprint holds three to four times less low band spectrum than other national wireless providers, as reflected in its weak coverage and performance of its current lte network. the lack of low-band spectrum leaves sprint in a particularly poor position. the low population density of rural areas makes it unlikely that the limited geographic
range of sprint's mid band service will reach enough customers to be financially viable. the company resulting from the proposed t-mobile/sprint merger is planning a very different strategy from those being pursued by other national wireless providers. t-mobile is already using its 600 megahertz spectrum to deploy lte and if the merger is approved, the merged company plans to use the low-band spectrum that t-mobile obtained in the recent incentive option, provide the macro cell foundation for its 5g service. because this spectrum is newly deployed, the company will be able to convert these macro cells to 5g merely by reconfiguring the software. and its mid band micro cells do not need spectrum assignments, while the other national wireless providers are following a strategy relying on high-band spectrum, which has not yet been allocated by the federal communications commission. sprint's inability to provide service in 5g service in rural areas explains why a bipartisan group of 13 house members have
signed a letter supporting the transaction and makes the presence of respected advocates for rural consumers such as the national grange and attorneys general for new mexico and utah supporting the merger. i find those gestures particularly meaningful. i would be happy to answer any questions you have. >> thank you very much. thank you all for your opening statements. we'll now proceed under the five-minute rule with questioning and begin with the gentleman from georgia, mr. johnson, for five minutes. >> thank you, mr. chairman. and thank the panelists for being here today. mr. ledger, the day after the t-mobile/sprint merger was announced, nine t-mobile execs checked into trump hotel, is that correct? >> thank you, congressman, for the question. we announced our deal on april 29th. and on april 30th, we came to washington, d.c., as a leadership team for two things. one is to meet the fcc and the
doj. the second is to announce our quarterly earnings. that was the reason for a large group. >> i understand there was a purpose in coming, but the very next day, nine top execs checked into the trump hotel. after the announcement. correct? >> yes, sir. very importantly, if i may add, i made the decision. i'm a long-time trump hotel stayer. way before this transaction. for example, for ten years, i've stayed. >> yeah, yeah, okay. but the company had not paid for more than two nights at trump hotel prior to the announcement, correct? >> sir, the trump hotel is only in existence for about a year. and frankly -- >> so, yeah -- bottom line, though, is that, you yeah, only two nights had been paid for by t-mobile prior to the announcement, correct?
>> at the trump d.c. but not founding -- >> trump d.c. hotel. >> other hotels. >> sir -- >> let me -- because i'm running out of time now. and since the announcement, $195,000 has been spent by t-mobile at trump hotel washington. is that true? >> that number is approximately true. and it's also -- >> and let me ask -- >> part of our spend in washington, d.c. >> i understand. prior -- yeah. this -- do you see how that looks? in other words, you don't spend any money at trump hotel, two nights, and then after the merger, you spend $195,000 at the trump hotel? >> sir, that's not on that
night. and i would say -- >> no, i'm saying over the last 11 months, you've spent $195,000. are you -- do you understand the optics of that? what it looks like? >> sir -- >> it looks like what's happening is that t-mobile is trying to curry favor with the white house. did it occur to you that members of the public, members of congress, the fcc and president trump himself -- did it occur that we would all see that expenditure as an attempt by t-mobile to gain acceptance by donald trump and his administration? >> congressman, i was and i am 100% sure that this deal will be judged by the fcc and the doj. >> i'm just talking about the
optics of what happened. >> the optics of me staying at the trump hotel haven't changed for ten years. >> well, i appreciate that. it kind of doesn't pass the smell test with the american public. it looks like you're trying to purchase influence. it looks like it could be a violation of the emoluments clause of the united states constitution. let me ask you this question. do you know if the trump organization or the trump campaign or the trump administration has attempted to contact the justice department to talk about this merger? >> sir, i have no information of that at all. >> do you know -- has t-mobile had any discussions with the trump organization or the trump campaign or the trump administration about approving this merger? >> i have not, and i am -- not
aware of any discussions by my organization. >> mr. clary, your company interacts with broadband providers, isn't that true? >> i don't understand your question. >> okay. the rural wireless association contracts with sprint and t-mobile for the use of their towers when rural wireless customers are roaming, is that correct? >> the gentleman's time has expired but the witness may answer the question. >> that's correct, we provide service to rural carriers. >> and those contracts will soon be expiring with those rural carriers, is that correct? >> that is incorrect. most of the contracts have self-renewal, and they're in different time lines. >> all right. thank you. >> thank you. >> the chair now recognizes the ranking member, mr. sensenbrenner, for five minutes. >> thank you very much, mr.
chairman. where mr. ledger and t-mobile employees stay when they come to washington really has no relationship whatsoever to whether or not this proposed merger is in the public interest or is not. and let me say, i'm kind of embarrassed, you know, sitting here, listening to the gentleman from georgia's line of questions, particularly since the fcc is an independent agency. it is not a part of the administration. and the commissioners of the fcc are supposed to act independently, based upon the data and the information and the testimony that is presented to them. now, you know, having said that, and, you know, i certainly will stand up for the independence of the fcc and these other independent agencies. let's get down to whether this
merger is in the public interest or not. so i want to ask the two ceos, particularly mr. legere. i've been on this committee for as long as i've been in congress, which is 40 years. i've worked on antitrust questions, including the mixed up at&t divestiture of the aerial '80s, which was supposed to divide things up and ended up putting more things back together than they were beforehand. but i come to the conclusion that european countries tend to put much more emphasis on whether a company is too big and stifles competition, whereas here we focus on what's best for the consumer. so obviously going to 4 to 3 may stifle competition, it may not. but that's not what american antitrust law has been about. so anybody that talks about four to three mergers and things like that -- in europe, it's an
entirely different law and we ought to realize that. so, you know, i'd like mr. legere and mr. clury to say what can consumers expect out of this, and you say that prices will decrease as coverage, speed and capacity continue to improve. you know, in some ways, it kind of looks like, you know, that's mutually exclusive. that you get a better product and you pay less for. but, you know, it seems to me that certain mergers, you know -- might deal, one, with the economics of scale, you know. and number two, allow each of the partners of the merger will be able to benefit from the strengths of the other and get rid of the weaknesses that they have. so can our two ceos answer that in the two minutes i have left? >> yes, thank you, sir.
the -- the transaction will provide a 5g network capability that the united states desperately needs. $40 billion will be invested by coming together of these two companies. a merger usually is fearful. airlines are used many times, where airline mergers got us less supply, less leg room, more fees, higher prices. and in this case, supply will go up dramatically. prices will go down. services will expand. in-home broadband competition will become -- rural coverage will expand. rural competition will expand and jobs will go up. so every piece of what is good for consumers happens in this transaction. >> can you tell me what all these things have to do with where you stay when you come to d.c.? >> they don't, sir. >> thank you. >> thank you. so i think a good way to portray this is many times we try to
compare these mergers to others. there has never been a merger in wireless whereby mixing two companies because of our unique spectrum position that you're going to create eight times the capacity. so therefore, nobody can stand here and say that we're going to increase prices. when you have anything when you increase capacity by eight times, we have an economic interest to basically fill that capacity. i and the only way the american consumer will move, at&t and verizon customers will move is by us lowering prices. it's that simple. it's not what john or i say. it's we have an economic necessity as part of our business plan to lower prices, to fill that capacity, which is going to be eight times what we would have if we were stand-alone. and the reason why is because our spectrum holdings are able, when put together, creating eight times the capacity. >> i yield back. >> i thank the gentleman for
yielding back. i now recognize the gentle lady from washington. >> thank you, mr. chairman. and thank you to our panelists for being here today. i have been following this proposed merger closely, because t-mobile is just outside of my district, and many of the workers are in my district. and i know mr. legere you've requested a meeting with my office and we have reached out and we hope to do that next week. and i do want to say to the gentleman from wisconsin that there is actually reason to look at this question of where -- what happened at the trump hotels, because it has been clear from quite a bit of reporting that president trump appears to have involved himself in the at&t/time warner merger, and we want to make sure that is not happening today. so i do want to refer to the letter that senator warren and i sent to you, mr. legere, and also to thank you for your very prompt response to that letter. and so let me just run through this quickly and give you a
chance to just give me quick answers on this, because i want to turn to the content of the merger after this. in 2015, you had a public twitter dispute with now president trump regarding the quality of mr. trump's hotels in new york that ended with you tweeting, and this is a quote, i am so happy to wake up in a hotel where every single item isn't labeled trump and all the books and tv is about him. is that correct? just a yes or no. >> that is correct. >> thank you. and then in august of 2017, though, you did stay at mr. trump's washington, d.c., hotel, correct? >> that's correct. and many times in between, as well. >> and then last april, you announced the merger. it was actually just once, according to your letter, that you responded to me. it was once between then and april when you announced the merger with sprint, and you knew that the merger couldn't go forward without approval. and so you stayed there one time, according to this letter you sent me, between august and
april. is that correct? >> yes, that's true. i had much less reason to be coming to washington. i hope that time returns at some point. >> great, thank you. and the very day after the merger was announced, you and eight of your top executives were on a list of vip arrivals at the trump hotel in d.c., correct? >> i'm not aware of that. >> okay. that is per a january 16th "washington post" article that has the details of that. and so in my letter, one of my questions was how much t-mobile spent at the trump international hotel, and you very kindly gave me that number. can you just please tell the committee what that number was? >> we've spent $194,000 out of a $1.7 million spend at hotels in d.c. during that period. >> understood. and, you know, i appreciate you have a big budget, you have to travel around, and this was relatively small in the grand scheme of things. however, were you at all concerned that staying at the trump hotel so soon after the merger was announced, and then in my -- again, according to
reporting, you have hired corey lewandowski to consult with you, is that correct? >> can i answer both of those questions? >> you can answer both of those questions. >> every consultant that we hire is completely disclosed. and we had hired turn berry, an organization that he has been affiliated with or not affiliated with, but had not hired corey lewandowski directly. the decision to stay at the trump hotel, again, was my decision, and it was consistent with where i have stayed and how i chose hotels in the past. >> except that in 2015, you said you were never going to stay there. and so relying on what you have said. and so i only raise this, because we, unfortunately, have a situation where the president has not disclosed his business interests. and so when he has business interest, and it appears that you might be trying to influence the president to get involved in something he really should not be involved in, that causes concern for this committee, which is the judiciary committee. and so now let me just turn --
and so i would just say to you, if you do want this to be judged on the merits of the merger, which i think you want, we would expect that there would be concern around anything that might shed a light of impropriety on the merits of the merger. let me turn to the merger it is. there are four big companies in the telecommunication space. verizon has 34% of the market. at&t has 33%. t-mobile has 18%. and sprint has 14%. mr. lege re and i think actuall both of you testified that critics who say that prices will go up and that jobs will be lost are wrong. and so let me turn to you, miss sohn. you used to work for the fcc, you are an expert on antitrust policy, and i would like to ask you, is it your opinion that moving from four companies to three will make the telecommunications market more competitive? >> no. it will make it less competitive. and it will raise prices on consumers, as the fcc's record shows.
mr. legere makes a lot of promises, but as the senate said, nine senators said in 18-page single-space letter, a dynamic ceo is not a legal commitment. >> congresswoman, that's just false. >> i'm sorry, mr. legere, it is my time. >> that's just false. >> it is my time. i just wanted to end my testimony by saying that both the netherlands and austria underwent four to three mergers in the wireless space, both saw price increases. and mr. chairman, i ask for unanimous consent to enter into the record both my letter with senator warren to mr. legere and his response back to us. >> without objection. >> thank you. >> mr. chairman will now recognize the gentleman from florida, mr. gates, for five minutes. >> thank you, mr. chairman. i just cannot believe what we're watching. the gentle lady from washington just talked about how the substance of this merger is critically important to her constituents because it's so nearby, and then only reserved the remaining 50 seconds of her time to ask questions about the substance of the merger, because we have to go into what kind of hotel towels you like. i guess i should confess.
i once said i would never stay in a la quinn at that again, and i have stayed there. i would like to spend the lion's share on the substance. huawei put a proprietary robot arm into a labtop bag and walked out. with this in mind, mr. legere, does t-mobile currently have any chinese equipment in its existing network? do you plan to use huawei in the new t-mobile g5 network and what is t-mobile itself doing to secure its network? >> thank you for the question, sir. t-mobile has no huawei or zte in the core of its network. we have no huawei or zte plans. they will not be in our network now or ever. there was a robotic arm that was stolen in a lawsuit we filed with huawei. and we're pleased with the things the government is doing to ensure the safety around huawei. >> miss bennett, do your members
contain huawei or zte equipment? >> yes. we have about 25 person of our members have those two chinese vendors in their networks. they did it because they had universal service funds to spend. they were trying to look for a low-cost economical way to spend their money, and they did deploy those back in 2010, 2011, before it became known that it was a problem. and our member -- >> so for the sake of cost, your members do have huawei and zte parts. do your -- does huawei sit on your board? >> we do have a member -- huawei representative on our board. in a nonvoting capacity. and has no influence over our public policy committee or our board. >> it's come to my attention that some of your member companies also use huawei equipment and have sites or towers in close proximity to military bases. is that correct? >> i believe that that is correct, yes. >> and so as we move to 5g, what plans do your member companies have to remove huawei equipment,
and how quickly do you plan to address the national security concerns that these questions raise going forward? >> it's a very good question, and thank you. we plan to do what the federal government says that we should do to the extent that that equipment needs to be replaced. we plan to replace it. of course, we're going to need funding to do that, and we have been in discussions with both members of congress, the fcc and the administration on how to go about that without harming the rural americans that live in that area by having them have no access to public safety services by putting the equipment out of order. >> mr. legere, will t-mobile be requesting any additional government assistance to accommodate your plans to not use the lower cost huawei and zte equipment? >> no, sir. we wouldn't. and frankly, i think we've even offered to play a role with the rural wireless association to help them possibly use some of our pricing power to purchase alternative equipment. >> so as i understand it, some of the rural providers oppose
the merger. if the merger were to take place, there would be more connectivity that would come not from their providers, but from t-mobile in that circumstance. and that would result in not having as much zte and huawei equipment utilized in our technology, transfers of information. and you wouldn't require any additional government assistance like the rural carriers have said they will require. >> right. and the existence of it in their networks concerns us. >> mr. chairman, i seek unanimous consent to sbhenter i the record a cnn article, entitled huawei connects rural america. >> without actiobjection. >> i want to ask about emergency response. coming from north florida, we have been dealing with the aftermath of hurricane michael. and i have seen in trips that we have taken, bipartisan trips, where cities that have 5g technology have amazing capabilities in the event of disasters, especially for vulnerable populations like people in hospitals and nursing
homes. can you speak specifically to how 5g will help our local communities respond to disasters? >> yes. and congressman, that's a very, very important question. resiliency is a combination of back hall power, tower design and restoration capability. and we have significantly invested in those areas to now. and that's a core part of the deployment of the 5g network. in fact, in hurricane michael, the restoration capability and the power investments we made allowed us to virtually have our entire network up throughout the disaster. that's a core principle of the design of the new t-mobile network. >> and what would be an example of how 5g could save lives in a disaster? >> well -- the 5g network, most importantly, the reach and breadth and coverage will provide capabilities that are far more resilient and far more pervasive in their coverage. >> thank you, mr. chairman. i yield back. >> thank you. the chair now recognizes the gentleman from maryland, mr.
ro rosskin for five minutes. >> thank you very much. i'll start with you, miss sohn. mr. legere said 16 of 19 agencies have already approved the transaction. but i know there is still ongoing state ag investigations. are those 16 agencies that mr. legere cited as having approved the merger, are they responsible for determining if the merger violates antitrust laws, related to the question before the ftc and the justice department? >> yeah. when the pucs -- public utilities commissions and the state public service commissions review this merger, they're not actually looking at the mobile wireless market. that's not in their jurisdiction. >> what are they looking at? >> they're looking at wire line -- the small amount of wire line capacity that's involved in this merger. >> under state antitrust principles? >> that's correct. but they do not look at what is the main event in this merger, which is the mobile wireless
market. so with all due respect to, you know, the pucs, the review is kind of irrelevant. >> you are my constituent, i think. do you live in carol county? >> that's correct. >> the most rural part of my district and beautiful part of my district. and you're here on behalf of the rural wireless association representing 50 or more wireless carriers, right? would this merger lower prices or increase prices and why? and what would the impact be in rural areas, such as where you live? >> from a rural american's perspective, it will increase prices, and the reason is because of the roaming agreements. each carrier has -- in a rural market, we only serve the very small areas that are our little islands in rural america. when rural americans leave those areas to go travel to cities, they have to use a bigger carrier's network. in the case of sprint, my
members have reported that their roaming arrangements with sprint are often 20 times lower than those with t-mobile. so the fear is if the merger takes place and the agreements that are in place right now, that some of them, contrary to what mr. clara said earlier, they are starting to expire. they don't automatically renew. and t-mobile has not indicated that they would renew those agreements. they have said that we can select those agreements, but if they're going to expire in a couple of months, we're very concerned about that. the pricing would go up -- please let me finish. the pricing would go up for those rural consumers, so we're going to have a situation, we fear, where rural consumers will have really good service at home with their local carrier and use a phone there for that service. but when they travel, they'll have to purchase another phone, which means rural consumers will end up paying double. one for their local home service and one for their travel service. so two phones to carry around. >> thanks. mr. legere, can you respond to that? >> yes. just for the record, several
times now people are referring to what's going to happen to my prices. i'm going to be the ceo of the new t-mobile. i've already taken a business plan to the rating agencies and financial markets. prices are going down. it's in my business plan. it's also promised in the commitments that i made to the fcc. from a roaming standpoint, we've made it very clear that we will honor the agreements that both sprint and t-mobile have. and remember, 70% of all of the roaming agreements t-mobile have are reciprocal. and we are $25 million net payer. anybody that wants a roaming agreement that's reciprocal at zero, we will sign that right now. whether the rural carriers pass those prices on to their consumers, that's a different story. but 96% of rural america will be covered by the new t-mobile network, which is also significant, contrary to the point that mr. shelton made. >> mr. shelton also testified that the transaction would result in lower wages and thousands or tens of thousands of layoffs. perhaps hundreds of millions of
dollars lost to cwa workers. are you willing to make the same promises to the workers that you're making to the customers when you say prices are going to go down, are you promising that those workers are not going to lose their jobs? or do you concede they will? >> thank you, sir. i would just have to categorize everything mr. shelton said as bad assumptions, bad math. last time we were here in a hearing, mr. shelton said wages would go down, but when asked what the wages were at t-mobile and sprint, he said, i don't know. we don't have an agreement with them. so he has no -- >> but can you -- just explain as a matter -- can you explain as a matter of economic theory that if you have -- you know, the two businesses across the street from each other, and you take over the other business, why doesn't it logically follow that half of the people are going to lose their jobs? >> if there is a sprint -- t-mobile support in close proximity to each other, even if we take one of the geographies and close the real estate, we're
offering a job to every t-mobile and sprint employee. we also have at sprint retail stores a 60% attrition rate annually. and a 19% attrition rate at t-mobile. so this is something that we can take into consideration. >> thank you. mr. chairman, could i give mr. shelton the chance to respond, just in fairness to him? >> your time has expired, but if mr. shelton wants to answer the question. >> as far as promising employees a job, there are so many loopholes there, it's amazing. but when you look at what those stores are actually -- 84% of them are authorized dealers who are not employees of t-mobile. and have no promise, even from mr. legere that may not be kept -- will not be kept with authorized dealers, because they're not t-mobile employees. that's some 88,000 people in the
united states. >> with all due respect, sir, when metro pcs was acquired, mr. shelton said we would decline 10,000 jobs. i added 23,000 jobs. in my tenure as ceo, i've added 75,000 jobs in addition to the 16,000 from metro pcs. so my track record speaks for itself. >> thank you. the chair now recognizes mr. buck. >> before my time starts -- >> i'm going to give you an extra minute, if you need to, since the witness on this side took an extra minute. >> actually, i just wanted a ruling from the chair, if i may. i had dinner at the trump hotel three weeks ago. my steak wasn't cooked properly. and i sent it back. and it was then returned cooked really well. and i'm just wondering if i have a conflict of interest. >> i think only if you're involved in a merger of two large companies. if not, i think you're safe. >> that means he can't speak at this hearing. >> yes, that's true. i think perhaps they're trying to say you shouldn't speak during the hearing? no. mr. buck is recognized. >> thank you very much. i appreciate that.
first, mr. chairman, i would like to introduce a letter for the record from a constituent of mine, frank dur eco, who writes about the effect of this merger on rural broadband. and he is very excited about this merger, and continuing to work with t-mobile. mr. chairman? is there any objection to entering this -- >> without objection. >> thank you. then i wanted to just comment, miss sohn, that between the two of you, i'm going with t-mobile, just because he has better shoes. i don't know -- if you've seen them. but those -- >> he's counting on that. >> i have better glasses, though. >> they are cool glasses. if they were a little pinker, i would -- so i wanted to ask the two gentlemen from t-mobile whether you are planning on buying more spectrum as a result of this merger.
>> the answer, sir, is yes. currently we're participating in a millimeter wave spectrum auction as we speak and there will be more needed in addition to what we'll get together with these two companies. >> and do you plan on buying that from current holders of spectrum, or in the mark -- other areas of the marketplace? >> yeah, the significant amount of the spectrum that we need to run this new company will come from the integration of the low band, mid band and high band spectrum portfolios that we have. but they will continually, as 5g advances, be a need to buy. and there are a number of auctions that we're involved in. >> and mr. -- you have made promises about pricing. and i'm wondering, based on those promises, do you believe that there is any role for any government agency in the pricing that you will be setting? >> my -- i believe my
commitments are enforceable. and i've made it clear, two things. i have a business plan that has prices declining. i have supply going up significantly. i've an 87% reduction in the unit cost of a gigabit of data that's being sold. so i have huge supply. i have a significant price decline capability. and i committed that to the fcc in writing for the first three years. >> so i took an economics class in college, and i immediately went into law. i wanted to just ask you to explain to the american public why three big companies makes for better competition in the marketplace than two big companies and two small companies. >> right. and i -- thank you, sir. i think you categorized that well. amongst the ways that i look at this merger is going from two to three.
and, by the way, after the number three and number four players come together, we will still be a much smaller number three to the economic power of at&t and verizon. and, you know, why this makes sense is that we will be able to significantly increase supply and bring competition greatly to those other two. last thing i would also say, we continue to ignore that the cable monopolists are in wireless. the comcast added more phone customers in the last year than at&t and verizon together. comcast, charter. all altese. tracfone happens to be the largest prepaid player in the market. so there is more than just the three players. but going from two to three makes more sense than just having two. >> and you agree with that? >> 100%. we talked about the u.s. market being a competitive market. it's not. at&t and verizon today have over
70 market share -- 70% market share. but what is worse is they control over 93% of the cash flow in this industry. so think about it. how could you compete when you're competing against two companies that are generating 93 cents of every dollar of profit? so the only way we're going to be able to compete is when we put our two companies together. we build a better product, we lower our prices, we cover every corner in america. and this is the first time that at&t, verizon, comcast and charter are really going to feel the competition. so we are going to make this market for competitive and this merger is pro-consumer, because everybody benefits whether you're a post paid customer or prepaid customer. better product and lower prices. that is the basics of business. >> so the two of you put your head together and figured out which color this new entity will go with? >> that would be magenta. >> i yield back. thank you. >> thank you. the chair recognizes the chairman of the full committee, mr. nadler, for five minutes. >> thank you.
before i start my questions, miss sohn, you looked very eager to respond to the last question. could you take just a moment to do that? >> i am very eager. so mr. legere keeps talking about unit price. and i think that that's really important. because what he's saying is, the new t-mobile will give you more. he's not saying they're not going to -- but on a per-unit price, you'll either pay the same or less. so you'll get faster speeds, you'll get better quality, but in absolute terms, you're going to pay more. but on a per unit -- but that's the words you just used, okay? number two, if i hear excess capacity, excess capacity one more time, i think my head is going to explode. that is seldom the primary the only determinant of a pricing decision. a market-dominating entity can reduce output because it's more profitable to do so. carnegie owned all the railroads. he had lots of capacity. he was still a monopolist. so capacity is meaningless when it comes to setting prices.
>> thank you. okay. now the questions that i had for mr. shelton. economic concentration in every sector of the economy almost has reached historic levels. last week a professor testified in front of the senate that concentration has been steadily rising and competition declining in great many sectors of the economy, raising, quote, legitimate concerns about increasing market power in large swaths of the u.s. economy. close quote. what effect has rising employer market power and declining organization rates have on workers? >> please use your microphone, mr. shelton. >> obviously, it has put a downward spiral on wages. the loss of unions has put more -- probably a bigger downward spiral on wages. >> but the loss of unions aside, do you think the concentration has put a downward spiral. >> right. and what -- it has increased competition for labor, and when you increase competition for labor, the labor prices go down.
and that's what exactly -- >> you mean, decreased competition for labor. >> increased. i'm sorry. did i say decrease? increase. >> it is increased competition? >> no, no, decrease. i'm sorry. >> yeah. that -- okay. and then the prices go down, is what you're saying. >> right. >> and as you note in your written -- and in your written testimony, you discussed both t-mobile's and sprint's, quote, long history of ignoring workers' rights and violating federal labor laws, closed quote, noting that t-mobile in particular has been the subject of more unfair labor practice charges per employee than any other business in the united states. that's a quote from you. how could sprint/t-mobile merger affect new t-mobile's ability to engage in unfair labor practices? >> that will become that much more powerful. this is a company that has been found guilty by various and sundry courts of already doing unfair labor practices.
and if you put them together, they'll be more powerful and they do everything they can to try to kick the unions out. and will continue to. >> have more power. and if you put them together, all be it, they have more power, they wouldn't have less desire to do so? >> i don't think they would have more desire, because they want to keep unions out. the only way that their employees have a voice is through collective bargaining. and they don't want any part of collective bargaining. >> that wouldn't change. >> no. >> mr. chairman, can i comment? >> i have one more question for someone else, and then if we have time. miss garato. in your testimony, you note that the proposed sprint/t-mobile merger would cause harm to low-income communities and people of color. what are the harms that low-income communities and people of color are likely to experience as a result of the sprint/t-mobile merger, and why do you think they would experience those harms? >> thank you for the question. they're going to experience
higher prices. if you look at the fcc record and these companies' economic studies, they actually show that prices are going to increase. and i'm going to quote here. >> they show the price is going to increase because of consolidation? >> yes, absolutely. and actually, dish economists have concluded that sprint predicts significant price increases. the harms of which are going to disproportionately fall on lower-income subscribers. >> who did you say predicted that? >> yes. they're own economist. >> sprint and t-mobile's economist. >> at dish. >> dish's economist. >> dish's economist predicted that. and that is what is in the fcc's record. >> thank you. mr. -- >> let me just intercede. >> mr. -- >> who wanted time to reply? are you still there? you asked for time to reply. >> giving authority. >> so when we --
>> reply to what you want to reply to. >> we're here under oath. and somebody says that we have said we're going to get higher prices. >> i think she said that she quoted dish's economist as quoting your economist. >> correct. so let me make sure that we're very clear. we have made a commitment that we're going to lower prices. we went above and beyond. in another merger, people go and make a filing with the fcc. we did that voluntarily. nobody asked us to do that. we are making a commitment, because we have eight times the capacity, which is something substantial. just remember one thing. we're going to lower the price. or the cost of our product by 87% of the manufacturing cost of a gig. of course, we're going to lower prices. of any industry in the world where you lower your cost by 87%, so therefore we have excess capacity and we made a commitment to have lower prices. >> thank you. >> thank you, my time has expired.
>> mr. chairman? >> yes. i recognize the gentleman from florida for unanimous consent request. >> thank you. i enter into the record a letter from northeast colorado cellular, inc., directed to you and mr. sensenbrenner. >> without objection. now recognizing the gentle lady from florida, miss demmings, for five minutes. >> thank you, mr. chairman. thank you to all of the witnesses. as i sit and listen to all of my colleagues, i guess it's necessary for some to try to find humor when we're talking about american workers potentially losing their jobs and people of color once again potentially being taken advantage of. and persons who live in rural communities potentially losing adequate coverage. for some reason, i'm struggling to find the humor in that. and with all due respect to my colleagues who feel like where you stay is irrelevant, i do
associate myself back to the comments originally made by my colleague from georgia, because when we're talking about mergers that cost millions of dollars -- billions of dollars, excuse me, i do believe a compromise or the appearance of compromise or undue influence is relevant to this conversation. mr. legere, i am going to start with you. in your testimony, you said that this proposed merger would -- and we referred to this quite a bit, lead to lower cost. th that it would create -- it would be a tremendous job-creator, and would create thousands more jobs. so under those circumstances, when i hear what you say, and when i hear what mr. shelton says, it appears to me that that would be a marriage made in heaven. but apparently, obviously, the workers do not feel that way.
so if you would just please, if you've already done it, do it again for me. because i don't see it quite yet. and i am really struggling to see it. how does the merger -- how does it actually lower costs? how does it become a tremendous job-creator, and how do you create, and will you create, thousands of jobs that should make american workers and the unions that represent them extremely happy? but they're not. >> thank you very much, congresswoman. i'm sure the topics that you outlined, that you said were finding humor in, i find no humor. we are the largest provider to people of color in low-income, and will be. and there will be top beneficiaries of this transaction. rural america will be, as well. jobs. we're going to create 5,000 new rural retail jobs. we're going to onshore 5,600 customer care jobs. we're going to have 1,800 network immigration jobs. and we're going to have 11,000
new positions. we'll have 3,600 more employees in the first year than the two separate companies combined, and 11,000 by 2024. so jobs are going up. again, mr. shelton's track record is -- when at&t tried to buy t-mobile, he predicted it would increase jobs 96,000. when t-mobile bought metro pcs, he said it would decrease 10,000. i would submit, those are related to whether or not he has a union agreement. and he would be very happy in this job creation if, in fact, we were a union-created organization. jobs will go up. every single day of this new company. >> mr. shelton, will you respond to that, please? >> mr. legere is talking about jobs going up 5,500 or 5,000 call center jobs. right now t-mobile ships call center jobs overseas every moment of every day.
there is a tape wandering around the internet where his vice president of something is telling the people in the philippines that work for t-mobile in call centers that they're doing a great job, because a year ago there was none of them and now there's 1,000 of them. so -- >> so mr. legere, is the merger an american job-creator or an american-job destroyer? >> it's a significant american-job creator. and i would just say to mr. shelton, i do have some offshore jobs. and i will have some. >> do you ship american jobs overseas every day, as he indicated? >> absolutely not true. jobs in america are going up significantly every day in the new t-mobile. >> if i may? the -- you know, when you consider that 84% of the stores that are operated by authorized dealers, not employees of t-mobile, but authorized dealers, and then you consider
that after this merger, if this merger goes through, t-mobile/sprint, will have twice the number of stores that either at&t or verizon has. what do you think is going to happen to those stores? >> i know exactly what i think. thank you. his sohn, would you please go ahead with the last few seconds? >> thank you so much. i just want to list the promises i've heard today. on wholesale access, prices, lifeline, in-home broadband and jobs. it's like every day there is a new promise. my question is, who is going to enforce these vague promises? i agree with assistant attorney general macon delaware hooem that behavioral remedies don't work. they didn't work in the comcast/nbc merger. they didn't work in other mergers. who is going to enforce all these promises? that's the problem. nobody is the answer. and nobody is equipped. >> thank you so much. mr. chairman, i yield back. >> thank you. the chair now recognizes the gentleman from north dakota, mr. armstrong, for five minutes. >> thank you, mr. chair.
mr. legere, we talk a lot about the race to 5g, and we have talked about it today. we all recognize that when we're competing in this, we're competing with china and there is no real private business in china. and they have a sense and unity of purpose in this country in these types of scenarios that we don't. my question is, what does it mean for the u.s. to win the race to 5g? why -- i mean, we're talking about short-term and jobs and those types of things. but a longer view of the economics of what this means, and that's before we get into national security questions. >> thank you very much, sir. the statistics from ctia suggest that there are 3 million american jobs at stake with 5g leadership. that being that if we don't retain and take leadership in 5g as we do with 4g, we can lose those jobs. there will be $350 billion of investment and half a trillion of economic impact.
right now the u.s. is behind china and south korea in the deployment of 5g. as you say, heavily because the country of china has a massive state-run budget to deploy 5g as a critical national priority. with what we're going to do with the new t-mobile, the $40 billion of investment and creation of a new network, enforcing at&t and verizon to not just have short-term focus on millimeter wave and small geographies. together we can lead the country to 5g and attain that critical position. >> and when we get into this technology, i think it's important to recognize, too, we'll pay $800 for a phone, but not if there is one available for $740. i mean, that is -- that is the nature of the american consumer. so when we start talking about where these processes are made and those -- and those types of things. i mean, basic economics tells us more capacity should relate to lower prices.
but the 5g dates are, you know, 2021, 2024. and those -- for everybody, those dates seem like a long way off. but can we expect to see improvements in speed and performance and i i suppose mos critically, capacity, before then? >> yes. the new t-mobile's network is going to have median speeds by 2024 of 450 megabits. by 2021 it will be 150 median speeds across the country. as i said, we're aspiring to cover 96% of all of rural america. the promise of 5g, by the way, is 100 times the speed, 100 times the number of devices and ten times less the latency. even as we migrate, the new t-mobile speeds will be ten times faster. >> in my never-ending quest to
educate people about north dakota, we have the best rural broadband in the country. we do recognize rural america is significantly underserved across the entire country. i guess my question for mr. claure would be, i mean, do you think sprint can no longer -- is continued viably as a nationwide competitor especially as we transition to 5g under the current structure? >> there will be a different sprint. in order for sprint to be able to offer 5g in our current coverage, which is about half of at&t and verizon's coverage, we would have to spend close to $25 billion. as you know, sprint already has $45 billion in debt, we don't make any money, we barely break even. we would have to get that money from the bank and increase prices and only offer 5g in certain areas. the promise of 5g needs to have coverage end to end. sprint would be a very different
company. why this is extremely relevant is, today at&t and verizon, again, like i said before, they have 93% of the profit generated, 70% of the market. if you shrink sprint to be in a smaller company, then basically the market share of at&t and verizon would grow more and the market dominance or the market abuse that they have will eventually grow. the way to make this market more competitive is by allowing sprint and t-mobile to merge to create a viable competitor that will bring competition to america. >> thank you. i think you and i can have a longer conversation than 20 seconds about what potential pitfalls there are if sprint shrinks. the type of company you are now versus the type of company you will be in in four years. >> a smaller company, as i said, and more importantly, it will make the other two much, much stronger. as we talk about market
dominance, they will actually become a lot more dominant if that would be the case. >> thank you. >> i thank the gentleman. i recognize the gentlelady from pennsylvania, ms. scanlon, for five minutes of. >> thank you. i wanted to try to focus my time on the impact of the proposed merger on the consumers and workers in my district, which is pennsylvania 5, it's south philadelphia, all of delaware county and part of montgomery county, pennsylvania. so ms. gora it"ta, and i note t you're a villanova law grad which is in my district, your testimony that you submitted talks about the harm to price conscious customers in low income communities and communities of color. would that also include seniors? >> yes. to the extent that they are price conscious customers, it would include seniors. >> okay.
you talk about -- i'm sorry, i'm losing my place here. you've got a chart on page 11 of your testimony that looks at major markets. can you explain the significance of that chart with respect to the philadelphia region? >> sure, absolutely. so this is a percent of the market that sprint and t-mobile owned as a company or they own as a wholesale partner. so it actually shows what percentage of the market they actually have in that district in philadelphia. >> and so what is the impact of a merger on the philadelphia region, if they have, what is it, 46% of the market? >> so the impact is that the price-conscious customer doesn't have that robust competition between sprint and t-mobile in order to keep prices low. >> is this what you would
describe as a highly concentrated market? >> absolutely. >> okay. and as i understand it, your testimony is that in a highly concentrated market, that elimination of choices is what tends to drive prices up? >> correct. >> okay. mr. shelton, you kindly attached exhibit a to your testimony that has the distribution of sprint and t-mobile's stores in various regions, and one of them that you have highlighted there is philadelphia. do you have that? does that also show there's fairly highly concentrated sprint and t-mobile coverage and retail stores there? >> excuse me. i didn't hear you. >> your graph, what does that indicate with respect to the philadelphia region, the concentration of sprint and t-mobile retail stores? >> yes. >> what is the impact in your
estimation of the merger on retail workers, if the merger goes through? >> obviously, as you can see, these stores are very close together in most of these places. not only that, but as i said before, 84% of all their stores are owned by authorized dealers, owned and operated by authorized dealers. so when t-mobile says that they are going to offer a job to employees, that doesn't mean anything to authorized dealers' emplo employees. when you have this many stores, twice of what at&t and verizon have if this merger goes through, obviously they are going to get rid of some of those stores. and those stores are probably going to be authorized dealer stores and the employees in those stores. >> okay. thank you. so we do have those concerns on
the impact on consumers that less competition could lead to higher prices and consolidation of stores could lead to less jobs. so mr. ledger, how is this 4-3 merger so different from traditional mergers where we have the concern about lessening competition? >> thank you very much for the question. i think i've tried to be very clear that going from two to three is going to increase competition. in cities that have a high concentration of share, we run this business on nationwide advertising, nationwide pricing. we don't price particularly down to a neighborhood. in the lower end of the market, when we bought metro pcs, the main concern was the same. metro pcs customers had a 12 times increase in data usage and a 4% decline in price. so the low end of the market has been a high beneficiary, and we would expect that to be. mr. shelton keeps talking about
the authorized dealers. boost, virgin, and metro are pretty much heavily concentrated in authorized dealers. we've made it clear, we're going to run these brands as businesses as the way they are now. we can't make job offers to employees that aren't ours. but we can run these businesses. we can segment the market so that metro and boost and virgin all have a clear role to play. and with sprint and t-mobile stores, we can offer jobs to every person. >> i think ms. son was looking to respond. >> this is not a 2-3 merger. this is a 4-3 merger. you don't have to have four equal sized players to compete. sprint and t-mobile, and by the way, t-mobile became t-mobile after the justice blocked the merger of at&t and t-mobile, that's when they became the uncarrier and wisely hired this man to my right. they're mavericks. they not only compete with at&t and verizon, they compete with each other. as we've seen, not only in
europe, and i don't know why europe is different, it's actually smaller, so i would think if you're shrinking from four to three in europe and it's bad, and you have double digit price raises, it's going to be worse in the united states. so there's no rule that says that everybody's got to be the same size. and in fact, three is an invitation to collude rather than compete. >> can i make one final comment since the word "collude" was used? >> the time has expired but we're going to get back to you. i want to go to mr. neguse from the great state of colorado for five minutes. >> thank you, mr. chair. mr. claure, i want to talk a little bit about mobile virtual network operators. correct me if i'm wrong, my understanding is sprint is one of the largest providers of roaming contracts in rural america. is that a fair characterization? >> we provide to both mobile
mvnos and rural america, their customers. >> so i represent a district that's both urban and rural, quite a few rural counties in my district, in the second district in colorado. and while i understand that t-mobile has made a commitment with respect to legacy rate plans for the new t-mobile in terms of maintaining those plans for three years after the merger, am i correct that that commitment does not extend to mvnos that currently rely on sprint for wholesale service? >> i will let mr. ledgere answe that since he's going to be running the company. there is one enormous company in the united states known as tracfone. they have 20-some million customers. tracfone has endorsed this merger, sent a letter saying this merger is good for consumers. >> i understand that, i don't
mean to interrupt it, i'll just give it to mr. legere, whether or not that price commitment will extend to this piece of the market since that piece is such a huge component of the ability of folks in rural america to be able to access -- >> thank you, congressman. i'll go even one step further. not only will we honor the agreements that of both sprint and t-mobile have, if there's any mvno that is concerned about them not having the ability to get the rates that they have now, i will lock in a contract with any one of them that wants to take their rates right now and lock it in for as long as they want. prices are going to go down in that market as well, especially since i can't think of an mvno where prices ever went up or stayed flat. if there's somebody who wants to lock it in, i'm your guy, i'll meet you out in the hallway. >> thank you for your answer. mr. legere, i want to follow up on a question my friend from north dakota posed, around the
reasoning for this merger, particularly as it relates to sprint's standing in the market. my sense, based off what i've read, you've made statements previously that the path that sprint is on is not sustainable in terms of the path forward. i think you referenced to the gentleman from north dakota that sprint would have to be a smaller company. am i characterizing your statements accurately? >> that is correct. >> okay. so what i'm struggling to kind of reconcile is, from your -- this is a january 31st, 2019 press release detailing the first quarter results in 2018 of sprint. and i'll just go through some of these. post paid service revenue grew year over year for the first time in five years. prepaid service revenue grew year over year for the fifth consecutive year. net operating income of $479 million, sixth consecutive quarter of net additions, tenth consecutive quarter of net additions in the business market. those don't sound like metrics
of a company that would be getting smaller. it sounds like a company that is getting larger. and maybe you can adduce -- >> sir, with all due respect, the only metric that matters in business is whether a business has the ability to generate cash or not. if you continue reading the press release, sprint is expected to generate a negative free cash flow of a billion dollars this year. a company that doesn't generate free cash flow doesn't have the ability to invest. the company like sprint that has $40 billion in debt, and the only way we can continue to invest is if we borrow more money, and if we borrow more money, the only way to pay for it is we'll have to increase prices. and i've said that prior to this merger, the only way sprint will continue is basically by increasing its prices. and now -- just to finish, we are a generally negative free cash flow. that means we spend more money than money that's coming into the company. >> i'm going to give the witness
a chance to respond to that but i would just follow up to say, and again, part of this is just reconciling the statements that the company has made with respect to its financials, with the justifications for the merger. that's what i'm trying to glean from your testimony, is that much of the testimony, and your written testimony, focused on the need to be able to make more capital investments. and yet, you know, in your press release you talk about the fact that network investments year to year have doubled, which i understand were reduced drastically in the years prior, but nonetheless are now on the rise. there has been a lot of conversation about 5g. i read the letter that sprint issued in "the new york times" just yesterday, essentially to customers, right, far and wide, with respect to one of your competitors. and in that letter, it made clear to me that sprint, that its plan is to be the first carrier in the united states that has mobile 5g later this year.
i guess i'm trying to understand that difference between the position of the company and your testimony. if you'll indulge me to give the witness a chance to respond. >> the gentleman's time has expired but the witness may answer the question. >> so we do plan to deploy 5g in a very limited area. we've said it, in specific cities around the country. but we will not have the capability to offer a true nationwide 5g because we lack low band spectrum in order to do it throughout the country. now, what you see, the metric that you see, yes, sprint has been getting better. when we started sprint in 2014, we lost $5 billion. today as a company that's barely breaking even and generating minus $1 billion. that's a limited ability to invest going forward. >> thank you. the chair now recognizes the gentlelady from georgia, ms. mcbath, for five minutes. >> thank you. and thank you to all of you that
are here sharing your views on this proposed merger. we've heard a lot of talk today about the potential effects of this deal. and obviously i am not an antitrust lawyer. but it doesn't take an antitrust lawyer to see that there are real reasons to be concerned about how this proposed merger might harm consumers and workers. our economy relies on robust competition. my constituents in georgia don't need a law degree to tell them the difference between having four phone plans to choose from or just three. you don't need an economist to tell you that a company doesn't need two phone stores on the same block or that if you work at one of the stores that's about to close, that you're going to need a job. as was stated here earlier by the communication workers of america, they project that 28,900 jobs would be lost due to this merger.
so my question for you, mr. legere, you know, on february 4th, t-mobile committed to make available the same or better rate plans as those offered by t-mobile or sprint for three years. so why not four or five years? and why do we need this promise if this deal is to be such a good deal to consumers? >> thank you very much for the question. and i'm happy to explain that. my business plan has prices going down the whole time. the panel has said several times that our own modeling showed prices going up in the first three years. that's not true. what happened is the buildout of the network takes three years. an economist inserted price pressure in the first three years as a theory as to what could happen before the capacity would go up. that's not my business plan. so what i decided to do is make the commitment to the fcc. i will keep every rate plan that everybody has and keep it for three years, because at the three-year point, when the capacity is significantly built, there was no question from all of the theoretical economists
but what would happen to price. >> do you have any response, ms. sohn, to that answer? >> i want to repeat what i said earlier in my testimony, that this pricing commitment, which as you mentioned, is for a limited time only, is an admission that post-merger, there's not going to be enough competition in the wireless market to constrain pricing increases. he's basically saying i've got to do this, i've got to make this promise and i'm get back to, promises, promises. who is going to enforce these vague promises? i'll also make another point. after the february 4th letter, you know, several people filed with the fcc showing how many loopholes there were in this pricing commitment. and t-mobile had to file an eight-page letter explaining why this was simple and ironclad. now, if you've got to take eight
pages to explain why your pricing commitment is ironclad, it ain't ironclad. >> thank you. mr. shelton, sprint and t-mobile have promised to offer employees new jobs if they're affected by a store enclosure. what kinds of jobs might those be? and just kind of tell us from your research what kinds of jobs would those individuals be, i guess, asked to take. >> there's no way to tell what kind of jobs they might be. there's no way to tell what kind of wages they might make. there's no way to tell where they're going to work. there's no way to tell where they'll be forced to transfer to go to work. and we still have 88,000 people who work for authorized dealers that haven't been promised anything. and those stores are going to close, mark my words. >> thank you so much. i would like to yield the rest of my time to mr. naguse. >> i thank the gentlewoman from
georgia. if you would care to opine on the colloquy we had earlier. >> thank you so much. sprint had a cash flow because they built up a large reserve of cash and now they're spending it on capex. they spent 1$1.4 billion on ther network in the third quarter. that's why they had negative cash flow. in fact, in the prior quarter, so q2, sprint had positive cash flow of $525 million. let me say one other thing. nobody's talked about softbank. softbank is like overflowing with money. it's got $31 billion in cash and cash equivalents across its portfolio. its vision fund has more than $90 billion in capital, which it invests in cutting edge technology companies. there's more on the way. they're going to have an ipo,
listing the offering at $30 billion. so there's money there. it just needs to be spent. >> thank you, i yield back. >> can i reply now? >> the time of the gentleman has expired. i'm going to recognize myself for five minutes. so i want to start with, you know, there's been a suggestion somehow, and i wasn't good in math, but there's been a suggestion that somehow we're going from three -- i mean, from two to three, which seems to be a really silly claim. t-mobile represents 18% of the market and sprint represents 14% of the market. that going from two to three acts as if those are nonexistent players in the market. it seems to me that's not true, this is a substantial part of the market. we need to be honest, this is a transaction that takes four companies and makes it three. and then the question is what's the impact on consumers and workers and costs from my perspective. so i want to start with, first, there's been a lot of discussion
about the projected impact on consumers in terms of costs. and i take mr. legere at his word that he intends as ceo to keep costs down for the first three years. but of course this is not just something decided by a single individual. this is a market that will have some impact on whether that happens or not. you have shareholders you're responsible to and you can't simply say i'm going to keep my prices low and we're going to lose money because i want to do that personally. there are a bunch of fiduciary area duties you have and market conditions. i want to focus on the testimony of ms. scorato who references testimony from t-mobile's economist, a firm called cornerstone, that acknowledged that price increases are likely and that that was referenced in the dish filing. so i want to start really with you, ms. scordato. it seems that's a conclusion that's consistent with other history in this sector and the reduction from four to three.
would you just explain a little bit about that, respond to that, then i want to ask mr. legere to respond. >> sure, thank you. in the cornerstone study it actually speculates that lower income customers will be more willing to pay for better service and higher income customers because they rely on smartphones for their only access to the internet. so that is part of the cornerstone study. and again, dish's economist, when looking at this study, they have concluded that sprint and t-mobile's own economists have predicted that significant price increases, those harms are going to disproportionately impact low income consumers. >> i want to -- you know, i applaud, you know, both t-mobile and sprint have been, i think most people have recognized, scrappy, aggressive players in this market and it's resulted in maybe not better experiences for workers, according to mr. shelton, but at least better experiences for consumers, lower
costs, more innovation, more choices. that's the reason we want -- that's what competition is impend intended to promote. so it's hard to understand, both the conclusions of your economists that prices are going to go up, and what we know about antitrust and law broadly, that less companies is less competition which produces higher prices. which isn't this presumptively anticompetitive and not in the best interests of consumers, american jobs, or prices? i mean, it seems kind of -- >> thank you, mr. chairman. several things. you did refer in the beginning of your comments about being a ceo with a fiduciary obligation to shareholders. i made it very clear that the business plan that i've shown to shareholders, that i've taken to rating agencies, has price declines from day one, down. not what we keep hearing about here is giving credence to dish.
>> it's your economists, a firm called cornerstone. >> dish's interpretation. secondly, i would tale you, one of the reasons that the fcc's shot clock is currently stopped is that we provided a tremendous amount more information about the years '19 to '21 because this was such a question. prices are going down. on the collusion comment, because she made it, if i can just make this comment, t-mobile has done a great job as a young carrier. it didn't just come with hard work. we got $3 billion in cash from the spectrum from the at&t breakup and we did a merger the metro pcs. sometimes those things are required. the uncarrier brand is all about taking it to at&t and verizon. those two wouldn't even speak to me if i was in a dark room alone with them. >> mr. legere, i understand that. our goal is not whether or not you get to take it to at&t and verizon. our goal in deciding whether or not this merger makes sense and is in the public interest is whether it's good for consumers, it's good for american jobs, and
whether it will result in more choice and lower prices. i get the sort of competition view as a ceo of the company, but that is actually not part of the equation. the equation from my view is, does it produce how choice, more competition, lower prices for consumers. >> which it has, sir, in the years i've been ceo. >> i understand. you keep saying this three-yeha able to make a representation that -- >> prices are going down, forever, for the entire -- >> forever, that doesn't seem credible to me. you're not going to be there forever, presumably. that's what's worrisome to me. i don't think we can be looking at transactions like this and basing approval or disapproval on whether you're going to behave in a certain way. >> there's going to be an 87
decline. the unite cost is going to go up. they'll have ten times more data. >> i'm going to indulge myself for a couple of more minutes. ms. sohn, could you respond to this idea of -- i know in your testimony you spoke about the representations that were made by t-mobile and sprint to wall street and how that ought to be sort of, you know, relied upon. but also how it conflicts with your own analysis of this. then i have one final question to mr. shelton. >> yes, thank you. yeah, i mean, look, it's axiomatic that companies seeking to merge will tell wall street that everything is wonderful until you see that everything is falling apart. i think we talked about that specifically with sprint. and mr. naguse i think did a really great job of talking about how 2018 was a banner year, third quarter we delivered solid financials. >> that would be illegal. >> that's just one example. also we can talk about the 5g, because the promise of 5g, which both companies have been making, that is not merger-specific.
both companies have been promising premerger a nationwide 5g network. that's what they've been telling wall street. now they're going to tell you it's deeper, stronger, bigger, use your adjective, but that's what they've been telling wall street before this merger was concerned. i want to just, if i could, mr. legere -- >> that's totally false. >> -- if i could just finish. they're committing 5 to $6 billion annually until 2020. that pretty much equals, comes pretty damn close to the $40 billion that they talk about if this merger is consummated. one last point, if i could. there's so much talk about the race to 5g, the race to 5g. ask at&t, ask chairman pai, who i rarely agree with, and ask abi research, a leading research company in this space. they all say the u.s. is winning. they're gonna win and they're
gonna be winning for the next two years. i wouldn't worry, mr. armstrong, about losing the race to 5g, because we're winning, because these companies are investing boat loads of money. >> mr. chairman, i have to say i finder the comments made about public company ceos saying whatever they need to say to wall street markets, being insulting. it's a legal obligation to say exactly what's taking place in the business. and the 5g integration of the two companies is dramatically different. >> i understand that. i think we're trying to reconcile two very different presentations. i want to just ask mr. shelton, you have made reference to the impact of this transaction on jobs and particularly you've made reference to people being unrepresented in these companies. and i will disclose my own bias, that i think we can see clearly that when people are represented by a union, they earn better wages and better benefits. we don't want to just preserve jobs. we want to preserve good-paying, family-supporting jobs.
i wonder if you would just, my final question, talk about what is the impact on jobs and your assessment, i know there was an assessment that was done for congress by cwa that demonstrates significant job loss. and the aggregate, maybe as much as $543 million in losses to workers. i think one of the big priorities of this committee and this congress is doing everything we can to protect good-paying american jobs. and if you could speak a little on that. i'll give mr. legere an opportunity to respond. >> first of all, on the jobs, we believe that there will be 30,000 jobs lost if this merger goes through. we're not alone in that. there are some wall street firms that -- maybe not 30,000, but 20,000 jobs will be lost if this merger goes through. the merger is based on $43 billion in synergies.
synergies, as everybody knows, is a euphemism for job cuts. and what's going to happen in these stores if this merger goes through is absolutely job cuts, because they are not going to be able to live with stores across the street from each other all over the country when they'll have twice the stores that at&t or verizon has. it's just not going to happen. and, you know, to believe that it is going to happen, i have a nice bridge i would like to sell you in new york. >> thank you. mr. legere. >> thank you. again, as has been all day, bad assumptions, bad math. mr. shelton should be ashamed of himself with some of these -- >> mr. legere, i'll ask you to refrain from comments -- >> i'll withdraw that statement. but i would say, t-mobile, every single employee is a shareholder. i give them stock every year. they're all owners. we've won every award as the top places to work in america. and that's because of the way we treat our employees. our employees have the right to unionize if they choose.
in fact one of our stores has. but the rest have significantly found that the relationship -- >> so mr. legere, as you sit here today, mr. claure, would you be willing to commit as part of this transaction to not interfere with efforts by your employees to not organize? >> we don't interfere. >> today, we don't do it today. our employees have made the choice that they don't want to be part of a union. but that has always been an option. i want to add one more thing since i haven't had a chance. it is crazy to say we're going to fire 30,000 people. sprint has 28,000 people. do the math. it's absolutely impossible, number one. number two, the gentleman to my left, who i appreciate what you do in terms of protecting the american workers, you're contractual lly obligated to support at&t because they know what's going to come. third, i don't appreciate the comments about bullying, intimidation.
we don't. our employees come to work. what john said is true, top employer in america. saying we're going to take out 28,000 or 30,000 employees, that's irresponsible, because this causes fear among our employees who are watching right now who know that it's absolutely not true. >> mr. shelton, do you want to respond before i ask my very last question? >> they keep, mr. cicilline, they keep using the word "employees." they are going to -- there is no doubt, there can't be any doubt in anybody's mind, they are going to take these authorized dealers and they are going to slash and burn. and those are american jobs that they are going to cut and they're going to cut 30,000 of those jobs. and as far as sprint and t-mobile employees, at least t-mobile employees, being able to join unions, because that's what mr. legere just said, they went as far and have been found guilty of forming a company union to stop the union from
organizing people at t-mobile. that hasn't been done in this country since the 1930s. so that's how much they are against their employees becoming unionized. >> thank you, mr. shelton. i'm going to ask unanimous consent that a number of letters, both in support and opposition to the merger, be made a part of this record. and also a letter that i received and the ranking member received from freeconferencecall.com, mr. ericsson, and mr. legere, i've heard this concern from a number of people, about whether or not these free conference call programs are still going to be available, because i guess currently they are considered out of plan with t-mobile and there's a lot of anxiety about whether in a merged company, that kind of service would still be available. i don't know if you're in a position to answer that. >> i'll follow up. >> great. and i'll be sure to provide you a copy of the correspondence we got. thank you all. i know this has been a long hearing. but it's been incredibly
here's a look at our prime time schedule on the c-span networks. 9:00 p.m. eastern on c-span, testimony from wells fargo ceo timothy sloan on his company's business practices. 9:00 eastern on c-span2, acting white house budget director russe russell vogt. 8:00 p.m. on c-span3, officials from t-mobile and sprint look at their proposed merger and how it could impact the wireless industry. the only thing we have to
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