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tv   House Judiciary Subcommittee on T- Mobile Sprint Proposed Merger  CSPAN  March 13, 2019 2:02am-4:33am EDT

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executives from t-mobile and spri were on capitol hill today. the impact it could have on consumers and the wireless industry. other witnesses included representatives from organizations opposed to the merger. this hearing is about 2 1/2 hours. >>
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the subcommittee will come together. we welcome everyone to today's hearing on the state of competition in ohio's market. examining impact of the merger of t-mobile and sprint. consumer, workers and the internet. today's hearing is an important opportunity to examine the state of competition in the wireless industry and the competitive effects of the merger of t-mobile and sprint. over the past century the telecommunications industry has demonstrated the harms that results from monopoly. by 1948 at&t was considered to be a law for monopoly. the largest corporation controlling more than 80% of the market. it earned more than 53 billion in annual revenue and was the second largest employer in the
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u.s. behind the federal government. in 1982 the concluded two landmark the case against at&t for blocking competition in the telephone service and equipment market. as a result, the system was broken into separate companies. at&t's long-distance services were structured and separated from the services. the importance of the breakup cannot be overstated. it facilitated an explosion of competition in long-distance markets significantly lower prices, improved products and spread the creation of new jobs. most importantly for purposes of the hearing is the competitive pressure resulting from the deployment across the country. the assistant attorney general testified before the subcommittee in 1994 that at&t had copper wires across the country so competition enter the market and when it did they
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laid fiber optic coast-to-coast and they followed them. she noted there was no question of the speed of building the infrastructure for the nationwide internet was years and years ahead what would have been in the absence of the breakup of at&t and coupled with the reforms in the telecommunications act in 1996 consumers and small businesses saved billions of dollars each year while competitors were incentivized to enter the market to offer better services and more choice. largely from a retreat from any enforcement over the several decades. there is only four national carriers to dead. the merger of t-mobile and sprint would shrink the market to treat national wireless carriers resulting in the combined company controlling nearly 1/3 of the wireless market. the merging plays claims that it is necessary to deploy the next generation of broadband
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internet across the country. compete vigorously with the two largest, at&t and verizon. sprint and t-mobile have aggressively competed with the larger carriers over the past decade resulting and better policies. i am skeptical that consolidation is the path forward to lower prices or unleashing competition and places around the country where there is none today. the competition driven by sprint and t-mobile of the decade has occurred in the absence of consolidation and not because of it. second, a century of experience with telephone monopoly taught us that the pressure of competition is critical to build the infrastructure and improve quality for consumers. finally there is mounting evidence that additional consolidation would give the combined company the incentive and ability to raise prices, lower wages and abandon the policies that have benefited consumers. under both presidents and the merge of guidelines, mergers
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that significantly increase concentration and high location traded markets are presented to the illegal. this transaction will increase concentration in the wireless market beyond the level that the agencies consider to be enhancing. because of the reality, the only thing preventing the parties from raising prices, lowering quality and depressing wages are promises for limited periods of time. today's hearing is an opportunity to examine the current state of merger enforcement. it has been a year since the last challenge the merger in court. since the beginning of the trump administration the justice department has only challenged one significant merger. at&t's acquisition of time warner. not only did the antitrust division lose the chance with this case has been controversy since day one because of the presidents shameful attempt to interfere. he reported that the president instructed officials to get
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this lawsuit filed. against the at&t and time merger warner merger. suggesting the president seeks to use it as a political weapon to reward friends and punish enemies. in response to this explosive report, the chairman and i are seeking the production of every communication and document related to this case. you must get to the bottom of where the white house is weapon iced the antitrust laws to punish enemies or reward friends and we will. most importantly for purposes of today's hearing, the proposed merger is critical. the antitrust division generally dedicated to promote competition or only when the white house tells it to do so? this proposed merger does not occur in a vacuum. working people are struggling to make ends meet. parents wonder how they will afford children's insulin or
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health insurance deductibles. too many families have the extra 50 dollars in a bank to make a difference between scrapping by to the next paycheck for having the heat turned off in the winter. decades of consolidation throughout the economy has wiped out small businesses and the middle class with record levels of the quality. during this period the corporations have converted monopoly into higher compensation for it executives and driven down wages and made life unaffordable for many people. we have become a rent seeking society dominated by market power of large corporations unchecked by counter reading powers and the power has been weakened. every stagnant paycheck, every surprise medical bill, every overcrowded flight with hidden
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fees. every trip to the hospital where patients are forced to wait for hours risk personal bankruptcy to receive medical care and every astronomical telephone and cable bill that is accompanied by a forced arbitration clause and horrible customer service. all reminders that america has a monopoly problem that has broken our economy and the american dream. read read stories of billionaires buying outs that are furnished like palaces as large as elementary schools while the brave men and women who fought for our country do not have access to affordable healthcare. the nightmare is why democrats promised americans that we would crack down on corporate monopoly for a better deal and competition. ending this crisis is a top priority for me as chairman of the subcommittee the top party for house democrats to keep a promise to work for the people to prevent big mergers that would harm consumers workers and competition. in closing i think our esteemed panel of witnesses and i look forward to all of your
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testimony. i now 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 the hearing which will examine the t-mobile sprint mobile and the impact on the market and consumers. let me say that i am disappointed to hear the chairman paulette a partisan spin on this proposal even though we have not heard the testimony from the witnesses. i certainly have not made up my mind on whether this proposed merger is in the public interest or not. this hearing will shed light but i do want to say that i don't think the antitrust questions should be partisan in nature whatsoever. hi i've been on this committee for 40 years and there are very few of these proposals that the committee has examined where
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republicans and democrats have been divided from the get go. on march 29, 2018, t-mobile and sprint announced a merger agreement that undoubtedly will change the telecommunication landscape. if approved, there is 26 1/2 billion dollar deal will combine the third and fourth largest wireless providers while eliminating competitors 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, i look forward to hearing from both ceos on the implication of this merger is on the employment of 5g. it is key to improve service and increased data capacity. ensuring that we are at the
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forefront of this technology it will provide untold benefits to american consumers in the american economy and is important to many members of the committee. we will hear today from witnesses and outline a different picture. one that paints the merger as negatively impacting low income consumers in rural communities. many wireless competitive's and consumers 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 commission is reviewing the merger to ensure that it promotes the public interest, convenience and necessity. the department of justice and state attorney general are also reviewing a transaction pursuant to the respected authority. all congress has no formal role
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in the doj or scc merger of the process. the hearing provides an opportunity to ask the big questions which are of great importance to americans and i look forward to the testimony of the witnesses and debate among members of the committee and in the end, wise decisions by doj that ensure competitive future for wireless communications in america. >> thank you. the chairman of the full committee. the gentleman from new york, mr. nadler. >> thank you, mr. chairman. >> we appreciate the opportunity to consider carefully the impact of the proposed merger of sprint and t- mobile on competition, consumers and workers. i do not prejudge the merits of any proposed merger but it is clear that this transaction, if approved by regulators would have significant changes to the market for wireless services.
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95% of americans own a cell phone. 20% use a mobile device as their primary means of accessing the internet and it is critical that we closely analyze any merger with such a wide range impact. as independent countries have each brought the competitive and innovative projects to market. they have benefited the customers and also benefited the customers of other wireless carriers whose own carriers have had to compete with both companies. for example, sprint and t- mobile's reintroduction of unlimited data plans in 2016 resulted in lower monthly bills and better internet access for millions of consumers. these companies have also provided an important service 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
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and wireless cellular services without passing a credit check. i applied both companies for their competitive efforts. ingenuity and serving consumers in every market. in considering the proposed merger, however, we must determine whether this did combined company would have less incentive to innovate and compete. i am concerned about any merger that was significantly increase the concentration in the market that is already highly concentrated. there is only for 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 will control about a third of the marketplace. thereby dramatically altering the competitive landscape. consequently the combined sprint and t-mobile may no longer have any incentives to lower prices and offer proconsumer policies once it becomes as large as the other carriers.
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this in turn could harm other carriers customers who have indirectly benefited from sprint and t-mobile's competition over the past decade. concerns have been raised. must rely on cheaper prepaid phones for the wireless service because the transaction would also consolidate the market for the services. it may have disproportionately negative effects on low income households. this would be harmful in major cities with large populations of middle income people. new york experience higher levels of concentration in the market for prepaid phones and in other regions. for that part, sprint and t- mobile offer a variety of just supports in this merger. they argue it would enable new t-mobile as the company will be called to supercharge the market for wireless competition. its increased scale would lead to better quality and enable the development of new products
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at dramatically faster speeds. moreover, they believe the merger company would be in a better position to compete with the other giants and would push the other companies to offer better services to customers. they also anticipate the new company would extend the workforce 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 employment of the nationwide fifth-generation or 5g wireless network. these benefits of the merger will 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 made promises that were not borne out. that is one reason why i introduce the in story restoring an improver active.
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justify anticompetitive mergers. merging partners will be under the restructuring and other efficiencies which are generally codewords for widespread layoffs and reduced wages and benefits for employees. rather than create more markets, consolidation throughout the economy over the past several decades has power to reduce the benefits and mobility of workers and consumers routinely 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 is increasing incoming equality through stagnant wages and less economic equity duties. needless to say i am pleased
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that state regulators are closely scrutinizing this transaction to determine what impact it may have when the employers, i'm sorry, on consumers and employees and i appreciate the chairman holding this hearing today so that members of the subcommittee may examine the important questions of the proposed merger. i look forward to hearing from a large panel of expert witnesses including the ceos of sprint and t-mobile and i think them for their participation. particularly those who have rearranged their schedules for several occasions to accommodate conflicts that have arisen. >> i think the gentleman. >> i ask consent to put in the record a statement by the ranking member. the gentleman in charge, mr. collins. >> it is my pleasure to introduce the witnesses.
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the chief executive officer of t-mobile. he has been named a top ceo by glass door and granted the maverick in leadership award for the chief executive institute. he served as ceo of global crossing and asia global crossing and head of global corporate strategy at at&t. he received a bachelor degree from the university of massachusetts. additionally he received his masters in business and completed harvard business school's management the program. the executive chairman of the board of sprint corporation. previously served as prince chief executive officer and currently the chief operating officer and ceo. he was named the young global leader by the world economic forum and 42 individuals selected by the corporation as part of the
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great immigrants, the pride of america. he received his degrees from bentley university. the third witnesses christopher shelton. he worked since 1968 and elected as shop steward. a native of the bronx he joined cwa national staff in 1988 and served a multiple position representing new york, new jersey and new england. he was elected president of cwa after 75th convention in 2015. the fourth witness on the panel is a distinguished colleague and the public advocate. for 30 years gigi b. sohn worked to protect policies that made the interment internet more affordable. she received her bs from boston university and the university
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of the pennsylvania law still. before working with free press she served as vice president of policy in general policy of the national hispanic media coalition. the department of justice and received her ba from new york university and her jd from the villanova school of law. the sixth is the general counsel of the wireless association. since 1987 she represented rural wireless characters. she is a member of the federal communication bar association and the american bar association and published numerous articles. the president of the technology policy institute is the seventh
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witness. 's researches focused on regulation, telecommunication and policy. senior for public policy and received his ba from washington university the final witness is christopher. the professor is a director at the center for technology as well as the john chestnut communication and information science at the university of pennsylvania law school. regular return the law technology innovation and the internet. eight has taught at vanderbilt school of law serving at the founder of the law program. he received his a.b. from harvard and his jd from northwestern. we welcome all of our distinguished witnesses thank you for participating in today's hearing. if you would please rise and i will begin by sparing you in.
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>> please raise your right hand. do you swear or affirm under polity of perjury that the testimony is true and accurate to the best of your knowledge so help you god. let the record show the witnesses answered in the affirmative. thank you, you may be seated. each of your statement will be entered into the record in its entirety. summarize your testimony in five minutes. help you stay within the time minute with a timing light in the light switches from green to yellow and you have a minute to conclude and when it is read it singles the five minutes has expired so please keep that in mind. >> thank you. thank you for inviting us today. i appreciate the opportunity to tell you about the tremendous benefits of the proposed t- mobile sprint merger and the progress we are making towards the reality.
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first, what will the merger deliver? we will deliver a supercharged carrier ensuring 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. this is so important because 5g will unlock new capabilities that will fuel innovation, job creation beyond anything we have seen so far. 5g will completely transform the way americans live, work, travel and play. 5g means real-time navigation, downloading and movement and much more. nearly every american business will be able to use 5g to revolutionize how they create and deliver goods and services. best of all that this transaction want to split to big cities. combining them will produce a faster, broader, deeper network
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nationwide and benefit consumers and businesses everywhere including in rural america. neither company could do this on its own. second, the new t-mobile has the capital skill network to supercharge competition unleash and significant 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 options offering average download speeds of 100 megabits or greater to 90% of the united states population by 2024 and that is creating a new broadband option for millions of americans who have none. freeing up millions from the stranglehold of the cable. conscious customers use the most data as they rely on the phone for the main point to the internet. the most to gain when data cost last. they will offer a new bridge
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across the digital divide. the opponents around when they claim it will lead to higher prices. in fact, the opposite is true. the massive increase in the network capacity is a huge reduction to deliver the services will enable the new teen able t-mobile through lower prices and better service. it is in my business plan to do that. i am so confident that the merger will lower prices that we have committed in writing to the regulators and will make available the same or better plans as those currently offered by t-mobile and sprint for the next three years. third, this merger will be a tremendous job's creator at new t-mobile and across our country. the 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. by 2024 we will have 11,000 more employees. the critics are wrong about the impacts on jobs. i have looked at the arguments and supposedly announces and
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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 media and network built integration. we have heard the story before. they said we will cut 10,000 jobs when t-mobile merged with metro pcs. in fact, we expanded by tens of thousands. i may say this to ever every employees working at our store today. each of you will be offered a job with a new t-mobile. make no mistake, 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 incumbent big to wireless carriers and big cable and that is a goal. opponents are terrified of the competition that has a supercharged it. on the other hand, many have recognized the tremendous benefits of the merger.
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national security and approved the transaction. 16 of 19 state regulatory commissions have completed their reviews found the transaction to be in the public interest. over 200 organizations, companies and leaders publicly to support the transaction. i am honored the congress members have signed up bipartisan letter of support. to those that dallas i would say this, we are the ontario. my team and i believe in delivering on our promises and we know if we do not we will lose the credibility and trust of our customers and employees. i can promise to you 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.
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it is an honor to be here and i am grateful for the opportunity to speak to you. i would like to take this opportunity to explain why sprints proposed merger would be great for american consumers, great for sprint employees and more portly it will be great for the country. i will go through it in a moment but i want to tell you about me. first i am an immigrant. i emigrated to the united states as a young man from bolivia. i had little money and i want to great university in boston and i received a prices education. i am an entrepreneur. i graduated and founded a company called brightstar and started selling funds out of my car and i graduated into the largest mobile phone supply chain company in the world. we were quite angry to over $10 billion in sales we have thousands of employees all over the world. i am most proud that we made it the largest hispanic owned country in history. in 2014 i sold my business. after that i immediately came the sprint ceo and at that time sprint, the proud company was
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near financial ruin. in 2013 the company had lost over $5 billion and in the previous 10 years they lost over $25 million. we had approximately $31 billion in debt. a great company with tens of thousands of jobs across the u.s. at risk. guinean 2014 we undertook a massive transpiration of the company. we worked out from the ground up. we reduced expenses by close to $6 billion the cost reductions, employee laughs and jobs over seas. we didn't want to do it but we had to save sprint. we face serious challenges. despite the success, we were unable to fix the main challenge. the quality of the network. we cannot fix the network because of our poor financial situation and our lack of spectrum. because of a network quality
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sprint still struggles to attract lots of customers and many today live at a faster pace than the competitive. customers are not willing to sacrifice quality. today the market has become -- >> close to 70% market share and they control over 90 percent of the cash flow generating in our industry. as a result there is no way that we can invest and be able to compete at the same level. today, american is a inflection point. over the next few years, 5g will completely change the way we connect. the screen doesn't have the resources to build the 5g network to surprise the competition. we need at least $20-$25 billion just to have limited 5g in our limited coverage area and because we don't generate
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cash flow the only way to pay for this would be to raise more debt and to pay for that debt to raise 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 only do this if this merger is approved. as a combined company we are committed to invest nearly $40 billion over the next three years to build the world's best 5g network with nationwide coverage. how can we do this together? it is simple. the marriage of two necessary and complementary pieces. this spring has high capacity which has improved over the years. it allows us to build the most advanced network. every corner of america in urban, suburban and rural areas. sprint cannot do it alone and t- mobile can't either. we need each other to succeed. we cannot take lightly the fact
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that america needs to lead the world in 5g. china has made it a priority to win the fight against the 5g race. investing billions of dollars. when the country has the best network with the latest technology it brings massive economic stimulus, job growth and entrepreneurs. america is full of innovators. let's keep it this way. my story validates this. it takes it away from the u.s. and will cause damage. this is an opportunity for lifetime. in addition, as you heard john, we are committed to lower prices. when we merge the companies we will create eight times the network capacity we will have on our own. we will have to beat at&t and verizon impresses to fill this new capacity. this makes financial sense and good for business but more importantly it is our commitment. lastly, it is true that most marriages do not create jobs. this is the opposite. this new company will create new jobs.
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blue-collar and white-collar jobs. urban, suburban and rural america. a skilled network engineer, construction crews, call center jobs that we will bring from overseas and the new sales reps for the new stores. i can't thank you enough to let me to speak. i am grateful. as an american entrepreneur i hope the merger is approved. i look forward to answering your questions. >> >> chairman, ranking member, chairman, ranking member collins, members of the committee, i'm the president of the communication workers of my name is chris shelton and i am the president of the communication workers of america that represent 700,000 employees in telecommunication 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
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enrich two foreign companies. germany and japan. 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 label -- labor violations than walmart. let's talk numbers. this merger would kill american jobs. we estimate that 30,000 americans will lose their job if this merger is approved. the wall street firm estimates this merger would kill 20,000 jobs. whether you take their number or ours, you should understand that t-mobile job creation promises are sheer fantasy. spring and t-mobile compete for the same customers often low income households which is
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whether stores are located near each other. sometimes right across the street. if the companies merge, chances are they would shut down one and most of those workers will be out of a job. what about the people lucky enough to stay employed? the merger would drive down wages for all wireless retail workers and in some cases by as much as $3000 per year. employers compete for skilled labor with wages and benefits. take away competition and the remaining companies can prattle down employees compensation and jack up prices on consumers. both are symptoms of the same disease. too much market power. that leads me to something i hope the subcommittee and antitrust enforcement agencies 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
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of collective bargaining on jobs and wages. for the last 40 years we have seen more and more mega mergers. profits climb. 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 is a powerful 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. the antitrust terms, workers of lost power. together these factors go far to explain why wages and living standards have stagnated for u.s. workers. they help explain the dramatic increase and incoming equality
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in the u.s. the top 5% of americans control two thirds of the nation's wealth. the good news is that americans are doing something about it. first, we can say no to mergers like the t-mobile sprint transaction and preserve competition and consumer and labor markets. second, we can bring back collective bargaining as a way to protect workers. not just union members but all 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's and sprint usual bullying tactics, intimidation and antiunion propaganda. they simply 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
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as a way to address anti- competitive effects and relevant labor markets and finally this merger is not only bad for workers, it is a disaster for consumers. t-mobile and sprint are each other's closest rivals competing aggressively in particular for lower customers and customers of colors and eliminating competition. they estimate the price goes up by 15%. these companies trumpet the benefits for rural america but their own sec filings show that even six years after the merger 46 million americans, largely in rural areas would not be receiving the benefits of the 5g network. thank you and will look forward to your questions. >> thank you.
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thank you for inviting me to testify today. when i was working for the chairman in 2014, executives from t-mobile sprint and softbank visited the sec to get his thoughts in a merger between t-mobile and sprint. chairman did not discourage the approval but he was clear that they would have a tough time showing that the merger would not be competitive. a pioneer in the wireless injured in a he received immense consolidation. from 2003 220 13 the eight mobile wireless carriers shrunk to four. he believed that reducing the number would harm consumers to higher prices and less innovation. the assistant attorney general at the time agreed and said publicly in january 2014. later that year after the parties abandoned the deal, the german said for national
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providers are good for american consumers. sprint is an opportunity to focus on low competition. nothing has altered the previous analysis that this combination will be harmful for consumers and the wireless industry. t-mobile and sprint occupy vital roles in today's national wireless market. both mavericks who forced at&t to drop their prices. t-mobile was the first carrier to eliminate two-year contracts that provide a limited data. the first to allow subscribers to unlocked phones. both companies want to match at&t and verizon coverage, speed and reliability. importantly come of the companies compete with each other. the benefit of the valued conscious consumer. this will change the companies merge. the markets he would reduce incentives to engage in price competition. greater incentive and ability to cooperate with those
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companies to raise prices. indeed, one announces found that pricing increases from this transaction could be as much as 15%. the parties don't dispute the prices will rise but argue that improvements to the service quality no matter how small will be worth the extra cost. that is a dicey proposition for consumers attracted to t-mobile and spent because of the cheaper prepaid services. these prices will have a disproportionate effect on consumers of prepaid services who tend to be low income people of color. this will result in new t noble controlling the market and the market for prepaid services which shrink. the merging parties recognized the increase in argued that low income consumers will accept them because they and i quote, rely on the smart firm for communication and media consumption. that is a remarkable thing to say about consumers for an extra $10 a month will be an unwelcome hardship.
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the merger is clear. in both the netherlands and austria it was a double-digit price increases. one was a t-mobile affiliate. in the u.s., similar concerns over higher prices and the elimination of competition blocked the at&t t-mobile merger in 2011. evidence that the mergers and this particular nurture will lead to higher prices. t-mobile has promised not to rice prices for three years. the 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 undermines the party's insistence that the merge entity would have so much capacity that it would not raise prices. regardless, the pricing commitment is riddled with ambiguities and loopholes.
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either the fcc or the doj is capable of overseeing this regulation. the purported benefits of the merger are speculative not specific. in any event it would not outweigh the harm. the recent promise that it provides in-home broadband to a fraction of homes by 2024. i would love to see more competition. in addition to being too far in the future to be relevant to any scrutiny, this promise is nothing to do with the market that is the subject of the merger. the national mobile wireless services. i am a proud t-mobile customers and a fan of both the ceo and the government relation team. i am not a fan of this merger. it harms the consumer by lost benefits. thank you and i look forward to your questions. >> thank you and i will
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recognize miss carmen scurato. >> thank you for having me. my name is carmen scurato. 1.4 million mellows. we strongly oppose this merger. free press is extensive research shows a disproportionate harm it would cause too low income people and people of color who are more likely to be on the wrong side and rely on mobile phones to connecting to the internet. my organization assesses the applicant data and i am not a signatory. that means everything i say today is based on publicly available data. let me be clear, no matter where we look nothing about the steel is speculative and none are a form. sprint and t-mobile and the
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prince boost, emergent amateur other providers of mobile service for low income people. more than 30% of metro and boost subscribers report yearly incomes of $25,000 or less. due to structural demonstrations. they are former likely to be people of color than at&t and verizon. 56% of subscribers in 2018 identified as people of color as did 45% of sprint. the reason that members of these communities to sprint and t-mobile is very clear. the plans cost less. as the research confirms, they compete with one another vigorously. they are each other's closest competitors. they serve price conscious customers at 80 mavericks taking customers from each other and the big carriers after the government rejected previously proposed mergers like this one.
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my false testimony touches on the inflated 5g efficiency claims and exaggerated deal but i will focus my time on three fax illustrating the harms to these most impacted communities. first, no matter how antitrust finds the markets this will consolidate already highly concentrated markets. it would eliminate choice for customers who want need to pay rent for services. the sec filings document how t- mobile and sprint compete. exerted discipline on the rising and at&t. t-mobile and sprint offer lower price options. some believe the parties suggest having zero competitors strengthen competition. i am closer to prepaid market. it would reduce choice for all
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lower-priced plans that don't require customers to pass credit checks. second, the merger would increase prices. in the filings sprint and t- mobile don't have the likelihood the prices will go up for the postpaid and prepaid customers alike. that is right. their own economic model saved prices would go up. t-mobile's price pledge is riddled with loopholes and does nothing to believe this concern. plans will continue and for three years or until better plans that offer a lower price or more data made available. this mockery is meaningless. prices will stay the same. unless t-mobile decides to raise them just as they did to hide the fact that they get to decide whether a more expensive plan is better for you even if it offers more than many customers might want, need or can afford. third, this merger would mean
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consolidation in the wholesale wireless market. reducing supply would raise cost and pass them on to the retail customers. wholesale is used by carriers without their own network. including most carriers to offer service at resale. throughout my career have been a strong defender of lifetime because it helps get connected providing $9.25 a month to do for the high cost. lifeline is dependent on a well- functioning market. consolidation would widen the quality gap between lifeline offerings and non-subsidize plans. you should scrutinize the too good to be true claim. you should consider the real world impacts of community struggling with high prices and find themselves on the wrong side of the digital divide. thank you and i look forward to your question. >> thank you very much. carri
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bennet. >> members of the subcommittee, my name is carri bennet and i'm here on behalf of the world wireless association. thank you for the opportunity to testify on the impact of the proposed merger and what that will have on rural americans. rwa opposes this merger. it is bad for competition, bad for consumers for consumers who will experience fewer choices in substandard service. t-mobile has 20 years to build out in rome rural america. they are making a lot of promises about how it will expand coverage in rural america and improve coverage for these americans but based on the track record, we have no reason to believe that it will do so. i'm going to run through 4 areas of concern. first, roaming. roaming our arrangements are important. roaming keeps rural urban and
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suburban users connected. ensuring carriers have low cost wireless service, but t-mobile does not. t-mobile roaming rates are 20 times higher than sprint and their existing roaming agreements are one-sided. t-mobile will frequently enter into unilateral agreements into which rural carrier subscribers can roam on their network with no possibility of t-mobile subscribers on the carrier's network. t-mobile has simply chosen to deprive their own customers of coverage in rural areas. rather than pay the carrier for the network access which means in those areas t-mobile's customers cannot be reached and are basically off the grid. do we really want 100 million+ subscribers, more than one third of the market to be denied service in rural america? second, the build out in rural
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america. the repeated claims about the future 5g buildout is unfounded. when it comes to 5g networks and the potential applications like precision agriculture and remote healthcare, low latency is a must. the facilities needed for 5g technology cannot rely on satellite and microwave due to their high latency. fiber must be deployed and deploying fiber takes time and money. neither t-mobile nor sprint have extended resources to build out fiber in rural america. without a commitment in these undeveloped areas, their claims of building out future broadband networks ring hollow. acquiring sprint does not give t-mobile the fiber that it needs to serve rural america with 5g or in-home broadband. allowing the merger will enable hundreds of broadband providers across america to work with both sprint and t-mobile to more quickly build out
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broadband. third, less than one 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 ringtones into these because 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 consumers from running their businesses, communicating critical information to family and friends, and routine 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 this is eliminated. finally, folsom broadband mapping claims. our members have serious concerns about the broadband map submitted in the fcc mobility fund.
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the 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 sec asked while wireless carriers to indicate which carrier offers broadband coverage. according to testing, when t- mobile submitted its data they were overstated coverage to make its reach seem bigger than it is. when they went to test, 95.8% of the tests showed speeds below the threshold demanded by the fcc air or no broadband service at all. it is not-- if not corrected, funding will not be available in these areas. as part of the public interest review, the sec must determine where t-mobile has been honest
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in dealings with the fcc. members strongly suggest that it's not. a string of broken promises does not bode well for rural americans and should be denied. thank you and i look forward to your questions. >> miss ralston 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 wallsten. i'm an economist and senior fellow at the technology policy institute. we are a nonpartisan think tank that focuses on economics of innovation technological change and innovative regulations. we take no institutional regulation so this affects only my views. the key question is rather the weather the expected efficiencies gained from combining the third and fourth largest wireless firms outweigh the opportunity of combined competition. i make 4 points. first, this merger involves
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more than the usual level of uncertainty because it involves technology just beginning to be deployed. because we know so little, and claims are speculative and difficult to evaluate. second, empirical literature is inconclusive. some studies find that the prices increase after such mergers, some find that they decrease and some find that prices did not change. third, the uncertainty of new technology for the three mergers means the government has little basis for blocking a merger. because t-mobile and sprint may serve more than 50% of low income consumers, antitrust authorities could consider the potential effect of the mergers on this group. t-mobile and sprint argue that combining resources particularly spectrum will allow them to build a more robust network more quickly than either firm could on its own.
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i would like to contest this. evaluating this claim and whether it would benefit consumers is true is difficult because we know very little about 5g supply and almost nothing about demand. firms experimenting with different technological-- may yield outcomes but given the likelihood of making mistakes, stronger but fewer market firms may achieve outcomes. real-world evidence of wireless mergers, even with technology that did not consistently lead to one particular outcome. one paper reviewed 13 studies and found a consistent effect on prices. in short, real-world experience provides little experience to believe one outcome is more likely than another which also means we don't have consistent evidence that it would necessarily harm consumers or to competition overall. without evidence there's little reason to block it. opponents of also raised concerns about low income and
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wholesale consumers and they note the government should consider how a merger may affect different groups of customers. while t-mobile and sprint serve 30% of all subscribers, available public data suggests there are larger sales of wholesale and low income subscribers. those inter-lap-- overlap but are not identical. providers sell wholesale network access to other countries to resell under their own brand. resellers offer traditional services often prepaid and internet connectivity. estimates suggest that t-mobile and sprint currently provide more than half of the wholesale connections and annual reports show increases in the number of subscribers. low income subscribers probably rely disproportionately on prepaid plans but not all prepaid pans plans rely on wholesale network and not all wholesale based plans are prepaid. low-income and wholesale services are therefore related but different.
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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 considering wholesales. holding more than 50% to subscribers is not necessarily a problem but it depends on whether they can profitably raise prices without encouraging more entry by at&t verizon or others. they trust the authority to presumably have access to the proprietary data and should study segments carefully to evaluate what is necessary. the government can do a lot to promote competition. the fcc and an tia should continue making spectrum available and continue moving obstacles to hope hopeful entrance. we do not know what the 5g world will look like is the nature of innovation. without evidence that the merger is likely to lead to that outcome there's little reason for the government to oppose it but it should consider low income and wholesale segments where companies have a particularly strong presence.
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>> mr. chairman, members of the subcommittee, i'm grateful for the opportunity to testify today. at the request of the subcommittee my boat marks will focus on the impact of rural consumers. the key the analysis is the growth and demand for broadband and the resulting increase in the need for wireless spectrum. that can be divided into three basic types. low band, mid-band and high band it each of which operates in a different band and serves a different role. low band spectrum is designed for 1 ghz and they propagate really well for a distance of 18 miles. in addition low band sections does not require direct line of sight. mid-band spectrum consists of ranging from 1 to 6 ghz but for miles and broadband requires
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line to line submission but cannot-- can penetrate the legs. high band spectrum includes frequencies higher than 20 ghz that had long been regarded as unusable. the range of high band spectrum is typically propagating roughly half a mile and requires both line of sight and does not penetrate buildings well. higher frequencies do provide more bandwidth. the community has recognized the deployment of 5g that will depend on a mix of both low band and micro cells. this is particularly important in rural areas. the service range and good propagation characteristics of low band spectrum makes it ideal for supporting basic coverage for rural areas. the problem is not because it covers such large large areas, the been with that it provides can be quickly exhausted. other shortages can be addressed by adding more low
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band spectrum, because additional bandwidth would be needed only in population within rural areas, much of the additional low band spectrum would be wasted. the technical solution is to meet the demand for bandwidth by adding smaller cells that rely on higher band spectrum in those areas where they are needed. the service range allows it to be targeted efficiently at those areas that need additional bandwidth the most. not only does this addition expand what is available in the population clusters, but the demands generated by those clusters frees up capacity for the most remote customers for whom macro service is the only viable option. before underscoring the reality that successful deployment of 5g depends upon having a mix of low band and high band spectrum, sprint lacks the low band spectrum to be able to provide 5g in rural areas as a
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standalone company. sprint holds 3-4 times less than other national wireless providers as reflected in this coverage and performance of its current lte network. the lack of low band spectrum leaves sprint in a particularly poor position to serve rural customers as a standalone company. the low population density of rural areas makes it unlikely that the limited dear geographic range of the mid- band service will reach enough companies and customers to be financially viable. proposing the sprint and t- mobile merger is a very different strategy than those being pursued by other providers. t-mobile is using a 600 mhz spectrum to deploy lte and if the merger is approved, they plan to use the low band spectrum that t-mobile obtained in the low incentive options. because spectrum is newly deployed, the country will be able to convert these two 5g and merely by reconfiguring the software.
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they do not need spectrum assignments while the other wireless providers are following a strategy relying on high band spectrum which has not yet been allocated by the federal communications commission. the inability to provide service in rural areas explains why a bipartisan group have signed letters supporting the transaction and makes the president respected advocates for the consumers and atty. gen. for new mexico and utah supporting the merger. i find those gestures particularly meaningful and would be happy to answer any questions that you have. >> thank you for your opening statements. we will proceed under the five minute rule for questioning and begin with mr. johnson for five minutes. think you to the panelists for being here today. the day after the t-mobile sprint merger was announced, 9
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t-mobile executives checked into trump hotel. is that correct? >> thank you for the question. we announced our deal on april 29 and on april 30, we can to washington dc as a leadership team to meet the sec and the doj but the second to announce quarterly earnings for a large group. >> i understand there was a purpose in coming but the very next day, 9 executives checked into the trump hotel after the announcement. correct? >> yes sir. and very importantly, i made the decision. i'm a long time trump hotel stairway before this transaction. >> okay. yeah, okay. but the company had not paid for more than two nights at trump hotel prior to the
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announcement, correct? >> the trump hotel was only in existence for about a year and frankly we had no reason-- >> the bottom line is only two nights had been paid for by t- mobile prior to the announcement. correct? >> at trump dc not counting-- >> other hotels. >> let me, because i'm running out of time now. since the announcement, $195,000 has been spent by t-mobile at trump hotel washington. is that true? >> approximately true in itself- - so let me say desha >> i understand. i understand.
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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? >> that's not on that night and i would say desha >> i'm saying over the last 11 months you've spent 195,000. do you understand the optics of that? what it looks like? it looks like what is happening is that t-mobile is trying to win favor with the white house. did it occur to you that members of the public and members of congress, the sec and president trump himself, did it occur that we would all
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see that expenditure as an attempt by t-mobile to gain acceptance by donald trump and his administration? >> i was and i am 100% sure that this deal will be judged by the fcc. >> i'm just talking about the optics of what happened. >> the optics of me staying at the trump hotel have not changed for 10 years. >> i appreciate that. it doesn't pass the smell test with the american public. it looks like you are trying to purchase influence. it looks like it could be a violation of the clause of the united states constitution. 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?
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>> i have no information of that at all. >> 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'm not aware of any discussions by my organizations. >> your company contracts with broadband providers. isn't that true? >> i don't understand your question. >> well, okay. the rule of wireless association contracts with sprint and t- mobile for the use of their towers. when rural wireless customers are roaming, is that correct? >> my time is expired. >> that's correct we provide
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service to rural carriers. >> and those contracts will soon be expiring with those rural carriers. is that correct? >> that's incorrect. most have self renewal and are different time lights. >> thank you. >> the chair recognizes the ranking member for five minutes. >> thank you very much. where do legere and t-mobile employees stay . when they come to washington they have no relationship whatsoever to whether or not this proposed merger is in the public interest or is not. let me say, i'm kind of embarrassed sitting here listening to the gentleman from george's desha george's line of questions particularly since the fcc is an independent agency. it is not a part of the agency or the administration, and the commissioners of the fcc are
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supposed to act independently based upon the data in the information and the testimony that is presented to them. having said that, as you know i certainly will stand up for the independence of the sec-- fcc and other and a penchant agencies-- independent agencies. let's get down to whether this is in the public interest or not. i want to ask particularly mr. legere , i've been on this committee for as long as i've been in congress which is 40 years. i have worked on antitrust questions including the mixed up at&t developed a of the early 80s which was supposed to divide things up and ended up putting things were back together than they were before hand. i've come to the conclusion that european countries tend to put more emphasis on whether a company is too big and stifles
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competition whereas here we focus on what is best for the consumer. obviously going to 4 to 3 may staple stifle competition but that's not what american antitrust laws are about. anyone that talks about mergers in europe, it's an entirely different law. we ought to realize that. i would like mr. legere to say what can consumers expect out of this ? and, you say that prices will decrease as coverage continues to improve. in some ways it kind of looks like that's mutually exclusive. you get a better product that you pay less for but it seems to me that certain mergers, with the economics of scale and allow
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each of the partners of the merger to be able to benefit from the strengths of the other and get rid of the weaknesses that they have. can the two ceos answer that in the two minutes that i have left? >> thank you sir. the transaction will provide a 5g network capability that the united states desperately needs. $40 billion will be invested by the coming together of these two companies. a merger usually is fearful. airlines are used many times where airline mergers have less of a supply, less legroom, more fees, higher prices. in this case, supply will go up dramatically. prices will go down. services will expand. in home broadband competition will come and rural coverage and competition will expand.
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jobs will go up. every piece of what is good for consumers happens in this transaction. >> can you tell me what all of this has to do with where you stay when you come to dc? >> they don't serve. >> thank you. -- they don't, sir. >> thank you. >> many times we tried to compare these mergers to others. there has never been a merger in wireless whereby mixing two companies there is a unique spectrum position that you are going to create eight times the capacity. nobody can stand here and say we are going to increase prices. when you have anything that increases the capacity by my times we have an economic interest to basically fill that capacity. the only way that the american consumer will move, at&t and verizon customers will move, is by lowering prices. we have an economic necessity
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and a business plan to lower prices to fill that capacity which is going to be eight times what we would have if we were standalone. the reason why is because our spectrum holdings are able, when put together, to create eight times the capacity. >> thank you. i now recognize washington. >> thank you to our panelists for being here today. i have been following the proposed merger closely because t-mobile is just outside of my district and many workers are inside my district. i know mr. legere that you've requested a meeting with my office and we've reached out and hope to do that next week . i do want to say to the gentleman from wisconsin that there is actually reason to look at this question of what happened at the trump hotel because it has been clear from
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quite a bit of recording that pres. trump appears to have involved himself in the at&t time warner merger and we want to make sure that's not happening today. i want to refer to the letter that sen. warren and i sent to you mr. legere and to thank you for your prompt response to that letter. let me run through this and give me quick answers because i want to turn to the merger after this. in 2015 you had a public twitter dispute regarding the quality of mr. trump's hotels in new york that ended with you tweeting, and this is a quote, i'm happy to wake up in a hotel where every single item is not labeled trump in the books and tvs are about him. is that correct? say yes or no. >> that's correct. >> in august 2017 though, you did stay at mr. trump's washington dc hotel. correct? >> that's correct, and many times in between as well. >> last april you announced the
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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 the merger could not go forward without approval. so, you stay there one time according to this letter that you sent me between august and april. is that correct? >> i have much less reason to be coming to washington. i hope that time returns at some point. >> great, thank you. the very day after the merger was announced, you and 8 of your executives were on a list of vip arrivals at the trump hotel in dc. correct? >> i'm not aware of that. >> that was paris january 16 article that has the details of that. in my letter one of my questions was how much t-mobile spent at the trump international hotel and you kindly give me that number. can you please tell the committee what that number was?
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>> we spent $194,000 out of a $1.7 million spend at hotels in dc. >> understood. i appreciate you have a big budget and you have to travel around and this is relatively small. however were you at all concerned that saying staying after the merger was announced so soon afterward, according to reporting you have hired cordy lewin doubt-- corey lewandowski to consult with you. is that correct? >> can i answer both of those? >> every consultant that we hire is completely disclosed and we had an organization that he has been affiliated with are not affiliated with but we have not hired him directly. at the decision to stay at the trump host hotel, it was my decision inconsistent with how i've chosen hotels in the past. >> you said you would never going to stay there. we are relying on what you have said so i only raise this
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because we unfortunately have a situation where the president has not disclosed his business interests. when he has a business interest and it appears that you may be trying to influence the president and something he made not be involved in-- should not be involved in it affects his committee. i would just say to you that if you want this to be judged on the merits of the merger, which i think you want, we would expect they would be concerned around anything that may shed a light of impropriety on the merits of the merger. let me turn to the merger itself. there are 4 big companies in the space and verizon has 34% of the market. at&t has 33. t-mobile has 18% and sprint has 14%. mr. legere, i think both of you testified that critics who say that prices will go up and jobs will be lost are wrong.
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let me turn to you. you just work for the sec and were an expert on antitrust policy. i would like to ask you, is it your opinion that moving from format companies to 3 will make the telecommunications market more competitive? >> it will make it less competitive and will raise prices on consumers as the sec's record shows. mr. legere makes a lot of promises but as the senate side, in an 18 paged singlespaced letter, a dynamic ceo is not a couple legal commitment. >> i'm sorry legere it is my time. i just wanted to and my testimony by saying both the netherlands and austria underwent 43 mergers and both saw price increases. i ask for unanimous consent to enter in the record both my letter with sen. warren to mr. legere in his response back to us. >> without objection. >> i like to recognize the gentleman from florida, mr.
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gaetz. >> i cannot believe what we are watching. the generally from washington talked about how the substance of his merger are important to constituents 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 tells you like. i should confess that i once confessed i had never state-- to never stay in a la quinta again but i have. i would like to spend a lion shares time on the substance. an employee entered t-mobile into a testing lab and put a proprietary robot arm and walked out. with this in mind, esther legere, does t-mobile currently have any chinese equipment in its existing network? do you plan to use the g5 network and what is t-mobile doing to secure its network? >> in the core of the network
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we have no plans and they will not be in our network now or ever. there was a robotic alarm that was stolen in a lawsuit that we filed and we are very pleased for the things that the government is doing to ensure the safety. >> to your members contain lte equipment? >> yes. we have about 25% of members that have those in their network. they did it because they had universal service funding to spend and are trying to look for a low-cost economical way to spend their money and did the point deploy those in 2010 and 2011 before it became known that it was a problem. >> for the sake of cost your members have these parts. does while wasted on your board? >> we have a representative on our board and has no influence
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over public policy committee or the board. >> some of your member companies also use their equipment and have sites or towers in close proximity to military bases. is that correct? >> i believe that is correct, yes. >> as we moved to 5g what plans do they have to remove that equipment and how quickly do you plan to address the national securities concerns? >> we plan to do what the federal government says we should do to the extent that that equipment needs to be replaced, we will replace it. we need funding to do that and have been in discussion with members of congress the sec and the administration on how to go about that without harming the real americans that live in that area by having them have no access to public safety services by putting equipment out of order. >> will t-mobile be requesting
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any additional government assistance to accommodate plans to not use the lower cost huawei equip me? >> we wouldn't, and we've even offered to play a role in the wireless association to help them possibly use some of our pricing power to purchase alternative equipment. >> some of the rural providers oppose the merger and if it were to take place there would be more connectivity to come not from their providers but t- mobile in that circumstance which would result in not having as much utilized in our technology and transfers of information. you would not require any additional assistance like the rural carriers said they would acquire? >> the existence concerns us. >> i think it's unanimous consent to enter a cnn article march 11, 2019 called huawei connects rural america. could it threaten the most sensitive military sites?
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>> objection. >> i want to also asked about emergency response. we've been dealing with the aftermath of hurricane michael and we have seen in trips that we've taken where cities that have 5g technology have amazing capabilities in the event of disasters, especially for vulnerable circumstances, can you speak to how 5g will help local communities respond to disasters? >> that's an important question. resiliency is accommodation of tower design and restoration capabilities. we have significantly invested in those areas which is a core part of the deployment of the new 5g network. in hurricane michael the restoration capability and the investments that we made allowed us to have our entire network up throughout the disaster which is a core principle of the design of the
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network. >> what would be an example of how g5 could save lives in a disaster? >> the 5g network most importantly, the reach, breadth and coverage will provide capabilities that are far more resilient and pervasive in their coverage. >> thank you mr. chairman. >> the chair recognizes mr. ruskin for five minutes. >> mr. legere said that 16 of 19 state agencies reviewing the merger have already approved the transaction. is st investigations. are those 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 that? >> when the public utilities commission's and the state uphold reviews-- reviewing this
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merger, they are not looking at the mobile wireless market. that's not in their jurisdiction. >> what are they looking at? >> of the small alarm of the small amount of wireline capacity involved in this. >> state antitrust principles? >> that's correct but they do not look like look out what is the main event which is the mobile wireless market. with all due respect to pcs and psc's, the review is irrelevant. >> you're my constituent. do you live in carroll county? >> that's correct. >> that's the most rural part and most beautiful part and you are here on behalf of the rural wireless association representing 50 or more wireless carriers. right? would this lower prices or increase prices and why? what would the impact be in rural areas?
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>> from a rural american perspective it will increase prices and the reason is because of the roaming agreement. each carrier has in a rural market, very small areas that are little islands in rural america. when americans leave those areas to travel to cities they have to use a bigger carrier network and in the case of sprint, i've reported that roaming arrangements are often 20 times lower than those with t-mobile so the fear is that if the merger takes place and the agreements that are in a place right now that some of them contrary to what was said earlier, they are starting to expire, they don't automatically renew. t-mobile has not indicated they would renew those agreements. they've said we can select those agreements if they are going to expire in a couple of months and we are concerned about that. please let me finish. the pricing would go up for those rural consumers and we
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are going to have a situation where rural consumers will have good service at home with their local carrier and use a phone there for that service, but when they travel they will have to purchase another phone which means consumers will end up paying double. one for local home service and one for travel service. two phones to carry around. >> mr. legere can you respond? >> 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 and of taking a business plan to the agencies and financial markets. prices are going down. it's in my business plan and also promised in the commitments that i've made to the sec. -- sec. i've made it clear that we will honor the agreements that sprint and t-mobile have. 70% of all of the agreements they have are reciprocal and we are $25 million net payer. anyone that wants a roaming agreement at zero we will sign right now whether the rural carriers pass those prices on to their customers is a
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different story. 96% of rural america will be covered by the new network which is also a significant contrary to the point that mr. shelton made. >> he 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. are you willing to make the same promises to the workers that you are making to 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 contend that they will? >> i would have to categorize everything mr. shelton said as bad assumptions and bad math. last time we were here he said wages would go down but when asked what the wages were he said i don't know. we don't have an agreement with them. >> but can you explain as a matter of economic-- that the
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two businesses across the street from each other and you take over the other business, why doesn't it logically follow half of the people are going to lose their jobs? >> if there is a sprint and t- mobile store in close proximity, even if we take one of the geographies and close the real estate it's highly likely we will need both sets of employees because on foot traffic and share of ad requirements. the other thing i would tell you is that we are offering a job to every employee. we also have at sprint retail stores a 60% attrition rate annually and 19% at t-mobile. this is something we can take into consideration. >> can i give mr. shelton the chance to respond in fairness to him? >> your time is expired that mr. shelton wants to answer the question. >> as far as promising employees a job there are so many loopholes there it's amazing.
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but, when you look at those stores are actually, 84% of them are rationalized authorized dealers who are not employees of t-mobile and have no promise even from mr. legere that may not be kept and will not be kept with authorized dealers because they are not t- mobile employees. that is some 88,000 people in the united states. >> when metro pcs was acquired, mr. shelton said we would decline 10,000 jobs and i added 23,000 jobs. in my tenure i've added 75,000 jobs in addition to the 16,000 from mattress pcs so my track record speaks to itself. >> >> i will give you an extra minute if you need to since the witness on the side took an extra minute. >> i wanted a ruling from the chair if i may. i had dinner at the trump hotel three weeks ago. my state was not cooked properly and i sent it back and
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it was then returned cooked well and i'm wondering if i have a conflict of interest. >> only if you are involved in a merger of two large companies. >> i think perhaps you shouldn't speak during the hearing? no. i didn't say that. mr. buck is recognized. >> i appreciate that. mr. chairman i would like to introduce a letter for the record from a constituent of mine who is the ceo of vieira wireless writes about the effect of the merger and he's very excited about this merger continuing to work with t- mobile. is there any objection to entering this? >> that i wanted to comment that between the two of you, i'm going with t-mobile because he has better shoes.
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i don't know if you've seen them desha >> i'm counting on that. >> i have better glasses though. if they were a little pinker-- >> i wanted to ask the two gentlemen whether you are planning on via buying more spectrum as a result of this merger. >> the answer is yes. currently we are participating in a spectrum offer as we speak and there will be more coming together with these companies. >> do you plan to buy that from current holders of spectrum or in other areas of the marketplace? >> the significant amount that we need to run this company will come from the integration of low band mid-band and high band spectrum portfolios that we have but they will continually, as 5g advances, buying government options that we are involved in.
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>> 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 and the pricing that you will be setting? >> i believe my commitments are enforceable and i've made it clear of two things. number one, i have a business plan that has prices declining. i have supply going up significantly. an 87% reduction in the unit cost of one gigabit of data. i have huge supply, a significant price decline capability, and i committed that to the sec in writing for the first three years. >> i took an economics class in college and immediately went into law. [ laughter ] i wanted to just ask you to explain to the
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american public why 3 big companies makes for better competition in the marketplace then to big companies and two small companies. >> thank you sir. i think you categorize that well. amongst the ways i look at this merger is going from 2 to 3. by the way after the number 3 and 4 players come together we will still be a much smaller number three to the economic power of at&t and verizon. why this makes sense is that we will be able to significantly increase supply and bring competition greatly to those other two. the last thing that i would say is that we continue to ignore that the cable monopolists are in wireless. the comcast added more phone customers last year than at&t and verizon together. comcast. dish owns a massive amount of spectrum that will come in and
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tracfone happens to be the largest prepaid player. there is more than just the three players. but going from 2 to 3 makes more sense than just having 2 >> do you agree? >> 100%. we talk about the us market being a competitive market but it's not. at&t and verizon have over 70 market shares. 70% market share but what is worse is they control over 93% of the cash flow in this industry. how could you compete when you're competing against two companies generating $.93 of every dollar of profit? the only way we're going to be able to compete is when we put our two companies together. we will build a better product, lower prices, we cover every corner in america and this is the first time that at&t verizon and comcast are going to feel the competition. we're going to make the market more competitive and proconsumer because everybody benefits whether you are post
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be customers or prepaid customers. better product and lower prices is the basics of business. >> will have the two of you put your heads together and figure out which color you will go with? [ laughter ] >> that would be magenta. thank you. >> the chair recognizes the chairman of the committee mr. nadler for five minutes. >> miss sohn you look very eager to respond to the last question so could you take a moment to do that? >> mr. legere keeps talking about unit price and i think that's important because what he is saying is that the new t- mobile will give you more . on a per unit price you need to pay the same or less. so you will get faster speeds, better quality, but in absolute terms you are going to play pay more. but that's the words you just used. number two, if i hear access come excess capacity i think my
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heads going to explode. that is seldom the only determinant of a pricing fiction. it is more profitable to do so. carnegie owned all the railroads, he had lots of capacity and was still a monopolist. the capacity is meaningless when it comes to setting prices. >> now the questions that i have. mr. shelton, saturation has made reach historic levels. last week it was testified in front of the set of the constant senate the concentration has been steadily rising and competition declining. legitimate concerns about increasing large swats of the us economy, what effect has consolidation and rising employer market power in declining organization rates have on workers?
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>> obviously it has put a downward spiral on wedges, the loss of unions have probably been putting a bigger spiral desha >> do you think the concentration has created a downward spiral? >> it has increased competition for labor and when you do that, the labor prices go down. >> you mean decreased competition? >> increase. i'm sorry, did i see decreased? >> decrease. and the prices go down is what you are saying? >> correct. >> in your written testimony you discuss the quote long history noting that t-mobile in particular has been the subject of more unfair labor practices than any other big business in the united states. that's a quote from you. how could the sprint t-mobile
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merger affect the 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 courts and they are already doing unfair labor practices. if you put them together they will be more powerful and do everything they can to even things out and will continue to. >> if you put them together they would not have less desire to do so? >> i don't think that would have more desire because they want to keep unions out. the only way that employees have a voices through collective bargaining and they don't want any part of that. >> that wouldn't change. >> cannot comment? i have one more question for someone else if we have time.
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in your testimony you note that the proposed merger would disproportionately cause harm to low-income communities and people of color. what are the harms that they are likely to experience as a result of the merger and why do you think they would experience those? >> they are going to experience higher prices. if you look at the record and the company's economic studies they show that prices are going to increase. >> increase because of consolidation? >> yes, absolutely. economists have compared t- mobile and sprint economist next significant increases. the harms of which are going to disproportionately fall on lower income subscribers. >> who did you say predicted that? >> their own economist. >> sprint and t-mobile economist? >> dish. dishes economist concluded that sprint and t-mobile's own economist predicted that which
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is what's in the sec record. >> thank you. >> legere asked for the time to reply. >> you wanted to apply-- is that what you said? >> if somebody says that we have said we're going to get higher prices-- >> i think that she quoted that this is quoting your economist. >> we have made a commitment that we are going to lower prices. we went above and beyond. people go and make a filing with the sec and we did that voluntarily. we are making a commitment because we have 8 times the capacity which is substantial. remember one thing. we are going to lower the price and the cost of our product
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bite 87% of the manufacturing cost. of course we are going to lower prices. if any industry in the world where you lower costs by 87%, therefore we have excess capacity and made a commitment to have lower prices. >> my time is expired. >> i recognize the gentleman from florida. >> the unanimous consent to enter northeast colorado cellular inc. direct to you. >> without objection. i recognize ms. demings for five minutes. >> thank you to all of our witnesses for being here with you. as i listen to all of my colleagues, i guess it's necessary for some to try to find humor when we are talking about american workers potentially losing their jobs and people of color once again
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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. 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 colleagues from georgia because we are talking about mergers that cost millions of dollars. billions of dollars. excuse me. i believe a compromise of the appearance or the appearance of compromise our undue influence and irrelevant to this conversation. mr. legere i'm 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 costs.
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it would be a tremendous job creator and would create thousands more jobs. 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. if you would just, please if you've done it do it again for me because i don't see it quite yet and i'm struggling to see this, 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? they are not. >> thank you very much and i'm sure that the topics that you outlined, finding humor, i find
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no humor. we are the largest provider to people of color and low income and will be. they will be top beneficiaries of this transaction. rural america will be as well. we are going to create 5000 were rural retail jobs and ensure customer care jobs. we will have 1800 network immigration jobs and 11,000 new positions. we will have 3600 more employees in the first year then two separate companies combined in 2024. jobs are going up. again, mr. shelton's track record, when at&t tried to buy t-mobile he predicted it would increase jobs by 96,000. when t-mobile bought metro pcs i would submit that those are related to whether or not if we were created an organization.
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>> will you respond to that please? >> you talk about jobs going up and call center jobs, right now t-mobile ships jobs overseas every moment of every day. there is a tape wandering around the internet where the vice president of something is telling the people in the philippines that work with t- mobile in call centers that they are doing a great job because one year ago there were none of them, and now there's 1000. >> mr. legere is the merger american job creator or an american job destroyer. >> it is a significant american job creator. i would say to mr. shelton, i do have some offshore jobs and i will have some. >> you ship american jobs overseas every day as he indicated? >> absolutely not true. jobs in america are going up
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significantly every day in the new t-mobile. >> is jaime,-- if i may, when you consider that 85% 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 it goes through, t- mobile sprint will have twice the number of stores that at&t or verizon has. what do you think is going to happen to those? >> i know exactly what i think. ms. sohn would you go ahead with the last few seconds? >> i want to list the promises i've heard today. wholesale access, prices, lifeline, and home broadband and jazz. it's like every day there's a new promise. my question is who is going to enforce these promises? i agree with the assistant attorney general that behavioral remedies don't work.
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they did not work in the comcast merger, they didn't work in other mergers. was going to enforce all of these promises? that's the problem. nobody is the answer. nobody is equipped. >> thank you so much mr. chairman. >> we now recognize the gentleman from north dakota, mr. armstrong for five minutes. >> mr. legere, we talk about the race to 5g and we've talked about it today. we all recognize that when we are competing in this we are competing with china and there is no real private business in china. they have a sense of unity and purpose as a country in these types of scenarios that we don't. my question is, what does it mean for the us to win the race to 5g? we are talking about short-term and jobs and those type of things, but a longer view of the economics of what this means , and that's before we get into national security questions.
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>> the statistics from ctia suggest there are millions of jobs at stake . if we don't retain and take leadership in 5g as we do with 4g we could use as jobs. $350 billion of investment and half $1 trillion of economic impact. right now, the us 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 are going to do with the new t-mobile and $40 billion of investment and creation of the new wet network, -- network, forcing them to not have focus on millimeterwave sent small geographies, together we can lead the country to 5g and obtain that critical position. >> when we get into this
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technology i think it's important to recognize that we will pay $800 for a phone but not if there's one available for $740. that is the nature of the american consumer. when we start talking about where these processes are made, and the types of things that-- i mean, basic economics tell us more capacity should relate to lower prices but the 5g dates are 2021, 2024, and for everybody and, those seem way off. can we expect improvements in speed and performance and was critically capacity before then? >> the new network is going to have median speed by 2024 of 450 mb. by 2021 it will be 150 median speeds across the country. as i said, we are aspiring to cover 96% of all rural america. the promise of 5g is 100 times
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the speed and 100 times the number of devices and 10 times the latency. it's a major transformational step but even as we migrate to that, the new t-mobile speeds are going to be 15 times faster. >> my never-ending quest to educate people about north dakota, we have the best rural broadband in the entire country. when you deal with a success story for that north dakota is it. we do recognize that rural america is significantly underserved across the entire country. my question would be do you think sprint can delegate-- is continuing viably as a nation my 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, coverage which is about half of at&t and verizon's coverage, we have to spend close to $25 billion. as you know, sprint already has
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$40 billion in debt. if we don't make any money we barely break even and would basically have to borrow that money from the bank and have to increase prices potentially. we would only be able to offer 5g in selected areas. the promise of 5g needs to be covered and to and to enable the new technologies that would come with 5g. sprint would be a very different company. why this is extremely relevant, is today at&t and verizon like i said before, have 93% of the profit and 70% of the market. if you shrink sprint to be a smaller company than basically the market share of at&t and verizon would grow more and the market dominance or market abuse that they have will eventually grow. the way to make it more competitive is by allowing sprint and t-mobile to merge to create a one third viable competitor that will bring competition to america.
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>> i think we can talk about what pitfalls will happen and how that looks to your current economic outlook. the type of company that you are now versus you are supposed to be in four years? >> we will be a smaller company as i said, and more importantly it will make the other two much stronger. as we talk about market dominance it will actually because a lot-- become a lot more dominant if that would be the case. >> ladies and gentlemen, i recognize miss scanlon for five minutes. >> dashed to address the impact on corporate consolidation on the public and i wanted to focus my time on the impact of the proposed merger on the consumers and workers in my district which is pennsylvania 5 , south philadelphia, all of delaware county and part of montgomery county pennsylvania. so i note that you are a
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villanova grad, mr. scurato. the testimony you submitted is the heart and to price conscious customers in low- income communities and communities of color. with that also include seniors? >> yes to the extent that they are price conscious customers that would include seniors. >> you talk about-- i'm sorry. losing my place here. you've got a chart on page 11 of your testimony that looks at major markets and the percentage of market held by sprint and t-mobile. can you expand the significance of the chart with her respect to the philadelphia region? >> absolutely. this is 1% of the market that sprint and t-mobile owned as a company, or that they own as a wholesale partner. it actually shows what percentage of the market they actually have in that district
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in philadelphia. >> what is the impact of a merger on the philadelphia region if they have, what is it, 46% of the market? >> the impact is that the price conscious customer does not have the 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. >> as i understand your testimony is that in a highly concentrated market, that elimination of choices is what tends to drive up prices? >> correct. >> mr. shelton, you have kindly attached exhibit a to your testimony that has the distribution postpaid and prepaid stories in various regions. one of them that you have highlighted there is philadelphia. do you have that? >> does that also show highly
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concentrated sprint and t- mobile coverage in retail stores there? >> t-mobile and sprint retail stores? what is the impact in your estimation of the impact of the merger on retail workers if the merger goes through? >> obviously as you can see, these are very close together and most of these prices. not only that but as i've said before, 84% of all of their stores are owned by authorized dealers, owned and operated by authorized dealers. when t-mobile says they are going to offer a job to employees, that doesn't mean anything to authorized dealers employees.
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and, when you have this many stores as i've also said before twice with eight-- twice with at&t and verizon would have, obviously they are going to get rid of some of those stories. those stores are probably going to be authorized dealer stores and the employees in those stores. >> okay thank you. we do have these concerns about the impact on consumers that less competition could lead to higher prices and consolidation of stores could lead to less jobs. so mr. legere, how is this for ministry merger desha for mac to 3 merger so different when we have the concern of lessening competition? >> going from 2 to 3 is going to increase competition in cities that have a high concentration of share, we run this business on nationwide advertising and nationwide pricing. we don't price particularly
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down to a neighborhood. in the lower end of the market when we bought metro pcs were the main concern was the same, metro pcs customers had a 12 times increase in data usage and 4% decline in price. the low-end of the market has been a high beneficiary and we would expect that to be. mr. shelton keeps talking about authorized dealers. a boost, virgin, and metro are headed heavily concentrated and authorized dealers. we've made it clear that we are going to run them as businesses the way they are now. we can't make job offers to employees that are not ours, but we can run these businesses. we can segment the market so that metro, boost, and virgin have a clear role to play and with t-mobile stores we can offer jobs to every person. >> i think ms. sohn was looking to respond. >> this is not a 2 to 3 merger. it's 4 to 3. you don't have to have equal sized players to
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compete. if sprint and t-mobile, and by the way t-mobile became t- mobile after the justice department locked the merger of at&t and t-mobile, that's when they became the carrier and wisely hired this man to my right. they are mavericks that not only compete with at&t and verizon but they compete with each other. as we've seen not only in europe, and i don't know why europe is different, i would think that if you are shrinking from 4 to 3 europe it's going to be worse in the united states. there's no rule that says that everybody has to be the same size. in fact, 3 is an invitation to collude rather than compete. >> the time is expire but we are going to get back to you. i want to go to the great state of colorado for five minutes. >> thank you mr. chair.
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i want to talk a little bit about mobile virtual network operators. correct me if i'm wrong but my understanding is that sprint is one of the largest providers of roaming contracts in rural america. is that a fair characterization? >> we provide to both mobile-- in rural america. they are customers. >> i represented district that's both urban and rural, quite a few counties in mine and the second district in colorado. while i understand t-mobile has made a commitment with respect to legacy rate plans for the new t-mobile, in terms of maintaining those for three years after the merger, and make -- am i correct that it does not extend to mdno 's? >> i will let the running of
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the new company answer. there's one enormous mdno and that something called tracfone. they have twentysomething billing customers and they have endorsed this merger and sent a letter saying this is good for consumers. >> i understand that. i don't mean to interrupt you but i will give it to mr. legere. i'm trying to get to the question of whether or not that price commitment will extend to this piece of the markets since that peace is a huge component of the ability for folks in rural america. >> i will go one step further. not only will we honor the agreements that sprint and t- mobile have. if there's any mdno concerned about them not having the ability to get the rates that they have, i will lock into a contract with any one of them that wants to take their rates and lock it in for as long as they want. prices will go down in that
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market as well especially since i can't think of a mdno agreement where prices went up or stayed flat. for someone who wants to lock it in, i'm your guy. i'm right out of the hallway. >> i want to follow up on a question that my friend from north dakota posed around the reasoning for this merger as it relates to sprint and its standing in the market. based off of what i've said the path that sprint is on is not sustainable in terms of the path forward. i think you referenced the gentleman from north dakota that sprint would have to be a smaller company. in my characterizing your statements accurately? >> that is correct. >> what i'm struggling to reconcile is this is a january 31 press release detailing the first-quarter results in the first quarter of 2018 and
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sprint. postpaid revenue grew year-over- year, prepaid service revenue grew year-over-year for the fifth consecutive year. net operating income of $479 million, 6 consecutive quarters of net additions, 10th consecutive quarters of net additions in the market. those do not sound like metrics of a company that would be growing small or getting smaller. it sounds like a company that is getting larger. maybe you can adduce-- >> the only metric that matters in business is whether the business has ability to generate cash or not. if you continue reading the press release sprint is expected to generate a negative free cash flow of $1 billion this year. a company that does not generate free cash flow does not have the ability to invest. a company like sprint is $40 billion in debt and the only way we can continue to invest is if we borrow more money.
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if we do that the only way to pay for that is that we are going to have to increase prices. prior to this merger the only way sprint will continue is basically by increasing prices. just to finish, as i've said we are generating negative free cash flow meaning we spend more money than money coming into the company. >> i want to give the witness a chance to respond but i would say, and again part of this is just recognizing-- reconciling the statements that the company has made with respect to financials with the justifications for the merger. that is what i'm trying to glean from your testimony. much of your written testimony focused on the need to be able to make more capital investments. in your press release you talk about the fact that network investments year-to-year have doubled which i understand are reduced in the years prior but nonetheless are on the rise. we've had a lot of conversations about 5g.
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i read the letter that was issued in the new york times just yesterday essentially to customers far and wide with respect to one of your competitors. in that letter it made clear to me that the plan is to be the first carrier that has mobile 5g later this year. i guess i'm trying to understand that difference between your company and that testimony. if you will indulge me to get the witness a chance to respond. >> the witness may answer the question but the time is expired. >> we do plan to deploy 5g in a limited area. we set it in specific areas in the country but we do not have the capability to offer it to the nation because we lack low spectrum to do it in other parts of the country. the metric that you see, sprint has gotten better. when we started sprint in 20 in
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2014 we lost $5 billion. today that's barely breaking even which leaves us more to invest going forward. >> the chair recognizes miss mcbeth for five minutes. -- lucy mcbath for five minutes. >> we talked about the potential effects on this deal and obviously i'm not an antitrust lawyer. but it doesn't take one to see that there are real reasons to be concerned about how this proposed merger may harm consumers and workers. the economy relies on robust competition. my constituents in georgia don't need a law degree to tell them the difference between having 4 phone plans to choose from or 3 . you do not need an economist to tell you that a company does
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not need to max phone stores on the same block but if you work at one of those that's about to close, and you are going to need a job. as was stated earlier by the communication workers the project that 28,900 jobs would be lost due to this merger. my question for you mr. legere is on february 4 t-mobile committed to make available the same or better rate plans as those offered by t-mobile or sprint for three years. why not 4 or 5 years, and why do we need a promise that this deal is going to be such a good deal to consumers? >> thank you for the question. 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 should prices going up in the first three years but that's not true. the buildout of the network takes three years. an economist inserted price
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pressure in the first three years as a theory of what could happen before the capacity. that is not my business plan. what i've decided to do is make the commitment to the sec and keep every right plan that everyone has and keep it for three years. at that point where the capacity is significantly built, there was no question from the theoretical economists over what would happen to price. >> do you have a response to that answer? >> i'm sorry. 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 pricing markets to constrain price increases. they are basically saying i've got to make this promise and i will get back to promises promises. who is going to enforce these vague promises. i want to make another point
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that after the february 4, several people filed with the sec showing how many loopholes there were. t-mobile had to file an 8 a letter explaining why this was simple and ironclad. if you are going to take eight pages to explain why your pricing commitment is ironclad, it ain't ironclad. >> they've promised to offer employees new jobs if they are affected by a store closure. what kinds of jobs might those be and tell us from your research what kinds of jobs with those individuals be, i guess, asked to take? >> there's no way to tell what kind of jobs there may be or what kind of wedges they may make. there's no way to tell where they're going to work or where they will be forced to transfer. we still have 88,000 people who
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work for authorized dealers that have not been promised anything. those stores are going to close. mark my words. >> i would like to yield the rest of my time. >> miss sohn, i just want to give you a chance to-- >> thank you so much. it is true that in the third quarter 2018 sprint had negative cash flow of $908 million. that's because they built up a large reserve of cash and are spending it on cap x-- capex. they spent $1.4 billion on their network in the third quarter is why they had negative cash flow. in the prior quarter they spent positive cash for flow of $525 million.
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nobody has talked about softbank. it's overflowing with money. it has $31 billion in cash and cash equivalents. the vision fonda has more than $90 billion in capital which is investing in cutting-edge technology companies and there's more in the way. they are listing the upper offering at $30 billion so there's money there. it just needs to be spent. >> can i reply now? >> the time has expired. >> myself for five minutes. i want to start with, there has been a suggestion and i'm not good at math, but suggestions that we are going from 3, i mean from 2 to 3 which seems like a silly claim. t-mobile represents 18% and sprint represents 14%.
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if those are nonexistent players, it seems that's clearly not true. this is a substantial part of the market so i think we need to be honest. this is a transaction that takes 4 companies and makes it 3 and what is the impact on consumers workers and costs from my perspective? i want to start with first there has been a lot of discussion about the projected impact in terms of cost and i take mr. legere at his word that he intends to keep costs down for the first three years. of course this is not something decided by a single individual. this is a market that will have impact. you have shareholders that you are responsible to and you simply cannot say i'm going to keep my prices lower and we will lose money because i want to do that personally. there are duties that you have and market conditions. but i want to focus on is the testimony who references testimony from t-mobile's
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economist, a firm called cornerstone that acknowledges that price increases are likely and that was referenced in the dish filing. i want to start with you. it seems like that was a conclusion consistent with other history in this sector and the reduction from 4 to 3. will you explain a little bit about that? >> in this study it speculates that lower income customers may be more willing to pay for better service and higher income customers because they rely on smart phones for their only access to the internet. that is part of the cornerstone study and when looking at this study, they have concluded that sprint and t-mobile zone economists have predicted significant price increases and those harms are going to
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disproportionally impact low income consumers. >> i applaud both t-mobile and sprint. i think most people would recognize aggressive players in this market and it has resulted in maybe not better experiences for workers but at least better experiences for consumers, lower costs, more innovation and choices. that's what competition is intended to promote so it's hard to understand in terms of your own economic conclusions that prices are going to go up. what we know about antitrust law and competition broadly is that less companies is less competition that produces higher prices. why isn't this presumptively into competitive and not in the best interest of consumers, american jobs or prices? >> several things. you did refer in the beginning
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your comments about being a ceo with a fiduciary obligation to shareholders. i make it clear that the business plan that i've shown to shareholders and that i've taken to rating agencies has price declines from day one down. what we keep hearing about is getting credence to-- doing economic modeling. >> it's not dishing, it's your economist called your cornerstone. >> this interpretation, one of the reasons that the shot clock is currently stopped is that we provided tremendous amount more information about the years 19- 21 because this was such a question. prices are going down. give me a chance on the collusion comment if i could make this comment which was t- mobile has done a great job that it did not just come with hard work. we got $3 billion of cash from the at&t breakup and we did a merger with metro pcs. sometimes those are required.
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this is about taking it to at&t and verizon. those two would not speak to me if i was in a dark room alone with them. >> i understand that. our goal is not whether or not you get to take it to at&t and verizon. our goal is deciding whether or not this makes sense is if it's good for consumers, it's good for american jobs, and whether it will result in more choices or lower prices. i get that the competition is not out of the equation. from my view it really is does this produce more choice, more competition, or lower prices for consumers? >> it has served. >> the other thing i want to ask is you keep saying this window so i take it even you don't and aren't able to make a representation of after the three years. >> prices are going down forever. in the business plan for the entire period. >> that does not seem credible.
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forever? you're not going to be there forever. that's what was worrisome to me is that i don't think we can be looking at translations like this and basing approval on your personal judgment. >> in 2024 there will be an increase in capacity and a decline. the unit cost will go up and they will have 10 times more data at 6%. >> i'm going to indulge myself. could you respond to this idea of, i know in your testimony you spoke about the representations made by t- mobile and sprint to wall street and how that ought to be relied upon. but also, how it conflicts with your own analysis. and then there's one final question to mr. shelton. >> thank you. it's axiomatic that companies seeking to merge will tell wall street that everything is wonderful and tell dc that everything is falling apart. i think we talked about that
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specifically with sprint and did a great job of talking about how 2018 was a banner year ended the third quarter we delivered solid financials. that's just one example but also we can talk about 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 been telling wall street. now they are going to tell you it's deeper stronger and bigger? user adjective, but that's what they have been telling wall street before this merger was concerned. if i could, i would not mind just finishing. i think it's important to note that both are putting their money where their mouths are. they are committing five to $6 billion annually until 2020 which pretty much equals and comes pretty close to the $40 billion that they talk about if
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this merger is consummated. one last point if i could. there is so much to the race and ask the chairman who i really agree with, and ask the leading research company in this space. they all say the us is winning. they're going to be winning at least for the next two years, so i would not worry, mr. armstrong, about losing the rest of 5g. we are winning because these companies are investing boatloads of money. >> i have to say that i find 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 is taking place in the business. in the integration of the two companies is dramatically different. >> i think we are trying to reconcile two very different presentations. i want to attest to mr. shelton, you have made reference to the
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impact of this transaction on jobs and particularly you've made reference to people being unrepresented in these companies. i will disclose my own bias that i think we can see clearly that when people are represented by a union they have better wages and benefits. we don't want to just preserve jobs. we want to preserve good paying family supporting jobs. my final question to talk about , what is the impact on jobs in your assessment? an assessment done by cwa that demonstrates significant job loss, and the aggregate may be as much as $543 million in losses to workers. i think one of the big priorities of this committee is doing everything we can to protect good paying american jobs. if you could speak about that i will give mr. legere an opportunity to respond. >> first of all, we believe that there will be 30,000 jobs
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lost if this merger goes through. we are 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 everyone knows is a euphemism for job cuts. what's going to happen if this merger goes through is absolutely job cuts. they are not going to be able to live with stores across the street from each other all over the country when they have twice the store that verizon has. to believe that it's going to happen, i have a nice bridge i'd like to sell you in new york. >> again, as it has been all day, bad assumptions, bad math. mr. shelton should be us
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ashamed of himself. >> i would ask you to refrain. >> okay, i withdraw that statement but t-mobile, every employee is a shareholder. i give them stock and they are all owners. every award is the top places to work because of the way we treat our employees. our employees have the right to unionize if they choose and one of our stores has. the rest have significantly found that the relationship-- >> as you sit here, would you be willing to commit as part of this transaction to not interfere with efforts by employers to organize? >> we don't interfere. >> we don't do it today. employees have made the choice they don't want to be part of the union but that has always been an option. i'm going to add one less thing. it is crazy to say-- one less thing. it's crazy to say we are going to fire 38,000 people. sprint has 28,000. it's absolutely impossible.
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number one. number two, i appreciate what you are doing in terms of protecting the american workers. and at&t trying to block this merger because they know what's going to come, third, i don't appreciate the comment of bullying intimidation tactics. employees come to work, they like working for sprint and t- mobile and it's perfectly fine. employers in america, that's pretty much that-- saying we are going to take out 28,000 employees or 30,000 employees is irresponsible. this causes fear among employees were watching right now knowing it's absolutely not true? >> i keep using the word employees. they are going to, there is no doubt, there cannot be any doubt in anyone's mind that they are going to take these authorized dealers and slash and burn.
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those are american jobs they are going to cut and they will cut 30,000 of those jobs. as far as sprint and t-mobile employees, or at least t-mobile employees being able to join unions because that's what mr. legere just said, they went as far as and have found been found guilty from forming a company union to stop the union from organizing people and t- mobile. this hasn't been done since the 1930s so that's how much they are against their employees becoming unionized. >> i will ask unanimous consent that a number of letters in support and opposition to the merger be made part of this record and also a letter that i received from free conference, mr. erickson and legere, i've heard from a number of people about whether or not these preconference called programs are going to be
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available. i guess currently they are considered out of plan with t- mobile and there's a lot of anxiety about whether 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 will follow up. >> and i will provide a copy of the correspondence. thank you all. i know it has been a long hearing but it's been incredibly informative and i think helpful to members of the committee. do you have nothing else to say? >> with that we will adjourn the hearing. >>
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>> here are some of our life coverage wednesday. the house comes in for general speeches at 10:00 a.m. at noon the chamber begins two days of debate on a nonbinding resolution calling for special counsel robert moore's report to be made available to the public and congress. on c-span 2 the senate continues work on the presidents judicial and executive nominations including the us court of appeals judge for the dc circuit. at 8:50 recovered the 75th annual congressional dinner that includes members of the washington press corps, members of congress, and other elected officials. on c-span 3 a confirmation hearing for 2 judges to be on the ninth circuit court of appeals in california. this is the second time the president has nominated daniel collins and kenneth lee after their nominations expired in the last congress. the senate judiciary committee diane feinstein and sen. harris from california oppose the nominees. watch it 10:00 eastern.
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the management testifies on the trump administration 2020 budget proposal. >> c-span city store is exploring the american story and this weekend with the help of our cable partners we visit cedar rapids in east central iowa. >> painted american gothic here in the studio, it is a piece that everybody knows and a lot of times people will not know the title but it is an iconic piece. probably the most iconic piece of american art. >> the caucuses have not been great at selecting the next president. it seems that the caucuses really perhaps the highest function, we talk about three tickets out of iowa that the top three finishers can move on. >> join us this saturday at
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noon eastern as we speak with local cedar rapids authors. sunday at 2:00 is american history tv. working with table partners as we explore the american story. >> at a recent armed services subcommittee on sexual assault in the military, air force veteran martha mcsally should a personal story of how she was raped by a superior officer while serving in the military. it also included testimony from other sexual assault survivors and judicial officers from each branch discussing the process for investigating and prosecuting sexual assault cases. >> may come to order, i understand sen. gillibrand will be here briefly. i think that will give me time to make a few brief opening comments. i want to thank everybody for being


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