NSR on Antitrust Risks, Policy Implications of Big 3 JV
UPDATE New Street Research (NSR) has some preliminary thoughts on the antitrust risks and policy implications of the agreement in principle between AT&T (NYSE: T), Verizon (NYSE: VZ) and T-Mobile (NASDAQ: TMUS) joint venture to use satellite-delivered direct-to-device (D2D) service to help end network dead zones in rural areas.
“The JV raises antitrust issues, but with one important caveat, we think the odds favor the DOJ declining to challenge the deal,” write NSR’s Blair Levin, David Barden, Pierre Ferragu and James Ratzer in a client note. They say the cable industry has completed several JVs without raising antitrust concerns.
The Big 3 compete in both the product and geographic markets. “The JV arguably reduces competition in providing mobile voice/broadband services between the big 3 in a relevant product (mobile communication services) and geographic (unserved rural areas) market,” they state. The carriers could argue that using a more efficient way of delivering mobile voice/broadband service in rural areas will speed improved coverage while stimulating more competitive offerings in those areas, NSR believes.
The carriers could also assert they weren’t ever going to deploy networks in areas lacking coverage now and if the JV isn’t allowed, they would continue what’s happening now, with dead zones in rural areas, or individually negotiate for D2D coverage, raising rates in rural areas.
NSR also believes if the JV says they are doing the deal with AST, they’re increasing competition in the satellite market. “While black letter antitrust law states that increasing competition in one market is not a justification to reduce competition in another market, given concerns about SpaceX/Starlink’s current market dominance and the desire of policy makers to have three viable satellite providers, we think this argument will be useful in countering antitrust concerns,” writes NSR.
Overall, NSR thinks the odds favor that the DOJ Antitrust Department will agree with the efficiency argument and not challenge the JV, “unless SpaceX/Starlink decides to use its influence to push a serious investigation,” in which case it believes there will be one. They add that while “owners of rural towers and other wireless related infrastructure might also wish to challenge the deal, we don’t think their doing so would result in a DOJ challenge.”
States and their Attorneys General may potentially challenge the deal after reviewing how rural Americans could end up paying more than urban Americans for a basic mobile plan. NSR believes these state AGs “will use the process to improve the costs for access to rural customers,” rather than blocking the JV.
By Leslie Stimson, Inside Towers Washington Bureau Chief
