On Friday, July 26, 2019, the U.S. Department of Justice (DOJ) issued a News Release ¹ announcing that the government’s antitrust watchdog, along with the Attorneys General (AGs) for five states, ² had reached a settlement with T-Mobile US, Inc. (T-Mobile), Sprint Corporation (Sprint), their respective parent companies, ³ and Dish Network Corporation (Dish), that would allow the country’s third and fourth largest wireless carrier to merge, provided they divest certain assets to Dish that would allow the satellite operator to become a replacement fourth nationwide wireless operator.

Bottom Line: While DOJ has agreed not to block the proposed Sprint/T-Mobile merger, the agreement is contingent upon a complicated subscriber, asset, and spectrum divestiture deal and operational conditions imposed on Dish (that could potentially allow Dish to exit the market), and is still subject to a pending lawsuit filed by 15 Attorneys General to block the entire deal.

Background

Sprint and T-Mobile first proposed to merge in April of 2018. ⁴ In June of 2018, the Commission formally created a docket to review the tie-up. ⁵ In addition to a robust FCC proceeding, with numerous parties filing oppositions to the proposed merger, the U.S. House of Representatives held two separate hearings probing the competitive harms to U.S. consumers that would result from going from four to three nationwide mobile wireless carriers. ⁶ Nearly a year after the deal was first announced, FCC Chairman Ajit Pai and fellow Republican Commissioners Michael O’Rielly and Brendan Carr released statements that they would either not oppose the proposed merger, or would be inclined to support it. ⁷ On June 11, 2019, nine states and the District of Columbia filed a lawsuit in the U.S. District Court for the Southern District of New York and they were joined by four more states later in June and Texas added itself as a plaintiff on August 1, 2019. ⁸

Overview

The DOJ’s News Release was accompanied by several court filings filed with the U.S. District Court for the District of Columbia. Specifically, the DOJ’s Antitrust Division provided the court and the public with the following documents: (1) a Complaint; ⁹ (2) a Proposed Final Judgement; ¹⁰ (3) a Stipulation and Order; ¹¹ and (4) an Explanation of Tunney Act procedures. ¹² Also on Friday, July 26, 2019, Dish filed with the Federal Communications Commission’s (FCC or Commission) Wireless Telecommunications Bureau (WTB) a letter requesting, among other things, that the Commission “extend the construction deadlines” of various wireless licenses held by Dish in light of the company’s simultaneous commitments to the DOJ to become a future nationwide provider of 5G services and potential replacement for Sprint. ¹³ Specifically, the Dish Letter included various 5G network buildout commitments, newly proposed (extended) band-specific construction deadlines, restrictions on future spectrum sales or leases, verification and enforcement commitments, reporting commitments, and various proposed penalties for failing to achieve the proposed commitments. On Tuesday, July 30, 2019, the DOJ and Supporting State AGs filed with the court a Competitive Impact Statement (CIS). The CIS provides a general summary of the proposed merger and subsequent asset divestiture to Dish, and then goes into greater detail on the competitive effects of the overall transaction and the marketplace dynamics of the mobile wireless industry.

DOJ Complaint

The DOJ Complaint alleges that “[b]y combining two of the only four national mobile facilities-based wireless carriers, without appropriate remedies, the merger of T-Mobile and Sprint would extinguish substantial competition” and “cause the merged T-Mobile and Sprint (“New T-Mobile”) to compete less aggressively.” ¹⁴ Additionally, the DOJ and participating states determined that the proposed merger would “harm consumers” throughout the United States if it were allowed to proceed and that “New T-Mobile would have the incentive and ability to raise prices.” ¹⁵ Furthermore, the DOJ Complaint concludes that Verizon and AT&T “also would have the incentive and the ability to raise prices” and “leave the market vulnerable to increased coordination among these three competitors.” ¹⁶ Finally, the DOJ and Supporting State AGs noted that there existed an absence of countervailing factors that would mitigate or eliminate the anticompetitive impact of the proposed merger, calling specific attention to high barriers to entry by other firms to replace the competitive influence now exerted by Sprint. ¹⁷Accordingly, the DOJ Complaint requests that the court, among other things: (1) adjudge that the merger violates Section 7 of the Clayton Act, 15 U.S.C. § 18; and (2) permanently enjoin T-Mobile and Sprint from consummating the April 29, 2018 merger agreement. In a nutshell, DOJ and the five states (Oklahoma, Kansas, Nebraska, Ohio, and South Dakota) determined that the deal should be blocked, barring the creation of a viable fourth network. The issue becomes whether the settlement which was contemporaneously filed with the Complaint will result in a viable fourth network.

Competitive Impacts Statement

The CIS, much like the Complaint, notes that “[a] national facilities-based mobile wireless carrier needs to have spectrum and network assets deployed nationwide to provide retail mobile wireless services” and that “de novo entry by a facilities-based mobile wireless carrier is very difficult.” ¹⁸ However, the CIS also attempts to explain how the terms of the Proposed Final Judgment will be used to mitigate the anticompetitive concerns raised in the Complaint. In short, the CIS serves as both a summary of the legal issues and a roadmap of how the proposed deal will overcome those legal issues. The CIS also provides a summary of the procedural steps that needs to be taken for the Proposed Final Judgment to become finalized by the court. ¹⁹

Proposed Final Judgment

The DOJ and Supporting State AGs, together with the various defendant parties, submitted a [Proposed] Final Judgment (Proposed Final Judgment) meant to alleviate all of the concerns raised in the DOJ Complaint. The Proposed Final Judgment is several dozen pages in length and includes several attachments listing various Dish-held FCC licenses that are impacted by the proposed settlement. The Proposed Final Judgment essentially calls for Sprint and T-Mobile to divest and/or decommission various assets and for Dish to enter the marketplace as a brand new 5G competitor to AT&T, Verizon, and New T-Mobile. ²⁰

While the Proposed Final Judgment is exceedingly complex and contains conditions imposed on all of the joining parties, it has the following basic components: (1) Sprint’s divestiture of various prepaid assets; (2) Sprint’s divestiture of 800 megahertz (MHz) spectrum; (3) Sprint and T-Mobile’s decommissioning of cell sites and Dish’s simultaneous opportunity to purchase those cell sites; (4) Sprint and T-Mobile’s decommissioning of retail locations and Dish’s simultaneous opportunity to purchase those retail locations; (5) New T-Mobile’s promise to lease 600 MHz spectrum from Dish in exchange (in order for Dish to meet its FCC-obligated build-out requirements); (6) Dish and T-Mobile’s mutual promises to enter into new mobile virtual network operator (MNVO) wholesale agreement for at least seven years that would allow Dish to offer nationwide wireless service while it builds-out its own 5G network; (7) New T-Mobile’s promise to honor all existing MVNO agreements inherited by Dish until the expiration of the Proposed Final Judgment; and (8) Dish’s promise to comply with all network build-out commitments made to the FCC in the Dish Letter, which if performed fully, would result in Dish operating a nationwide 5G broadband network that is no longer reliant on wholesale access on New T-Mobile. The Proposed Final Judgment also stipulates that New T-Mobile and its various parent companies cannot reacquire any of the divested assets during the term of the ultimate final judgment and spells out various other administrative and legal mechanisms meant to effectuate the consent decree. ²¹

Divestiture of Prepaid Assets

The Proposed Final Judgment calls for New T-Mobile to “take all actions required to enable [Dish] to have” within 90 days after a final judgment by the court “the ability to provision any new or existing customer of the Prepaid Assets holding a compatible handset device onto the T-Mobile network pursuant to the terms of any Full MVNO Agreement.” ²² Additionally, New T-Mobile is ordered and directed, no later than 15 days after it can provide Dish access to on-board new or existing customers “of the Prepaid Assets holding a compatible handset device onto the T-Mobile network pursuant to the terms of any Full MVNO Agreement, or the first business day of the month following the later of consummation of the merger between T-Mobile and Sprint and the receipt of any approvals required for the divestiture of the Prepaid Assets from the FCC and any material state public utility commission, or five (5) calendar days after notice of the entry of this Final Judgment by the Court, whichever is later, to divest the Prepaid Assets to [Dish] in a manner acceptable to the United States, at its sole discretion.” ²³ T-Mobile and Sprint are also required within 10 days of the filing of the DOJ Complaint to submit to Dish and the Monitoring Trustee organization charts and lists of all Prepaid Asset personnel. Those prepaid employees must also be made available for job retention interviews with Dish. Sprint and T-Mobile warrant that all of the Prepaid Assets will be fully operational on the date of transfer and must also agree to enter into one or more “transition services agreements to provide billing, customer care, SIM card procurement, device provisioning, and all other services used by the Prepaid Assets” today, “at cost,” and for a period of up to two years after the transfer of the Prepaid Assets. Dish is also granted the ability to extend those transition services agreements for up to one additional year, if agreed upon by the DOJ and Supporting State AGs. Furthermore, Sprint and T-Mobile have agreed to assign or otherwise transfer to Dish all “transferable or assignable agreements…related to the Prepaid Assets including, but not limited to, all supply contracts, licenses, and collaborations.” ²⁴

Divestiture of 800 MHz Spectrum

Sprint and T-Mobile are ordered and directed to divest the 800 MHz Spectrum Licenses, “within three (3) years after the closing of the divestiture of the Prepaid Assets, or within five (5) business days of the approval by the FCC of the transfer of, whichever is later.” ²⁵ Interestingly, Dish will be obligated to pay a penalty of $360 million to the U.S. Treasury if it elects notto purchase Sprint’s 800 MHz Licenses; however, Dish can avoid this penalty “if it has deployed a core network and offered 5G Service to at least 20% of the U.S. population over DISH’s facilities-based network within three (3) years of the closing of the divestiture of Prepaid Assets.” If, after the conclusion of the Final Judgment, Dish has acquired the 800 MHz Spectrum Licenses but has not deployed service, it “shall forfeit to the FCC…all of the 800 MHz Spectrum Licenses that are not being used to provide mobile wireless services, unless [Dish] already is providing nationwide retail mobile wireless services over DISH’s facilities-based network.” ²⁶ By contrast, if Dish has not acquired the 800 MHz Spectrum Licenses, Sprint and T-Mobile are required to “conduct an auction of the 800 MHz Spectrum Licenses within six (6) months of [Dish] declining to purchase the licenses.” ²⁷ Sprint and T-Mobile are forbidden to sell the licenses to “any other national facilities-based mobile wireless network operator” unless the DOJ and Supporting State AGs give their written consent, but they will be allowed to sell the licenses at a price that is higher “than the price [Dish] originally agreed to pay for such licenses.” ²⁸ Finally, Sprint and T-Mobile will be excused from even being required to divest the 800 MHz Spectrum Licenses if “[Dish] declines to purchase” them and “the sale of the 800 MHz Spectrum Licenses is no longer needed fully to remedy the competitive harms of the merger” as determined by the DOJ and Supporting State AGs. ²⁹

Decommissioning of Cell Sites

In addition to the divestiture of Prepaid Assets and possibly 800 MHz Spectrum Licenses, the Proposed Final Judgment stipulates that Sprint and T-Mobile “shall make all Cell Sites Decommissioned by [New T-Mobile] within five (5) years of the closing of the divestiture of the Prepaid Assets, which shall not be fewer than 20,000 Cell Sites, available to [Dish] immediately after such Decommissioning.” ³⁰ Sprint and T-Mobile, before the closing date of the Prepaid Assets, are obligated to provide Dish with a detailed schedule identifying, over a five year period, each Cell Site they plan to decommission, the date of the planned decommissioning, and whether that Cell Site is freely transferable. For this five year period, on the first of each month, Sprint and T-Mobile are further required to submit to Dish and the Monitoring Trustee updated decommissioning schedules, on a rolling monthly basis, forecasted for the upcoming 270 days. All forecasted Decommissionings within 180 days “will be binding, subject to any mandatory restrictions on transfer imposed by federal or state law, unless the Monitoring Trustee determines that the Decommissioning was changed for good cause, and the changes and justifications are reported by [Dish]” to the DOJ. ³¹ Sprint and T-Mobile will be obligated to pay the government, within 90 days of the end of each calendar quarter, $50,000 per Cell Site for any 180 day forecast (outside of a two percent deviation) if the following occurs: (a) Dish exercised its option to acquire such Cell Site that was Decommissioned more than ten days after the date forecasted, or (b) the Cell Site was Decommissioned but did not appear on any 180 day forecast. If Sprint and T-Mobile violate those terms and cannot cure the transfer within ten days, on more than ten percent of Cell Sites in any three 180 day forecasts, the penalty shall increase to $100,000 per Cell Site, assuming several other conditions apply. The merging carriers are also required to “assign or transfer any rights that are assignable or transferrable and are useful for [Dish] to deploy infrastructure on the Decommissioned Cell Sites” and shall make all Decommissionings “promptly” and “vacate a Decommissioned Cell Site as soon as reasonably possible” after it is no longer being used by Sprint or T-Mobile.” ³²Finally, Sprint and T-Mobile “shall also make any Decommissioned transport-related equipment (including microwave backhaul gear and network switches) on such cell sites available for purchase” by Dish. ³³ The language contained in this section is highly nuanced and very much open to interpretation, if for no other reason than Sprint and T-Mobile are the only parties privy to when a Cell Site is active or not, and even if a dispute arises, any delay in oversight by the Monitoring Trustee could both aid or hinder the disputing party, depending upon their ultimate motivations. We view this as highly unenforceable and where all kinds of shenanigans can take place. No requirement is placed on Dish to build facilities at any of these 20,000 Decommission Cell Sites.

Decommissioning of Retail Locations

In addition to having the option to purchase Decommissioned Cell Sites, Dish will have the opportunity to purchase from Sprint and T-Mobile no fewer than 400 Decommissioned Retail Locations. ³⁴ Specifically, within five years of the closing of the divestiture of the Prepaid Assets, Sprint and T-Mobile shall make available to Dish at least 400 Decommissioned Retail Locations immediately after they are decommissioned. The merging companies are required to provide Dish with a list of the Decommissioned Retail Locations “as soon as the locations are identified.” ³⁵ Again, Dish has no requirement to acquire the Decommissioned Retail Locations.

Lease of 600 MHz Spectrum from Dish to T-Mobile

The Proposed Final Judgment includes a short section compelling T-Mobile and Dish to enter into good faith negotiations that would result in Dish leasing to T-Mobile 600 MHz Spectrum “for deployment to retail customers by [New T-Mobile].” While the non-binding offer to have T-Mobile lease 600 MHz Spectrum is interesting, what is more interesting are the precise words chosen by the DOJ (and presumably, agreed to by Sprint, T-Mobile and Dish). A literal interpretation of the quoted language would seem to indicate that Dish would be unable to have its prepaid and postpaid customers benefit from 600 MHz coverage. Why? Because once Dish and T-Mobile enter into a Full MVNO Agreement (to be discussed below), Dish would be a wholesale consumer of Sprint and T-Mobile and definitely not a retail consumer. Furthermore, Dish’s own subscribers would have no commercial relationship with New T-Mobile, and therefore would clearly not qualify as retail consumers of New T-Mobile. It is impossible to tell the real-world impact of this section, but there is also no guarantee that existing or new consumers of Dish wireless service stand to gain anything from this provision that is allegedly intended to override anticompetitive harms identified in the Complaint. In short, Dish is leasing its 600 MHz spectrum to T-Mobile and will not be able to use it for itself. So where is the facilities-based network for a fourth carrier in this arrangement? More importantly, and as will be discussed below, Dish has seemingly no right to resell its own wholesale access on New T-Mobile to its own MVNO subscribers or its own roaming partners.

Dish’s Right to Enter Into an MVNO Agreement with New T-Mobile

Today, Dish does not operate a mobile wireless network, whether 5G or even any other earlier technology. The only way for Dish to transition from a prepaid reseller of wireless services to an operator of a facilities-based network is to have the ability to access wireless services as an MVNO and use that wholesale access as a “bridge” until it can self-operate its own wireless network. Accordingly, the Proposed Final Judgment contains a provision that demands that Sprint and T-Mobile “enter into a Full MVNO Agreement for a term of no fewer than seven (7) years.” ³⁶ According to the Proposed Final Judgment, the terms and conditions of the Full MVNO Agreement must be “commercially reasonable” and acceptable to the DOJ and Supporting State AGs. ³⁷ Specifically, Sprint and T-Mobile cannot “reject any of [Dish’s] lawful traffic” or “unreasonably discriminate against [Dish’s] subscribers, including by blocking, throttling, or otherwise deprioritizing” Dish’s customers relative to Sprint and T-Mobile’s customers. ³⁸ There also exists a provision that would require Sprint and T-Mobile to not discriminate against Dish’s inbound wholesale traffic based on the type of devices used by Dish’s prepaid and postpaid customers. Finally, Sprint and T-Mobile are mandated to configure their wireless networks “to enable the provision of handover mobility…in the boundary areas between [Dish’s] network, built out in contiguous coverage areas (e.g., city-wide coverage), and [Sprint and T-Mobile’s] wireless networks.” ³⁹ In industry terms, this last provision means that, in theory, once Dish establishes a core network and begins deploying a Radio Access Network (RAN), whether by its own means or by acquiring Decommissioned Cell Sites, a Dish customer should be able to seamlessly “roam” between the nascent Dish wireless network and the more robust, nearly nationwide New T-Mobile network. What is not clear to us is whether Dish can provide wholesale services to other wholesale carriers akin to being a Mobile Virtual Network Enabler. If Dish is allowed to do this, then rural carriers needing commercially viable roaming agreements would be able to “piggyback” on Dish’s arrangement by entering into an agreement with Dish to utilize the T-Mobile network and the spectrum Dish leases to T-Mobile in areas where they do not have coverage. Put differently, unless Dish has the absolute right to: (1) provide unfettered inbound (domestic and international) roaming access; and (2) resell its access to the New T-Mobile network without limitations (like Sprint can do today) to its own MVNOs, then it is not a genuine independent, nationwide mobile wireless operator and should not be viewed as such.

New T-Mobile’s Promise to Honor and Extend Existing Wholesale Access Agreements

While the proposed Full MVNO Agreement is key to supporting Dish in the long term, assuming this merger is approved, there still is a lingering question as to how the various parties will treat the existing MVNO operations of Boost, Virgin, and Sprint’s self-branded prepaid customers. To address this matter, the Proposed Final Judgment contains a section on MVNO competition. Specifically, Sprint and T-Mobile are required to abide by all terms contained in their existing MVNO agreement. Additionally, the merging carriers are obligated “to extend existing MVNO agreement on their existing terms (other than any “most favored nation” provisions) until the expiration of this Final Judgment”, which should last approximately seven years. ⁴⁰ Sprint, T-Mobile, and Dish also agree in principle to not discriminate against devices using “remote SIM provisioning and eSIM technology” or devices that allow for “multiple active profiles” or what is commonly called multi-SIM or dynamic-SIM technology. ⁴¹ In the same vein, Sprint and T-Mobile cannot block access from Dish consumers who “use on-screen selection software or applications from devices capable of being remotely provisioned.” ⁴² Finally, the three carriers agree to abide by a set of device “unlocking” principles, which shall be clearly and concisely posted, and applicable to both prepaid and postpaid consumers.

Dish’s Promise to Comply with Amended License Build-Out Commitments

As discussed earlier, the entire premise of having Dish enter into this proposed merger and subsequent asset divestiture is to have Dish ultimately become a fourth genuine, facilities-based, nationwide, mobile wireless network operator. To that end, the Proposed Final Judgment contains a section alluding to “network build commitments made to the FCC related to the merger of T-Mobile and Sprint” ( i.e., the Dish Letter). ⁴³Beyond the specific build-out commitments, which are explained in greater detail below, this section of the Proposed Final Judgment contains certain commitments that will be under the purview of the DOJ and Supporting State AGs. First, Dish agrees to copy the DOJ and Supporting AGs on any FCC filings related to spectrum and network deployments within three days of when they are filed with the Commission. Second, Sprint and T-Mobile agree not to interfere with Dish’s “efforts to deploy a nationwide facilities-based mobile wireless network.” ⁴⁴ Third, Dish agrees to use its “best efforts” to use its own network instead of the New T-Mobile network. Fourth, twice per year after the entry of a Final Judgment, Dish must submit to the DOJ and Supporting State AGs “an update on the status of its wireless network deployment.” ⁴⁵

Other Matters Contained in the Proposed Final Judgment

The Proposed Final Judgment contains several important terms that could impact the viability of this deal, including:

• Sprint and T-Mobile are forbidden to reacquire any part of the Divestiture Assets, or any “substantially similar” assets, but only during the term of the Final Judgment.

• Dish is forbidden to sell, lease, or otherwise allow the use of the Divestiture Assets “to any national facilities-based mobile wireless provider” (i.e., AT&T and Verizon) during the term of Final Judgment, without the prior written approval of the DOJ, unless it is a “roaming arrangement.” ⁴⁶

• Sprint, T-Mobile, Softbank, and Deutsche Telekom are forbidden to finance any part of any Dish purchase, unless the DOJ approves the terms.

• Until all proposed divestitures are complete, Sprint and T-Mobile must take all steps to comply with the Stipulation and Order (described in detail below).

• The federal judge presiding over this case, Judge Timothy Kelly, appointed by President Trump, shall in turn appoint the Monitoring Trustee.

• The yet-to-be-named Monitoring Trustee shall serve at the cost and expense of Sprint and T-Mobile. Furthermore, the Monitoring Trustee may also “hire at the cost and expense of [Sprint and T-Mobile] any agents, investment bankers, attorneys, accountants, or consultants, who will be solely accountable to the Monitoring Trustee.” ⁴⁷ All of these costs must be reasonable and customary and approved by the DOJ. Notably, Sprint and T-Mobile are instructed to “take no action to interfere with or to impede the Monitoring Trustee’s accomplishment of its responsibilities.” ⁴⁸

• The Monitoring Trustee is obligated to file monthly reports with the DOJ setting forth the parties’ efforts to comply with the various obligations contained in the Final Judgment.

• The Monitoring Trustee shall serve until the latter of: (1) the divestiture of all the Divestiture Assets is finalized, (2) the build-out requirements are met, (3) any Full MVNO Agreement expires or terminates, or (4) the term of any transition services agreement expires.

• Any Final Judgment “should be interpreted to give full effect to the procompetitive purposes of the antitrust laws and to restore all competition harmed by the challenged conduct.” 49

• Up to four years after the Final Judgment expires, the DOJ may re-open the case if it finds evidence that Sprint, T-Mobile, or Dish violated any terms.

• The “term” of the Final Judgment shall be seven years, but it may be reduced to five years if the DOJ notifies the court and various defendants that the divestitures, build-outs, and other requirements have been completed and that continuation of the Final Judgment no longer serves the public interest.

Dish Letter to the FCC

The same day the DOJ and Supporting State AGs filed the Complaint, Stipulation and Order, and Proposed Final Judgment with the court, Dish filed an ex parte (Dish Letter) with the FCC. Interestingly, the Dish Letter was filed not in the Commission’s dedicated Sprint/T-Mobile merger docket, but rather it was submitted in reference to individual applications pending with the Commission. At its core, the Dish Letter is a formal request by the satellite carrier to “accelerate [its] competitive entry into the wireless market” by seeking an extension of “the construction deadlines associated with its AWS-4, 700 MHz E Block, and AWS H Block licenses.” ⁵⁰ Dish argues that by having the FCC extend its various build-out deadlines, the company can ensure that: (1) its deployment of nationwide 5G meets certain specifications; (2) 5G broadband service can be deployed on its AWS-4, 700 MHz E Block, and AWS H Block spectrum licenses on an “aggressive” schedule; (3) 5G broadband service can be deployed on its 600 MHz spectrum licenses on an “accelerated” schedule; and (4) it adheres to certain restrictions on its ability to sell or lease network capacity on its AWS-4 and 600 MHz spectrum. ⁵¹ Absent grant of this request, Dish will be obligated to meet its current obligations to build-out many of its licenses (AWS-4 and 700 MHz E Block) by March 2020 and the remainder (AWS H Block) by April 2022, which is extremely unlikely if it remains a stand-alone, facilities-based carrier. Unlike AT&T, Verizon, and the New T-Mobile, Dish’s business model completely eschews 3G or 4G network elements and its proposed network would be 5G-only from the ground-up. ⁵² Generally, Dish commits that by June 14, 2023, it will deploy a nationwide 5G network providing:

• Access to at least 70% of the U.S. population to download speeds equal to or greater than 35 megabits per second (Mbps), as verified by a drive test.

• At least 15,000 5G cell sites.

• At least 30 MHz of Dish’s downlink 5G spectrum averaged over all Dish 5G cell sites deployed nationwide.

The full details of Dish’s 5G build-out commitments, voluntary monetary penalties, and other conditions are detailed more fully in Attachment A to the Dish Letter. Below is a brief summary of those various commitments.

Amended AWS-4, 700 MHz E Block, and AWS H Block 5G Build-Out

Dish commits to provide the following services at specified levels with corresponding deadlines:

• Offer 5G broadband service to at least 20% of the U.S. population, and to have developed a core network no later than June 14, 2022.

• Offer 5G broadband service to at least 70% of the U.S. population no later than June 14, 2023.

Accelerated 600 MHz 5G Build-Out

Dish holds 486 separate 600 MHz licenses, each covering a Partial Economic Area (PEA), which must be partially built-out by June 2027 and fully built-out by June 2029. Dish further commits that by June 14, 2023, it will offer 5G services using 600 MHz licenses to at least 70% of the U.S. population, and by June 14, 2025, it will offer 5G services using 600 MHz licenses to at least 75% of the population in each PEA.

Restrictions on Sale of Licenses and Leasing Capacity

Dish commits not to sell its AWS-4 and 600 MHz spectrum for at least six years without the prior approval of both the DOJ and FCC. For that same period of time, Dish further commits not to lease, directly or indirectly, “to any of the three largest wireless providers, or any combination thereof, traffic accounting for more than 35% of the network capacity on its 5G network without prior FCC approval.” ⁵³ So, we view this as Dish leasing its 600 MHz spectrum to T-Mobile to meet its buildout commitments and then reserving 65% of the capacity for its use with 35% available for T-Mobile or possibly Verizon and AT&T or a combination thereof. Again, there would be no facilities-based fourth network.

Verification and Enforcement

Dish pledges to file with the FCC “detailed status reports” for each separate commitment it has made, and submit those reports within thirty (30) days of their respective due dates. Those reports will include polygon shapefiles, a list of 5G cell sites (including latitude and longitude and spectrum band usage by sector), a certification from a Dish engineering executive, and a statement qualifying the U.S. population covered by Dish’s “5G Coverage Area.” Dish further pledges that if it fails to meet any of the commitments, it will make voluntary contributions to the U.S. Treasury in an amount that could potentially total $2.2 billion. By way of example, Dish notes that it would pay $10,000,000 for each one percentage point it is below a key deliverable by the proposed deadline, with band-specific, maximum voluntary contributions ranging from $200,000 to $600,000.

Stipulation and Order

The DOJ’s Stipulation and Order is a legal document that, if signed-off by Judge Kelly, would accomplish several things, including: (1) enjoining Dish as a party in the case; and (2) forcing Sprint and T-Mobile to preserve spectrum assets, Prepaid Assets, Cell Sites and Retail Locations until the Final Judgment expires and/or divestitures are finalized. The Stipulation and Order acts as a unifying document that ensures that all of the parties to the proceeding comply with any Final Judgment and stipulate to the court’s jurisdiction in the matter.

Is Dish Serious About Being a Facilties-Based 5G Network Operator, and if Yes, is the Proposed Deal Realistic?

The Proposed Final Judgment contains several sub-sections that directly apply to what Dish is and is not required to do when it comes to divested and decommissioned assets. Specifically, the parties have provisionally agreed to the following language:

Unless the United States otherwise consents in writing or the Acquiring Defendant declines its option to purchase certain Decommissioned Cell Sites or Decommissioned Retail Locations, the divestitures pursuant to this Final Judgment will include the entire Divestiture Assets. ⁵⁴ The divestitures will be accomplished in such a way as to satisfy the United States, in its sole discretion, that the Divestiture Assets can and will be used by Acquiring Defendant as part of a viable, ongoing operation relating to the provision of retail mobile wireless service.

The Proposed Final Judgment continues with the following language:

Acquiring Defendant shall use the Divestiture Assets to offer retail mobile wireless services, including offering nationwide postpaid retail mobile wireless service within one (1) year of the closing of the sale of the Prepaid Assets.

While there is additional, qualifying language in this section, these two sub-sections provide needed context on what exactly Dish is legally obligated to do should the Sprint/T-Mobile merger actually get court approval and then close. The whole purpose of the Proposed Final Judgment - - and Dish’s entry into this entire saga - - is to overcome the noted problems with a “straight-up” merger between Sprint and T-Mobile. In other words, putting aside both Dish’s intent (which must be scrutinized by the presiding judge, the FCC, and Opposing State AGs) and desire to be a facilities-based (i.e., both Core and Radio Access Network) nationwide 5G carrier, do the terms of the Proposed Final Judgement actually create a scenario where Dish can succeed as a fourth nationwide competitor to AT&T, Verizon and New T-Mobile? In order to answer that pivotal question, the Proposed Final Judgment must be analyzed not just through a “legal” lens based solely an antitrust laws, but also through a “business” lens grounded in the realities of wholesale access, retail wireless service offerings, and especially wireless network construction and operations. When viewed through that second lens, the one viewpoint that matters in real life and outside legal textbooks, it is apparent that at best this entire proposition of Dish riding into town on a white horse is speculative and overly optimistic. At worst, this convoluted solution is a disaster waiting to happen. A summary of the known facts explains why this is so.

First, a plain reading of the Proposed Final Judgment tells us that within 90 days of a notice of entry of Final Judgment, Sprint and T-Mobile must give Dish the ability to provision existing and new prepaid customers. Second, the actual Prepaid Assets must be divested by one of three “to be determined” dates that themselves hinge on either the 90 day marker mentioned above, or the actual consummation of the commercial deal. Third, Dish must offer postpaid retail wireless service within one year of the closing of the sale of Prepaid Assets. Fourth, Dish has separately committed to the FCC to deploy 5G broadband services by certain dates, some of which are accelerated build-out dates (e.g., 600 MHz) and some of which are extended build-out dates ( e.g., AWS-4, 700 MHz E Block, AWS H Block). This is a mixed bag. The only way Dish can accomplish this aggressive buildout schedule is to load its spectrum in the T-Mobile network. By leasing its long-fallow spectrum to T-Mobile, building only a 5G core network, and then utilizing the combined T-Mobile/Sprint Radio Access Network (RAN), Dish could easily refrain from deploying its own RAN. There is no viable fourth facilities-based network created by this proposal. This proposal is merely a plan to piggyback onto New T-Mobile with a 5G core - - nothing more. Who sets the price for access to the T-Mobile network? T-Mobile. This deal is a pig in a poke and realistically eliminates not just one present-day market competitor (Sprint), but has the potential to eliminate Dish down the road, if Dish fails to meet its build out deadlines and loses its spectrum or if Dish decides to sell its entire business before completing any significant RAN build out. As we all scratch our heads to figure out how Dish will fund a $10 billion fourth facilities-based network, we speculate that they don’t have to do it. Dish just has to get its license build out requirements extended so it can eventually sell.

Other Recent Developments and Next Steps

Since the DOJ and Supporting State AGs filed their Complaint and Proposed Final Judgment with the U.S. District Court for the District of Columbia last week, this case has seen some major developments. First, on August 1, 2019, the State of Texas joined the other Opposing State AGs and signed its name to the lawsuit trying to stop the merger. This is important because the Opposing State AGs now consist of both a Republican and Democrats, and three of the four largest states in the U.S. are now on the record as opposing this merger and the sweetheart deal for Dish. Also of note is the fact that Texas joined this lawsuit after carefully reviewing the Complaint and Proposed Final Judgment whereas the five states supporting DOJ did not conduct such a review and appear to have blindly signed on to the DOJ Complaint and Proposed Final Judgment. Second, the Opposing State AGs have been successful in extending trial date in the U.S. District Court for the Southern District of New York from October 7, 2019 to December 9, 2019. Sprint, T-Mobile, and Dish (and especially their shareholders) are trying to get this deal closed, and any further legal delays do not help them. Third, because the basic terms of this proposed Sprint/T-Mobile merger are now drastically different from what was originally proposed in April of 2018 and because Dish is now asking the FCC for build-out extensions for at least 696 licenses, numerous parties are now urging the Commission to open up the merger proceeding and the Dish license build-out extension request for public comment. If the FCC were to approve the newly proposed transaction without seeking public comment, the FCC risks its order being overturned in federal court for violations of the Administrative Procedure Act. It is important for the FCC to be transparent and accept comment on the newly structured deal especially with license build-out requirements by a company that has been warehousing a significant amount of spectrum.

¹ “Justice Department Settles with T-Mobile and Sprint in Their Proposed Merger by Requiring a Package of Divestitures to Dish,” News Release, U.S. Department of Justice (July 26, 2019) (News Release); see https://www.justice.gov/opa/pr/justice-department-settles-t-mobile-and-sprint-their-proposed-merger-requiring-package.
² The participating state Attorneys General (Supporting State AGs) offices represent Kansas, Nebraska, Ohio, Oklahoma, and South Dakota.
³ Deutsche Telekom AG (DT) and Softbank Group Corp. (Softbank).
⁴ “T-Mobile and Sprint to Combine, Accelerating 5G Innovation & Increasing Competition,” T-Mobile News Release (April 29, 2018); see https://www.t-mobile.com/news/5gforall.
⁵ WT Docket No. 18-197; see https://docs.fcc.gov/public/attachments/DA-18-625A1.pdf.
⁶ Protecting Consumers and Competition: An Examination of the T-Mobile and Sprint Merger,” U.S. House Subcommittee on Communications and Technology (February 13, 2019); see https://energycommerce.house.gov/committee-activity/hearings/hearing-on-protecting-consumers-and-competition-an-examination-of-the-t; and “The State of Competition in the Wireless Market: Examining the Impact of the Proposed Merger of T-Mobile and Sprint on Consumers, Workers, and the Internet,” U.S. House Committee on the Judiciary (March 12, 2019); see https://judiciary.house.gov/legislation/hearings/state-competition-wireless-market-examining-impact-proposed-merger-t-mobile-0
⁷ “Chairman Pai Statement on T-Mobile/Sprint Transaction (May 20, 2019); see https://docs.fcc.gov/public/attachments/DOC-357535A1.pdf. See also https://docs.fcc.gov/public/attachments/DOC-357536A1.pdf and https://twitter.com/mikeofcc/status/1130583036595179520.
⁸ The states joining the lawsuit include California, Colorado, Connecticut, District of Columbia, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nevada, New York, Texas, Virginia and Wisconsin (Opposing State AGs). See https://ag.ny.gov/sites/default/files/6.11.19_new_york_attorney_general_james_moves_to_block_t-mobile_and_sprint_megamerger.pdf. Texas is a recent, significant addition because the state’s Attorney General is a Republican, with the other 14 Attorneys General are Democrats.
⁹ See https://www.justice.gov/opa/press-release/file/1187721/download
¹⁰ See https://www.justice.gov/opa/press-release/file/1187706/download
¹¹ See https://www.justice.gov/opa/press-release/file/1187711/download
¹² The Tunney Act requires that any proposed consent decree entered into by the United States government must first be published in the Federal Register. Any person may submit written comments concerning the proposed DOJ settlement within sixty (60) of the proposed consent decree’s publication. See 15 U.S.C. § 16.
¹³ Dish Letter (July 26 2019); see https://www.fcc.gov/sites/default/files/dish-letter-07262019.pdf.
¹⁴ DOJ Complaint at ¶¶ 3, 4.
¹⁵ DOJ Complaint at ¶¶ 16, 21.
¹⁶ DOJ Complaint at ¶ 21.
¹⁷ DOJ Complaint at ¶¶ 23-24.
¹⁸ CIS at p. 7.
¹⁹ CIS at pp. 17-23. See also Section 2(b) of the Antitrust Procedures and Penalties Act (APPA or Tunney Act); 15 U.S.C. § 16(b)-(h).
²⁰ Throughout the Proposed Final Judgment, the DOJ and Supporting State AGs make reference to the “Divesting Defendants” (defined as Sprint and T-Mobile) and the “Acquiring Defendant” (defined as Dish). However, in some instances, the Proposed Final Judgment makes reference to just “T-Mobile.” For the purposes of our analysis herein, unless explicitly noted otherwise, all references to “T-Mobile” shall mean “New T-Mobile”, or the potential post-merger legal entity.
²¹ The Proposed Final Judgment also appoints a “Monitoring Trustee” to oversee the defendants’ compliance with all the terms and conditions contained in any final judgment. The Monitoring Trustee’s fees are paid for by the defendants.
²² Proposed Final Judgment at p 6. “Prepaid Assets” is defined as “all tangible and intangible assets primarily used by the Boost Mobile, Sprint-branded prepaid, and Virgin Mobile businesses today, including but not limited to Boost and Virgin Mobile Retail Locations, licenses, personnel, facilities, data, and intellectual property, as well as all relationships and/or contracts with prepaid customers served by Sprint, Boost Mobile, and Virgin Mobile.” “Full MVNO Agreement” is defined as “an agreement that (1) provides [Dish] the ability to sell retail mobile wireless services as an MVNO using [Sprint and T-Mobile’s] wireless networks, (2) provides [Dish] the option to deploy its own core network with all associated service platforms to be offered in combination with services provided by [Sprint and T-Mobile’s] wireless networks, and (3) requires [Sprint and T-Mobile] to provide network connectivity between [Sprint and T-Mobile’s] and [Dish’s] network for all traffic.”
²³ Proposed Final Judgment at p 7.
²⁴ Proposed Final Judgment at p 11.
²⁵ Proposed Final Judgment at p 11. The DOJ and Supporting State AGs may agree to one or more extensions to complete the license transfer, each lasting 60 calendar days, provided Dish files timely applications with the FCC.
²⁶ Id.
²⁷ Id. We view this as T-Mobile seeking to dispose of the former Nextel spectrum that it really has no need to utilize and that it considers an albatross.
²⁸ Proposed Final Judgment at p 13.
²⁹ Proposed Final Judgment at p 13.
³⁰ Proposed Final Judgment at p 13. “Cell Sites” is defined as “any wireless communications towers, rooftops, water towers, or other wireless communications facilities owned or leased by [Sprint and T-Mobile] and the physical location and wireless equipment thereto.” “Decommissioned” or “Decommissioning” with respect to Cell Sites is defined as “when the Cell Site is no longer transmitting on [Sprint or T-Mobile’s] network.”
³¹ Proposed Final Judgment at p 14.
³² Proposed Final Judgment at p 15.
³³ Proposed Final Judgment at p 15.
³⁴ “Decommissioned” or “Decommissioning” with respect to Retail Locations is defined as “when [Sprint or T-Mobile] cease customer service operations.”
³⁵ Proposed Final Judgment at p 16.
³⁶ Proposed Final Judgment at p 19. “Full MVNO Agreement” is defined as “an agreement that (1) provides [Dish] the ability to sell retail mobile wireless services as an MVNO using [Sprint and T-Mobile’s] wireless networks, (2) provides [Dish] the option to deploy its own core network with all associated service platforms to be offered in combination with services provided by [Sprint and T-Mobile’s] wireless networks, and (3) requires [Sprint and T-Mobile] to provide network connectivity between [Sprint and T-Mobile’s] and [Dish’s] network for all traffic.”
³⁷ Proposed Final Judgment at p 19.
³⁸ Proposed Final Judgment at p 19.
³⁹ Proposed Final Judgment at p 20.
⁴⁰ Proposed Final Judgment at p 20. This provision can be overturned if Sprint and T-Mobile demonstrate to the Monitoring Trustee that honoring these extended terms causes material adverse effects beyond mere marketplace competition.
⁴¹ Proposed Final Judgment at p 21.
⁴² Proposed Final Judgment at p 22.
⁴³ Proposed Final Judgment at p 23.
⁴⁴ Proposed Final Judgment at p 23.
⁴⁵ Proposed Final Judgment at p 23. This report must include, at a minimum, the number of towers and small cells deployed by Dish, the spectrum bands over which Dish deploys equipment, Dish’s progress in obtaining devices that operate on each of its licensed spectrum bands, the percentage of population of the U.S. covered by Dish’s wireless network, the number of mobile wireless subscribers actually served by Dish, the amount of traffic transmitted to and from these users over Dish’s facilities-based wireless network, the amount of traffic transmitted to and from the Sprint and T-Mobile networks pursuant to the Full MVNO Agreement, and any efforts by Sprint and/or T-Mobile to interfere with Dish’s efforts to deploy and operate its own facilities-based wireless network.
⁴⁶ Proposed Final Judgment at p 31. However, if 800 MHz Spectrum Licenses are divested, Sprint and T-Mobile will be allowed to lease back from Dish up to four megahertz of spectrum, as needed, for a period not to exceed two years.
⁴⁷ Proposed Final Judgment at p 25.
⁴⁸ Proposed Final Judgment at p 27.
⁴⁹ Proposed Final Judgment at p 35.
⁵⁰ Dish Letter at p. 1. In total, Dish is requesting that the FCC allow it to delay the construction deadline for 696 total licenses throughout the United States in the AWS-4, AWS H Block, and Lower 700 MHz E Block.
⁵¹ Dish Letter at p. 2.
⁵² Dish defines “5G” as “at least 3GPP Release 15 capable of providing Enhanced Mobile Broadband (eMBB) functionality."
⁵³ Dish Letter at p. 4.
⁵⁴ “Divestiture Assets” is defined as “the Prepaid Assets, the 800 MHz Spectrum Licenses, the Decommissioned Retail Locations, and the Decommissioned Cell Sites.”