REDACTED – FOR PUBLIC INSPECTION Description of Transaction, Public Interest Statement, and Related Demonstrations June 18, 2018 REDACTED – FOR PUBLIC INSPECTION EXECUTIVE SUMMARY T-Mobile US, Inc. (“T-Mobile”) and Sprint Corporation (“Sprint”) respectfully request approval from the Federal Communications Commission (“FCC” or “Commission”) to join together to form “New T-Mobile.” This proposed merger is necessary to accomplish a goal critical to enhancing consumer welfare in this country: the rapid and widespread deployment of 5G networks in a market structure that spurs rivals to invest in a huge increase in capacity, and, correspondingly, to drop tremendously the price of data per gigabyte. New T-Mobile will be able to leverage a unique combination of complementary assets to unlock massive synergies in order to build a world-leading nationwide 5G network that will deliver unprecedented services to consumers, increasingly disrupt the wireless industry, and ensure U.S. leadership in the race to 5G. Consumer Benefits Are Compelling. This transaction is a unique opportunity to deliver myriad compelling benefits for American consumers, which would not be achievable in the absence of the merger: • New T-Mobile Will Build a World-Class Nationwide 5G Network That Will Leapfrog Verizon and AT&T’s Networks. New T-Mobile will invest nearly $40 billion to combine the complementary spectrum, sites, and assets of T-Mobile and Sprint to deliver a robust, nationwide world-class 5G network and services sooner than otherwise possible. Current Sprint customers will realize 4G LTE coverage benefits; T-Mobile customers will realize improvements from the greater depth of spectrum; and, as the 5G network is built out, the speed and capacity gains will be significant. By 2024, the New T-Mobile network will have approximately double the total capacity and triple the total 5G capacity of T-Mobile and Sprint combined, with 5G speeds four to six times what they could achieve on their own. In the face of this challenge, Verizon and AT&T will need to respond with improved and accelerated 5G network investment and deployment to the betterment of all consumers and the country. • American Consumers Will Pay Less and Get More. “As New T-Mobile expands its capacity, the cost of delivering each gigabyte of data to customers will be greatly reduced—“capacity will double and the cost of delivering data will plummet. [New TMobile] will compete aggressively with lower prices to take market share from Verizon REDACTED – FOR PUBLIC INSPECTION and AT&T, allowing more customers to enjoy the benefits of [its] increased capacity.”1 This benefit will not be limited to T-Mobile’s customers. Indeed, an economic analysis by Dr. David Evans concludes that building the nationwide 5G network will provoke competitive responses from Verizon and AT&T that result in as much as a 55 percent decrease in price per GB and a 120 percent increase in cellular data supply for all wireless customers.2 Consumers get both a dollar and also a data dividend from the merger. • New T-Mobile Will Deliver Fiber-Like Speeds That Enable Exciting and Innovative Uses on a Broader Basis. New T-Mobile’s nationwide 5G network will make possible real-time interactivity and a significantly enhanced user experience. The new network will virtually eliminate the constraints consumers currently experience in congested environments, allowing for near instantaneous sharing and downloading of content from almost any location. This will transform the way Americans live, work, travel, and play by facilitating an enormous variety of Internet of Things (“IoT”) applications, as well as the full spectrum of connected devices. Even better, the broad geographic reach of New T-Mobile’s 5G network will facilitate the use of advanced applications that are critically needed in small towns and rural communities. • New T-Mobile Will Provide a Bona Fide Alternative to Traditional In-Home Broadband Providers. New T-Mobile’s robust, nationwide 5G network will eliminate the speed and capacity differential between mobile and in-home wired broadband for many Americans, allowing millions more Americans to free themselves from the grip of traditional in-home broadband providers. The new 5G network’s speeds, capacity, and low prices will allow consumers to “cut the cord” and use their mobile wireless service as their broadband service both inside and outside the home and pocket the savings from eliminating an unnecessary and costly wired broadband bill month after month. New TMobile will also offer an aggressively priced wireless in-home broadband solution to compete head-on with the traditional providers. • The Merger Will Create Expanded Choices for Enterprise and Video Customers. The merger also will unleash a maverick Un-carrier delivering competition and lower prices for customers of other services. New T-Mobile will have the scale, spectrum, and financial strength to disrupt the enterprise segment and video marketplace with innovative products and services that will bring much-needed competition, innovation, and consumer choice to these areas. • Rural Americans Win Big with Better Service, Including High Speed Broadband. New T-Mobile will bring increased broadband coverage to rural Americans, along with improved signal quality and increased network capacity that will enable data-intensive 1 Declaration of G. Michael (“Mike”) Sievert, President and Chief Operating Officer, T-Mobile US, Inc., Appx. C, at ¶21 (“Sievert Decl.”). 2 See David S. Evans, Market Platform Dynamics, “Economic Analysis of the Impact of the Proposed Merger of TMobile and Sprint on the Deployment of 5G Cellular Technologies, the 5G App Ecosystem, and Consumers, Enterprises, and the Economy,” Appx. G, Section V.C., ¶¶220-44 (“Evans Decl.”). ii REDACTED – FOR PUBLIC INSPECTION applications and superior rural consumer experiences. This improved service will be accompanied by enhanced customer service through 600 or more new stores and up to five call centers located to serve rural areas and small towns. • Accelerated 5G Deployment Will Help the United States Continue to Lead the World. As Chairman Pai has stated, the United States should “be the best country for innovating and investing in 5G networks”3 and “continue[] to lead in 5G and to enable wireless consumers to benefit from these technologies sooner rather than later.”4 New T-Mobile’s 5G nationwide network will help ensure that this leadership happens right here in the United States. • The Merger Will Create Thousands of Additional American Jobs. Finally, the merger will create jobs on New T-Mobile’s first day and going forward. New T-Mobile will hire employees to build the new network; extend the Un-carrier customer care model to a wider subscriber base; and support customers in growing segments like in-home broadband, enterprise, and IoT. New T-Mobile’s increased investment and rapid growth—and resultant accelerated roll-out of 5G services—also will stimulate thousands of additional jobs throughout the U.S. economy. Competition Will Intensify. The merger is resoundingly pro-competitive and pro- consumer: • New T-Mobile Will Be a Disruptive Consumer-Focused Un-carrier. New T-Mobile will have the scale and resources to take the Un-carrier movement to the next level and into new market segments. The combined company will have lower costs and the incentives to engage in aggressive pricing to expand its 4G LTE customer base as the industry continues its major transformation towards 5G. To date, T-Mobile and Sprint, individually, have not been able to materially erode Verizon and AT&T’s wireless market share or overcome their scale advantages. New T-Mobile, however, will be able to go toe-to-toe with the two larger rivals to the benefit of competition and consumers. • New T-Mobile Will Have Incentives to Compete Aggressively. The combined company’s network will have enormous capacity that will incentivize New T-Mobile to compete vigorously to “fill up” the network. This increased pressure to utilize added capacity is supported by New T-Mobile’s financial plan, which calls for the company to provide a combination of greater value and lower cost for conventional data services and to continue offering subscribers more data each year without increasing prices. Indeed, as Dr. David S. Evans substantiates, added capacity has historically reduced unit prices for consumers, and it will continue to do so here. 3 Chairman Ajit Pai, Remarks at Mobile World Congress, Barcelona, Spain (Feb. 26, 2018), https://apps.fcc.gov/edocs_public/attachmatch/DOC-349432A1.pdf. 4 Chairman Ajit Pai, Remarks at Mobile World Congress Americas, San Francisco, CA (Sept. 12, 2017), https://docs.fcc.gov/public/attachments/DOC-346666A1.pdf. iii REDACTED – FOR PUBLIC INSPECTION • T-Mobile and Sprint Are Merging to Beat Verizon and AT&T, Not to Be Like Them. Verizon and AT&T are investing in a wide array of businesses in recognition of a converging broadband market, and therefore their interests and resources are spread across a lot of areas. New T-Mobile will be laser-focused on improved broadband connectivity at a lower price. This means New T-Mobile will not be coordinating with AT&T, Verizon or other large players to increase prices or restrict the amount of data delivered per dollar. • Other Large Players Will Intensify Competition Further. Many significant companies, particularly Comcast and Charter, but also DISH, TracFone, and Google, have successfully entered or are on the verge of entering the wireless market, demonstrating the intensity of current competition in the sector. Indeed, renowned economists Professor Steven Salop and Dr. Yianis Sarafidis find that, “a conclusion that there will be higher risk of coordination after this merger cannot be supported” by the totality of the evidence and economic analysis.5 T-Mobile’s Chief Executive Officer John Legere aptly captures the benefits of this transaction for consumers and competition: We are committing nearly $40 billion to bring this company into the 5G era over the first 3 years, with the majority of this investment focused on the rapid enhancement of the network, in order to retain our existing customer base, attract new customers, and benefit from being first to deliver transformative 5G services across the country. That’s why we plan to expand T-Mobile’s unique customer service model to Sprint while we subsequently deliver better coverage, reliability, and speed. And that’s why we will keep prices low for consumers, who are vital to our ability to build out 5G infrastructure across the country. When it comes to changing how the wireless industry operates, we’re only getting started.6 For these reasons, the grant of the T-Mobile and Sprint applications to transfer their authorizations to New T-Mobile clearly will serve the public interest, convenience and necessity. 5 Declaration of Prof. Steven C. Salop and Dr. Yianis Sarafidis, Charles River Associates, Appx. H, at ¶9. 6 Declaration of John Legere, Chief Executive Officer, T-Mobile US, Inc., Appx. A, at ¶23. iv REDACTED – FOR PUBLIC INSPECTION TABLE OF CONTENTS I. DESCRIPTION OF THE APPLICANTS AND TRANSACTION.........................1 A. II. III. The Applicants .............................................................................................1 1. Description of T-Mobile ..................................................................1 2. Description of Sprint ........................................................................2 B. The Transaction ...........................................................................................3 C. Approvals Requested ...................................................................................8 FCC STANDARD OF REVIEW.............................................................................9 A. Public Interest Evaluation ............................................................................9 B. Product and Geographic Markets...............................................................11 C. The FCC Competitive Analysis and Mobile Services in a Converging Broadband Market .....................................................................................12 THE MERGER WILL PRODUCE SIGNIFICANT PUBLIC INTEREST BENEFITS .............................................................................................................15 A. The Merger Will Provide New T-Mobile with the Ability to Construct and Deploy a World-Leading 5G Network ......................................................15 B. The Merger Enables Faster and Cheaper Deployment of a Nationwide 5G Network to Leapfrog Verizon and AT&T .................................................16 C. 1. Neither T-Mobile Nor Sprint Can Develop a Robust, Nationwide 5G Network on a Standalone Basis ...............................................18 2. New T-Mobile Will Deploy 5G Faster and on a Much Wider and Deeper Basis, While Also Improving LTE Service .......................28 3. The New T-Mobile 5G Network Will Result in Substantial Customer Experience Improvements Over the Standalone Networks of Either Company ........................................................41 4. New T-Mobile Will Cause Verizon, AT&T, and Others to Accelerate and Increase Investment in Their 5G Networks ..........47 The Merger Will Result in Enormous Consumer Benefits that Cascade from Today’s Typical Customer Services into Numerous Streams of Innovative New Offerings..........................................................................50 1. The Proposed Transaction Will Result in Consumers Paying Less and Getting More ...........................................................................51 2. Exciting and Innovative Services Will Flow from New T-Mobile’s Network Speed and Capacity .........................................................55 3. Consumers Will Have a New Lower Priced and Higher Quality Competitive Option for In-Home Broadband ................................58 4. Rural Consumers Will Get Improved Broadband and Retail Service............................................................................................64 REDACTED – FOR PUBLIC INSPECTION 5. D. E. IV. Accelerated 5G Deployment Will Help the United States to Continue to Lead the World ...........................................................69 The Merger Will Produce Improved Services and Expanded Choices for Enterprise and Video Customers ...............................................................70 1. New T-Mobile Will Bring Disruptive Un-carrier Choices for Enterprise Business Customers ......................................................71 2. New T-Mobile Will Disrupt the Video Distribution Marketplace by Bringing Added Choice, Lower Costs, and Innovative Services...76 The Merger Will Result in Thousands of Additional American Jobs .......80 1. The Merger Will Result in Job Gains, Not Losses at New T-Mobile ........................................................................................81 2. NERA’s Economic Analysis Confirms that the Merger Will Result in Tens of Thousands of New Jobs in the U.S. Economy..............83 THE MERGER WILL INTENSIFY, NOT HARM, COMPETITION .................84 A. Verizon and AT&T are Two Large, Entrenched Nationwide Carriers and the Wireless Marketplace Needs a Disruptive Rival of Similar Scale to Drive Competition and Innovation ............................................................85 B. Unlike the Two Standalone Companies, New T-Mobile Will Be a Strengthened Maverick with the Incentives and Ability to Go Toe-to-Toe with Verizon and AT&T ............................................................................94 C. D. 1. Sprint Faces Serious Challenges for the Future .............................94 2. T-Mobile, as a Standalone Company, Has Had Some Success But Will Not Be Able to Continue Competing as Well Without the Merger ............................................................................................98 3. New T-Mobile Will Have the Incentive and Ability to Compete with Verizon and AT&T ..............................................................100 Convergence of Industries to Create a Singular Broadband Marketplace is Enabling New Entrants in Wireless to Have Increasing Competitive Relevance, Particularly in 5G Services ....................................................102 1. Comcast and Charter Are Aggressively Entering Wireless .........105 2. DISH Is on the Cusp of Entering the Wireless Space with Nationwide IoT and 5G Networks ...............................................112 3. TracFone Is a Nationwide Wireless Provider with 23 Million Subscribers ...................................................................................114 4. Competitive Pressures Also Come from Other Sources ..............116 There Is No Significant Likelihood of Harmful Unilateral Effects or Coordinated Interaction ...........................................................................118 1. New T-Mobile Will Compete Aggressively with Its 5G Network and Will Lack Incentives to Engage in Competitively Harmful Unilateral Conduct .......................................................................119 ii REDACTED – FOR PUBLIC INSPECTION E. V. VI. 2. New T-Mobile Will Be a Maverick While Its 5G Network Is Being Deployed, and There Is No Credible Short-Term Threat of Harmful Unilateral Conduct ........................................................124 3. There Is No Credible Threat of Coordinated Action in Today’s Mobile Marketplace, Particularly Given New T-Mobile’s Network Plans .............................................................................................128 The Transaction Will Not Harm Competition in Local Markets .............132 PROCEDURAL CONSIDERATIONS ...............................................................137 A. Additional Authorizations ........................................................................137 B. Exemption from Cut-off Rules ................................................................138 C. Unconstructed Facilities...........................................................................138 D. Unjust Enrichment ...................................................................................139 E. 600 MHz Band Information .....................................................................139 F. Environmental Impact ..............................................................................140 G. National Security Agreement ...................................................................140 H. Related Governmental Filings .................................................................140 CONCLUSION ....................................................................................................141 APPENDIX A: APPENDIX B: APPENDIX C: APPENDIX D: APPENDIX E: APPENDIX F: APPENDIX G: APPENDIX H: APPENDIX I: APPENDIX J: APPENDIX K: APPENDIX L: APPENDIX M: DECLARATION OF JOHN LEGERE DECLARATION OF NEVILLE RAY DECLARATION OF G. MICHAEL SIEVERT DECLARATION OF PETER EWENS DECLARATION OF JOHN C. SAW DECLARATION OF BRANDON “DOW” DRAPER DECLARATION OF DAVID EVANS JOINT DECLARATION OF PROFESSOR STEVEN C. SALOP AND DR. YIANIS SARAFIDIS DECLARATION OF JEFFREY EISENACH, PH.D LOW-BAND SPECTRUM AGGREGATION PETITION FOR DECLARATORY RULING SPECTRUM HOLDINGS AND AGGREGATION DATA COMPETITOR CHART iii REDACTED – FOR PUBLIC INSPECTION By this application and related applications (the “Applications”)1 and pursuant to Sections 214 and 310(d) of the Communications Act of 1934, as amended (“the Act”), T-Mobile US, Inc. (“T-Mobile”) and Sprint Corporation (“Sprint” and, collectively with T-Mobile, “Applicants”) hereby request the Federal Communications Commission’s (“FCC” or “Commission”) consent to the transfer of control of the FCC authorizations, radio licenses, and spectrum leases held by Sprint’s subsidiaries from Sprint to T-Mobile. In addition, the Applicants hereby request authority for the pro forma transfer of control of the authorizations, radio licenses, and spectrum leases held by T-Mobile’s subsidiaries as a result of the proposed transaction. As discussed herein, the proposed transfers of control satisfy the Commission's standards for approval, generate substantial public interest benefits for the customers of TMobile and Sprint and for U.S. wireless customers as a whole, and do not give rise to any competitive harms. So that consumers can promptly enjoy these benefits, the Applicants seek expedited review and grant of the Applications. I. DESCRIPTION OF THE APPLICANTS AND TRANSACTION A. The Applicants 1. Description of T-Mobile T-Mobile is currently the third largest wireless carrier in the United States, serving approximately 72.6 million customers under the T-Mobile and MetroPCS brands.2 Through its owned and operated retail stores, third-party distributors, and its websites, T-Mobile offers 1 Individual applications have been filed to transfer control of the radio station licenses, leases, subleases, satellite earth station licenses, submarine cable landing licenses, experimental licenses, and domestic and international Section 214 authorizations involved in this transaction. ULS File No. 0008224209 is the lead wireless application; see also Joint Application for Consent to Transfer Control of Domestic and International Authority Pursuant to Section 214 of the Communications Act, as amended, WT Docket No 18-197 (filed June 18, 2018). 2 T-Mobile US, Inc., Annual Report (Form 10-K), at 37 (Feb. 7, 2018), http://investor.tmobile.com/Cache/392104903.pdf (“T-Mobile 2017 10-K”). REDACTED – FOR PUBLIC INSPECTION wireless voice and data services to residential and business customers in the United States, Puerto Rico, and the U.S. Virgin Islands, as well as a wide selection of wireless devices and accessories. T-Mobile is a publicly traded Delaware corporation headquartered in Bellevue, Washington. T-Mobile’s 2017 revenues were approximately $40.6 billion,3 its assets currently total approximately $70.56 billion,4 its market capitalization is approximately $50.82 billion,5 and it holds approximately $28.32 billion in debt.6 The company is controlled by Deutsche Telekom AG (“Deutsche Telekom”), which indirectly holds approximately 62 percent of TMobile’s stock. Deutsche Telekom is based in Bonn, Germany, and provides fixed broadband and wireless services to customers in more than 50 countries around the world.7 2. Description of Sprint Sprint is the fourth-largest wireless carrier in the United States, serving approximately 54.58 million customers across its retail and wholesale wireless service offerings at the end of 2017, and is an interexchange carrier and Tier 1 Internet backbone provider.8 Sprint offers a range of wireless and wireline voice and data products and services, as well as devices and accessories, to residential and business customers in the United States, Puerto Rico, and the U.S. Virgin Islands under the Sprint, Boost Mobile, Virgin Mobile, and Assurance Wireless brands. 3 Id. at 24. 4 Id. 5 See T-Mobile US, Inc., WALL STREET JOURNAL, https://quotes.wsj.com/TMUS (last visited June 16, 2018). 6 T-Mobile 2017 10-K at 24. See Deutsche Telekom, Leading European Telco, https://www.telekom.com/en/company/details/leading-europeantelco-355194 (last visited June 16, 2018). 8 Sprint Corporation, Annual Report (Form 10-K), at 40 (May 24, 2018), http://d18rn0p25nwr6d.cloudfront.net/CIK-0000101830/f87fb089-cbf4-415a-accf-2122a5b0323f.pdf (“Sprint 2017 10-K”). 7 2 REDACTED – FOR PUBLIC INSPECTION Sprint also provides wireline voice and data services to businesses with operations outside the United States. Sprint is a publicly traded Delaware corporation with its headquarters located in Overland Park, Kansas. Sprint’s 2017 revenues were approximately $32.41 billion,9 its assets currently total approximately $85.46 billion,10 its market capitalization is approximately $22.02 billion,11 and it holds approximately $32 billion in net debt.12 Sprint is controlled by SoftBank Group Corp. (“SoftBank”), which indirectly holds approximately 84 percent of Sprint’s stock.13 SoftBank is based in Tokyo, Japan, and provides mobile and fixed-line services in Japan through SoftBank Corp., its telecommunications subsidiary.14 B. The Transaction The Business Combination Agreement between the parties sets forth the structure and steps of the proposed transaction. In short, the transaction will be a merger of Sprint into an indirect subsidiary of T-Mobile, with Sprint surviving as a direct subsidiary of T-Mobile USA, Inc., which is a direct subsidiary of T-Mobile. This will be accomplished through several, virtually simultaneous steps. 9 Id. at 30. 10 Id. 11 See Sprint Corporation, WALL STREET JOURNAL, https://quotes.wsj.com/S (last visited June 16, 2018). 12 Sprint 2017 10-K at 18. See also Sprint Corporation, Sprint Delivers Best Financial Results In Company History With Highest Ever Net Income And Operating Income In Fiscal Year 2017 (May 2, 2018), http://investors.sprint.com/news-and-events/press-releases/press-release-details/2018/Sprint-Delivers-BestFinancial-Results-In-Company-History-With-Highest-Ever-Net-Income-And-Operating-Income-In-Fiscal-Year2017/default.aspx (laying out debt maturity schedule). 13 Sprint 2017 10-K at 1. 14 See SoftBank Group, Group Structure, https://www.softbank.jp/en/corp/irinfo/about/outline/ (last visited June 16, 2018). 3 REDACTED – FOR PUBLIC INSPECTION In anticipation of the transaction, T-Mobile has formed two indirect subsidiaries, Huron Merger Sub LLC (“Huron”) and Superior Merger Sub Corporation (“Superior”). The current, pre-closing structure of Sprint and T-Mobile is illustrated below: At closing, if certain conditions are met, the first step will be that SoftBank subsidiaries, Galaxy Investment Holdings, Inc. (“Galaxy”) and Starburst, Inc. (“Starburst”), which currently collectively own approximately 84 percent of Sprint, will merge with and into Huron, with Huron continuing as the surviving corporation. All of the issued and outstanding shares of Galaxy and Starburst stock will be converted such that SoftBank will receive an aggregate number of shares of T-Mobile Common Stock, par value $0.00001 per share, equal to the product of 0.10256 (the “Exchange Ratio”) and the aggregate number of shares of common stock of Sprint, par value $0.01 per share, held by Galaxy and Starburst, collectively. 4 REDACTED – FOR PUBLIC INSPECTION Next, Superior will merge with and into Sprint, with Sprint continuing as the surviving entity. Each share of Sprint stock issued and outstanding (other than shares of Sprint Common Stock that were held by Galaxy and Starburst or are held by Sprint as treasury stock) will be converted into the right to receive a number of shares of T-Mobile Common Stock equal to the Exchange Ratio. SoftBank and its affiliates will receive the same amount of T-Mobile Common Stock per share of Sprint Common Stock as all other Sprint stockholders. If the first step above does not occur, Sprint shares held by Galaxy and Starburst will be converted into T-Mobile shares in this step. 5 REDACTED – FOR PUBLIC INSPECTION As a final step, Huron will distribute Sprint stock to T-Mobile, which T-Mobile will then contribute to its subsidiary, T-Mobile USA, Inc. Following completion of these steps, Sprint will be a wholly owned subsidiary of T-Mobile USA, Inc., which is a direct subsidiary of T-Mobile. Deutsche Telekom and SoftBank are expected to hold approximately 42 percent and 27 percent of the fully diluted shares of T-Mobile Common Stock, respectively, with the remaining approximately 31 percent of the fully-diluted shares of T-Mobile Common Stock held by public stockholders. Pursuant to a Proxy, Lock-up and ROFR Agreement between Deutsche Telekom and SoftBank to be executed prior to closing, SoftBank will grant Deutsche Telekom the right to direct the voting of SoftBank’s T-Mobile shares. The post-closing structure of New T-Mobile is below: 6 REDACTED – FOR PUBLIC INSPECTION John Legere, CEO of T-Mobile and the creator of T-Mobile’s successful Un-carrier strategy, will serve as Chief Executive Officer of the combined company. Mike Sievert, TMobile’s current President and Chief Operating Officer, will serve as President and Chief Operating Officer of the combined company. The Board of Directors (“Board”) of New T-Mobile will be comprised of 14 members. Pursuant to the Business Combination Agreement, Deutsche Telekom will designate 9 directors (at least 2 of whom will be independent). SoftBank will designate 4 directors (at least 2 of whom will be independent).15 The remaining director will be New T-Mobile’s CEO. Existing T-Mobile Chairman and Deutsche Telekom CEO, Tim Höttges, has been designated to serve as 15 Masayoshi Son, current SoftBank Chairman and CEO, and Marcelo Claure, current SoftBank Chief Operating Officer and Sprint Executive Chairman, will serve on the Board of the new company as SoftBank designees. 7 REDACTED – FOR PUBLIC INSPECTION Chairman of the Board of New T-Mobile. The combined company will have its headquarters in Bellevue, Washington, with a secondary headquarters in Overland Park, Kansas. C. Approvals Requested Sprint’s subsidiaries hold a variety of FCC authorizations, licenses, and leases, including radio station licenses, leases and subleases, satellite earth station and Cable Television Relay Service (“CARS”) licenses, submarine cable landing licenses, and domestic and international Section 214 authorizations. The transaction will result in a transfer of control of these authorizations to New T-Mobile and, accordingly, applications seeking Commission consent to such transfers are being contemporaneously submitted to the agency. The parties request that the Commission find that such transfers are in the public interest and grant the applications. The transaction will also result in a pro forma transfer of control of the FCC authorizations, licenses, and leases held by T-Mobile’s subsidiaries to New T-Mobile. These entities hold radio station licenses and leases, experimental licenses, and international Section 214 authorizations. As a result of having a majority of Board seats and the right to direct the voting of SoftBank’s shares, T-Mobile’s controlling shareholder, Deutsche Telekom, will retain de facto control of New T-Mobile post-closing even though its shareholdings in New T-Mobile will drop below 50 percent. While the Commission’s rules permit post-closing notification for pro forma transfers of control of many of the licenses and leases held by T-Mobile’s subsidiaries, T-Mobile is submitting all of its pro forma applications and notifications at this time per instructions from the FCC staff. It requests that the Commission approve such submissions. Following consummation of the transaction, the T-Mobile and Sprint licensees will have indirect non-U.S. ownership in excess of 25 percent. For that reason, the parties are additionally 8 REDACTED – FOR PUBLIC INSPECTION submitting a request for declaratory ruling under Section 310(b)(4) of the Communications Act16 and section 1.5000(a)(1) of the Commission’s rules.17 The parties seek Commission grant of that request. II. FCC STANDARD OF REVIEW A. Public Interest Evaluation Pursuant to sections 214(a) and 310(d) of the Act,18 when transactions in the communications industry are proposed involving common carrier authorizations under Title II or radio licenses under Title III, the Commission must determine whether the proposed transfer of control will serve the “public interest, convenience, and necessity.”19 Procedurally, if the proposed transaction does not violate a statute or rule, then the Commission “considers whether the transaction could result in public interest harms by substantially frustrating or impairing the objectives or implementation of the Act or related statutes.”20 The Commission’s review of potential competitive harms is an integral part of the FCC’s public interest analysis, but importantly, the analysis “is informed by, but not limited to, traditional antitrust principles.”21 In particular, “the Commission’s competitive analysis under the public interest standard is somewhat broader [than that conducted by the Department of Justice],” and “the Commission may impose and enforce narrowly tailored, transaction-specific 16 47 U.S.C. § 310(b)(4). 17 47 C.F.R. § 1.5000(a)(1). 18 47 U.S.C. §§ 214(a), 310(d). 19 47 U.S.C. §§214(a), 310(d). See also AT&T Inc. and BellSouth Corp. Application for Transfer of Control, Memorandum Opinion and Order, 22 FCC Rcd 5662, 5671-72 ¶19 (2007). 20 Applications of Level 3 Communications, Inc. and CenturyLink, Inc. for Consent to Transfer Control of Licenses and Authorizations, Memorandum Opinion and Order, 32 FCC Rcd 9581, 9585 ¶9 (2017) (“CenturyLink-Level3 Order”). 21 Id. at 9585 ¶9. 9 REDACTED – FOR PUBLIC INSPECTION conditions that address the potential harms of a transaction.”22 The FCC has clarified that it “will impose conditions ‘only to remedy harms that arise from the transaction (i.e., transactionspecific harms)’ and ‘related to the Commission’s responsibilities under the Communications Act and related statutes,’ and it ‘will not impose conditions to remedy pre-existing harms or harms that are unrelated to the transaction.’”23 Then, “if the Commission is able to find that narrowly tailored, transaction-specific conditions are able to ameliorate any public interest harms and the transaction is in the public interest, it may approve the transaction as so conditioned.”24 The FCC’s competitive review takes place against a backdrop where the Commission “has long recognized the clear public interest benefits in a license or authorization holder being able to assign or transfer control of its license or authorization freely.”25 And the Commission considers other benefits as well—the FCC “will also review other claimed public interest benefits of a transaction,” although “applicants [bear] the burden of proving those benefits by a preponderance of the evidence.”26 While a finding of public interest benefits is thus necessary 22 Id. at 9585-86 ¶9. 23 Id. at 9586 ¶9 (citing SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, Memorandum Opinion and Order, 20 FCC Rcd 18290, 18303 ¶19 (2005); Applications of AT&T Wireless Services, Inc. and Cingular Wireless Corporation for Consent to Transfer Control of Licenses and Authorizations et al., Memorandum Opinion and Order, 19 FCC Rcd 21522, 21545-46 ¶43 (2004); Applications of Nextel Partners, Inc. Transferor, and Nextel WIP Corp. and Sprint Nextel Corporation, Transferees, for Consent to Transfer Control of Licenses and Authorizations, Memorandum Opinion and Order, 21 FCC Rcd 7358, 7361 ¶9 (2006); Applications of AT&T Inc. and CellCo Partnership d/b/a Verizon Wireless for Consent to Assign or Transfer Control of Licenses and Authorizations and Modify a Spectrum Leasing Arrangement, Memorandum Opinion and Order, 25 FCC Rcd 8704, 8747 ¶101 (2010) (“AT&T-Verizon Wireless Order”)). 24 CenturyLink-Level3 Order, 32 FCC Rcd at 9586 ¶11. 25 Id. at 9586 ¶10. 26 Id. 10 REDACTED – FOR PUBLIC INSPECTION for approval, the FCC has emphasized that it does not “employ a ‘balancing test,’ . . . or a ‘sliding scale approach.’”27 B. Product and Geographic Markets In prior transactions, the FCC’s competitive review has started by first determining “the appropriate market definitions for its evaluation,” which “includes establishing the product and geographic market definitions that [the FCC] will apply.”28 The FCC has found that “[t]he relevant product market includes ‘all products ‘reasonably interchangeable by consumers for the same purposes.’’”29 Specifically, the Commission has traditionally viewed the relevant product market for wireless services as “a combined ‘mobile telephony/broadband services’ product market, which is comprised of mobile voice and data services, including mobile voice and data services provided over advanced broadband wireless networks (mobile broadband services).”30 In its analyses, however, the FCC has not restricted itself to facilities-based carriers, but rather 27 Id. n.36. The Commission has specifically noted that it “has not allowed potential competitive harms to go unremedied nor allowed them to be offset by benefits that are not transaction-specific, i.e., benefits that do not naturally arise from the transaction at issue.” Id. 28 Application of AT&T Inc. and Qualcomm Incorporated, Order, 26 FCC Rcd 17589, 17602 ¶32 (2011) (“AT&TQualcomm Order”). 29 Id. (citing United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395 (1956); United States v. Microsoft, 253 F.3d 34, 52 (D.C. Cir. 2001), cert. denied, 122 S. Ct. 350 (2001)). 30 AT&T-Qualcomm Order, 26 FCC Rcd at 17603 ¶33 (citing AT&T-Verizon Wireless Order, 25 FCC Rcd at 8721 ¶35; Applications of AT&T Inc. and Centennial Communications Corp. For Consent to Transfer Control of Licenses, Authorizations, and Spectrum Leasing Arrangements, Memorandum Opinion and Order, 24 FCC Rcd 13915, 13932 ¶37 (2009) (“AT&T-Centennial Order”); Applications of Cellco Partnership d/b/a Verizon Wireless and Atlantis Holdings LLC For Consent to Transfer Control of Licenses, Authorizations, and Spectrum Manager and De Facto Transfer Leasing Arrangements and Petition for Declaratory Ruling that the Transaction is Consistent with Section 310(b)(4) of the Communications Act, Memorandum Opinion and Order and Declaratory Ruling, 23 FCC Rcd 17444, 17469-70 ¶45 (2008) (“Verizon Wireless-ALLTEL Order”); Sprint Nextel Corporation and Clearwire Corporation Applications for Consent to Transfer Control of Licenses, Leases, and Authorizations, Memorandum Opinion and Order, 23 FCC Rcd 17570, 17583-84 ¶26 (2008)). 11 REDACTED – FOR PUBLIC INSPECTION has “assessed the competitive effect of Mobile Virtual Network Operators (‘MVNOs’) and resellers.”31 With respect to the appropriate geographic market, the FCC “will primarily use Cellular Market Areas (‘CMAs’) as the local geographic markets in which [it] analyze[s] the potential competitive harms.”32 The FCC has used CMAs historically because “most consumers use their mobile telephony/broadband services at or close to where they live, work, and shop, [and thus] they purchase mobile telephony/broadband services from service providers that offer and market services locally.”33 However, the Commission has also said that it “recognize[s] that two key competitive variables—prices and service plan offerings—do not vary for most providers across most geographic markets,” and therefore in certain transactions the FCC “find[s] it is in the public interest not only to consider the local markets, but also to consider the effect of [the] transaction at the national level.”34 C. The FCC Competitive Analysis and Mobile Services in a Converging Broadband Market While the Applicants herein analyze the proposed transaction under the review framework that has been used by the FCC for mobile transactions in the past,35 the mobile 31 Applications of Cricket License Company, LLC, et al., Leap Wireless International, Inc., and AT&T Inc. for Consent to Transfer Control of Authorizations, Memorandum Opinion and Order, 29 FCC Rcd 2735, 2751 ¶35 (2014) (“Cricket Leap-AT&T Order”). 32 AT&T-Qualcomm Order, 26 FCC Rcd at 17603 ¶32. 33 Applications of Deutsche Telekom AG, T-Mobile USA, Inc., and MetroPCS Communications, Inc. for Consent to Transfer of Control of Licenses and Authorizations, 28 FCC Rcd 2322, 2332-33 ¶31 (WTB 2013) (“T-MobileMetroPCS Order”). See also AT&T-Qualcomm Order, 26 FCC Rcd at 17604 ¶34 (stating “[n]othing in our record causes us to doubt that, in the event of a price increase limited to one CMA, . . . too few buyers would switch to purchasing mobile wireless services in another area to make that quality-adjusted price increase unprofitable.”). 34 AT&T-Qualcomm Order, 26 FCC Rcd at 17605 ¶37. 35 Importantly, however, the Commission has not reviewed a major wireless transaction since the 2014 acquisition of Leap Wireless by AT&T. See generally Cricket Leap-AT&T Order. While the Commission has iteratively applied the prior definition of relevant “product market” in a string of decisions since 2014, it has not seriously considered whether the definition should be considered anew in light of technology and market changes. 12 REDACTED – FOR PUBLIC INSPECTION services landscape has undergone significant transformation in recent years to converge with wireline services within the broadband market. Preferences and patterns for consuming communications services and content have shifted, with wireless being increasingly used as a complete solution to users’ broadband data and video content needs—wireless is becoming many consumers’ principal connection to the Internet. These changes have been driven by innovations like unlimited wireless plans and rapid changes in wireless technology that have enabled faster data connections. In this new environment, mobile providers are bringing mobile Internet, and content, to consumers in ways never imagined. Cord-cutting—in the broadest sense of removing any fixed landline connection to the home—is increasing and customers have become platformagnostic. And, data is increasingly consumed not just by individuals, but also by machines connecting to other machines that are supporting infrastructure, services, and applications that will benefit consumers. As the Applicants discuss, fundamental changes to the ways mobile broadband is used are being made at an accelerating pace, and the FCC has recognized that “the mobile wireless services marketplace is on the brink of a major technological transformation that is likely to be both competitively disruptive and transformative”—the introduction of 5G. In Section III.C, infra, the Applicants discuss the technological changes ongoing in the marketplace and the massive consumer welfare benefits that will cascade from New T-Mobile’s 5G network and its derivative ability to offer 100 Mbps service to two-thirds of the country. That speed and coverage will allow New T-Mobile to bring new and enhanced competition to multiple adjacent business segments, including in-home broadband, consumer and business IoT, enterprise, and rural market segments. In Section IV, the Applicants then discuss the changing face of competition in a market shaped by the convergence of businesses around the central axis of 13 REDACTED – FOR PUBLIC INSPECTION broadband connectivity. New T-Mobile will face competition from Verizon and AT&T—both entities are actively engaging in acquisitions and leveraging existing diverse assets to bundle services and content from related businesses to lure and keep subscribers. And, just as Verizon and AT&T are reaching into new areas, cable entities like Comcast and Charter and satellite providers like DISH are executing business strategies that exploit their existing consumer reach to provide broadband through wireless technology. As Chairman Pai has suggested, the lines between wireless and wireline service will continue to blur as technology advances and the former becomes a more reliable way to connect.36 Against this dynamic backdrop, now more than ever the FCC’s review of the public interest benefits should not be retrospective or overlook clear trends and business plans being executed in the market today.37 The FCC has always looked at potential competitive entry and changes in the market in its competitive analyses.38 Especially at a time when the industry is undergoing transformative change, the merger should be considered in the context of today’s marketplace. 36 See Diana Goovaerts, FCC’s Pai Won’t Rule Out Wireless Consolidation, Wireless Week (May 8, 2017), https://www.wirelessweek.com/news/2017/05/fccs-pai-wont-rule-out-wireless-consolidation. 37 As discussed in Section III.C, IV.D, and IV.E, even under a static view of the market, the substantial public interest benefits of this transaction far outweigh any potential harms. 38 See, e.g., CenturyLink-Level3 Order, 32 FCC Rcd at 9589 ¶18 (noting “we assess the likelihood of competitive entry to the . . . in response to any post-Transaction unilateral attempt by the combined company to increase prices to customers at that location.”) and 9602 ¶46 (observing “numerous potential competitors exist in the form of ‘other large Internet providers, such as AT&T, Comcast, and Charter,’ all of which are ‘well positioned to compete aggressively in the transit marketplace,’ in addition to other network owners, including firms such as Apple and Google, that have built IP networks to transport content to ISPs serving end-users but historically have not sold transit services,” and recognizing “other developments in the transit services marketplace, such as falling capacity costs and the increasing tendency of large transit services customers to invest in their own network infrastructure, rather than purchasing capacity from transit providers.”). 14 REDACTED – FOR PUBLIC INSPECTION III. THE MERGER WILL PRODUCE SIGNIFICANT PUBLIC INTEREST BENEFITS T-Mobile’s Un-carrier approach of putting consumers first and driving increased competition has led to dramatic changes in the wireless industry over the last five-plus years. Today, all wireless consumers have the freedom to choose the carrier, plans, and services that work best for them, thanks in large part to T-Mobile’s introduction of the Un-contract and elimination of termination fees and penalties for over-usage.39 New T-Mobile will be able to leverage a unique combination of assets and unlock massive synergies that will allow it to build a world-leading 5G network, resulting in substantial benefits for consumers, competition, and the country. A. The Merger Will Provide New T-Mobile with the Ability to Construct and Deploy a World-Leading 5G Network Together, T-Mobile and Sprint possess a truly unique combination of spectrum, sites, and equipment that will provide New T-Mobile with the scale and resources necessary to supercharge the Un-carrier model. The combination of the two companies will generate enormous cost-savings in the form of approximately $43.6 billion total net present value cost synergies by 2024, allowing New T-Mobile to invest in new network technology, innovation, and operations to rapidly construct and deploy the first true, nationwide 5G network.40 New TMobile will use these synergies to invest nearly $40 billion to bring the combined company into the 5G era over the next three years, or approximately three times the amount that T-Mobile would have invested on its own without the merger.41 These merger synergies also will free up 39 Declaration of John Legere, Chief Executive Officer, T-Mobile US, Inc., Appx. A, at ¶4 (“Legere Decl.”). 40 Declaration of G. Michael (“Mike”) Sievert, President and Chief Operating Officer, T-Mobile, US, Inc., Appx. C, at ¶12, 15 (“Sievert Decl.”). 41 Id. at ¶15. 15 REDACTED – FOR PUBLIC INSPECTION financial resources that can be invested into improving customer care, and expanding or enhancing business segments, such as in-home broadband, consumer and business IoT, business, and rural market segments.42 This capital commitment, paired with the unique combination of spectrum, sites, and equipment of T-Mobile and Sprint, will produce a network that will deliver unprecedented services to consumers, increasingly disrupt the wireless industry, and ensure U.S. leadership in the race to 5G. New T-Mobile also will be positioned to use its 5G network to deliver increased competition in broadband, enterprise, and video offerings.43 Moreover, New T-Mobile will use the increased capacity realized by the combination of T-Mobile and Sprint’s networks to deliver lower prices and allow for increased data usage by subscribers.44 As T-Mobile President and Chief Operating Officer Mike Sievert explains, “[o]ur goal for the merger is to be the first, fastest, and best in the 5G race and to capture market share with the Un-carrier combination of value and quality.”45 B. The Merger Enables Faster and Cheaper Deployment of a Nationwide 5G Network to Leapfrog Verizon and AT&T Chairman Pai recently noted with respect to 5G deployment, “[i]f you ain’t first, you’re last.”46 Neither T-Mobile nor Sprint can win on its own, yet both see winning the race to deploy the first next-generation nationwide 5G network as critical to their combined future. The merger provides over $40 billion in synergies, a beneficial increase in scale, and a combination of 42 Id. at ¶16. 43 Id. 44 Id. at ¶21. 45 Id. at ¶12. 46 See Chairman Ajit Pai, Remarks at the Wireless Infrastructure Association Connectivity Expo (May 23, 2018), https://docs.fcc.gov/public/attachments/DOC-350919A1.pdf (citing Ricky Bobby, Talladega Nights: The Ballad of Ricky Bobby (Relativity Media 2006), in the context of country leadership in 5G). 16 REDACTED – FOR PUBLIC INSPECTION complementary and essential assets (including spectrum and sites) to accelerate and deliver a superior nationwide 5G network that will be better and more expansive than anything the companies could deliver on their own. The goal, if not the imperative, is to leapfrog Verizon and AT&T’s networks and, in doing so, force them and other competitors to more quickly provide faster, better 5G services and ensure U.S. leadership in the ongoing race to the 5G finish line. The transaction will enable New T-Mobile to build a network with distinct advantages over both the standalone 5G networks planned by T-Mobile and Sprint and will provide a platform for an unrivaled nationwide 5G mobile service.47 On a standalone basis, neither company has enough or the right combination of spectrum or cell site resources to deliver the enormous gains in capacity that New T-Mobile will provide in the near term. By having the option to use cell sites from either company, the transaction will allow the merged entity to have almost immediate access to more cell sites than either company would have absent the merger. New T-Mobile’s deployment of T-Mobile’s and Sprint’s combined spectrum portfolios, together with the addition of many more radios across the combined network than either party would install on its own, will create a massive increase in capacity that would not be possible but for the transaction. The merger will also enable the combined company to dedicate more spectrum to 5G much sooner than either company could do individually, while also allowing New TMobile to more efficiently utilize existing spectrum assets for continued and unimpaired LTE services. At a fundamental level, the multiplicative effects associated with more cell sites, more 47 Declaration of Neville R. Ray, Executive Vice President and Chief Technology Officer, T-Mobile, US, Inc., Appx. B, at ¶4 (“Ray Decl.”); Declaration of John C. Saw, Chief Technology Officer, Sprint Corporation, Appx. E, at ¶4 (“Saw Decl.”). 17 REDACTED – FOR PUBLIC INSPECTION spectrum per cell site, and higher spectral efficiencies will result in dramatic increases in capacity, throughput,48 and coverage: Figure 1: New T-Mobile 5G Network Comparison to Standalone Networks (2024) 49 The increased competition for 5G leadership stimulated by the merger will dramatically enhance U.S. efforts to meet Chairman Pai’s challenge to deliver world class 5G services to American consumers ahead of any other country. While T-Mobile and Sprint have each been developing plans to deploy 5G, their combined assets will bring significantly better and broader benefits to American consumers much sooner than either company could on its own, if ever. With a quicker path to true, nationwide 5G, New T-Mobile will exert competitive pressure on other U.S. providers to accelerate and improve 5G network deployment and thereby accelerate the country’s technological progress, rapidly bringing enormous benefits to consumers. 1. Neither T-Mobile Nor Sprint Can Develop a Robust, Nationwide 5G Network on a Standalone Basis The creation of New T-Mobile solves the most intractable problems standing in the way of T-Mobile and Sprint in building a superior, nationwide 5G network—the right mix of 48 Average data rate is not equivalent to the actual user experience. The user experience will be affected by a number of variable factors, including received signal strength, location of the mobile device and base station, and whether the device is in motion, among others. 49 Ray Decl. at ¶51. 18 REDACTED – FOR PUBLIC INSPECTION spectrum and cell site resources needed to deliver 5G capacity and services faster than any other wireless provider in the world. On a standalone basis, T-Mobile would be capacity constrained and Sprint lacks coverage. The transaction will solve these issues as New T-Mobile combines each company’s complementary spectrum and site assets to mitigate their individual shortcomings and leverage their strengths. The result will yield gains that are otherwise unattainable by each as a standalone network for the foreseeable future. For T-Mobile, it would be cost-prohibitive to build out enough sites to reach comparable capacity and quality to what New T-Mobile can achieve.50 In addition, T-Mobile’s standalone capability to refarm spectrum to provide 5G service is limited because its spectrum is extensively used for LTE.51 Its ability to roll out a robust 5G network is further challenged by its lack of available mid-band spectrum and the fact that additional mid-band spectrum suitable for 5G is not expected to become available via spectrum auctions in the near term.52 For these reasons, and because LTE is significantly less spectrally efficient than 5G,53 T-Mobile’s ability to expand capacity to maximize the value of its spectrum assets and roll out robust 5G cannot come close to matching that of New T-Mobile. Similarly, Sprint faces a number of constraints that do not allow it to roll out a nationwide 5G offering with robust and ubiquitous coverage. As is true for T-Mobile, Sprint cannot maximize the value of its spectrum as it would be cost-prohibitive for it to build out enough sites using its valuable 2.5 GHz spectrum to enable capacity, coverage, and quality 50 Id. at ¶32. 51 Id. at ¶18. 52 Id. at ¶18. 53 Id. at ¶24. 19 REDACTED – FOR PUBLIC INSPECTION comparable to New T-Mobile’s network.54 Sprint is further constrained from deploying a geographically ubiquitous 5G network because of its lack of sufficient low-band spectrum and because the propagation characteristics of its 2.5 GHz spectrum restrict its ability to cover wide geographic areas, including many rural areas, or provide strong-in building coverage.55 Sprint on a standalone basis would only cover much more limited geographic areas with 5G services using its 2.5 GHz spectrum.56 Finally, Sprint’s ability to fully dedicate its 2.5 GHz spectrum to 5G is limited by its need to use a significant portion of that spectrum for LTE under its standalone plans.57 a. T-Mobile’s 5G Network Would Have Broad Coverage But Lack Capacity T-Mobile has announced its intention to install a standalone 5G network utilizing its newly acquired 600 MHz low-band spectrum as well as its spectrum holdings in the millimeter wave bands.58 T-Mobile recently began deploying equipment for its 600 MHz spectrum, which provides a clean slate for building a 5G network as an initial offering in the band. T-Mobile plans to build a 5G network in 30 cities during 2018, including New York, Los Angeles, Dallas and Las Vegas.59 As a standalone network, T-Mobile would provide enhanced LTE through its 5G-compatible 600 MHz base stations and enable 5G on those sites when standards-based equipment becomes available. In sum, on a standalone basis, T-Mobile would have only 54 Saw Decl. at ¶18, 23; Declaration of Brandon “Dow” Draper, Chief Commercial Officer, Sprint Corporation, Appx. F, at ¶10 (“Draper Decl.”). 55 Saw Decl. at ¶23. 56 Id. at ¶18, 23. 57 Id. at ¶22-24. 58 See T-Mobile, T-Mobile Ready to Rock New Spectrum With First 600 MHz LTE Smartphone & 5G-Ready Network Gear (Aug. 31, 2017), https://newsroom.t-mobile.com/news-and-blogs/tmobile-600mhz.htm. 59 T-Mobile, T-Mobile Building Out 5G in 30 Cities This Year . . . and That’s Just the Start (Feb. 27, 2018), https://newsroom.t-mobile.com/news-and-blogs/mwc-2018-5g.htm. 20 REDACTED – FOR PUBLIC INSPECTION megahertz of spectrum dedicated to 5G with 5G in 2021 and only megahertz of spectrum split between LTE and megahertz of spectrum dedicated to 5G with megahertz of spectrum split between LTE and 5G by 2024, and limited amounts of millimeter wave spectrum in select markets.60 Thereafter, T-Mobile would refarm LTE spectrum to 5G gradually to avoid network congestion, and would devote more network resources to 5G over time. The majority of T-Mobile’s spectrum holdings that would be used for 5G coverage on a standalone basis reside in the 600 MHz band. While the 600 MHz band provides superior coverage and would allow T-Mobile to extend its footprint beyond areas currently served, this spectrum band is also constrained by its relatively low bandwidth and limited ability to efficiently support applications that require high data rates.61 As a result, this band is best suited for certain mobile and IoT applications where wide area coverage, but not the highest data rate, is needed.62 To complement the low-band spectrum used for 5G, T-Mobile on a standalone basis would use up to 200 megahertz of millimeter wave spectrum for 5G,63 which today covers nearly 100 million people in most major metropolitan markets, including New York, Los Angeles, San Francisco, Boston, Dallas, and Philadelphia.64 While T-Mobile’s millimeter wave spectrum constitutes a valuable component of its 5G plan, its millimeter wave holdings are far smaller than 60 For the AWS/PCS spectrum divided between LTE and 5G, some markets will have LTE, some will have 5G. See Ray Decl. at ¶41. 61 Id. at ¶¶18, 35, 38. 62 Id. at ¶52. 63 In most markets, T-Mobile has 200 MHz, but in others the company has as much as 800 megahertz. 64 Ray Decl. at ¶16, 34. See also T-Mobile, T-Mobile Announces Plans for Real Nationwide Mobile 5G (May 2, 2017), https://newsroom.t-mobile.com/news-and-blogs/nationwide-5g.htm; Neville Ray, Setting the 5G Record Straight: Announcing Plans for Nationwide 5G from T-Mobile (May 2, 2017), https://newsroom.t-mobile.com/newsand-blogs/nationwide-5g-blog.htm. 21 REDACTED – FOR PUBLIC INSPECTION those of Verizon and AT&T.65 T-Mobile, therefore, has limited overall capacity and ability in the near term to serve a large number of simultaneous customers with high bandwidth applications as compared to its competitors.66 The millimeter wave spectrum will be used to support applications that require very high speeds but, due to the propagation properties of this spectrum, millimeter wave band coverage will be available only in limited areas.67 Although T-Mobile will build a nationwide 5G network, as shown in the map below, its broad coverage is based on deployment of the 600 MHz spectrum, which lacks the bandwidth to deliver upon the full data rate and capacity gains possible for 5G.68 The map below also demonstrates that T-Mobile’s lack of access to significant, unused mid-band spectrum and large amounts of high-band millimeter wave spectrum across the entire U.S. would continue to limit its ability to support the most demanding, high capacity 5G applications.69 While the Commission has announced future auctions for millimeter wave band spectrum, and T-Mobile may participate in those auctions, such auctions do not address the need for mid-band spectrum to support many of the consumer benefits that New T-Mobile would be able to provide.70 65 The Competitive Carriers Association recently calculated that AT&T and Verizon hold “a staggering 80 percent of the MHz-POPs in the 28 GHz and 39 GHz bands”—with 850 MHz in the 28 GHz band and 1,400 MHz in the 39 GHz band, that comes to an average of 1,800 MHz between the two carriers. See Application for Review or, in the Alternative, Petition for Reconsideration of Competitive Carriers Association, ULS File Nos. 0007652635 and 0007652637 (filed Mar. 12, 2018). 66 In contrast, both AT&T and Verizon have substantially greater millimeter wave band spectrum holdings that are licensed on a much broader geographic basis. See Competitor Chart, Appx. M. 67 Ray Decl. at ¶37. 68 Id. at ¶18. 69 Id. 70 See Auctions of Upper Microwave Flexible Use Licenses for Next-Generation Wireless Services, AU Docket No. 18-85 (rel. April 17, 2018), https://docs.fcc.gov/public/attachments/FCC-18-43A1.pdf; Ray Decl. at ¶18. 22 REDACTED – FOR PUBLIC INSPECTION Figure 2: T-Mobile Standalone Projected 5G Coverage in 2024 b. Sprint’s Standalone 5G Network Deployment Would Have Capacity But Lack Coverage Like T-Mobile, Sprint’s standalone 5G plans also face significant limitations, but whereas T-Mobile faces capacity constraints, Sprint faces coverage limitations. Sprint has announced plans to begin providing 5G commercial services and devices in the first half of 2019.71 However, Sprint’s spectrum holdings would require it to constrain 5G deployments to the 2.5 GHz band while it continues providing traditional 3G and 4G service in its other spectrum bands.72 The majority of Sprint’s spectrum holdings are in the 2.5 GHz mid-band, and this band will be the primary resource for the standalone company to develop and deploy 5G. However, by being restricted to this spectrum band, Sprint’s standalone 5G network would be 71 Saw Decl. at ¶17. 72 Id. at ¶22-24. 23 REDACTED – FOR PUBLIC INSPECTION limited in terms of geographic reach.73 The map below projects the extent of Sprint’s 5G services in 2024. Figure 3: Sprint Standalone Projected 5G Coverage in 2024 To begin offering 5G services on a standalone basis, Sprint would split its 2.5 GHz spectrum between 5G functionality and LTE. Initially, Sprint would upgrade approximately sites to massive MIMO74 in the 2018-19 timeframe.75 To allow each 2.5 GHz base station site to support both LTE and 5G, Sprint would deploy split mode LTE+5G Dual Connect functionality at each site. The split mode functionality support by equipment vendors will allow Sprint initially to deploy massive MIMO sites for LTE only but then, through software changes, 73 Id. at ¶¶17-18. 74 Massive MIMO (multiple-in; multiple-out) is a technique that uses large antenna arrays so that multiple transmitters and receivers can simultaneously transmit to improve network coverage and capacity. In today’s networks, 2x2 or 4x4 MIMO arrays are common, but massive MIMO requires a much larger antenna array. See, e.g., Ericsson, Going Massive with MIMO (Jan. 26, 2018), https://www.ericsson.com/en/news/2018/1/massivemimo-highlights. 75 Saw Decl. at ¶17. Sprint would roll out more than approximately sites in 2019. massive MIMO sites in 2018, increasing to 24 REDACTED – FOR PUBLIC INSPECTION migrate to simulcasting LTE and 5G through a single radio at each base station site equipped in this fashion.76 However, the performance impact of massive MIMO would occur only in the limited geographic areas where Sprint would deploy this technology on its own. Sprint expects to deploy this feature on approximately sites by the end of 2020—and will be focused only on population-dense metropolitan areas, not ubiquitous geographic coverage.77 Additionally, splitting 2.5 GHz spectrum between LTE and 5G significantly limits Sprint’s ability to realize the full potential of this valuable spectrum resource. This is a substantial opportunity cost as compared to New T-Mobile, which can use the combined resources of both companies to deploy more of the 2.5 GHz band spectrum for 5G faster, unlocking greater performance benefits.78 Sprint does not currently have plans to deploy 5G on its 800 MHz or 1900 MHz spectrum due to Sprint’s limited available spectrum holdings in these bands and the need to continue to support 3G and 4G services with this spectrum.79 New T-Mobile, on the other hand, would be able to deploy 5G on Sprint’s PCS spectrum.80 In sum, while Sprint would be able to use its 2.5 GHz band spectrum resources to achieve higher data rates to meet the requirements of some new 5G applications, it would lack sufficient low-band spectrum needed to provide the robust, national 5G coverage that New T-Mobile would offer and would not be able to utilize as much 2.5 GHz spectrum for 5G. 76 Id. at ¶¶20-21. 77 Id. at ¶17. 78 Id. at ¶¶ 29, 33. 79 Id. at ¶¶23-24. 80 See infra Section III.B.2.b. 25 REDACTED – FOR PUBLIC INSPECTION c. The Standalone Networks Cannot Deliver Data Rates Comparable to New T-Mobile The limits of the standalone T-Mobile and Sprint network roll-outs are further highlighted by a review of the potential data rates each could provide to consumers.81 The charts below depict the geographic distribution of data rates expected by each standalone company as compared to New T-Mobile. Figure 4: 5G Speed vs. Covered Population Distribution (2021)82 81 Average data rate is not equivalent to the actual user experience. See supra n.48. 82 Ray Decl. at ¶18, Figure 3. 26 REDACTED – FOR PUBLIC INSPECTION Figure 5: 5G Speed vs. Covered Population Distribution (2024)83 The capacity constraints for standalone T-Mobile are demonstrated in the figures above. In 2021, New T-Mobile’s 5G network will cover over 6.5 times the covered POPs with data rates greater than 100 Mbps and nearly 18 times the covered POPs with data rates greater than 150 Mbps as compared to the T-Mobile standalone 5G network. New T-Mobile’s 5G network also will provide data rates exceeding 300 Mbps to nearly 100 million POPs and 500 Mbps to over 16 million POPs, which the T-Mobile standalone 5G network would be unable to do at all. This trend would continue in 2024, with New T-Mobile able to cover over 2.8 times the covered POPs with over 100 Mbps and over 4 times the covered POPs with more than 150 Mbps. New TMobile would be able to cover 252.4 million POPs at data rates greater than 300 Mbps and 208.7 million POPs at greater than 500 Mbps, while standalone T-Mobile would still be unable to cover anyone at those speeds.84 Although the 5G network coverage supported by T-Mobile and New T-Mobile would be somewhat equivalent in terms of covered POPs, the merger would 83 Id. at ¶18, Figure 4. 84 Id. at ¶18. The performance metrics defined here are derived by an internal T-Mobile engineering modeling effort. 27 REDACTED – FOR PUBLIC INSPECTION provide the network capacity and complementary spectrum resources to provide massively increased capacity and a significantly more robust mobile broadband experience for American consumers. The comparison to the standalone Sprint network yields a similar result. As shown in the figures above, in 2021, New T-Mobile will cover approximately 1.3 times the covered POPs with data rates greater than either 100 or 150 Mbps than standalone Sprint. Moreover, whereas New T-Mobile will provide data rates greater than 300 or 500 Mbps to a substantial portion of the covered POPs, Sprint would not be able to do so. In 2024, New T-Mobile will cover more than 1.5 times the covered POPs with data rates greater than 100 or 150 Mbps. And Sprint’s standalone 5G network will still not cover any POPs with speeds greater than 300 Mbps. Therefore, the standalone Sprint 5G network will not come close to achieving the depth of service and performance that the New T-Mobile 5G network would deliver. 2. New T-Mobile Will Deploy 5G Faster and on a Much Wider and Deeper Basis, While Also Improving LTE Service New T-Mobile will have significant advantages over both standalone networks that will allow it to create a platform for an unrivaled 5G mobile service.85 The merger will enable the combined company to: (1) access more cell sites expeditiously than either company could do on its own, (2) deploy a unique combination of spectrum across more cell sites on a more accelerated basis than either company could do individually, (3) provide unencumbered spectrum for 5G deployment, (4) allow faster spectrum refarming that will drive better spectral efficiency, and (5) provide enhanced LTE services and a rapid, seamless migration for existing T-Mobile and Sprint customers. 85 Ray Decl. at ¶4; Saw Decl. at ¶4. 28 REDACTED – FOR PUBLIC INSPECTION a. The Transaction Will Provide Nearly Immediate Access to More Cell Sites New T-Mobile will be able to densify the network infrastructure nearly immediately and reuse spectrum more intensely from the natural “cell splits” occurring as a result of the deployment of both parties’ spectrum on the combined network’s sites.86 A “cell” is shorthand for the coverage area surrounding the transmission from a base station. A “cell split” means that in that same coverage area, rather than a single base station, there are multiple base stations reusing the spectrum more intensely to improve network capacity. A simplified example of cell splitting is provided in the figures below: Figure 7: Cell Split to 7 Cells Covering Same Area (7X improvement in capacity) Figure 6: Single Cell with 20 MHz of Bandwidth New T-Mobile will implement natural cell splitting by (1) anchoring on the T-Mobile cell site network, (2) augmenting the density of deployed cell sites by retaining a number of Sprint cell sites (approximately 11,000 retained sites), and (3) deploying both parties’ spectrum across New T-Mobile’s network, ultimately leading to far more 5G sites being deployed than either 86 Ray Decl. at ¶31. 29 REDACTED – FOR PUBLIC INSPECTION standalone company had planned or could practicably deploy.87 This approach will lead to a multiplicative increase in overall network capacity, as demonstrated by the formula below.88 The combined effect, as shown in the figure below, is to drive more spectrum availability at more sites for the New T-Mobile 5G network.89 These cell site increases would be practically and economically unattainable by T-Mobile without the transaction. To match the capacity of New T-Mobile, the T-Mobile standalone network would require approximately 162,400 cell splits.90 In effect, standalone T-Mobile 87 Id. at ¶32. Anchoring means that the existing T-Mobile network of cell sites and network core would be retained and supplemented with resources (cell sites, spectrum) from Sprint. 88 Id. at ¶23. 89 Id. at ¶59. 90 Id. at ¶32. 30 REDACTED – FOR PUBLIC INSPECTION would be required to more than double the number of existing sites in the next several years.91 From an operational standpoint, it would not be possible to get this many sites designed and approved (through local zoning processes) in that short period of time.92 And even if more than double the existing site base were possible, the costs associated with this exercise would be economically unachievable.93 Having more than double the number of cell sites would more than double the operational expenditures (including cell tower rents and backhaul expenses) needed to support the network. Moreover, the capital expenditures needed to build out this many sites would be out of reach.94 Similarly, it would be infeasible for Sprint to match the throughput, capacity, and coverage of New T-Mobile. Sprint would face the same insurmountable challenge as standalone T-Mobile—an overwhelming increase in capital and operational expenditures that would not be supported by the cost model for the business.95 Only through the creation of New T-Mobile can these economic barriers be overcome, enabling a rapid and substantial increase in capacity for consumers. b. The Combined Company’s Spectrum Assets Are Complementary and Span All Ranges to Create a True Nationwide 5G Network By combining T-Mobile’s and Sprint’s spectrum resources, New T-Mobile will be positioned to rapidly deliver a broader and deeper 5G network and a superior, more consistent 91 Id. 92 Id. 93 Id. 94 Id. 95 Saw Decl. ¶18, 23. 31 REDACTED – FOR PUBLIC INSPECTION user experience than either T-Mobile or Sprint could on its own.96 The complementary spectrum assets of T-Mobile and Sprint will allow New T-Mobile to expeditiously create a nationwide, truly robust 5G network that will support a broad range of innovative 5G use cases.97 New TMobile will deploy the spectrum holdings of T-Mobile and Sprint across the combined network, leading to the highest and best use of those assets, simultaneously allowing more customers access to ultra-fast speeds, and improving existing customers’ LTE experience.98 Faster refarming enabled by accelerated device deployment and New T-Mobile’s unique spectrum portfolio will increase spectral efficiency. From a spectrum standpoint, the merger yields the following key benefits: • Access to a complementary spectrum portfolio to deploy 5G, including a combination of low-, mid-, and high-band spectrum that offers options for wide area coverage and high capacity; • Spectrum available for 5G from Day One; • Sufficient spectrum available to accelerate refarming of spectrum for 5G; and • Sufficient available spectrum to accommodate existing users on legacy networks without degradation of quality while pursuing an aggressive refarming strategy. Having a diverse mix of spectrum assets is the foundation for implementing a robust 5G network: • Low-band spectrum (below 1 GHz) allows for better coverage in-building as well as in rural areas. These bands can support cell site operating radii of up to 18 miles, allowing for broad coverage without the need for as much capital expenditure, such as backhaul and tower rents, especially in rural areas.99 • Mid-band spectrum (from 1 GHz to 6 GHz) is better suited to suburban and urban areas as it provides higher capacity but some diminishment in coverage. The mid- 96 See, e.g., Ray Decl. at ¶60. 97 Id. at ¶33. 98 Id. 99 Id. at ¶35. 32 REDACTED – FOR PUBLIC INSPECTION band has more available spectrum, meaning that more capacity can be delivered from a single cell site. However, operating areas around mid-band cell sites would be reduced to approximately 4 miles, which makes the band less optimal for rural market coverage.100 • Finally, high-band, millimeter wave spectrum (above 20 GHz) is preferable in dense urban markets to address extreme demand, the need for low latency, and high-speed data applications. Cell operating areas are significantly less than half a mile in the millimeter wave bands, making use of this spectrum economical only in very densely populated areas. However, the physical characteristics of millimeter wave spectrum (large bandwidth availability, ability to use very small antennas) allows for much higher data rates (multiple gigabits per second) than mid-band or low-band spectrum.101 By combining all these spectrum resources, New T-Mobile will be able to accommodate existing LTE users and dedicate more spectrum to 5G. The aggregate amount of spectrum available to New T-Mobile will allow it to dedicate spectrum in the 600 MHz, 2.5 GHz, and millimeter wave bands to 5G more rapidly—with a migration path to ultimately also offer 5G using the AWS and PCS bands more quickly.102 The spectrum refarming plans of T-Mobile, Sprint and New T-Mobile included below demonstrate the complementary spectrum holdings across the low-, mid-, and high-bands that New T-Mobile will utilize for 5G and LTE services. 100 Id. at ¶36. 101 Id. at ¶37. 102 Id. at ¶¶41-42. 33 REDACTED – FOR PUBLIC INSPECTION As can be seen, the combined entity’s spectrum resources will allow New T-Mobile to deploy 5G more quickly by providing the flexibility to continue offering LTE service to all customers in some bands, while focusing on building out the 5G network in others. By 2024, on average, New T-Mobile will have at least megahertz of 600 MHz spectrum, megahertz of PCS, and MHz of 2.5 GHz spectrum to deliver 5G services.104 In sum, by 2024, New T-Mobile will have approximately 103 megahertz of dedicated 5G low- and mid-band spectrum nationally (and Id. at ¶40, Table 2. 104 megahertz of AWS spectrum in certain markets will also be available for 5G, but is not included in this count for New T-Mobile. 34 REDACTED – FOR PUBLIC INSPECTION possibly more if refarming is faster than projected), while the combined standalone companies would on average only have a little over c. megahertz105—less than half as much. New T-Mobile Will Allow Faster Spectrum Refarming That Delivers Spectral Efficiency Gains The ability to rapidly migrate consumers from LTE to 5G also provides immediate benefits because 5G has much better spectral efficiency.106 An increase in spectral efficiency translates into a proportional increase in the number of users supported at the same load per user—or, for the same number of users, an increase in throughput available to each user. As TMobile’s Chief Technology Officer Neville Ray describes in greater detail in his declaration, 5G delivers spectral efficiency improvements due to four main factors: (1) lean carrier design; (2) high bandwidth utilization; (3) improved massive MIMO and beamforming; and (4) inter-cell coordination.107 Each of these improvements contributes to significant spectral efficiency benefits for 5G. Greater efficiency gains will be provided in the high-band spectrum because this spectrum has smaller wavelengths.108 Smaller wavelengths mean that antennas optimized for that frequency can be smaller—meaning that more antenna elements can be placed in a given area or form factor. More antennas will typically improve coverage and capacity in the network.109 As can be seen in the table below, moving from LTE to 5G will result in low-band spectrum receiving a 19 percent improvement in average spectral efficiency (2.1 bps/Hz to 2.5 105 The combined standalone calculation for 2024 is: megahertz of 600 MHz spectrum for T-Mobile and megahertz of 2.5 GHz spectrum for Sprint. megahertz of PCS and megahertz of AWS spectrum in certain markets will also be available for 5G, but is not included in this count from standalone T-Mobile. 106 Ray Decl. at ¶43. 107 Id. at ¶44-49. 108 Id. at ¶49. 109 Id. 35 REDACTED – FOR PUBLIC INSPECTION bps/Hz) and mid-band receiving a 52 percent improvement in average spectral efficiency (2.5 bps/Hz to 3.8 bps/Hz).110 These improvements in efficiencies could not be achieved at the same pace without the transaction because neither company has the required spectrum resources to migrate users to 5G in the low- and mid-band spectrum as rapidly as New T-Mobile, nor does either company have sufficient spectrum to create the transformational speed and capacity improvements at scale that New T-Mobile will provide. Percentage Increase Average Spectral Efficiency (bps/Cell) Spectrum Antennas LTE 5G Low band 4x2 MIMO 2.1 2.5 19% Mid band 4x4 MIMO 2.5 3.8 52% mmWave mMIMO N/A 7 N/A 111 Table 2: Spectral Efficiency Comparison d. New T-Mobile Will Provide LTE Network Benefits and a Fast and Seamless Migration for Existing Customers Because spectrum must be preserved for the existing LTE network and to serve consumers with LTE-only devices, spectrum cannot easily be re-assigned for 5G use. In fact, one of the primary barriers limiting technological advancement in wireless technology is the need to continue servicing the older technology during the transition. Repurposing existing spectrum away from LTE and other legacy services requires careful coordination and a broad and deep spectrum portfolio to avoid undermining the performance of the current predominant LTE service. New T-Mobile’s broader spectrum portfolio will allow it to devote substantial spectrum resources to 5G more rapidly, while also enhancing the coverage and capabilities of the existing LTE network. This spectrum depth will allow New T-Mobile to transition subscribers 110 Id. at ¶50. 111 The spectral efficiency improvements are derived from equipment vendor simulations, internal T-Mobile analysis, and ITU requirements. 36 REDACTED – FOR PUBLIC INSPECTION to 5G much faster than either T-Mobile or Sprint could alone and will allow more spectrum (and a higher percentage of the company’s spectrum) to be dedicated to 5G than either company could manage on its own.112 New T-Mobile will optimize the use of existing LTE spectrum resources (AWS, PCS, 600 MHz, 700 MHz, and 800 MHz spectrum bands) to provide enhanced LTE, while simultaneously freeing up extensive spectrum resources for 5G (using 600 MHz, PCS, AWS, 2.5 GHz, and millimeter wave band spectrum).113 As part of this transition, Sprint customers’ 2.5 GHz LTE traffic will move to T-Mobile’s AWS spectrum, which could not occur but for this transaction. This refarming frees resources to implement a pure 5G network in the 2.5 GHz band as rapidly as possible. As can be seen from Table 1 above, the LTE migration for the 2.5 GHz band is projected to be complete by 2022 for the combined entity, while standalone Sprint would likely still be required to reserve at least megahertz of 2.5 GHz spectrum for LTE through 2024 (and would reserve at least some 2.5 GHz spectrum for LTE for the foreseeable future).114 This means that New T-Mobile will have nationally to 5G, as compared to the megahertz of 2.5 GHz spectrum dedicated megahertz that Sprint would have on its own—an increase of 75 percent. In addition, by 2024, the transaction will allow all megahertz of available PCS spectrum to be dedicated nationally to 5G, whereas the standalone companies would only have megahertz of PCS available in some markets.115 At the same time, during the transition to 5G, the Sprint and T-Mobile PCS and AWS spectrum will provide a dense LTE layer in combination with the Sprint 800 MHz and 2.5 GHz 112 Ray Decl. at ¶40. 113 Id. 114 Saw Decl. at ¶22. 115 Ray Decl. at ¶42. Sprint would megahertz of PCS available only in some markets. available for 5G; T-Mobile would have 37 REDACTED – FOR PUBLIC INSPECTION and T-Mobile 600 and 700 MHz spectrum assets and allow for 5G to be deployed without degrading the LTE experience.116 New T-Mobile’s LTE network will be able to maintain LTE average data rates without any network congestion and without a need for any additional costs for cell splits.117 In contrast, in transitioning to 5G, both standalone companies would have lower LTE average data rates with high levels of congestion, absent additional cell splits or other network investments.118 In addition, New T-Mobile will rely upon best practices developed during previous technology migrations to allow for the smooth migration of existing T-Mobile and Sprint customers to the new network.119 New T-Mobile will use the existing T-Mobile network as its anchor, increase network density and coverage with selected Sprint retained sites, deploy 2.5 GHz spectrum on T-Mobile sites, and utilize the full T-Mobile spectrum portfolio on virtually all the Sprint retained sites, as needed.120 This will enable New T-Mobile to migrate Sprint customers to the existing T-Mobile network within three years without degrading the user experience for LTE, while simultaneously allowing a more rapid introduction of a robust 5G network.121 The New T-Mobile LTE network will maintain a consistent data throughput level, while avoiding any network congestion, during this more rapid 5G migration than would be possible for either company on a standalone basis.122 116 Id. at ¶40. Saw Decl. at ¶¶31-33. 117 Ray Decl. at ¶62. 118 Id. 119 Id. at ¶71. 120 Id.. at ¶¶63-65. 121 Id. at ¶65. 122 Id. at ¶¶61-62. 38 REDACTED – FOR PUBLIC INSPECTION The transition of T-Mobile customers to New T-Mobile will be simplified because the existing T-Mobile network will be the anchor network for the combined company, allowing TMobile’s existing subscriber base immediately to access the New T-Mobile network and enjoy the overall benefits from increased speed, capacity, and footprint in the near term.123 In a similar fashion, Sprint subscribers with compatible devices will be able rapidly to convert to the New TMobile network and, almost immediately, be able to take advantage of the greater network breadth and depth.124 About one-half of Sprint’s branded customer base, or about 20 million users, have devices that are compatible with T-Mobile’s network and can be integrated into the New T-Mobile network with an over-the-air software update shortly after deal close.125 Additionally, New T-Mobile will migrate Sprint CDMA voice users to VoLTE (either through a software upgrade or handset replacement promotions).126 Significantly, the one area of overlapping spectrum holdings—the 1900 MHz PCS band—will allow a seamless integration of Sprint’s existing customers onto T-Mobile’s network.127 Finally, billing and back office system transitions will occur over time to minimize disruption to distribution, customer care, and operations. Track Record of Successful Migration. T-Mobile has a proven track record of success in large-scale customer migration, and will use this experience to ensure the migration of Sprint customers to the New T-Mobile network is smooth, quick, and painless. After acquiring 123 Id. at ¶70. 124 Id. at ¶¶64-69. 125 Id. at ¶72. 126 VoLTE is an acronym for Voice over LTE networks. VoLTE is a standards-based technology that is required to allow for the delivery of voice calls over the LTE network. Sprint is beginning to deploy VoLTE on its network on a standalone basis in 2018. By moving Sprint customers to the T-Mobile network, VoLTE-capable devices of existing Sprint customers can immediately be updated through an over-the-air software upgrade. See Saw Decl. at ¶7. 127 Ray Decl. at ¶72. 39 REDACTED – FOR PUBLIC INSPECTION MetroPCS, T-Mobile projected that it could complete the entire migration of approximately 9 million MetroPCS subscribers in 24 months.128 At the time, industry experts predicted “a hugely complex and challenging migration that will take significant time and investment, and which is a major risk for derailing the benefits of the deal.”129 Indeed, the migration was complex—it involved a market-by-market transition of MetroPCS customers from an incompatible network (CDMA) that required handset changes for all existing subscribers to access the T-Mobile network.130 However, T-Mobile’s team was able to migrate 70 percent of MetroPCS subscribers within 15 months and complete the full migration within 26 months, with the majority of markets completed well ahead of this date, and well before outside predictions.131 After the migration, MetroPCS customers enjoyed radically expanded coverage (as TMobile retained more MetroPCS cell sites than its original target to increase coverage and capacity).132 The MetroPCS customer base has doubled in the first 4.5 years since the deal closed, testifying to the success of the migration and the improved customer experience for these subscribers.133 Refarming spectrum from MetroPCS CDMA to LTE was also expedited—70 percent of MetroPCS subscribers migrated to HSPA+ or LTE within 15 months and this enabled a more accelerated refarm of the MetroPCS spectrum to LTE (from CDMA).134 Furthermore, the company’s rapid decommissioning of the old MetroPCS equipment allowed it to realize the 128 Id. at ¶71. 129 Harro Ten Wolde and Sinead Carew, Merged T-Mobile USA, MetroPCS to face tech challenges, REUTERS (Oct. 3, 2012), https://www.reuters.com/article/us-deutschetelekom-tmobile/merged-t-mobile-usa-metropcs-to-face-techchallenges-idUSBRE8920IY20121003. 130 Ray Decl. at ¶71. 131 Id. 132 Id. 133 Id. 134 Id. 40 REDACTED – FOR PUBLIC INSPECTION target synergies a year ahead of schedule and achieve 40 percent higher synergies than planned.135 Just like the MetroPCS transaction, the migration required following the proposed transaction must be accomplished on a market-by-market basis.136 New T-Mobile will use the same know-how, same tools, and a similar approach for migrating Sprint customers as it did for MetroPCS.137 By carefully managing this transition process, New T-Mobile will ensure existing T-Mobile and Sprint subscribers migrate to the new network in a seamless manner without negatively affecting their day-to-day wireless experience.138 Moreover, the current LTE performance will not only be maintained, but also improved, due to the efficiencies associated with the complementary spectrum and network assets of T-Mobile and Sprint that will be combined in one network.139 3. The New T-Mobile 5G Network Will Result in Substantial Customer Experience Improvements Over the Standalone Networks of Either Company Combining the two companies’ assets will boost average throughput, make greater capacity available, and increase the reliability and depth of coverage everywhere—providing benefits to consumers that would not arise but for the merger.140 Aggregating the two companies’ spectrum and site portfolios will dramatically increase capacity, reduce costs, and decrease the need to split existing spectrum between LTE and 5G.141 This approach will 135 Id. 136 Id. at ¶72. 137 Id. 138 Id. at ¶63. 139 Id. at ¶62. 140 Id. at ¶53. 141 Id. at ¶40. 41 REDACTED – FOR PUBLIC INSPECTION improve the subscriber experience by creating more spectrum dedicated solely to 5G, while keeping significant spectrum to maintain LTE quality of service.142 Also, for both the LTE and 5G networks, the combination of fewer sites per subscriber to support the same traffic and subscriber base will cost-effectively support an increase in subscriber density per site, resulting in lower operating expenses. a. New T-Mobile Will Dramatically Increase Overall Capacity for 5G Customers While both T-Mobile and Sprint have standalone plans to deploy 5G networks, the combined company will make available significantly more capacity for 5G services. As seen in the tables below, the combined company provides substantial capacity improvements that will benefit consumers, both in the near term (by 2021) and in the medium term (by 2024). Entity 2021 5G Monthly 2024 5G Monthly Available Capacity Available Capacity (Exabytes) (Exabytes) T-Mobile Sprint New T-Mobile 6.8 20.3 Table 3: 5G Monthly Available Capacity (in addition to LTE)143 142 Id. at ¶33. 143 Id. at ¶57, Table 6. 42 REDACTED – FOR PUBLIC INSPECTION 2021 5G Monthly Carried Capacity (Exabytes) Entity 2024 5G Monthly Carried Capacity (Exabytes) T-Mobile Sprint New T-Mobile Table 4: 5G Monthly Carried Capacity (in addition to LTE)144 2021 LTE Available Capacity (Exabytes) Entity 2024 LTE Available Capacity (Exabytes) T-Mobile Sprint New T-Mobile Table 5: LTE Monthly Available Capacity145 Entity 2021 LTE Carried Capacity (Exabytes) 2024 LTE Carried Capacity (Exabytes) T-Mobile Sprint New T-Mobile Table 6: LTE Monthly Carried Capacity Per Month146 New T-Mobile’s capacity and output will give it the ability to deploy broad-based 5G services rapidly without compromising the quality of services for existing subscribers.147 It will also allow New T-Mobile to provide ever more competitive offerings in the marketplace, such as 144 Id. at ¶57, Table 7. 145 Id. at ¶57, Table 8. 146 Id. at ¶57, Table 9. 147 Id. at ¶¶39, 52. 43 REDACTED – FOR PUBLIC INSPECTION unlimited data, at much higher data rates to the benefit of consumers.148 Additionally, the greater available capacity will enable New T-Mobile to compete directly against other types of wired broadband providers and deliver additional consumer benefits discussed in detail below, including supporting higher quality video streaming, faster data downloads, and new and innovative applications such as augmented and virtual reality.149 Absent this transaction, neither company alone would have the cell sites, spectrum, and spectral efficiency gains needed to drive the increased capacity available to New T-Mobile.150 b. New T-Mobile Will Provide Faster Data Rates for 5G With greater spectrum resources, enhanced capacity, and a denser cell site network, New T-Mobile will be able to provide dramatic improvements in data rates to consumers.151 The tables below demonstrate the substantially improved data rates that will occur by 2021 and 2024 due to the transaction. Average 5G Data Rates (Mbps) Peak 5G Data Rates (Mbps) T-Mobile 25 900 Sprint 55 300 New T-Mobile 149 1500 Entity Table 7: Average and Peak Data Rate Comparisons (Year 2021)152 148 Id. at ¶51. 149 Id. at ¶15. 150 Id. at ¶¶39-42. 151 Average data rate is not equivalent to the actual user experience. See supra n.48. 152 Ray Decl. at ¶53, Table 4. 44 REDACTED – FOR PUBLIC INSPECTION Average 5G Data Rates (Mbps) Peak 5G Data Rates (Mbps) T-Mobile 76 2700 Sprint 113 700 New T-Mobile 444 4100 Entity Table 8: Average and Peak Data Rate Comparisons (Year 2024)153 These marked improvements in data rates will have a direct impact on wireless consumers. Customers traditionally have relied upon wired, rather than wireless, connections to deliver average data rates in excess of 25 Mbps—and these wired connections have been extremely costly. The merger will allow New T-Mobile to deliver data rates that compete against wired data speeds (and exceed current wireless speeds) and enable the delivery of myriad new and improved services.154 This increased capacity results, in part, from greatly expanding the 2.5 GHz 5G geographic coverage, as the New T-Mobile 5G network infrastructure will be much denser than Sprint could deploy on a standalone basis.155 The geographic coverage for 5G deployments for New T-Mobile and standalone Sprint are provided below. 153 Id. at ¶53, Table 5. 154 Id. at ¶53. 155 Saw Decl. at ¶12. 45 REDACTED – FOR PUBLIC INSPECTION Figure 9: Sprint Standalone 5G Coverage in 2024 Figure 10: New T-Mobile 5G Coverage in 2024 New T-Mobile will leverage the variety of spectrum at its disposal to deploy greater quantities (more spectrum per cell site) more densely (to more cell sites throughout the network).156 New T-Mobile will be able to deploy a capacity layer of 2.5 GHz spectrum to provide much higher 5G data rates to many more consumers than either T-Mobile or Sprint could provide alone.157 Moreover, the combined company will be able to deploy more spectrum 156 Ray Decl. at ¶23; Saw Decl. at ¶¶ 27-28, 30. 157 Ray Decl. at ¶38. 46 REDACTED – FOR PUBLIC INSPECTION in more cell sites, providing a much more consistent signal strength throughout the coverage area than either company could on a standalone basis.158 Signal strength is one of the best approximations of the actual user experience—the stronger and more consistent the signal strength, the more likely the consumer will have a steady and robust connection.159 For this reason, signal strength is directly related to the actual data rates delivered to a customer.160 As shown in the table below, the New T-Mobile network will cover a far larger population than either T-Mobile or Sprint would on its own. Table 9: 5G Coverage Comparisons161 4. New T-Mobile Will Cause Verizon, AT&T, and Others to Accelerate and Increase Investment in Their 5G Networks The scope and scale of the New T-Mobile 5G network will necessitate a competitive response from parties seeking to compete in the broadband market, including Verizon and 158 Id. 159 Id. 160 Id. 161 Id. at ¶39, Table 1. 47 REDACTED – FOR PUBLIC INSPECTION AT&T. The capacity added by New T-Mobile’s 5G network, as well as the response it will induce in its competitors, will have a significant consumer welfare benefit, both enhancing value for subscribers in the form of greater quality and decreasing prices across the board.162 And beyond the simple increase in capacity, New T-Mobile will be able to deploy a multi-faceted 5G network that combines T-Mobile low- and high-band spectrum with Sprint mid-band spectrum to provide the full array of features and improvements that the new 5G standard promises across the country.163 At present, both Verizon and AT&T have announced 5G deployments that rely upon their significant millimeter wave band holdings, but are not true nationwide 5G networks because they lack coverage outside the most densely populated areas. Millimeter wave spectrum has massive bandwidth, which provides the potential for incredible capacity when deployed in high density areas.164 Even though Verizon and AT&T also have significant low- and mid-band spectrum resources,165 they have both concentrated on limited 5G networks built around millimeter wave spectrum—in the case of Verizon, seemingly as a fixed fiber replacement166 and, in the case of AT&T, providing mobile broadband in very select metropolitan areas.167 Neither carrier has yet announced plans to extend 5G to cover rural markets, which would require that they refarm low- 162 See infra Section III.C.1. 163 Ray Decl. at ¶52. 164 Id. at ¶37. 165 See e.g., Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, Report, 32 FCC Rcd 8968, 8995-97 ¶¶40-41 (2017) (“Twentieth Mobile Wireless Competition Report”). 166 Verizon has announced plans to launch 5G residential broadband service in 3-5 markets in late 2018, but makes no commitment on offering mobile 5G services, opting to wait until more mobile devices become available. See, e.g. Verizon, What it means to lead the race to 5G (Apr 25, 2018), http://www.verizon.com/about/news/what-itmeans-lead-race-5g. 167 AT&T, AT&T to Launch Mobile 5G in 2018 (Jan. 4, 2018), http://about.att.com/story/ att_to_launch_mobile_5g_in_2018.html. 48 REDACTED – FOR PUBLIC INSPECTION and mid-band spectrum away from 4G LTE users and potentially require cell-splitting or new investments in spectrum. Instead, Verizon and AT&T seem more intent on taking advantage of vertical assets they uniquely possess through various content and distribution acquisitions. These announced 5G plans pale in comparison to New T-Mobile’s proposed deployment of 5G services to two-thirds of the U.S. population with data rates greater than 100 Mbps by 2021.168 As documented in the economic analysis conducted by Dr. David S. Evans, “this tepid adoption of the next generation of cellular technology [by Verizon and AT&T] will likely continue until a carrier makes a first move to accelerate deployment.”169 Dr. Evans reviewed the history of investment in the mobile market (dating back to the first generation of cellular technology) and concludes that, absent the impetus provided by New T-Mobile, neither Verizon nor AT&T will race to deploy real 5G on a nationwide basis because history demonstrates that “one carrier makes the first move to the new technology, inducing other carriers to follow.”170 Noting that Verizon and AT&T’s existing announced 5G plans are “limited” and that “[n]either Sprint nor T-Mobile have the spectrum resources, or scale as stand-alone companies, to deploy high-quality 5G networks with national coverage in the near future,”171 Dr. Evans notes that “[t]he public data indicates that none of the carriers are on track to deploy a robust national 5G network quickly.”172 Observing that “the Transaction will cause New T-Mobile to deploy a stronger 5G network sooner because of the substantial efficiencies described above,” Dr. Evans 168 Sievert Decl. at ¶36. 169 Evans Decl. at ¶197. 170 Id. at ¶2. 171 Id. at ¶¶193-95. 172 Id. at ¶196. 49 REDACTED – FOR PUBLIC INSPECTION finds that “New T-Mobile’s aggressive launch would be the catalyst that would spur AT&T and Verizon along.”173 Because New T-Mobile’s network will leapfrog what Verizon and AT&T have announced, it must trigger a competitive response. The competitive threat from New T-Mobile’s network will spur Verizon and AT&T to change their overall 5G approaches to the benefit of consumers. Verizon and AT&T have long marketed their own networks as providing superior network performance. These companies will find it imperative to make the additional network investments necessary to try to catch up with the higher quality network of New T-Mobile. Furthermore, because New T-Mobile will experience reduced operating expenses as compared to T-Mobile and Sprint on their own through access to more cell sites and deployment of more spectrum per site, it will be able to offer unlimited data at higher data rates and at reduced cost.174 Such action will put similar pressure on Verizon and AT&T, and other entrants, to provide comparable value to their customers. C. The Merger Will Result in Enormous Consumer Benefits that Cascade from Today’s Typical Customer Services into Numerous Streams of Innovative New Offerings New T-Mobile’s broad and deep nationwide 5G network will enable the delivery of unprecedented coverage and capacity, resulting in a revolutionary consumer experience with unmatched speed. This massive capacity increase, combined with the enhanced scale of New TMobile, will allow consumers to get more value for their money and benefit from new competition and disruption through (1) the expansion and improvement of existing services and (2) the arrival of new, innovative services. As a result, New T-Mobile will accelerate significant 173 Id. at ¶197. 174 Declaration of Peter Ewens, Executive Vice President, Corporate Strategy, T-Mobile US, Inc., at ¶7 (“Ewens Decl.”). 50 REDACTED – FOR PUBLIC INSPECTION industry-wide investment and propel the United States across the finish line first in the race to 5G. 1. The Proposed Transaction Will Result in Consumers Paying Less and Getting More Consumers—of both New T-Mobile and the industry as a whole—will benefit from enhanced value as New T-Mobile develops the capacity to augment further T-Mobile’s Uncarrier movement. As John Legere has noted, T-Mobile and Sprint “aren’t merging to be like AT&T and Verizon. . . . This merger is about being able to go toe-to-toe with them and all comers to provide aggressive, disruptive competition that is anything but the ‘status quo’—well into the future.”175 Indeed, the new company’s business plan is centered on expanding TMobile’s Un-carrier initiatives and providing consumers with increased capabilities at decreased prices. In the words of Mike Sievert, “New T-Mobile will use that [added] capacity and the resulting lower marginal costs per customer to deliver lower prices and to accommodate increased customer data usage at the same or lower prices.”176 If New T-Mobile were to do otherwise—for example, raise prices or reduce customer value under its rate plans—it would damage the Un-carrier brand, alienate its customer base, and leave the company with idle capacity. Consistent with T-Mobile’s past practices, New T-Mobile’s network capabilities will provide the capability and incentive for the company to deliver more value at a lower cost to American subscribers.177 As T-Mobile Executive Vice President of Corporate Strategy Peter Ewens observes, “[m]easured by revenue yield per GB on average, for the past several years T- 175 Legere Decl. at ¶24. 176 Sievert Decl. at ¶12. 177 New T-Mobile will also continue the Lifeline services currently provided by T-Mobile and Sprint. 51 REDACTED – FOR PUBLIC INSPECTION Mobile has given its subscribers 37 percent more data each year per dollar spent on their wireless plans while at the same time lowering their package prices (a data dividend).”178 Continuing to add capacity has been integral to T-Mobile’s consumer-oriented approach, allowed T-Mobile to grow the Un-carrier brand, and eventually permitted T-Mobile to make unlimited its core offer, which forced competitive responses from Verizon and AT&T and made unlimited rate plans broadly available.179 Mr. Ewens observes that “[o]ur demand forecasts for the next 6 years indicate that consumers are likely to continue growing their demand by over 30 percent per year,” and that “[w]ith the New T-Mobile we will be able to continue offering subscribers more data each year without increasing prices.”180 But, he cautions, “[w]ithout this merger we will not be able to sustain those rates of data growth without severely degrading network performance.”181 Dr. Evans’ work also documents that the proposed merger—particularly the creation of added wireless capacity—will result in significant, tangible, and verifiable public interest benefits by increasing the value of wireless services offered to the public, while decreasing prices. The economic analysis conducted by Dr. Evans found that, based on illustrative calculations, the transaction would result in as much as a 55 percent decrease in cellular data price and an 120 percent increase in cellular data supply.182 In order to reach this conclusion, Dr. Evans used capacity data from the network model for New T-Mobile to project that “New T178 Ewens Decl. at ¶5. 179 Id. at ¶4. 180 Id. at ¶14. 181 Id. 182 Evans Decl. at Section V.C, ¶¶220-44. Dr. Evans assumes that “AT&T and Verizon will approximately match New T-Mobile in terms of performance and the amount of data they could offer subscribers so that they remain competitive with New T-Mobile,” noting that “[t]hey could not offer competitive packages if they had materially less national practical capacity available per subscriber.” Id. at ¶227. 52 REDACTED – FOR PUBLIC INSPECTION Mobile could provide national practical capacity of GB per month per smartphone subscriber.”183 Based on his findings that New T-Mobile would provide a competitive impetus to Verizon and AT&T, which is discussed in Section III.B.4, supra, Dr. Evans determined that Verizon and AT&T would likely upgrade their networks to match New T-Mobile’s GB per month per smartphone subscriber, which is a significant increase over the average of GB per month per smartphone subscriber he calculates in the absence of the merger.184 Dr. Evans uses the derived capacity and estimated data ARPU to calculate prices per GB (price/GB) and other comparative criteria summarized in the table below:185 Without Transaction With Transaction Percent Change Due to Transaction National Practical Capacity (EB/Month) 120.25% National Practical Capacity per Smartphone Subscriber (GB/Month) 120.25% Price per GB -54.60% Source: Exhibit 14A. Table 10: National Practical Capacity and Price per GB With and Without the Transaction Notably, these calculations by Dr. Evans do not consider non-price dimensions, and Dr. Evans further concludes that “[t]he Transaction would also result in a decline in quality-adjusted cellular data prices due to a dramatic improvement in network performance, and induce the development of new app features that would increase the value consumers get from a given 183 Id. at ¶234 (also noting that “T-Mobile as a stand-alone company would provide GB per month per smartphone subscriber, and Sprint as a stand-alone company would provide GB per month per smartphone subscriber.”). 184 Id. at ¶235. 185 Id. at ¶238, Table 17. 53 REDACTED – FOR PUBLIC INSPECTION amount of cellular data.”186 Some of the other major benefits of the transaction, as discussed in Section III.B.3, supra, are improved quality and performance due to the conversion to 5G technology. This ability to improve consumer quality and value is illustrated in Figure 11 below, which shows that New T-Mobile will be able to bring a much greater percentage of its capacity on-line as 5G capacity, rather than as 4G LTE, as compared to the combined standalone case:187 Thus, the connection quality aspects of the New T-Mobile, including speed, latency, and configurability, among other factors, will be a substantial improvement over the combined standalone case.188 186 Id. at ¶180. 187 Id. at ¶185, Figure 5. 188 New T-Mobile will be able to transition more spectrum to 5G earlier, which will result in a faster migration of subscribers from 4G LTE to 5G service. Thus, while New T-Mobile has less capacity dedicated for LTE than the 54 REDACTED – FOR PUBLIC INSPECTION In sum, both T-Mobile’s executive declarations and economic analysis confirm that the proposed transaction will have substantial consumer welfare benefits. These benefits will be derived from the added capacity New T-Mobile will create, giving it the capability and incentive to amplify T-Mobile’s Un-carrier initiatives. This maverick behavior has been shown to benefit all wireless customers, as entrenched industry players are forced to respond with matching proconsumer policies. Economic work also documents the substantial consumer benefits—more than halving unit data prices per GB and more than doubling data capacity—that will result from New T-Mobile driving a competitive response and forcing the industry to broader and deeper 5G plans. 2. Exciting and Innovative Services Will Flow from New T-Mobile’s Network Speed and Capacity Consumers will reap enormous benefits from the inherent improvements in wireless service resulting from the transition to 5G, which “will not only be an evolution of mobile broadband networks, it is also envisioned to enable new unique network and service capabilities.”189 New T-Mobile’s 5G network will provide a nationwide footprint and robust capacity to enable all Americans to benefit from the full spectrum of possible 5G services and applications. The combined company’s 5G network will make possible fiber-like data speeds and enable real-time interactivity and more consistent performance and user experiences, as well as leaving plenty of capacity for unlimited data.190 For example, the new network will support streaming of state-of-the-art 4K video straight to devices, providing consumers with the freedom combined standalone companies, it will have significantly fewer customers relying on 4G LTE and therefore the connection quality of 4G LTE services should not be adversely affected. See supra Section III.B.2.d. 189 Ray Decl. at ¶13. 190 Id. 55 REDACTED – FOR PUBLIC INSPECTION to watch content wherever and whenever they want without having to subscribe to multiple providers.191 The new network will virtually eliminate the constraints consumers currently experience in congested environments, such as sporting events and concerts, allowing for the sharing and downloading of content nearly instantaneously from any location.192 The 5G services provided by the new network will also fundamentally transform the way Americans live, work, travel, and play by being able to connect an enormous variety of IoT devices and sensors. T-Mobile currently offers a small number of basic consumer IoT products, with a focus on smart and connected home and car devices, wearables, and mobile hotspots.193 For its part, Sprint has made recent efforts to expand its IoT offerings, but has struggled to launch competitive products in part due to its lack of low-band spectrum. Because of its spectrum limitations, standalone Sprint does not have the coverage needed to successfully provide the kinds of broad-based IoT deployments contemplated in the 5G era.194 As a result, both companies have a very low share in the emerging IoT segment as compared to other wireless providers, particularly Verizon and AT&T. However, New T-Mobile’s robust nationwide network will enable it to support and offer the full range of IoT products and services. It will also allow the combined company to extend the Un-carrier approach to IoT, helping customers take advantage of the latest products and services at lower prices.195 Supported by New T-Mobile’s nationwide 5G network, everything in the house can be connected—for example, a smart refrigerator can monitor consumer usage and 191 Id. 192 Id. 193 Sievert Decl. at ¶29. 194 Draper Decl. at ¶38. 195 Sievert Decl. at ¶¶30-34. 56 REDACTED – FOR PUBLIC INSPECTION grocery needs, a smart range can prevent a user from overcooking or burning a meal, a smart fan and air filter can turn on automatically if needed, and a connected home security and safety system can alert authorities remotely if an issue arises. New T-Mobile’s nationwide 5G network also will enable myriad uses beyond the home (e.g., autonomous cars, real-time traffic data).196 Additionally, the broad geographic reach of New T-Mobile’s 5G network will facilitate the use of advanced applications that are critically needed in small towns and rural communities. For instance, rural residents are forced to rely on only 13.1 physicians per 10,000 people, compared to residents in urban areas who have access to 31.2 physicians per 10,000 people.197 The network’s ability to transmit high-resolution video and audio to distant physicians will enable rural residents to access higher-quality medical care and to get it faster and without having to travel hundreds of miles. The New T-Mobile 5G network also will support information-enabled agriculture processes that allow farmers in rural areas to monitor crops, climates, livestock, equipment, and commodities markets.198 Senator Deb Fischer and Commissioner Brendan Carr recently recognized, “[p]recision agriculture generates incredibly useful information for producers, helping them to be more efficient. But for producers to take advantage of these innovative processes that gather, transmit, and analyze vast amounts of data, . . . all Americans, need sufficient Internet connectivity. . . . In rural America today, the broadband needed to support precision agriculture applications isn’t always available.”199 The 196 Id. at ¶¶28-34. 197 National Rural Health Association, About Rural Health Care, https://www.ruralhealthweb.org/about-nrha/aboutrural-health-care (last visited June 16, 2018). 198 Dusty Weis, How Smart Farms Are Making the Case for Rural Broadband, AEM (Oct. 19, 2017), https://www.aem.org/news/october-2017/how-smart-farms-are-making-the-case-for-rural-broadband/. 199 Senator Deb Fischer and Commissioner Brendan Carr, Agriculture and Connectivity, NORFOLK DAILY NEWS (May 29, 2018), http://norfolkdailynews.com/blogs/agriculture-and-connectivity/article_313f71d0-633c-11e8-91f1f725de833061.html. 57 REDACTED – FOR PUBLIC INSPECTION complementary spectrum and network assets brought together in the merged company will provide the high-speed broadband needed to support these types of beneficial applications and bring them to rural areas and small towns that would otherwise go without them. 3. Consumers Will Have a New Lower Priced and Higher Quality Competitive Option for In-Home Broadband Commissioner Michael O’Rielly recently observed that wireless broadband service, both mobile and fixed, should no longer be considered a “complement” to wired broadband, as it has become a viable “substitute” in many instances.200 That is T-Mobile’s view as it already considers itself a broadband company today. Indeed, a significant number of T-Mobile’s existing customers utilize their T-Mobile device as their sole broadband connection. Yet, while the services offered currently by T-Mobile, Sprint, and other wireless companies are sufficient for many data uses, they are not on par with the speeds of wired in-home broadband connections offered to many Americans. With the merger, however, that will all change. New T-Mobile’s robust nationwide 5G network will close the speed differential between mobile and wired broadband and have the capacity to handle the diverse needs of in-home broadband customers in many areas. The combined company intends to directly and aggressively compete against conventional in-home wired broadband products, providing consumers with an attractive high-speed broadband alternative to the wired incumbent—some for the first time.201 The new 5G network’s 200 Statement of Commissioner Michael O’Rielly, Inquiry Concerning Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, GN Docket No. 17-199, https://apps.fcc.gov/edocs_public/attachmatch/FCC-18-10A4.pdf. 201 Sievert Decl. at ¶¶36-37. 58 REDACTED – FOR PUBLIC INSPECTION performance and low prices will incentivize consumers to “cut the cord,” pocketing the savings from eliminating their wired broadband bill month after month.202 New T-Mobile’s In-Home Offering Will Provide Meaningful Competition to Wired Broadband Incumbents. Consumers will benefit from the introduction of a supercharged Uncarrier into the in-home broadband delivery business. The in-home broadband segment today is not competitive. According to a study based on FCC data, 48 percent of U.S. households lack any competitive choice for in-home broadband service exceeding 25 Mbps.203 Of that group, 9 percent are unable to receive any broadband service at all.204 Moreover, approximately 79 percent of U.S. households lack a competitive choice in service providers delivering high-speed broadband with speeds exceeding 100 Mbps.205 New T-Mobile will change this dynamic. As described above, New T-Mobile’s 5G network will deliver high-speed wireless broadband with speeds in excess of 100 Mbps to nearly two-thirds of the U.S. population by 2021 and to almost 90 percent of the U.S. population by 2024.206 These speeds are sufficient to support HD and 4K video streaming to screens of the customer’s choosing. The network will also have improved signal strength, which will enhance in-building service. New T-Mobile will utilize this network performance and coverage to shake up the in-home broadband marketplace and offer consumers a new and very attractive competitive option for in-home broadband 202 Id. at ¶38. 203 Hal Singer, Economists Incorporated, and Ed Naef and Alex King, CMA Strategy Consulting, Assessing the Impact of Removing Regulatory Barriers on Next Generation Wireless and Wireline Broadband Infrastructure Investment, at 10-11 (June 2017), http://ei.com/wp-content/uploads/2017/06/SingerAssessingImpact6.17.pdf (based on FCC Form 477 data from June 2016). 204 Id. 205 Id. 206 See supra Section III.B.1.c. See also Sievert Decl. at ¶36. 59 REDACTED – FOR PUBLIC INSPECTION service. With New T-Mobile, many consumers would be enjoying a choice for their in-home provider for the first time. Specifically, the merger enables New T-Mobile to offer in some areas a robust wireless broadband solution for residential use that will have equipment, service packages, and products matching or exceeding those of traditional, subscription-based—and often costly—in-home wired broadband providers. Given the lack of competition in the in-home market, this offering should be well-received, and the combined company plans to market it aggressively, particularly in rural areas. By 2024, the Applicants expect New T-Mobile to provide high-speed, in-home broadband service to approximately 9.5 million subscriber households, equating to approximately 7 percent market penetration, and making New T-Mobile the fourth largest inhome Internet service provider (“ISP”) in the United States based on current subscriber counts.207 Of particular importance, T-Mobile estimates that 20-25 percent of these new subscribers for inhome broadband service will be located in rural areas.208 New T-Mobile’s 5G network will provide speeds and capacity, as well as enhanced inbuilding quality, sufficient to support consumers’ evolving in-home broadband needs, and will do so without compromising the quality of its core wireless service offerings.209 This would not be possible without the merger as neither T-Mobile nor Sprint on its own has the spectrum assets, scale, or other resources necessary to deploy networks with the capabilities required to support the quality of streaming HD and 4K video and other key applications in-home broadband customers will demand. T-Mobile’s standalone plan contemplates the deployment of only a thin 207 These estimates assume that the average monthly mobile subscriber data consumption would increase ten-fold from today’s 9.8 GB to 80 GB by 2024, and that the capacity needed for providing in-home broadband, would be approximately 500 GB per month per household. See Sievert Decl. at ¶37. 208 Id. 209 Ray Decl. at ¶¶15, 61-62. 60 REDACTED – FOR PUBLIC INSPECTION layer of 5G services that will not have the speed or capacity to justify aggressive entry into the in-home broadband market. While Sprint’s 5G network will have substantial capacity, it will lack the broad, ubiquitous coverage of New T-Mobile’s 5G network, particularly in areas outside of major urban and suburban areas that want for high-speed broadband options today. However, by combining the two companies’ assets, the transaction will enable a true competitor in the inhome broadband space and will alter the fundamental dynamics that have left millions of customers lacking an alternative option for residential wired high-speed broadband. New T-Mobile’s 5G Service Will Spur Mobile Substitution for In-home Broadband. The term “cord cutting” is typically used to refer to cable TV subscribers who elect to cancel their subscriptions entirely or in favor of alternative video content distribution providers (e.g., over-the-top viewing options such as Netflix or Amazon). The trend towards “cord cutting” is now emerging for in-home wired broadband as well. Increasingly, consumers are choosing to rely solely on mobile wireless subscriptions for their Internet needs and are dropping their inhome broadband service entirely. Today, 19 percent of households could eliminate their home broadband subscription entirely by tethering on a T-Mobile two-line plan. New T-Mobile will accelerate this trend by providing an increasingly viable alternative to in-home broadband. By 2024, 35 to 45 percent of households could completely eliminate their home broadband subscription and rely on New T-Mobile for all their broadband needs. According to the National Telecommunications and Information Administration’s review of Census Bureau data in 2016, “mobile Internet service appears to be competing more directly with wired Internet connections.”210 Last year, Deloitte estimated that in 2018, one-fifth (20 210 Giulia McHenry, Evolving Technologies Change the Nature of Internet Use, NTIA (Apr. 19, 2016), https://www.ntia.doc.gov/blog/2016/evolving-technologies-change-nature-Internet-use. 61 REDACTED – FOR PUBLIC INSPECTION percent) of North Americans with Internet access would get all of their in-home Internet access via cellular mobile networks.211 A good indicator that this trend will continue is that the shift from wired to wireless Internet use is particularly strong among young adults. One report found that 95 percent of American teens have smartphones, and that 45 percent of U.S. teens who say they use the Internet, either on a computer or a cellphone, are connected to the Internet almost constantly.212 But it’s not just the young: another report found that a full one-fifth (20 percent) of all American adults are “smartphone only” users at home.213 Just as many consumers terminated their landline telephone service when cellphone service became an effective substitute, many will see the mobile wireless services provided by the New T-Mobile 5G network as an extremely attractive and effective substitute for in-home broadband, allowing them to cut the cord and terminate their residential broadband subscription completely. Customers who do so will experience performance equivalent to the available wired broadband option in many areas. More importantly, such customers will pocket the savings from terminating their costly wired subscription—and continue to do so month after month. Cost Savings for Broadband Consumers. The combined company will be a robust and disruptive competitor in the in-home broadband marketplace, which will result in lower prices for consumers. New T-Mobile will price its own in-home offering aggressively to gain market 211 Mobile-only: wireless home Internet is bigger than you think, at 1, DELOITTE (2017), https://www2.deloitte.com/content/dam/Deloitte/global/Images/infographics/technologymediatelecommunications/g x-deloitte-tmt-2018-mobile-home-Internet-report.pdf. 212 Monica Anderson and Jingjing Jiang, Teens, Social Media, and Technology 2018, at 7-8, PEW RESEARCH CENTER (May 31, 2018), http://assets.pewresearch.org/wpcontent/uploads/sites/14/2018/05/31102617/PI_2018.05.31_TeensTech_FINAL.pdf. 213 Aaron Smith and Kenneth Olmstead, Declining Majority of Adults Say the Internet Has Been Good for Society, at 3, PEW RESEARCH CENTER (Apr. 30, 2018), http://assets.pewresearch.org/wpcontent/uploads/sites/14/2018/04/27165144/PI_2018.04.30_Internet-Good-Bad_FINAL.pdf. 62 REDACTED – FOR PUBLIC INSPECTION share and utilize its expansive network capacity. However, the cost savings will extend beyond New T-Mobile’s in-home broadband customers. Today, the median cost of residential wired broadband in the United States is approximately $80 per month,214 with nearly all subscribers of such services also paying a separate monthly charge for mobile wireless service. As the FCC has recognized, just one additional competitor entering the in-home broadband marketplace would lead to lower prices and higher data rate services for all consumers.215 In fact, prices for in-home high-speed broadband service are projected to drop by more than 25 percent with the entry of a faster competitor to the market.216 And, when that new entrant is the Un-carrier, consumers will benefit even more through the introduction of New T-Mobile’s innovative and lower priced plans. Accordingly, all consumers of in-home broadband service are likely to enjoy cost savings as a result of New T-Mobile’s entry into this business. However, consumers who choose to cut the in-home wired broadband cord and utilize New T-Mobile’s 5G mobile wireless service to meet their in-home broadband needs will see the most savings. By way of example, today such a consumer might pay $80 per month for their wired in-home broadband service and $60 per month for mobile wireless service, for a total of $140 per month. Once New T-Mobile deploys its broad and deep nationwide 5G network that 214 Carl Weinschenk, Report: U.S. Median Broadband Price is $80 Monthly, TELECOMPETITOR (Aug. 8, 2017), http://www.telecompetitor.com/report-u-s-median-broadband-price-is-80-monthly. See also International Comparison Requirements Pursuant to the Broadband Data Improvement Act, Sixth Report, DA 18-99, Appx. C, at 59, Table 3 (2018) (finding mean cost of residential wired broadband to be approximately $62). 215 Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, 2016 Broadband Progress Report, 31 FCC Rcd 699 (2016). 216 Fiber to the Home Council, Broadband Competition Helps to Drive Lower Prices and Faster Download Speeds for U.S. Residential Consumers (2016) (finding that the presence of a gigabit service in a market decreases prices of 100+Mbps plans by 25 percent). 63 REDACTED – FOR PUBLIC INSPECTION will deliver service approximating or exceeding the speed and quality of wired broadband offerings, this same consumer may find it desirable to terminate his or her wired broadband subscription and rely exclusively on New T-Mobile’s 5G mobile offering. That consumer would now pay only $60 per month for equivalent services that previously cost $140—pocketing an $80 savings every month. That’s $960 per year that the consumer can now put toward other priorities. This will be particularly beneficial to low-income and cost-conscious consumers, helping to close the digital divide, as the transaction will allow them to enjoy equivalent or better service for much less. 4. Rural Consumers Will Get Improved Broadband and Retail Service Approximately 14 million Americans remain without access to mobile LTE broadband at download speeds of 10 Mbps.217 While urban areas saw a 10.5 percent increase in mobile LTE deployments capable of 10 Mbps downloads between 2014 and 2016, rising to nearly 91 percent deployment, access to these speeds in rural areas remained flat at about 70 percent over the entire period.218 Further, almost 10 million rural Americans lack access to at least three LTE providers.219 As a result, millions of rural Americans are deprived of the consumer benefits of a robustly competitive LTE marketplace. After the merger, New T-Mobile will be positioned to accelerate and expand T-Mobile’s plans to bring real broadband and broadband competition to rural Americans for the first time. There are several business drivers for doing so. First, New T-Mobile’s 5G network will have enormous capacity, providing the company with strong incentives to reach out and maximize the 217 See Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, 2018 Broadband Deployment Report, 33 FCC Rcd 1660, 1682-83 ¶52, Table 2b (2018). 218 Id. 219 See Twentieth Mobile Wireless Competition Report, 32 FCC Rcd at 9028 ¶ 83, Chart III.D.11. 64 REDACTED – FOR PUBLIC INSPECTION number of customers. In this industry, excess capacity means lost revenue and wasted resources. As Peter Ewens explains, a significant customer growth opportunity for the merged company is potential new rural customers.220 Second, T-Mobile already has demonstrated a commitment to rural America by building out its 600 MHz spectrum to small towns and rural communities. Combining this build-out with Sprint’s 2.5 GHz spectrum, however, will allow New T-Mobile to deliver improved, broader services to these areas. Indeed, small towns and rural communities will experience greater coverage and quality of service, increased capacity, and faster speeds not only for mobile broadband service, but also as a result of New T-Mobile’s in-home wireless broadband service offering. As a result, consumers in these areas will have access to services that are more commensurate with those available to urban consumers, helping to bridge the digital divide. But rural deployment is about more than simple coverage, and the enhanced scale of New T-Mobile will permit it to invest in a more robust rural network. In the simplest terms, the economic justification for a new cell site or splitting an existing site—or deploying mid-band or millimeter wave spectrum on a tower—is based on whether the anticipated usage offsets the cost. With more subscribers and more scale, New T-Mobile’s investments in rural areas will be spread across a broader base of subscribers, and therefore will be easier to justify. The direct effect of scale will mean New T-Mobile can rationalize more investment in rural America than either TMobile or Sprint could on a standalone basis. New T-Mobile will leverage its spectrum resources and merger synergies to deliver the following broadband benefits to Americans living in small towns and rural communities across the country: 220 Ewens Decl. at ¶27. 65 REDACTED – FOR PUBLIC INSPECTION • Coverage: increasing outdoor wireless coverage to reach 59.4 million rural residents, or 95.8 percent of the estimated 62 million rural residents, and indoor wireless coverage to reach 31 million rural residents; • Quality: improving signal quality and reliability and increasing network capacity to enable data intensive services and improve the overall consumer experience; • Speeds: delivering mobile broadband service with download speeds of at least 10 Mbps or greater to 45.9 million rural residents over two million square miles, accounting for 74 percent of rural residents; and • In-Home Service: providing fixed in-home broadband service of at least 25/3 Mbps to 52.2 million rural residents over 2.4 million square miles, approximately 84.2 percent of rural residents. Rural consumers will also benefit from the additional competition New T-Mobile will bring to the market. New T-Mobile will compete toe-to-toe with Verizon, AT&T, and other competitors, forcing new deployments, upgraded services, and lower prices from all providers in rural areas. Because of the limited geographic footprint of Sprint’s network, its current customers are forced to rely on roaming agreements for service coverage in rural areas where they cannot access Sprint’s network.221 However, Sprint customers often receive an inferior subscriber network experience as a result of these agreements.222 For example, Sprint’s roaming agreement with its largest partner, , provides customers with voice roaming and 3G data roaming, but no LTE data roaming and data speeds of only 64 kbps.223 On its own, Sprint would not be able to attain ubiquitous nationwide 5G coverage, as its lack of sufficient low-band spectrum inhibits its ability to provide widespread geographic coverage.224 The limitations of Sprint’s current coverage compared to other carriers is particularly stark in rural areas where it is difficult to justify incremental network investment due 221 Saw Decl. at ¶14. 222 Id. 223 Id. 224 Id. at ¶31. 66 REDACTED – FOR PUBLIC INSPECTION to limited population density and challenges associated with building out 2.5 GHz spectrum.225 Thus, moving forward on its own, Sprint would not become a major competitor in small towns and rural communities.226 By 2024, as demonstrated by the below map, standalone Sprint anticipates providing 5G wireless service to only limited rural areas.227 Figure 12: Sprint Standalone Projected 5G Coverage in 2024 Sprint also has no current plans to launch in-home fixed wireless broadband services and lacks the rural presence needed to become an independent provider for rural broadband subscribers.228 While T-Mobile has already begun deploying mobile broadband services in rural America using its 600 MHz spectrum, the utility of its 5G rural coverage would be limited absent the combined spectrum enabled by the transaction. Adding Sprint’s 2.5 GHz spectrum (that otherwise won’t be used for rural service) to T-Mobile’s spectrum portfolio will enable New TMobile to increase coverage to additional rural residents, and to provide mobile and in-home 225 Id. 226 Saw Decl. at ¶31; Draper Decl. at ¶10. 227 Saw Decl. at ¶18. 228 Draper Decl. at ¶¶10, 35. 67 REDACTED – FOR PUBLIC INSPECTION broadband service at greater speeds and more consistent signal levels. Thus, a critical benefit of the transaction, particularly for Sprint subscribers, will be the dramatic increase in rural 5G coverage due to the combined company’s 600 MHz spectrum.229 New T-Mobile also will make a significant economic investment in the future of rural America as a result of the transaction, expanding retail and sales operations to serve small towns and rural communities. Specifically, New T-Mobile plans to open 600 or more new stores to serve small towns and rural areas—at least 500 dealer stores and 100 corporate stores—directly resulting in approximately 5,000 new retail jobs.230 New T-Mobile also anticipates creating approximately 1,800 new jobs dedicated to transitioning the T-Mobile and Sprint networks in rural areas and expanding rural coverage.231 New T-Mobile also expects to substantially increase its domestic customer care workforce to ensure it maintains T-Mobile’s industry-leading standard of customer care. For example, the combined company anticipates opening up to five new technologically advanced Customer Experience Centers in small towns and rural communities to implement the company’s innovative “Team of Experts” customer care and business model, directly employing approximately 5,600 professionals with career-boosting jobs.232 Employees at these centers will benefit from significant management preparation experience, as well as qualify for college 229 Saw Decl. at ¶31. 230 Sievert Decl. at ¶17. 231 Id. 232 Id. at ¶18. 68 REDACTED – FOR PUBLIC INSPECTION tuition reimbursement.233 In total, New T-Mobile expects to create over 12,000 new jobs to serve small towns and rural communities as a direct result of the transaction.234 Aside from its corporate commitment to rural America, New T-Mobile will continue the long history of T-Mobile and Sprint partnering with rural carriers to further wireless deployments in rural areas. Specifically, New T-Mobile will offer to become the Preferred Roaming Partner for rural carriers, providing long-term roaming access to the robust New TMobile network at industry-leading terms. This will include a roaming program that offers carriers with existing roaming rates with either T-Mobile or Sprint to determine which rates will govern their relationship with New T-Mobile after the transaction closes.235 Moreover, New TMobile will cooperate with rural partners on their 5G roll-out, including providing technical assistance and advice on 5G deployments.236 5. Accelerated 5G Deployment Will Help the United States to Continue to Lead the World New T-Mobile’s aggressive deployment will help promote U.S. leadership in 5G in the face of concerted efforts by others, including China, Japan, South Korea, the U.K., and other European countries to lead the world in this new technology. As Chairman Pai has stated, the United States should “be the best country for innovating and investing in 5G networks.”237 U.S. leadership in 4G accounted for a nearly $100 billion increase in annual GDP by 2016 as the wireless industry’s contribution to U.S. GDP shifted from a projected $350.3 billion 233 Id. 234 Id. 235 Id. at ¶17. 236 Id. 237 Chairman Ajit Pai, Remarks at Mobile World Congress, Barcelona, Spain (Feb. 26, 2018), https://apps.fcc.gov/edocs_public/attachmatch/DOC-349432A1.pdf. 69 REDACTED – FOR PUBLIC INSPECTION in 2016 to a realized $445.0 billion.238 The launch of 4G in the United States increased total wireless-related jobs by 84 percent from 2011 to 2014 and U.S. 4G leadership also meant roughly $125 billion in revenue to American companies that could have gone elsewhere if the country had not led the world in 4G development and deployment.239 In sum, 4G leadership enabled the United States to set the pace for global innovation for mobile broadband services and applications for the last decade. As many nations now seek to replicate that success, the United States finds itself in a race to similarly lead the world in the development and deployment of 5G networks. With the combined spectrum, sites, and resources of T-Mobile and Sprint, and the concomitant pressure on Verizon and AT&T to accelerate investment, the United States will be well-positioned to lead in the global race to 5G, allowing consumers and the country as a whole to reap the benefits of the new applications that will be delivered over the most advanced nationwide telecommunications network anywhere. By accelerating nationwide 5G in the United States, the merger will help ensure America’s economy, industries, and consumers are among the early beneficiaries of the enormous transformative technological and economic benefits that 5G services will create for the country. D. The Merger Will Produce Improved Services and Expanded Choices for Enterprise and Video Customers In addition to transforming the mobile wireless experience and stimulating the creation of new capabilities and choices for consumers, the merger also will boost competition and lower prices for other service customers. New T-Mobile will have the scale, spectrum, and financial 238 How America’s 4G Leadership Propelled the U.S. Economy, RECON ANALYTICS (Apr. 16, 2018) https://api.ctia.org/wp-content/uploads/2018/04/Recon-Analytics_How-Americas-4G-Leadership-Propelled-USEconomy_2018.pdf. 239 Id. 70 REDACTED – FOR PUBLIC INSPECTION strength to disrupt the enterprise and video markets with innovative products and services that will bring much-needed competition and price discipline to these segments. New T-Mobile will leverage its 5G network to provide new and better competitive options and capabilities than either T-Mobile or Sprint could achieve on its own. 1. New T-Mobile Will Bring Disruptive Un-carrier Choices for Enterprise Business Customers Verizon and AT&T currently enjoy extremely strong positions with enterprise customers. T-Mobile and Sprint collectively serve only a very small portion of the enterprise segment today.240 As standalone companies, neither T-Mobile nor Sprint has the scale, network, or financial resources to compete in a meaningful way against Verizon and AT&T for enterprise customers: • Historically, T-Mobile has focused on delivering quality wireless products and services to consumers and has not been a major player in the enterprise marketplace. This was due, in large part, to the limitations of the old T-Mobile network, which often failed to meet certain technical requirements demanded by enterprise and government clients (e.g., specific standards for network performance, reliability, and coverage).241 Thanks to significant network improvements and an aggressive pricing strategy, T-Mobile has made modest gains in the enterprise segment in recent years, but it still lags far behind Verizon and AT&T in market share. • Sprint has also lagged behind Verizon and AT&T in the enterprise segment. Limited by its lack of scale, perceived inferior network quality, and limited ability to invest in its network compared to large carriers, Sprint has been unable to compete effectively with Verizon and AT&T.242 Sprint—like T-Mobile—will be unable independently to improve its network such that it could meet the demanding requirements of enterprise customers. 240 T-Mobile estimates that it accounts for only very small share of the business market segment and only four percent of the large enterprise and government portion of the segment. Sievert Decl. at ¶43. Sprint estimates that it has a low single digit share of this segment. Draper Decl. at ¶31. 241 Sievert Decl. at ¶43. 242 Draper Decl. at ¶31-33. 71 REDACTED – FOR PUBLIC INSPECTION The enterprise services segment has traditionally been characterized by low customer churn, resulting from the typically longer contractual terms, high transactional costs of changing providers, institutional inertia, and other factors. Accordingly, to draw enterprise customers away from Verizon or AT&T, New T-Mobile will need to offer higher quality services at a substantially better value. And it will. Better Network Quality and Coverage. New T-Mobile’s 5G network will be able to meet or exceed enterprise and government customers’ technical and operational requirements, as well as surpass the performance of both the Verizon and AT&T networks. As discussed above, New T-Mobile’s 5G network will, on average, be approximately four to six times faster than either T-Mobile’s or Sprint’s standalone 5G network by 2024.243 It will be the highest capacity mobile network in U.S. history, capable of supporting more devices with more data than ever before. These advantages, furthered by the network’s truly nationwide coverage, will allow New T-Mobile’s 5G network to meet the network quality needs of even the most demanding enterprise clients. Lower Prices. New T-Mobile will bring the Un-carrier strategy to enterprise, offering flexible and inventive plans and pricing to business and government customers. T-Mobile currently uses innovative approaches to pricing to compete in this market segment, offering terms like free international roaming, no overages, and unlimited data plans. New T-Mobile will be well-positioned to continue and expand this approach. The increased capacity and lower costs per unit provided by New T-Mobile’s 5G network will allow the combined company to offer lower prices—and thus, greater value—to enterprise customers, and therefore exert downward 243 See supra Section III.B.1.c. 72 REDACTED – FOR PUBLIC INSPECTION pricing pressure in this segment.244 Moreover, lower prices will enable New T-Mobile to counteract the ability of Verizon and AT&T to cross-sell between services (e.g., bundled service packages) to entice large enterprise and government buyers. Larger Sales Force. In addition, funded by significant synergies, the transaction will enable New T-Mobile to have the scale and resources to greatly expand its enterprise sales force—a key component to successfully competing in this space. The enterprise segment is highly dependent on direct client contact and relationships, and providers typically utilize large teams of direct sellers to market enterprise services to potential customers. After the merger, New T-Mobile will have the resources necessary to greatly enlarge the combined company’s enterprise sales force, which will in turn allow it to more effectively target enterprise customers.245 The greater financial resources available to New T-Mobile will also enable it to invest more in internal business tools and processes, employee expertise, and other elements that can be leveraged to improve the enterprise customer experience. Larger Product Portfolio. New T-Mobile’s superior network will also allow it to develop an expanded portfolio of innovative enterprise solutions. As an initial matter, the combined company will be able to integrate the Sprint wireline assets to diversify its enterprise offerings and make available fixed broadband products, cloud computing services, network security offerings, or other complementary business lines. Further, New T-Mobile will be able to support competitive wireless alternatives to legacy wired enterprise devices and services (e.g., 244 Sievert Decl. at ¶44. 245 Id. 73 REDACTED – FOR PUBLIC INSPECTION landline desk phones and SDLANs), while still offering a full suite of enterprise-grade platforms and services.246 In addition, with its world-class 5G network, New T-Mobile will be able to support and spur the broad spectrum of commercial IoT applications of the future. For example, large enterprises and government and educational institutions are likely to be at the leading edge of the IoT adoption and integration curve and therefore may serve as points of entry into IoT business lines for which there are no current incumbents.247 Put differently, large enterprise clients will likely be first in adopting IoT solutions designed for businesses, and the service providers supporting them will enjoy early entry into the nascent IoT market that will provide broad economic benefits for the entire U.S. economy well into the future. New T-Mobile’s network will be able to support these new IoT and enterprise services—and thereby enhance competition in the enterprise market segment—in the near term. Enhanced Commercial IoT. New T-Mobile’s broad and deep 5G network will create opportunities for better products and services across a range of commercial IoT applications. Some applications, such as connectivity for autonomous vehicles, are possible only with a network that provides reliability, speed, and low latency. Other applications, such as smart city lighting, sensors, or meter reading, are not latency-sensitive and do not require much speed, but do need a network that can handle a very large number of devices over a wide area. Unlike TMobile’s and Sprint’s standalone networks, New T-Mobile’s 5G network will meet the needs of IoT use cases at both ends of this spectrum and at all points in between. Three particular areas where New T-Mobile will focus are: 246 Id. 247 Id. at ¶45. 74 REDACTED – FOR PUBLIC INSPECTION • Smart Mobility. “Smart mobility” refers to IoT solutions that will help Americans transport themselves, and/or their goods, in a faster, safer, more efficient, and more cost-effective manner. For New T-Mobile, this translates into leveraging its new 5G network to provide reliable high-speed and low-latency connectivity for autonomous and connected vehicles, including unmanned aerial vehicles, to compete for a share of the growing vehicular connectivity market. Smart mobility also means using the New T-Mobile 5G network’s superior nationwide coverage to offer better logistics management and asset tracking services and, because of the network’s vast capacity, to provide these services at a lower cost.248 • Smart Communities. “Smart communities” refer to IoT solutions that will help connect, manage, and optimize community infrastructure. New T-Mobile’s IoT solutions can achieve positive results for enterprise customers while also making American communities safer, healthier, more efficient, and generally nicer places to live, visit and work in the process. This may translate into partnerships with cities to provide targeted products, such as lighting optimization, traffic management, utilities, and public safety. Smart communities also entail similar solutions produced for a smaller scale, such as smart campuses and even smart buildings.249 • Other Key Commercial IoT Applications. New T-Mobile’s 5G network will also provide IoT solutions for numerous other applications for which high-speed, high capacity, low latency, and coverage characteristics will be particularly wellsuited. For example, to preserve food safety and integrity, sensors can be deployed throughout a field to monitor plant growth and soil moisture, and asset tracking can be applied to agricultural shipments to ensure that proper food safety precautions are taken. Other applications like private wireless networks and distributed computing applications, telemedicine, and backup connectivity will also be enabled by New T-Mobile’s 5G network.250 In sum, the speeds, coverage, and unprecedented capacity of New T-Mobile’s 5G network will enable it to offer an expanded suite of high-value enterprise products and service offerings, thereby benefiting enterprise and government customers and putting meaningful competitive pressure on leading players Verizon and AT&T. It will also open the door to a 248 Id. at ¶31. 249 Id. at ¶32. 250 Id. at ¶33. 75 REDACTED – FOR PUBLIC INSPECTION whole new world of innovation for business communications, out of which will grow unimaginable new services and products for consumers and businesses. 2. New T-Mobile Will Disrupt the Video Distribution Marketplace by Bringing Added Choice, Lower Costs, and Innovative Services New T-Mobile will leverage the benefits of scale in network, costs, and financial resources to disrupt the video market by offering TV packages that will allow customers to forego traditional multi-channel video programming distributors (“MVPDs”) in favor of broadband-delivered video offerings.251 The company’s 5G network will provide mobile and fixed video services to consumers in all markets, including rural areas, and deliver high quality— including 4K video—service offerings with lower prices than traditional options.252 This will exert tremendous competitive pressure on legacy cable providers and other MVPDs, forcing them to lower prices and invest and innovate to keep up with New T-Mobile. The transaction thus will greatly improve consumer welfare as consumers reap the benefits of competition in video delivery across the country. a. Rapidly Shifting Consumer Demand for Content Has Facilitated New and Innovative Content Delivery Models, but Incumbent Providers Still Dominate the Video Distribution Marketplace, Particularly Pay Television The cable and satellite television marketplace is rapidly changing and converging with wired broadband and wireless services. Consumers are increasingly demanding access to video content wherever they are located and on whatever device they have available. Despite these rapid changes, the in-home video distribution marketplace, particularly with respect to pay television, is still dominated by traditional wireline and satellite MVPDs. Most consumers 251 Id. at ¶32. 252 Id. at ¶42. 76 REDACTED – FOR PUBLIC INSPECTION continue to receive their in-home, pay television services from incumbent cable operators.253 The Commission has recognized in numerous instances that the in-home pay television sector is not fully competitive. Indeed, the Commission has acknowledged that “cable MVPDs exist in non-overlapping franchise areas and as a result generally do not compete directly with one another for the same subscriber, so most consumers have access to only one cable MVPD.”254 The lack of more than one option for in-home cable television services—for most Americans—is reflected in the poor customer satisfaction rates for these services. The sector ranks the lowest out of 43 industries for customer satisfaction as most consumers remain extremely dissatisfied with its high prices and terrible customer service.255 As Consumer Reports recently noted, “[m]ost pay TV providers continue to do a poor job of leaving their customers feeling like their service is worth the money.”256 They are especially frustrated by their inability to take, watch, and enjoy all of their favorite content wherever they go. b. T-Mobile Entered the Pay-Television Marketplace With its Layer3 Acquisition, but Challenges Hinder Broad Expansion of the Layer3 Business T-Mobile entered the content delivery marketplace earlier this year when it acquired Layer3 TV (“Layer3”). Layer3 currently offers customers a baseline package priced at $89 per month, providing more than 275 HD channels and an in-home digital video recorder with the 253 Dade Hayes, U.S. Pay-TV Providers Lost Nearly 1.5M Video Subscribers In 2017, Double The 2016 Drop: Survey, DEADLINE (Mar. 12, 2018), https://deadline.com/2018/03/u-s-pay-tv-providers-cord-cutting-lost-1-5million-subscribers-in-2017-1202336334/ (citing a study of approximately 92 million subscribers (95 percent of the market) finding that the top six cable operators account for more than half of the total subscribers (48.1 million)). 254 Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Eighteenth Report, 32 FCC Rcd 568, ¶21 (2017). 255 See Aaron Pressman, The Cable TV Industry is Getting Even Less Popular, FORTUNE (May 25, 2017), http://fortune.com/2017/05/25/cable-tv-comcast-verizon. 256 See Dissatisfaction with Cable TV Remains High as Cord-Cutters Gain Intriguing New Options, CONSUMER REPORTS (June 20, 2017), https://www.consumerreports.org/media-room/pressreleases/2017/06/consumer_reports_dissatisfaction_with_cable_tv_remains_high_as_cordcutters_gain_intriguing_new_options. 77 REDACTED – FOR PUBLIC INSPECTION ability to record up to eight programs at once. Layer3’s service is currently available in five markets. The acquisition of Layer3 provided T-Mobile with a foothold in the video distribution marketplace, while positioning the company to leverage its national distribution footprint for expansion of the business going forward. However, further expansion of the business will be limited for T-Mobile on a standalone basis. In particular, Layer3 faces higher costs, especially for licensing content, than its major MVPD rivals because its smaller customer base does not provide the scale needed to leverage volume discounts. Indeed, T-Mobile estimates that Layer3’s content acquisition costs are 20-30 percent higher than its larger rivals for accessing the same programming. Expansion of the Layer3 business on a standalone basis is further hindered by customers’ dependence on the in-home broadband service offerings of incumbent cable operators. Without these offerings, which are expensive and often contain monthly usage caps, Layer3 customers cannot access the company’s services. T-Mobile’s current spectrum assets and relatively thin 5G deployment also restrict its ability to expand Layer3’s service to include mobile video services over 5G. Even prior to the Layer3 acquisition, consumers’ daily use of mobile video services was significantly increasing, with each T-Mobile Unlimited customer now viewing approximately day while on the T-Mobile network. Currently, approximately of data content per percent of T-Mobile’s total network traffic is mobile video. Given this rapidly rising trend, T-Mobile’s standalone network will not have the capacity to handle projected future consumer demand for mobile video absent the transaction.257 257 Sievert Decl. at ¶40. 78 REDACTED – FOR PUBLIC INSPECTION As a standalone company, Sprint does not have the spectrum, assets, scale or other resources necessary to deploy the network it needs to expand its currently limited video offerings to offer significant competition to AT&T and Verizon, let alone traditional cable providers and MVPDs.258 Sprint has had some one-off video partnerships, largely focused on combining its wireless services with video content, but these have not driven meaningful share for Sprint or shifted customer perception of the company’s offerings.259 c. The Transaction Will Provide the New T-Mobile With the Customer Scale and Spectrum Resources to Bring Innovative and Disruptive Video Services to Consumers In the near term, the customer and retail scale created by the transaction will enable New T-Mobile to more rapidly expand the current Layer3 model than possible without the transaction. This scale should allow the company to acquire content at lower rates and on better terms than TMobile and Layer3 can do on their own. Layer3 estimates that its content acquisition costs will decrease by percent as a direct result of the transaction and accompanying increased customer scale, allowing the company to price its service offerings to provide more affordable options for consumers.260 Competitive pressures in the marketplace will demand that Layer3 pass these cost savings on to consumers through lower prices and more flexible rate offerings. Over the longer term, New T-Mobile’s 5G network will allow the company to offer the nation’s first 5G-delivered in-home and mobile video services. This will include high-quality video content—including HD and 4K—to in-home and mobile locations across the country. The Applicants are confident that New T-Mobile will add significant customers and rapidly grow share in the pay television marketplace in the years following the merger. These customer 258 Draper Decl. at ¶36. 259 Id. at ¶37. 260 Sievert Decl. at ¶41. 79 REDACTED – FOR PUBLIC INSPECTION additions and market share gains will lead to significant revenue growth for New T-Mobile, with the company growing its video distribution business into a multi-billion-dollar enterprise.261 This contrasts with T-Mobile’s consolidated revenues, EBITDA, net income, and cash flows which remain just a fraction of those financials at the much larger AT&T or Verizon.262 While the merger will produce quantifiable benefits and opportunities for those consumers who New T-Mobile will serve with its video distribution services, it will also help other consumers as it will spur competition and lower prices from incumbent video delivery providers. New T-Mobile’s in-home and mobile 5G video offerings will force competitors to respond with lower prices and more innovative services to retain customers and market share. The disruptive 5G video services provided by New T-Mobile will also offer transformative benefits for other innovators, who seek to build upon T-Mobile’s extensive investment to offer video, content, and applications to in-home and mobile consumers and devices. E. The Merger Will Result in Thousands of Additional American Jobs The merger will create jobs on New T-Mobile’s first day and going forward.263 In its initial three years, New T-Mobile will invest significantly more in network infrastructure than the standalone firms combined to build a world-leading nationwide 5G network. This investment will translate into thousands of additional American jobs, as New T-Mobile will need to hire employees to build the new network; extend the Un-carrier customer care model to a wider subscriber base; and support growing services like in-home broadband and IoT. The result is that New T-Mobile will be jobs positive from its first year and beyond, with an initial increase 261 Id. at ¶42. 262 Id at ¶8. 263 Id. at ¶19. 80 REDACTED – FOR PUBLIC INSPECTION relative to the combined companies standalone of more than 3,000 jobs that increases to 11,000 jobs by 2024. In order to evaluate the broader merger specific jobs effects, Dr. Jeffrey A. Eisenach of NERA Economic Consulting performed an analysis of how the transaction will affect overall employment in the United States. Dr. Eisenach estimates that the proposed transaction will contribute an annual average of approximately 24,960 jobs, or a total of 124,800 job-years, from 2019-2023. The NERA showings are consistent with and complement the jobs estimates performed by T-Mobile for its direct internal jobs analysis. New T-Mobile’s increased investment and rapid growth—and resultant accelerated rollout of 5G services—seem likely to produce thousands of additional jobs throughout the U.S. economy. CTIA recently estimated that the deployment of 5G would stimulate $275 billion in investment, create millions of new U.S. jobs, and result in $500 billion in economic growth.264 New T-Mobile will be a critical part of the engine driving job growth throughout the mobile ecosystem during 5G deployment and beyond. 1. The Merger Will Result in Job Gains, Not Losses at New T-Mobile To evaluate the transaction’s positive effect on jobs, T-Mobile conducted an internal analysis of the direct effects on employment resulting from the merger, as compared to the business plans of the standalone companies. It found that within a year of closing, New TMobile is expected to employ 3,600 more direct internal employees than the two standalone companies would have absent the merger.265 It also showed that New T-Mobile’s number of 264 See e.g., David Abecassis, et al., Global Race to 5G—Spectrum Infrastructure Plans and Priorities, at 7, ANALYSYS MASON (Apr. 2018), https://api.ctia.org/wp-content/uploads/2018/04/Analysys-Mason-Global-Race-To5G_2018.pdf. 265 Sievert Decl. at ¶19. “Direct internal” employees are on-payroll jobs (e.g., a badge-carrying employee who would receive a W-2 from the New T-Mobile). 81 REDACTED – FOR PUBLIC INSPECTION direct internal jobs will continue to increase—relative to what the standalone companies’ combined employee base would have been for the foreseeable future.266 As described in the table below, the incremental job increases relative to the standalone companies’ baselines are, or will be, at or above the combined employer baselines: Direct Internal Incremental Jobs 2019 2020 2021 2022 2023 2024 3,625 3,755 5,045 5,010 8,115 11,060 In addition, the incremental increases for the combined direct internal and external employees will be 9,600 more jobs relative to the standalone companies’ baselines for 2021.267 These estimates are conservative and likely to understate the ultimate effects of the merger on company employment. Indeed, T-Mobile has a track record of significant job creation in connection with mergers. In 2013, T-Mobile acquired MetroPCS, then the fifth-largest mobile provider in the United States. At the time, T-Mobile conservatively projected that MetroPCS would employ roughly the same number of people after the merger.268 But, since the date of closing, MetroPCS has expanded into new markets and more than tripled the number of employees and contractors who support the MetroPCS brand.269 266 Id. 267 Id. These projections were developed using a model that starts with a detailed assessment of the New T-Mobile business plan, which incorporates an analysis of internal as well as contractor and dealer employment across the full range of employment functions, including engineering; retail; back-office and other administrative functions; customer care; enterprise support; and infrastructure installation, operations, repair and maintenance. 268 Id. at ¶20. 269 Id. See also Aaron Pressman, How T-Mobile Turned a Tough Merger Into an Industry Success, FORTUNE (May 5, 2017), http://fortune.com/2017/05/05/t-mobile-metropcs-merger/ (describing the MetroPCS acquisition as “one of the more surprisingly successful mergers in telecommunications history”). 82 REDACTED – FOR PUBLIC INSPECTION 2. NERA’s Economic Analysis Confirms that the Merger Will Result in Tens of Thousands of New Jobs in the U.S. Economy In addition to T-Mobile’s internal projections for post-merger employment, Dr. Jeffrey A. Eisenach performed an analysis of how the transaction will affect overall employment in the United States. Dr. Eisenach evaluated the combined effects of transaction-specific changes in both operating and capital expenditures at New T-Mobile (including anticipated post-merger cost savings and other efficiencies); changes in net output; and accelerated deployment and adoption of 5G infrastructure and services. Dr. Eisenach estimates that the direct, indirect, and induced employment effects of the changes in spending and output resulting from the merger will contribute 51,200 additional “jobyears”270 to the U.S. economy between 2019 and 2023.271 He further estimates that accelerated 5G deployment and adoption will result in an additional 73,600 job-years.272 Taken together, the transaction should contribute 124,800 additional job-years to the U.S. economy in the five years following consummation.273 In terms of job increases, this represents an annual average of 24,960 new American jobs. Dr. Eisenach’s analysis of the effects of transaction-specific changes in spending and output rely on the IMPLAN model, which calculates net employment effects resulting from 270 Economists measure employment in terms of “job-years” to reflect the fact that the level of employment is constantly changing. One job for one year is one job-year. If that job continues for another year, the employment effect is considered to be two job-years. 271 Declaration of Dr. Jeffery A. Eisenach, Managing Director, NERA Economic Consulting, Appx. I, at ¶34 (“Eisenach Decl.”). NERA’s estimate of the employment effects of the merger includes not only the effects of hiring more people to work at the New T-Mobile as badged and contract employees, but also (a) the indirect employment effects as T-Mobile’s suppliers and business partners hire more workers, and (b) the induced effects resulting from increased labor income and higher consumer spending. 272 Id. at ¶56. 273 Id. 83 REDACTED – FOR PUBLIC INSPECTION changes in economic activity across a variety of business and policy applications.274 NERA’s application of the IMPLAN model considered both merger-specific employment losses and employment gains associated with increased capital and operational expenditures following the merger. Applying the IMPLAN multipliers to the net expenditures of the combined company allowed NERA to calculate the employment effects of the transaction over time. Ultimately, Dr. Eisenach’s analysis helps to show that increased expenditures and output resulting from New TMobile’s investments—along with the effects of accelerated 5G—will create significant net positive employment effects across the United States. IV. THE MERGER WILL INTENSIFY, NOT HARM, COMPETITION The approval of the merger and launch of New T-Mobile’s 5G network will send competitive shockwaves throughout the mobile wireless marketplace, as well as adjacent market segments. New T-Mobile will have strong business incentives to engage in disruptive competition. Verizon, AT&T, and others will have to react to the threat with aggressive investments in their own 5G networks along with pricing and innovation responses throughout their product offerings. Once this cycle of network investment and competitive responses is underway, there is no recall button. The prospect of the competitors coordinating with each other to increase prices or restrict output is not a realistic threat. As documented in the declarations of the Applicants’ executives and supported by studies of leading economists, the merger of T-Mobile and Sprint will promote competition and enhance consumer welfare. As also detailed below, the pro-competitive effects of the merger have to be 274 Id. at ¶7. See generally Implan Group, http://www.implan.com/ (last visited June 16, 2018). In using the IMPLAN model, Dr. Eisenach identified the incremental changes in economic activity specific to the proposed merger and classified these changes per the economic sectors that comprise IMPLAN’s model of the U.S economy. He then applied employment multipliers to the incremental transaction-specific expenditures and output to estimate job creation by sector. The resulting multiplier effects are consistent with prior economic studies of the employment effects of changes in telecommunications sector expenditures. 84 REDACTED – FOR PUBLIC INSPECTION evaluated against the competitive consequences in the absence of the merger. The reality is that Sprint and T-Mobile both face significant challenges; even T-Mobile’s successful Un-carrier campaign has not advanced the company beyond the rear view mirrors of Verizon and AT&T. The delta between today without the merger and tomorrow with the merger confirms the significant increases in consumer welfare following approval of the merger. A. Verizon and AT&T are Two Large, Entrenched Nationwide Carriers and the Wireless Marketplace Needs a Disruptive Rival of Similar Scale to Drive Competition and Innovation Despite aggressive competitive efforts by T-Mobile and Sprint, Verizon and AT&T have held consistently leading positions in the wireless industry for well over a decade. Verizon and AT&T are bigger, better-capitalized wireless companies that also have expanded into horizontally or vertically-related businesses. The two companies’ scale, spectrum, vast financial resources, and stable leading positions in the wireless industry have enabled them to leverage their positions to expand into the provision of other services, diversify their offerings for consumers and businesses, and become more firmly and comfortably entrenched. Market Share. A review of the Commission’s wireless competition reports of the last decade makes clear that Verizon and AT&T have long maintained leading positions in the wireless industry, accounting collectively for about two-thirds of the market. As of the end of 2016, Verizon maintained a 36.8 percent share of mobile wireless service revenues and AT&T maintained a 32.8 percent market share.275 In comparison, at the same time, T-Mobile and Sprint held a 15.4 percent share and 13.4 percent share, respectively.276 As described in greater detail below, Verizon and AT&T account for the vast majority of subscribers and revenue in the 275 Twentieth Mobile Wireless Competition Report, 32 FCC Rcd at 8988, Table II.C.1. 276 Id. 85 REDACTED – FOR PUBLIC INSPECTION industry, have significant network advantages, and are well positioned to continue to hold onto their steady market share. Network Advantages. Verizon and AT&T have nationwide networks that claim to provide customers with the coverage and depth of capacity to experience consistently fast upload and download LTE speeds, regardless of location. These networks, which were built on Verizon and AT&T’s early low-band spectrum advantages, enabled them to establish a strong nationwide footprint and customer relationships before either T-Mobile or Sprint was able to compete as effectively through network quality or coverage. Verizon’s LTE Network covers an estimated 303 million POPs,277 while AT&T’s LTE network covers an estimated 305 million POPs.278 Verizon’s and AT&T’s LTE networks each also cover more area than either T-Mobile’s or Sprint’s networks,279 which puts the two smaller carriers at a significant disadvantage when trying to compete at a national level. Capital Advantages. Verizon and AT&T each have access to far more capital than TMobile and Sprint. Verizon and AT&T each have market capitalizations that are more than double the market capitalizations of T-Mobile and Sprint combined, significantly greater cash flow, and much higher earnings before interest, taxes, and depreciation (“EBITDA”). With respect to market capitalization, Verizon’s stands at $198.58 billion280 and AT&T’s at $203.57 billion.281 T-Mobile’s and Sprint’s market capitalizations of $50.82 billion282 and $22.02 277 Id. at 9049, Appx. III, Table III.D.vi. 278 Id. 279 Id. 280 See Verizon Communications, Inc., WALL STREET JOURNAL, https://quotes.wsj.com/VZ (last visited June 16, 2018). 281 See AT&T, Inc., WALL STREET JOURNAL, https://quotes.wsj.com/T (last visited June 16, 2018). 282 See T-Mobile US, Inc., WALL STREET JOURNAL, https://quotes.wsj.com/TMUS (last visited June 16, 2018). 86 REDACTED – FOR PUBLIC INSPECTION billion,283 respectively, are small by comparison. Verizon and AT&T finished 2017 with adjusted free cash flow of $8.1 billion284 and $17.6 billion,285 respectively. For the same period, T-Mobile and Sprint had adjusted free cash flow of $2.7 billion286 and $945 million,287 respectively. In 2017, Verizon and AT&T had adjusted EBITDA of $45.1 billion288 and $45.3 billion,289 respectively. T-Mobile and Sprint finished 2017 with adjusted EBITDA of $11.7 billion290 and $11.1 billion,291 respectively, which is one-fourth that of the larger companies. Compounding Competitive Advantages. Greater scale and access to capital provide Verizon and AT&T with greater capacity to invest in critical wireless business inputs, including spectrum and network infrastructure. These investments themselves compound to further reinforce Verizon’s and AT&T’s leading positions: • 283 Spectrum Investments: The scale and capitalization of Verizon and AT&T have enabled them to aggressively acquire spectrum. Both companies moved quickly to accumulate the majority of the available millimeter wave spectrum in the secondary market, a band See Sprint Corporation, WALL STREET JOURNAL, https://quotes.wsj.com/S (last visited June 16, 2018). 284 Verizon, Fourth Quarter 2017 Earnings Results, at 10 (Jan. 23, 2018), https://www.verizon.com/about/file/25853/download?token=jlF8vBIT. 285 AT&T, AT&T Reports Fourth-Quarter and Full-Year Results (Jan. 31, 2018), http://about.att.com/story/att_fourth_quarter_earnings_2017.html. 286 T-Mobile, T-Mobile Reports Record Financial Results Across the Board for FY 2017, Issues Strong Guidance for 2018 and Beyond (Feb.7, 2018), https://www.t-mobile.com/news/tmus-q4-2017-earnings.htm. 287 Sprint, Sprint Delivers Best Financial Results in Company History with Highest Ever Net Income and Operating Income in Fiscal Year 2017 (May 2, 2018), http://investors.sprint.com/news-and-events/press-releases/press-releasedetails/2018/Sprint-Delivers-Best-Financial-Results-In-Company-History-With-Highest-Ever-Net-Income-AndOperating-Income-In-Fiscal-Year-2017/default.aspx. 288 Verizon, Fourth Quarter 2017 Earnings Results, at 5 (Jan. 23, 2018), https://www.verizon.com/about/file/25853/download?token=jlF8vBIT. 289 AT&T, 2017 Annual Report, at 59, https://investors.att.com/~/media/Files/A/ATT-IR/financial-reports/annualreports/2017/complete-2017-annual-report.pdf. 290 T-Mobile, T-Mobile Reports Record Financial Results Across the Board for FY 2017, Issues Strong Guidance for 2018 and Beyond (Feb.7, 2018), https://www.t-mobile.com/news/tmus-q4-2017-earnings.htm. 291 Sprint, Sprint Delivers Best Financial Results in Company History with Highest Ever Net Income and Operating Income in Fiscal Year 2017 (May 2, 2018), http://investors.sprint.com/news-and-events/press-releases/press-releasedetails/2018/Sprint-Delivers-Best-Financial-Results-In-Company-History-With-Highest-Ever-Net-Income-AndOperating-Income-In-Fiscal-Year-2017/default.aspx. 87 REDACTED – FOR PUBLIC INSPECTION that is an important component of the spectrum stack needed to provide next-generation 5G technology.292 Indeed, T-Mobile was very interested in acquiring some of this spectrum to complement its low-band spectrum, but was outbid by these larger rivals.293 • Business Investments: Greater scale and access to capital also provide Verizon and AT&T with an increased ability to invest in existing and new business lines. Verizon and AT&T have leveraged these advantages to: (1) establish superior positions in important segments, including enterprise, government, and rural wireless services; and (2) grow larger and more diverse business portfolios including through the acquisition of vertically integrated assets. Developing a footprint in these segments often involves major acquisitions that neither T-Mobile nor Sprint, currently could afford or fully capitalize on given limited scale and lack of complimentary assets. For example, in 2014, AT&T acquired DirecTV for approximately $48 billion, which is approximately the total market capitalization of T-Mobile today.294 • Bundling: Acquisitions of vertically integrated and complementary assets and businesses have helped to entrench the significant competitive advantages that Verizon and AT&T hold over T-Mobile and Sprint, as they can offer a greater diversity of services and products to customers and provide attractive bundled packages of services. As noted above, the convergence of industries has resulted from fundamental shifts in consumer expectations and consumption patterns. Consumers today are interested in obtaining content and services wherever they are and are increasingly cost-conscious. These consumers value bundled content and services and Verizon and AT&T compete more effectively by providing bundled packages that match consumer preferences. • Subsidization: Verizon and AT&T can subsidize less profitable business lines with more profitable ones, providing flexibility in diversifying their services. Moreover, Verizon and AT&T are in an excellent position to leverage their vertically related wireline assets in negotiations with content distributors and Internet companies. As noted by GSMA, “[AT&T] and [Verizon] are driving the current phase of telecoms and media convergence as the operators look to diversify away from core mobile services and compete more effectively with the Internet players.”295 292 See, e.g., Application of Verizon Communications Inc. and Straight Path Communications, Inc., Memorandum Opinion and Order, 33 FCC Rcd 188 (2018); Application of AT&T Mobility Spectrum LLC and FiberTower Corporation For Consent to Transfer Control of 39 GHz Licenses, Memorandum Opinion and Order, 33 FCC Rcd 1251(2018). 293 For example, Verizon acquired Straight Path and its spectrum holdings for $3.1 billion after a bidding war with AT&T. T-Mobile’s top bid was approximately percent lower than the eventual sale price. See Verizon Communications, Inc., Amendment No. 1 to Form S-4 Registration Statement, at 52-54 (June 23, 2017), https://www.sec.gov/Archives/edgar/data/732712/000119312517211750/d406130ds4a.htm#rom406130_2. 294 AT&T, AT&T Completes Acquisition of DIRECTV (July 24, 2015), http://about.att.com/story/att_completes_acquisition_of_directv.html. 295 GSMA, The Mobile Economy North America 2017, at 4 (Sept. 2017). 88 REDACTED – FOR PUBLIC INSPECTION Convergence-Driven Business Models. The most successful wireless companies of today recognize that the boundaries between “wireless” and “wireline” are rapidly dissolving and that, to succeed in a converged market, they must compete in the expanding “broadband” market. Both Verizon and AT&T have adopted convergence-driven business strategies that are aligned with the business realities of tomorrow, and those strategies are paying off. For example, AT&T says it aims to become “the world’s premier technology, media, and telecommunications (TMT) provider,”296 and it is consistently leveraging its position as a wireline and content distributor to compete in wireless. AT&T’s CEO has acknowledged that its bundling efforts, including combining its wireless products with DIRECTV, landline phone services, U-Verse MVPD offerings and broadband wired Internet access, have reduced churn.297 AT&T also: (1) offers Data Free TV, which allows subscribers to stream AT&T’s U-verse and DIRECTV content without incurring data charges;298 (2) provides a streaming-only DIRECTV Now service;299 and (3) includes HBO in its lower-end Unlimited Plus and AT&T Unlimited Choice plans.300 In the first quarter of 2018, AT&T reported 312,000 additional DIRECTV Now subscribers and a total of 1.5 million DIRECTV Now subscribers, offsetting its traditional pay- 296 David Alton Clark, AT&T Is Dead Money? I Beg To Differ, SEEKING ALPHA (Jul. 12, 2017), https://seekingalpha.com/article/4087053-t-dead-money-beg-differ. 297 Sean Buckley, AT&T’s Stephenson: Multiproduct wireless, video households have dramatically lower churn, FIERCE WIRELESS (Sep. 12, 2017), http://www.fiercewireless.com/wireless/at-t-s-stephenson-multi-productwireless-video-households-have-dramatically-lower-churn. 298 AT&T, About Data Free TV, https://www.att.com/esupport/article.html#!/wireless/KM1131836 (last visited June 16, 2018). 299 AT&T, About TV, https://www.att.com/directv-now/ (last visited June 16, 2018). 300 AT&T, HBO channels included with AT&T unlimited plans, https://www.att.com/esupport/article.html#!/directv/KM1199253 (last visited June 16, 2018). 89 REDACTED – FOR PUBLIC INSPECTION TV subscriber losses and helping its total U.S. video base to rebound to the same level it reached in the first quarter of 2017.301 AT&T’s acquisition of Time Warner will enable the low-cost integration of a vast collection of content, provide valuable advertising efficiencies, and supply numerous distribution conduits. AT&T previously stated that the acquisition will “give us the scale, resources and ability to deploy video content more efficiently to more customers than otherwise possible and to provide very attractive integrated offerings of video, broadband and wireless services; compete more effectively against other video providers as well as other technology, media and communications companies; and produce cost savings and other potential synergies.”302 AT&T’s CEO recently noted that the Time Warner acquisition will allow the company to “us[e] video as a key differentiator in the marketplace and driv[e] share by virtue of integrating video and different experiences with video.”303 This aligns with AT&T’s goal to provide content to any customer in any location on any device, meeting future demand for mobile video.304 As 301 Todd Spangler, AT&T Misses Q1 Targets, as DirecTV Now Streaming Service Hits 1.46 Million Subscribers, VARIETY (Apr. 25, 2018), http://variety.com/2018/biz/news/att-q1-2018-directv-now-subscribers-1202786896. 302 AT&T, Inc., Financial Review 2016, at 42 (2017) https://www.att.com/Investor/ATT_Annual/2016/downloads/att_ar2016_mda_consolidatedtables.pdf. 303 AT&T Presents at JPMorgan Global Technology, Media and Communications Broker Conference, SEEKING ALPHA (May 15, 2018), https://seekingalpha.com/article/4174200-ts-t-presents-jpmorgan-global-technology-mediacommunications-broker-conference-transcript?part=single. 304 Jennifer M. Fritzsche, Caleb Stein, and Eric Luebchow, AT&T: Getting Ready For Hollywood (& NYC!), at 1, WELLS FARGO SECURITIES (Oct. 10, 2017). See also United States v. AT&T Inc., No. 17-2511, Memorandum Opnion at 36 (D.C. Cir. June 12, 2018) (“At trial, the evidence showed that defendants view the proposed merger as an essential response to the industry dynamics described above—that is, the increasing importance of web- and mobile-based content offerings; the explosion in targeted, digital advertising; and the limitations attendant with AT&T’s and Time Warner’s respective business models. The proposed merger would do so, defendants’ executives asserted, through vertical integration of the companies’ complementary assets: Time Warner’s popular content and significant advertising inventory, and AT&T's consumer relationships, customer data, and large wireless business.”). 90 REDACTED – FOR PUBLIC INSPECTION AT&T contends, “the future of video lies in its wireless network, and the future of its wireless network lies in video.”305 Verizon’s actions similarly demonstrate the importance of a convergence-driven strategy. Verizon has long bridged both wireless and wireline and used the advantages of each to expand both businesses. However, Verizon’s convergence-driven diversification extends much further than its legacy properties. For example, its strategic acquisitions of AOL and Yahoo broadened Verizon’s subscriber reach and allowed it to branch into the content and digital media businesses.306 Verizon combined the media and technology assets of AOL and Yahoo into a new company called Oath and plans to leverage the content of its Oath properties with premium thirdparty content to offer an OTT streaming service.307 Verizon already has entered into alliances with Vice Media for OTT content,308 and Verizon recently entered into a $2.5 billion agreement with the National Football League to stream live games to its subscribers, further augmenting its video offerings.309 As a result of the above, Verizon and AT&T are growing their market footprints, are better able to bundle and offer more innovative services and packages to their customers, and are 305 United States v. AT&T, Inc., DirectTV Group Holdings, LLC, and Time Warner, Inc., Pretrial Brief of Defendants, at 22 (Mar. 9, 2018), https://www.courtlistener.com/recap/gov.uscourts.dcd.191339/gov.uscourts.dcd.191339.77.0_1.pdf. 306 Majit Kavithia, Verizon Wireless head looks to AI for transformation, MOBILE WORLD LIVE (Aug. 9, 2017), https://www.mobileworldlive.com/featured-content/home-banner/dunne-details-vision-of-verizon-as-informationprovider/. 307 Chaim Gartenberg, Verizon’s streaming TV service might have standalone app ‘channels’, THE VERGE (Jan. 16, 2018), https://www.theverge.com/2018/1/16/16892512/verizon-streaming-tv-service-standalone-app-channels-ottnew-details. 308 Sarah Perez, Verizon Signs Up VICE To Deliver Original Content For Its Upcoming Mobile Video Service, TECH CRUNCH (Jul. 14, 2015), https://techcrunch.com/2015/07/14/verizon-signs-up-vice-to-deliver-original-content-forits-upcoming-mobile-video-service/. 309 Darren Rovell, Verizon, NFL agree to new 5-year deal worth nearly $2.5 billion, ESPN.com (Dec. 11, 2017), http://www.espn.com/nfl/story/_/id/21737823/verizon-nfl-agree-new-5-year-deal-worth-nearly-25-billion (“‘Media is one of the major pillars for us now,’ said Brian Angiolet, Verizon’s global chief media and content officer.”). 91 REDACTED – FOR PUBLIC INSPECTION better at retaining subscribers. Indeed, the two companies have extremely low rates of costly customer churn. In 2017, Verizon and AT&T had postpaid phone churn rates of 0.78 percent310 and 0.85 percent,311 respectively, while T-Mobile and Sprint had corresponding rates of 1.18 percent312 and 1.60 percent,313 respectively. Foundations for Continued Stability and Success. Verizon and AT&T are wellpositioned for continued success in the wireless space and adjacent markets. Verizon’s extensive fiber backhaul network, combined with its strengthened dark fiber backhaul as a result of its acquisition of XO Communications for $1.8 billion,314 supports its existing 4G LTE network and provides an optimal starting point for its forthcoming 5G wireless network.315 Additionally, Verizon’s recently approved transaction with Straight Path Communications,316 combined with its purchase of XO, provides the company with increased millimeter wave spectrum holdings that position it to launch 5G in various metropolitan areas. AT&T’s CFO has lauded the advantages of scale that make AT&T a “fully integrated network carrier,” including its expansive wireless holdings and capabilities, massive fiber 310 Verizon, 2017 Annual Report, at 4, https://www.verizon.com/about/sites/default/files/2017VerizonAnnualReport.pdf. 311 AT&T, 2017 Annual Report, at 26, https://investors.att.com/~/media/Files/A/ATT-IR/financial-reports/annualreports/2017/complete-2017-annual-report.pdf. 312 T-Mobile, T-Mobile Reports Record Financial Results Across the Board for FY 2017, Issues Strong Guidance for 2018 and Beyond (Feb.7, 2018), https://www.t-mobile.com/news/tmus-q4-2017-earnings.htm. 313 Sprint, Sprint Reports Highest Retail Net Additions in Nearly Three Years and Raises Adjusted Free Cash Flow Guidance with Fiscal 2017 Third Quarter Results (Feb. 2, 2018), http://investors.sprint.com/news-and-events/pressreleases/press-release-details/2018/Sprint-Reports-Highest-Retail-Net-Additions-In-Nearly-Three-Years-AndRaises-Adjusted-Free-Cash-Flow-Guidance-With-Fiscal-2017-Third-Quarter-Results/default.aspx. 314 See Application of Cellco Partnership d/b/a Verizon Wireless and XO Holdings, Memorandum Opinion and Order, 32 FCC Rcd 10125 (2017). 315 Sean Buckley, After delay, Verizon wraps $1.8B XO acquisition, deepening metro fiber density in 45 markets, FIERCE WIRELESS (Feb. 1, 2017), https://www.fiercetelecom.com/telecom/after-delay-verizon-wraps-1-8b-xoacquisition-deepens-metro-fiber-density-45-markets. 316 See Application of Verizon Communications Inc. and Straight Path Communications, Inc., Memorandum Opinion and Order, 33 FCC Rcd 188 (2018). 92 REDACTED – FOR PUBLIC INSPECTION footprint, extensive traditional wireline network, and satellite distribution.317 AT&T recently added to these advantages by acquiring FiberTower Corporation, giving the company a significant footprint in the 39 GHz band, with average holdings of more than 375 megahertz in the top 100 markets, and facilitating AT&T’s deployment of 5G services in many metropolitan areas.318 Further, AT&T recently launched a “controlled introduction” of the core of the FirstNet nationwide public safety network.319 Though focused on enabling communications between first responders and other emergency personnel, AT&T will be able to leverage excess FirstNet capacity to provide additional services to non-public safety customers. Competition is Needed to Hasten, Expand, and Enhance 5G Deployment. Both Verizon and AT&T have adopted a restrained approach to 5G deployment that focuses only on deploying millimeter wave spectrum in high-density urban areas. Because of their scale, stable market positions, high-performing LTE networks, strong brands, and perceived network quality and advantage, Verizon and AT&T can afford to be conservative in their 5G efforts and still maintain their large customer bases. As Dr. Evans’ economic analysis has shown, Verizon and AT&T’s “tepid adoption” of 5G will likely continue absent a carrier moving to accelerate deployment. Neither T-Mobile nor Sprint can accelerate deployment without the merger and, therefore, absent the additional competition in the 5G arena that would be created by New T317 AT&T’s Management Presents at 4th Annual MoffettNathanson Media & Communications Summit Results, SEEKING ALPHA (May 17, 2017), https://seekingalpha.com/article/4074190-ts-t-management-presents-4th-annualmoffettnathanson-media-and-communications-summit-results?part=single. 318 See Application of AT&T Mobility Spectrum LLC and FiberTower Corporation For Consent to Transfer Control of 39 GHz Licenses, Memorandum Opinion and Order, 33 FCC Rcd 1251(2018). See also AT&T, AT&T Completes Acquisition of FiberTower Corporation (Feb. 9, 2018) http://about.att.com/story/att_completes_acquisition_of_fibertower_corporation.html. 319 FirstNet is the nation’s first broadband network dedicated to police, firefighters and emergency medical services. Built and managed by AT&T in a public-private partnership with the federal government, the FirstNet network will cover all 50 states, 5 U.S. territories and the District of Columbia, including rural communities and Tribal lands in those states and territories. See Jon Fingas, AT&T launches the base of its FirstNet public safety network, ENGADGET (Mar. 27, 2018), https://www.engadget.com/2018/03/27/att-firstnet-network-core-live/. 93 REDACTED – FOR PUBLIC INSPECTION Mobile, Verizon and AT&T have little incentive to more aggressively invest in a robust, nationwide 5G networks. However, New T-Mobile will drive Verizon and AT&T to hasten, expand, and enhance their 5G deployment plans. B. Unlike the Two Standalone Companies, New T-Mobile Will Be a Strengthened Maverick with the Incentives and Ability to Go Toe-to-Toe with Verizon and AT&T Despite aggressive competitive efforts by T-Mobile and Sprint, including network investments, innovations, marketing and lower pricing, neither company has been able to loosen Verizon and AT&T’s grip on about two-thirds of the wireless marketplace. Yet, following the merger, New T-Mobile will have the network, scale, and incentives to finally make inroads into Verizon’s and AT&T’s leading market shares, spurring even greater competition. 1. Sprint Faces Serious Challenges for the Future Scale. Sprint has lost share despite its aggressive competitive actions and price moves. While Sprint held a 15.5 percent share of mobile wireless service sales in 2013, its share had dropped to 13.4 percent by 2016.320 These decreases have a very real practical impact on Sprint’s competitive strength. Sprint’s loss of subscribers has steadily dwindled the base of customers across which it could distribute costs, exacerbating its scale disadvantages compared to larger competitors. As John Saw states in his declaration, “[b]ecause we lack the scale of our larger competitors, we do not have as many subscribers over which to spread out our network costs, particularly compared to AT&T and Verizon.”321 Spectrum and Network. Sprint’s present challenges and the challenges it will face in transitioning to 5G stem from the limitations inherent in its mix of spectrum and network assets 320 Twentieth Mobile Wireless Competition Report, 32 FCC Rcd at 8988, Table II.C.1. 321 Saw Decl. at ¶9. 94 REDACTED – FOR PUBLIC INSPECTION and its below-scale subscriber base. Sprint’s LTE network footprint covers far less geography (particularly in rural areas) and fewer POPs than Verizon’s, AT&T’s, or T-Mobile’s networks.322 Sprint must rely on costly roaming agreements to provide services to its customers when they travel outside of its network footprint. Those roaming agreements typically provide Sprint customers with an inferior user experience to what Sprint provides on its own network. Even within Sprint’s network footprint the propagation limitations of its 2.5 GHz spectrum, coupled with an inadequate density of cell cites equipped with 2.5 GHz radios, result in significant coverage gaps in the 2.5 GHz layer.323 As a result, Sprint’s user experience is often diminished in buildings and in suburban, exurban, and rural locations. Sprint’s in-building POPs coverage for 2.5 GHz is much lower than its total LTE coverage.324 These spectrum and network challenges will carry forward into the 5G era and multiply. All nationwide wireless competitors have identified 5G as the critical path to their future competitiveness in the industry. However, on a standalone basis, Sprint’s 5G plans also face limitations. Sprint’s spectrum holdings restrict its 5G deployment to the 2.5 GHz band while Sprint continues to provide traditional 3G and 4G services in its other spectrum. It would not be economically practical for Sprint to deploy 5G outside of high population density areas given Sprint’s limited standalone subscriber scale. This constraint would dramatically limit the reach of Sprint’s 5G deployment during a critical competitive period for attracting and retaining new customers with innovative 5G capabilities. Further complicating Sprint’s 5G competitiveness is the fact that tower prioritization for massive MIMO deployment—Sprint’s stepping stone to 5G deployment—will largely be driven by capacity demands on Sprint’s existing 4G LTE 322 See Saw Decl. at ¶12; Draper Decl. at ¶11. 323 Saw Decl. at ¶15. 324 See Draper Dec. at ¶11; Saw at ¶13. 95 REDACTED – FOR PUBLIC INSPECTION network.325 This means that Sprint’s 5G network will not be contiguous. Sprint’s lack of lowband spectrum sufficient to provide a robust 5G coverage layer also precludes it from providing ubiquitous, nationwide service. Absent the merger, the company will not be a major competitor in most of rural America in the foreseeable future. Consumer Perception and Satisfaction. Sprint’s historically poor perceived network performance and other challenges have led to high levels of customer churn and will continue to make it difficult for Sprint to attract and retain customers as a standalone company.326 The negative perception of the Sprint network has been extremely difficult for the company to overcome, and gives even further competitive advantage to AT&T and Verizon.327 Data show that Sprint has the highest churn rate among major carriers.328 In 2017, Sprint’s postpaid phone churn rate was around twice that of AT&T’s and Verizon’s.329 In fact, Sprint is the only major carrier with a rising churn rate.330 Finances. Finally, Sprint faces serious, mutually reinforcing challenges that limit its ability to improve its competitive prospects. To attract and retain customers, it must invest heavily in its network and other capabilities. Yet to support those investments it must throttle back on the aggressiveness of its promotions, which failed to achieve a fundamental shift in Sprint’s ability to attract and retain customers. Indeed, Sprint’s declining share and persistently 325 Saw Decl. at ¶15. 326 Draper Decl. at ¶14. 327 Id. at ¶20. 328 Id. at ¶14. 329 Id. 330 Id. at ¶20. 96 REDACTED – FOR PUBLIC INSPECTION high churn occurred despite Sprint’s aggressive attempts to add subscribers and thereby gain scale.331 Reflecting these patterns, Sprint’s service revenue and ARPU have been declining for at least five years, with total service revenue falling around 25 percent from 2013 to 2018, and postpaid ARPU falling approximately 30 percent. Sprint also has a current net debt of approximately $32 billion and is the most highly leveraged company in the S&P 500.332 As previously mentioned, Verizon and AT&T both dwarf Sprint in terms of adjusted EBITDA and free cash flow, leaving Sprint as a standalone company at a severe disadvantage with respect to the cash necessary to invest in improving its network and business. Sprint plans to spend $5-6 billion a year over the next three years to build a 5G network and, even with that spending, Sprint’s 5G footprint would be geographically limited as noted above.333 And though Sprint’s massive cost reductions have stabilized the company’s finances and yielded positive free cash flow for the first time in many years, the company achieved that result only by shrinking the company and reducing network investment to historically low levels.334 Put simply, Sprint lacks the scale and resources to expand its network capital spending (as required to avoid falling further behind in network quality and to begin deploying 5G network technologies) and continue its aggressive spending (in the form of promotional pricing and other incentives) on customer acquisition.335 331 Id. at ¶¶18-20. 332 See Sprint Corporation, WALL STREET JOURNAL, https://quotes.wsj.com/S (last visited June 16, 2018). 333 Draper Decl. at ¶5. 334 Id. at ¶4. 335 Id. at ¶¶5, 22. 97 REDACTED – FOR PUBLIC INSPECTION As a result, Sprint’s standalone future will not be one that allows it to be an effective competitor to Verizon and AT&T on a nationwide basis. And while Sprint has planned network investment over the next several years, such investments will be difficult for Sprint to manage and Verizon and AT&T have announced their intentions to spend nearly as much in CapEx this year alone.336 Even with accelerated investment, Sprint is still unable to “catch up” from previous underinvestment, much less build a network that achieves parity with Verizon and AT&T (based on Network CapEx per subscriber).337 2. T-Mobile, as a Standalone Company, Has Had Some Success But Will Not Be Able to Continue Competing as Well Without the Merger T-Mobile’s Un-carrier strategy has worked, but it alone is not enough to overcome the scale and spectrum advantages of Verizon and AT&T. While T-Mobile has gained some market share, those gains have amounted to only a few percentage points after five years of continuous aggressive implementation of its Un-carrier strategy. And, much of that gain is attributable to its successful acquisition and integration of MetroPCS, rather than taking share through organic gains in the marketplace.338 In 2013, T-Mobile accounted for 10.9 percent (pro forma T-Mobile and MetroPCS) of mobile wireless sales; despite its Un-carrier efforts, by 2016 that number had grown only to 15.4 percent, including the 9.3 million acquired MetroPCS customers (MetroPCS 336 AT&T has announced plans to spend approximately $23 billion in capex, with significant spending to lay the foundations of their 5G network. See AT&T to Spend Trump Tax Bump on Fiber, 5G ‘Foundation’, LIGHT READING (Jan. 31, 2018), https://www.lightreading.com/mobile/5g/atandt-to-spend-trump-tax-bump-on-fiber-5gfoundation/d/d-id/740215. Verizon has announced plans to spend nearly $18 billion in capex in 2018 in preparing for 5G. See Verizon to spend $18 billion on Capex including 5G in 2018, TELECOMLEAD (Jan. 23, 2018), http://www.telecomlead.com/5g/verizon-to-spend-18-billion-on-capex-including-5g-in-2018-81685. 337 Draper Decl. at ¶5. 338 Legere Decl. at ¶7. 98 REDACTED – FOR PUBLIC INSPECTION had a 3.84 percent market share in 2016, therefore, without MetroPCS, T-Mobile would only have held an 11.56 percent market share in 2016).339 Scale. Though T-Mobile has gained some subscriber share in recent years, Verizon and AT&T’s scale advantages enable them to realize greater scale efficiencies than T-Mobile. “AT&T and Verizon Wireless have higher asset utilization measured by the number of customers supported per unit of fixed cost network (e.g., cell towers).”340 Additionally, “TMobile must instead allocate the largely fixed costs of its network over less than half of the subscriber base of AT&T or Verizon, so T-Mobile’s costs-per-subscriber are substantially higher.”341 This scale better enables the two larger rivals to invest in new businesses and acquire assets with which to enhance or expand their networks, such as the millimeter wave spectrum that will be critical to future 5G deployments.342 Scale differentials, such as the gap between T-Mobile and the much larger Verizon and AT&T, are compounding. Lacking sufficient scale to spread costs, T-Mobile will fall farther behind, and Verizon and AT&T will continue to be positioned to capitalize on new spectrum acquisition opportunities, whether at auction or in the secondary market. As Mike Sievert states, “without a large and well-resourced challenger, [Verizon and AT&T] will remain unchecked and able to further distance themselves from any meaningful competition in the 5G era.”343 Spectrum and Network. As discussed in greater detail above, as a standalone company, T-Mobile does not have the spectrum portfolio required to launch a competitive, broad, and deep 339 Twentieth Mobile Wireless Competition Report, 32 FCC Rcd at 8988, Table II.C.1. 340 Sievert Decl. at ¶9. 341 Id. 342 Id. 343 Id. 99 REDACTED – FOR PUBLIC INSPECTION nationwide 5G network during the next few years. T-Mobile’s thin layer of 600 MHz spectrum provides excellent coverage, but is inadequate for purposes of providing target 5G speeds, low latency, or robust capacity.344 Greater capacity is the most important component for achieving cost reductions and, in turn, price reductions for consumers. Without this capacity, not only is TMobile less able to compete with Verizon and AT&T in terms of network capability, but it also is limited in its ability to continue driving down prices to increase consumer benefit. T-Mobile’s capacity challenges will intensify as customer demand for mobile data continues to grow and more subscribers seek unlimited data plans.345 As Mike Sievert notes, “[w]ithout the proposed transaction, T-Mobile’s ability to continue exerting competitive pressure on Verizon and AT&T is likely to plateau because of its smaller subscriber share, revenue base, and longer-term spectrum constraints.”346 3. New T-Mobile Will Have the Incentive and Ability to Compete with Verizon and AT&T New T-Mobile’s business incentives will be no different than those of any for-profit corporation—to maximize profitability and shareholder value. But T-Mobile has consistently shown, since it adopted the Un-carrier approach in 2013, that a consumer-first approach that gives customers better service for a lower price is not just compatible with maximizing profitability and shareholder value. It is the most profitable and value-accretive way to do business and it has been central to T-Mobile’s business strategy. Over the last five years as the Un-carrier, T-Mobile has significantly improved performance and created value for 344 See supra Section III.B.1.a. 345 Sievert Decl. at ¶11. 346 Id. 100 REDACTED – FOR PUBLIC INSPECTION consumers.347 The merger will give New T-Mobile the tools to take the Un-carrier model to new levels, enabling it to compete more aggressively against the market leaders and escalating competition to the benefit of consumers. Here is how New T-Mobile will make the competitive leap: • Spectrum and Network. With the world-leading nationwide 5G network described in Section III, New T-Mobile will have strong incentives to use its new capabilities and capacity to seize previously unattainable market share in multiple segments of the converging wireless market (e.g., consumer, commercial IoT, enterprise, and video) as well as to challenge entrenched incumbents in the in-home broadband market. And, with broader 5G coverage, New T-Mobile will be able to provide services that Verizon and AT&T cannot currently match in places that they cannot reach, particularly in rural America.348 • Scale. New T-Mobile will be able to match Verizon and AT&T in scale and, for the first time, force them to compete with an aggressive competitor that can leverage comparable scale efficiencies to invest on par with them and engage in even more aggressive price competition. • Broadband-Focused Plan. Finally, while Verizon and AT&T have pursued a wide range of divergent businesses, billions of merger-related synergies will be reinvested into improving broadband connectivity for consumers, providing new broadband services, and lowering prices. Indeed, New T-Mobile will have significant incentives to compete aggressively for customers. The combined company’s 5G network will have more capacity than any network in history—more than three times the available capacity of the standalone T-Mobile and Sprint 5G networks combined in 2024.349 Once it has that capacity, New T-Mobile will be compelled to fill it by vigorously competing for consumers to maximize the value of that network investment. Further, since this additional capacity will decrease the marginal cost of each gigabyte of data, 347 Legere Declaration at ¶¶4, 16. 348 New T-Mobile would also be able to leverage the benefits of Sprint’s wireline assets to supplement its network capabilities. 349 See supra Sec. III.B.3.a. 101 REDACTED – FOR PUBLIC INSPECTION New T-Mobile will be able to lower prices while increasing quality and value.350 The company will also be incentivized to leverage the network’s enhanced capabilities to cross-sell new services. Furthermore, as described in greater detail below, New T-Mobile will be compelled to initiate this aggressive price reduction quickly and even before full deployment of its 5G network. While New T-Mobile’s aggressive efforts alone will drive benefits to consumers, consumer welfare will be enhanced further by Verizon’s and AT&T’s inevitable competitive response to this new strong competitor in the marketplace. Both Verizon and AT&T have announced plans for limited 5G deployments that rely heavily on their millimeter wave spectrum. Because of the propagation characteristics of this spectrum, Verizon’s and AT&T’s planned deployments are focused on high density areas, such as urban cores. However, New TMobile’s nationwide 5G network will enable it to offer true 5G service to far more potential customers across a much larger geographic area than either Verizon or AT&T could plausibly muster using only millimeter wave spectrum. Also, New T-Mobile’s lower pricing will provide those potential customers a greater value for their dollar. The pressure of being outperformed in terms of both price and network quality will force Verizon and AT&T to drastically accelerate and expand their 5G deployment plans and quickly lower prices, enhancing—not harming— competition to the benefit of consumers. C. Convergence of Industries to Create a Singular Broadband Marketplace is Enabling New Entrants in Wireless to Have Increasing Competitive Relevance, Particularly in 5G Services Unleashing fierce competition between New T-Mobile, Verizon, and AT&T is enough to justify approving the merger on its own. However, advances in technology and new innovations 350 Evans Decl. ¶¶212-13. 102 REDACTED – FOR PUBLIC INSPECTION are causing previously separate and distinct businesses to converge. This convergence is changing the wireless marketplace and attracting well-capitalized and aggressive new entrants that are now able to compete at a high level. In this new competitive landscape, it is implausible that the merger will reduce competition. The Commission has recognized that the wireless space has entered an especially dynamic period and “is on the brink of a major technological transformation that is likely to be both competitively disruptive and transformative.”351 Moreover, Chairman Pai has noted that “the lines between wireless and wireline service will continue to blur as technology advances and the former becomes a more reliable way to connect.”352 The marketplace for wireless services already looks substantially different today than it did a decade ago. Consumers’ increased reliance on wireless connectivity is changing the way today’s wireless businesses operate. As these changes continue, it is important for the Commission to take that shift into account when considering wireless transactions. Commissioner O’Rielly has observe that “the traditional mobile sector is likely to experience more, not less, competition from new 5G services, next generation satellites and other innovations,” and such “competition must be considered not only as we contemplate imposing regulations—or more appropriately—enacting deregulations, but as we consider the convergence of industries and merger activity.”353 Consistent with Commissioner O’Rielly’s observations, the wireless industry is being transformed today by major new entrants that fit squarely within 351 Twentieth Mobile Wireless Competition Report, 32 FCC Rcd 8968, 8974 ¶10. 352 Diana Goovaerts, FCC’s Pai Won’t Rule Out Wireless Consolidation, Wireless Week (May 8, 2017), https://www.wirelessweek.com/news/2017/05/fccs-pai-wont-rule-out-wireless-consolidation. 353 Remarks of Commissioner Michael O’Rielly, International Institute of Communications’ International Regulators Forum (Oct. 10, 2017), https://www.fcc.gov/document/comm-oriellys-remarks-iic-intl-regulators-forum-2017. 103 REDACTED – FOR PUBLIC INSPECTION the Commission’s definition of “market participants,” as they exert clear and economically significant competitive pressures on wireless incumbents even today. The wireless space is increasingly populated by competitors beyond the traditionally recognized four nationwide wireless providers. Comcast is now offering a wireless service in partnership with Charter (expected to launch in June 2018), and DISH has announced near-term plans for both a narrowband IoT network and a 5G network (DISH has license obligations to build out much of its spectrum by 2020). These facilities-based companies have common characteristics that are the hallmarks of what the Commission has defined as a nationwide market participant, as they: (1) operate and advertise nationally, serving customers across the United States; (2) have millions of customers for their traditional cable and satellite services, positioning them well to cross-sell wireless services; (3) have access to spectrum, equipment, network facilities, and programming; and (4) engage in the full range of non-price rivalry activities, such as creating capacity through “network investments, network upgrades, or network coverage.”354 Indeed, these competitors are investing heavily in their existing networks and assets today to better compete in the 5G world.355 Additionally, other competitors, such as TracFone and Google, also bring resources, scale, brand recognition, technological capabilities, and customer bases that cannot be ignored in the Commission’s assessment of competitive effects. 354 See, e.g., Implementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, Sixteenth Report, 28 FCC Rcd 3700, 3741 ¶36 (distinguishing facilities-based providers from nonfacilities-based providers as full market participants on the basis that the former “engage in the full range of nonprice rivalry.”) (“Sixteenth Mobile Wireless Competition Report”). 355 See, e.g., Mari Sibley, Comcast: Our Network’s Ready for 5G, LIGHT READING (Mar. 6, 2017), https://www.lightreading.com/mobile/5g/comcast-our-networks-ready-for-5g/d/d-id/730854 (citing Comcast Cable Chief Executive Officer Neil Smit stating “[o]ur overlay with the 5G overlay, the network similarities are just uncanny…and the ability of our network to service the 5G needs, we feel very confident with.”). 104 REDACTED – FOR PUBLIC INSPECTION The recognition that the wireless industry has a deep field of new players further reinforces the conclusion that the wireless space will continue to be competitive and vibrant following the merger. Though none of these new entrants presently rival Verizon and AT&T, these new competitors are already having a meaningful impact on competition in the wireless market. Also, as discussed by Prof. Salop in his declaration, these new entrants diminish the possibility of coordinated effects in the market because the emergent entrants will seek to take share in the wireless marketplace, thereby destabilizing any coordinated equilibrium that today’s players could achieve.356 Below, the Applicants examine in greater detail the major players that have expanded, or will soon expand, the available wireless options. Based on their current and expected contributions to competition, these competitors should be included in an assessment of the transaction’s implications for competition. 1. Comcast and Charter Are Aggressively Entering Wireless Major wireless players have recognized the competitive pressure exerted by cable providers, noting that the cable providers are expected to “invest heavily in . . . terms of wireless” and are “being very targeted, being very smart.”357 Comcast and Charter are two of these major new entrants. Comcast is the nation’s largest cable and in-home broadband provider with more than 29 million total customers (approximately 26 million of whom receive high-speed Internet through 356 Salop/Sarafidis Decl. at ¶84-87. 357 AT&T, AT&T Chief Executive Officer Provides an Update at JP Morgan Conference (May 15, 2018), http://about.att.com/story/att_ceo_provides_update_at_jp_morgan_conference.html; AT&T Presents at JPMorgan Global Technology, Media and Communications Broker Conference, SEEKING ALPHA (May 15, 2018), https://seekingalpha.com/article/4174200-ts-t-presents-jpmorgan-global-technology-media-communications-brokerconference-transcript?part=single. 105 REDACTED – FOR PUBLIC INSPECTION Comcast).358 Charter is the nation’s second largest cable and in-home broadband provider with more than 27 million total customers (and approximately 24 million of whom receive high-speed Internet through Charter).359 Together, the two companies account for approximately 50 million cable broadband subscribers and have vast wireline telecommunications networks, which serve as the backbone for wireless network operations. Comcast has launched and Charter will soon launch their own wireless services, Xfinity Mobile and Spectrum Mobile, respectively.360 These services leverage a valuable combination of access to spectrum, scale, distribution infrastructure, backhaul, and programming. The cable giants have spectrum resources through their millions of Wi-Fi hotspots (Comcast alone has 18 million hotspots in its network),361 their favorable MVNO agreements with Verizon that give them access to Verizon’s spectrum, and licensed 600 MHz spectrum across the country. Like other facilities-based wireless carriers, Comcast and Charter use their own facilities that are integrated into their differentiated wireless offerings, directly affecting capacity, coverage, quality of service, and price. Cable networks are well suited for 5G, as they have large footprints and already support millions of Wi-Fi nodes in places where combined share is highest. As Charter’s CEO recently observed, the company’s strength as a wireless competitor “comes from [its] powerful easy to 358 Comcast Corporation, 2017 Form 10-K, at 2 (Feb. 1, 2018) https://www.cmcsa.com/static-files/111ba611-eb854edc-9000-3907c84697d8. 359 Charter Communications, Charter Announces First Quarter 2018 Results (Apr. 27, 2018), http://ir.charter.com/phoenix.zhtml?c=112298&p=irol-earnings. 360 See Karl Bode, Exclusive: Charter Wireless Launches June 30, DSL Reports, (May 4, 2018), https://www.dslreports.com/shownews/Scoop-Charter-Wireless-Drops-June-30-Mirrors-Comcast-Pricing-141756 (reporting that Charter will launch Spectrum Mobile by June 2018). 361 Comcast, Xfinity Mobile has over 18 million Wi-Fi hotspots, areas where you can save on data by accessing free Wi-Fi, https://www.xfinity.com/mobile/support/article/221762167/what-are-xfinity-wifi-hotspots-and-how-do-iconnect. 106 REDACTED – FOR PUBLIC INSPECTION upgrade network. Its unique design allows for the most cost-effective deployment of new technologies, which should drive massive increases in the amount of data we drive through that network.”362 These networks also have high capacity for both access and backhaul, are highly reliable, and have low intrinsic latency because they are based on optical fiber that penetrates deep into the access network before feeding wideband coaxial cables that reach all the way to the end-user premises. Finally, cable networks have a multi-node, remotely powered access topology that is ideally suited to support the connection of a large number of small cells close to homes and businesses that will be needed for 5G. Fortunately for cable providers, recent research supports their immediate viability as competitors in the traditional wireless space, with 40 percent of respondents already indicating they would consider switching from their existing wireless provider to wireless service offered by their cable provider.363 Building upon their vast underlying networks, Comcast and Charter have committed to pursuing mobile wireless business opportunities and have invested in doing so. Both companies have negotiated arrangements enabling them to resell Verizon’s network capacity on very favorable terms.364 Both companies have also undertaken their own experimentation with providing future wireless service using 3.5 GHz CBRS spectrum.365 And Comcast recently 362 Charter Communications’ CEO Tom Rutledge on Q1 2018 Results, SEEKING ALPHA (Apr. 27, 2018), https://seekingalpha.com/article/4167080-charter-communications-chtr-ceo-tom-rutledge-q1-2018-results-earningscall-transcript?page=3. 363 Mike Dano, 40% of Americans would consider buying wireless from their cable provider, FIERCE WIRELESS (May 4, 2018), https://www.fiercewireless.com/wireless/40-americans-would-consider-buying-wireless-from-theircable-provider. 364 David Lieberman, Comcast Unveils Plan To Sell Mobile Services That Harness Its Wi-Fi Network, DEADLINE (Apr. 6, 2017), http://deadline.com/2017/04/comcast-unveils-plan-sell-mobile-service-harness-wifi-network1202063357/. 365 Mike Dano, Comcast eyes 3.5 GHz CBRS for both fixed and mobile applications, including commercial handsets, FIERCEWIRELESS (Feb. 15, 2018), https://www.fiercewireless.com/wireless/comcast-eyes-3-5-ghz-cbrs-for-bothfixed-and-mobile-applications-including-commercial. See also, Comcast Application for Experimental 107 REDACTED – FOR PUBLIC INSPECTION acquired 10 megahertz of 600 MHz spectrum for $1.7 billion.366 This spectrum covers approximately 145 million POPs across the country, mostly in major markets within Comcast’s existing footprint, including Chicago, San Francisco, and Philadelphia.367 As shown in the maps below, Comcast and Charter’s wireless resources span the country. Figure 13: Comcast 600 MHz Licenses Authorization in 3650–3700 MHz Citizens Broadband Radio Service, https://apps.fcc.gov/els/GetAtt.html?id=204745&x. 366 Colin Gibbs, Mapping T-Mobile, Dish, Comcast and AT&T: Who got how much 600 MHz spectrum and where?, FIERCEWIRELESS (Apr. 18, 2017), https://www.fiercewireless.com/wireless/mapping-t-mobile-dish-comcast-and-att-who-got-how-much-600-mhz-spectrum-and-where. 367 Dan Meyer, T-Mobile US, Dish, Comcast dominate 600 MHz incentive auction, Verizon a no-show, RCR WIRELESS NEWS (Apr. 13, 2017), https://www.rcrwireless.com/20170413/policy/t-mobile-us-dish-comcastdominate-600-mhz-incentive-auction-verizon-a-no-show-tag2. 108 REDACTED – FOR PUBLIC INSPECTION Figure 14: Comcast Hotspots368 Figure 15: Charter Hotspots369 Charter has said it views itself as “already a wireless operator today with over 250 million authenticated wireless devices connected to our deployed small cell network.”370 Charter also 368 Xfinity Mobile, How do I check for Xfinity Mobile coverage?, https://www.xfinity.com/mobile/ (last visited June 16, 2018). 369 Charter Communications, Search for Hotspots, https://www.spectrum.com/wifi-hotspots.html (last visited June 16, 2018). 109 REDACTED – FOR PUBLIC INSPECTION recently explained that it is “in the process of transitioning its wireless network from a nomadic Wi-Fi network to one that supports full mobility by combining its existing Wi-Fi assets with multiple 4G and 5G access technologies.”371 Deployment in the 3.5 GHz band or on 600 MHz spectrum will effectively untether Comcast and Charter from Wi-Fi and carrier reliance as they expand their wireless offerings in the future. Strong Early Performance. Comcast is already making significant early gains in the market. Recently, Comcast announced that Xfinity Mobile added 196,000 new subscribers in the first quarter of 2018, bringing its total wireless subscribership to 577,000 customers.372 Comcast achieved this impressive start despite initially choosing to market only to existing Comcast broadband subscribers.373 Coupled with Comcast’s other strengths, these figures show the potential for even faster growth in the near future as Comcast more aggressively markets its wireless services as part of a bundle to new customers, and its partnership with Charter comes to fruition. Among those with Xfinity Mobile as their primary wireless carrier, almost 50 percent have switched from either Verizon or AT&T, demonstrating that Comcast already is having a competitive impact on the leading wireless incumbents.374 Almost 30 percent of these subscribers indicated that the ability to purchase bundles of television, Internet, and wireless 370 Charter Communications' CEO Tom Rutledge on Q1 2018 Results, SEEKING ALPHA (Apr. 27, 2018), https://seekingalpha.com/article/4167080-charter-communications-chtr-ceo-tom-rutledge-q1-2018-results-earningscall-transcript?page=2. 371 Comments of Charter Communications, Inc., GN Docket No. 17-258, at 1 (filed Dec. 28, 2017). 372 Andy Szal, Comcast Enrolls 577,000 Xfinity Mobile Subscribers Through Q1, WIRELESS WEEK (Apr. 26, 2018), https://www.wirelessweek.com/news/2018/04/comcast-enrolls-577000-xfinity-mobile-subscribers-through-q1. 373 See Comcast, The Xfinity Mobile Plan, https://www.xfinity.com/mobile/plan (last visited June 16, 2018) (identifying availability to current Comcast Internet customers). 374 Phil Britt, Report Declares Comcast Quad Play ‘Firmly Rooted,’ With Verizon Being the Biggest Loser, TELECOMPETITOR (May 2, 2018), http://www.telecompetitor.com/report-declares-comcast-quad-play-firmly-rootedwith-verizon-being-the-biggest-loser/. 110 REDACTED – FOR PUBLIC INSPECTION services on one bill contributed to their switch to Xfinity Mobile, indicating that Comcast’s scale and ability to offer multiple services make it a strong wireless competitor.375 The Comcast/Charter Partnership. Independently, Comcast and Charter are formidable competitors. However, the two cable giants have also formed a wireless cooperative arrangement to compete together in wireless.376 The cooperative agreement provides that the arrangement’s stated purpose is “to compete with national wireless operators and to respond to changes in technology and the marketplace.”377 Under the agreement’s terms, the companies committed to “explore working together in a number of potential operational areas in the wireless space, including: creating common operating platforms; technical standards development and harmonization; device forward and reverse logistics; and emerging wireless technology platforms.”378 The companies also agreed to a one-year period of exclusive partnership with respect to nationwide wireless business endeavors with a restriction on discussing mergers, acquisitions, or other such transactions with any national mobile wireless carriers.379 By collaborating to compete in mobile wireless on a nationwide scale and combining their assets, resources, and expertise under a new partnership, Comcast and Charter have multiplied their individual competitive strengths to become an even more formidable new force in the industry. 375 Jeffrey T. Johnson, The Xfinity Mobile Effect, MARKET STRATEGIES INTERNATIONAL (2018), https://landing.marketstrategies.com/hubfs/Research-Reports/The-Xfinity-Mobile-Effect.pdf. 376 Wireless Operational Cooperation Agreement by and between Comcast Corporation and Charter Communications, Inc. (May 5, 2017), https://www.cmcsa.com/node/25396/html. 377 Id. 378 Comcast Corporation, Comcast and Charter to Explore Operational Efficiencies to Speed Entry Into Wireless Market (May 8, 2017), https://corporate.comcast.com/news-information/news-feed/comcast-charter-wirelessefficiencies. 379 Id. 111 REDACTED – FOR PUBLIC INSPECTION 2. DISH Is on the Cusp of Entering the Wireless Space with Nationwide IoT and 5G Networks DISH Network Corporation is the nation’s fourth largest pay-TV provider, offering service through substantial spectrum holdings, satellite systems, and extensive nationwide operations. DISH has a total of 13.2 million television subscribers (2.3 million of whom are attributed to DISH’s online streaming service Sling TV) and approximately 590,000 broadband customers.380 DISH has the resources and spectrum to compete effectively in offering 5G wireless broadband services. Estimates indicate that DISH’s spectrum holdings already are worth approximately $30 billion,381 giving the company roughly the same potential wireless capacity and coverage capabilities as Verizon, AT&T, and T-Mobile. DISH also purchased $6.2 billion of spectrum in the Commission’s 600 MHz auction, acquiring a total of 486 licenses that cover 416 Partial Economic Areas (“PEAs”).382 Further, the Commission recently initiated a proceeding that may allow two DISH designated entity affiliates to recoup an additional 200 spectrum licenses—valued at approximately $3 billion—as well as a $515 million forfeiture related to an eligibility issue regarding the 2015 AWS-3 auction.383 Once deployed, DISH’s 380 Scott Moritz, Dish's 2.2 Million Sling Customers Stem Pay-TV Losses, BLOOMBERG TECHNOLOGY (Feb. 21, 2018), https://www.bloomberg.com/news/articles/2018-02-21/dish-says-it-has-2-2-million-sling-customersboosting-tv-gains; DISH Network Corporation, 2017 10-K Filing, http://dish.client.shareholder.com/secfiling.cfm?filingID=1558370-18-826. DISH expects to lose broadband subscribers as it transitions its focus from wholesale to authorized rep arrangements. 381 Kendra Chamberlain, Dish’s ‘undervalued’ spectrum assets worth $30.2B, FIERCE WIRELESS (Mar. 27, 2018), https://www.fiercewireless.com/wireless/dish-s-undervalued-spectrum-assets-worth-30-2b-analyst . 382 See Colin Gibbs, Mapping T-Mobile, Dish, Comcast and AT&T: Who got how much 600 MHz spectrum and where?, FIERCE WIRELESS (Apr. 18, 2017), https://www.fiercewireless.com/wireless/mapping-t-mobile-dishcomcast-and-at-t-who-got-how-much-600-mhz-spectrum-and-where. 383 Mike Dano, Dish Network sees path to nab around $3B worth of spectrum, FIERCE WIRELESS (Jan. 26, 2018), https://www.fiercewireless.com/wireless/dish-network-sees-path-to-nab-around-3b-worth-spectrum; Mike Dano, Dish works to rescue $3.3B spectrum discount on AWS-3 licenses, FIERCE WIRELESS (Apr. 5, 2018), https://www.fiercewireless.com/iot/dish-works-to-rescue-3-3b-spectrum-discount-aws-3-licenses. 112 REDACTED – FOR PUBLIC INSPECTION spectrum assets—plus the company’s considerable financial resources, large customer base, and potential access to valuable content—will enable DISH to be a major player in the wireless space. DISH is required under the terms of its AWS-4 and 700 MHz E-Block spectrum licenses to use these licenses to build out a wireless network to at least 70 percent of its licensed territories by March 2020—less than two years from now.384 DISH has announced plans to use its spectrum and other resources to start competing in wireless with a focus on IoT followed by 5G wireless service.385 In fact, recent reports suggest DISH may be constructing its IoT network for Amazon using 10 MHz of spectrum and 40,000 towers.386 According to DISH, this narrowband IoT (“NB-IoT”) network will provide a stepping stone for Phase Two of its plans, which involve using its 600 MHz spectrum to support a 5G deployment.387 Underscoring the importance of wireless to DISH’s business, DISH co-founder and former CEO, Charlie Ergen, recently stepped aside to focus on building out the company’s wireless business.388 Mr. Ergen also recently indicated that the company has begun entering into key partnerships and plans to invest up to $10 billion to build out its nationwide 5G network “to 384 Trefis Team, Why Dish Network Needs To Roll Out Services For Its Spectrum Holdings, FORBES (Dec. 13, 2017), https://www.forbes.com/sites/greatspeculations/2017/12/13/why-dish-network-needs-to-roll-out-services-for-itsspectrum-holdings/#4a53cc102f85. 385 Scott Moritz, Dish's Ergen Seeks Partners For 2020 Wireless Service Launch, BLOOMBERG BNA (Jul. 1, 2017), http://telecomlaw.bna.com/terc/1513/split_display.adp?fedfid=112671622&vname=wrlsnotallissues&jd=a0m5f8p9 m1&split=0. 386 Mike Dano, Dish’s Ergen on NB-IoT network: ‘You shouldn’t expect that we would make big profits on that on Day One’, FIERCE WIRELESS (May 8, 2018), https://www.fiercewireless.com/iot/dish-s-ergen-nb-iot-network-youshouldn-t-expect-we-would-make-big-profits-day-one. 387 Colin Gibbs, Mapping T-Mobile, Dish, Comcast and AT&T: Who got how much 600 MHz spectrum and where?, FIERCE WIRELESS (Apr. 18, 2017), http://www.fiercewireless.com/wireless/mapping-t-mobile-dish-comcast-and-att-who-got-how-much-600-mhz-spectrum-and-where. 388 Drew FitzGerald and Imani Moise, Charlie Ergen Steps Down as Dish CEO to Focus on Wireless Business, The WALL STREET JOURNAL (Dec. 5, 2017), https://www.wsj.com/articles/dish-network-ceo-steps-down-to-focus-onwireless-business-1512485856. 113 REDACTED – FOR PUBLIC INSPECTION power the next generation of technologies that will rely on wireless connections.”389 This investment of up to $10 billion comes in addition to the $1 billion that Mr. Ergen previously committed for building out DISH’s AWS-4 and 700 MHz E-Block spectrum.390 DISH’s large and diverse spectrum holdings will further the company’s competitive abilities and, given looming FCC deadlines to build out its spectrum, DISH’s entry into the wireless market is expected imminently. Figure 16: DISH Spectrum Licenses 3. TracFone Is a Nationwide Wireless Provider with 23 Million Subscribers TracFone is exerting huge competitive pressure on traditional wireless competitors. With approximately 23 million subscribers, 391 it remains the largest MVNO in the United States and 389 Andy Szal, Dish Could Spend Up to $1B on NB-IoT Network, $10B on Nationwide 5G, WIRELESS WEEK (May 24, 2018), https://www.wirelessweek.com/news/2018/05/dish-could-spend-1b-nb-iot-network-10b-nationwide-5g. 390 Michael Farrell, Dish Will Spend $1B on First Phase of Wireless Buildout, BROADCASTING & CABLE (Feb. 21, 2018), https://www.broadcastingcable.com/news/dish-will-spend-1b-first-phase-wireless-buildout-171936. 391 Carlos García-Moreno and Daniela Lecuona Torras, América Móvil’s first quarter of 2018 financial and operating report (Apr. 24, 2018), http://www.americamovil.com/sites/default/files/2018-04/1Q18.pdf . 114 REDACTED – FOR PUBLIC INSPECTION the fifth largest wireless carrier by subscribership. TracFone operates under numerous brands that include its main TracFone product line, plus Net10 Wireless, Total Wireless, Straight Talk, SafeLink Wireless, Telcel America, Simple Mobile, Page Plus Cellular, and Walmart Family Mobile.392 TracFone services are widely available in 90,000 retail locations across the United States, Puerto Rico, and the Virgin Islands, including national distribution through major retailers like Walmart, as well as in TracFone standalone retail stores. TracFone’s initial success was driven by its ability to develop service plans that approximate those of Verizon, AT&T, T-Mobile and Sprint, but at a lower price point. These plans have appealed to consumers. Across its brands, TracFone provides nationwide coverage and service availability. Figure 17: TracFone Service Coverage In 2017, the company had $7.8 billion in revenues from its provision of wireless services.393 That TracFone is an MVNO does not diminish the significance of its competitive impact. As the Commission has recognized, “[t]he strategic partnerships between MVNOs and facilities-based 392 TracFone Wireless, Brands, http://www.tracfonewirelessinc.com/en/brands/ (last visited June 16, 2018). 393 Carlos García-Moreno and Daniela Lecuona Torras, América Móvil’s first quarter of 2018 financial and operating report (Apr. 24, 2018), http://www.americamovil.com/sites/default/files/2018-04/1Q18.pdf . 115 REDACTED – FOR PUBLIC INSPECTION providers increase competition and consumer welfare by providing service to various market segments using the capacity of the hosting facilities-based provider and the marketing strategy and distribution network of the MVNO.”394 TracFone and other MVNOs will continue to exert competitive pressures following the merger and, with its greatly expanded capacity and incentives to fill it, New T-Mobile will continue to host MVNOs that serve valuable consumer segments. 4. Competitive Pressures Also Come from Other Sources The wireless industry is increasingly seeing competition from a growing number of companies. Although some of these companies have a background in providing wireless service to consumers, many other non-traditional entrants view the provision of wireless service as essential to sustaining their core businesses as consumers increasingly demand mobility. A number of these new entrants have novel business models that bring a new approach to offering wireless service. And several have the scale and significant resources to compete fiercely and effectively. For example, Google has launched Project Fi, providing “Fi-ready phones [that] can intelligently shift among mobile networks and Wi-Fi to give you clear calls and fast data—at home and around the world.”395 The combination of these networks gives Project Fi nationwide coverage: 394 Sixteenth Wireless Competition Report, 28 FCC Rcd at 3741 ¶ 35. 395 Google Project Fi, About Phones, https://fi.google.com/about/phones (last visited June 16, 2018). 116 REDACTED – FOR PUBLIC INSPECTION Figure 18: Google Project Fi Service Coverage Google promotes its service as giving subscribers access to three leading national carriers, two million Wi-Fi hotspots, and more than 170 countries and territories.396 Most attractive to many users is that Project Fi allows subscribers flexibility in selecting from a range of pricing options including an unlimited plan.397 Recently, Google’s Project Fi ranked higher than Verizon, AT&T, T-Mobile, or Sprint in a Readers’ Choice survey.398 * * * * * Verizon and AT&T have distinct advantages that underscore the need for a super maverick with the scale, spectrum, network, and incentives to challenge them and force them to compete. New T-Mobile will go toe-to-toe with these long-time market leaders in every part of the wireless market and bring T-Mobile’s disruptive Un-carrier approach into new market segments. Plainly, the clash between Verizon, AT&T, and New T-Mobile will enhance—not 396 Id. 397 Aaron Pressman, Google’s Fi Low-Cost Wireless Service Adds Unlimited Data. Here’s How Much It Costs, FORTUNE, (Jan. 17, 2018), http://fortune.com/2018/01/17/google-fi-unlimited-wireless/. 398 Daniel Fuller, Tech Crowd Prefers Google Project Fi Over The Big Four: Data, ANDROID HEADLINES (Mar. 22, 2018), https://www.androidheadlines.com/2018/03/tech-crowd-prefers-google-project-fi-over-the-big-fourdata.html. 117 REDACTED – FOR PUBLIC INSPECTION harm—competition in the wireless marketplace. However, a realistic assessment of today’s wireless marketplace must also recognize the competitive pressures increasingly exerted by the large and diversified new players entering the market. D. There Is No Significant Likelihood of Harmful Unilateral Effects or Coordinated Interaction In its prior merger reviews, the Commission has considered whether “the proposed transaction may result in a significant likelihood of successful unilateral effects and/or coordinated interaction.”399 Unilateral effects arise “when the merged firm finds it profitable to alter its behavior following the merger by ‘elevating price and suppressing output,’” which in the case of mobile services might take the form of “delaying improvements in service quality or adversely adjusting plan features without changing the plan price.”400 Coordinated effects, on the other hand, occur when “firms may be able to exercise market power by either explicitly or tacitly coordinating their actions,” and the factors that impact the potential for coordinated activity typically involve “the availability of information about market conditions, the extent of firm and product homogeneity, and the presence of maverick providers in the market,” as well as the ability to detect and punish defectors from a common understanding.401 As discussed in this section, the facts and analyses corroborate that prices will not go up, outputs will not be constrained, and coordination will not result: • Section IV.D.1 discusses New T-Mobile’s market position and its clear incentives post-merger to compete aggressively with its 5G network. New T-Mobile’s 5G network will add considerable capacity, and it would be irrational for New TMobile to hold idle capacity with a low marginal cost of use instead of using maverick Un-carrier behavior to seize market share. 399 Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 17491 ¶101. 400 Verizon ALLTEL Order, 23 FCC Rcd at 17485 ¶84. 401 Id. at 17486-87, ¶¶88, 90. 118 REDACTED – FOR PUBLIC INSPECTION • Section IV.D.2 discusses the incentives on New T-Mobile during the transition to 5G, and in particular, the industry factors that make pursuing long term, incremental growth through aggressive competition the predictable and logical outcome. New T-Mobile will have every incentive to grow its customer base in the short term so that it can cross-sell additional services, such as in-home broadband and pay television services, that will be made possible by New TMobile’s robust 5G network. Increasing prices post-merger “would be economically irrational and contrary to shareholder interests.”402 • Section IV.D.3 provides an overview of the impact of the 5G transition on competitive incentives, and specifically addresses why coordination in that environment would be difficult, but also irrational, for a company in New TMobile’s position. As the declarations supporting this Application make clear, economic analyses of this transaction demonstrates no significant likelihood of anticompetitive harm. 1. New T-Mobile Will Compete Aggressively with Its 5G Network and Will Lack Incentives to Engage in Competitively Harmful Unilateral Conduct New T-Mobile’s economic incentives will flow from the vastly improved mobile network that the merger will create. Neville Ray’s declaration highlights the impact of the massive capacity and increased speed that comes from adding Sprint’s spectrum (and, in particular, its mid-band spectrum), sites, and assets to T-Mobile’s network to create a world-leading 5G network.403 And, as Peter Ewens discusses in his declaration, this added capacity also comes with significant cost synergies—which creates a huge incentive for New T-Mobile to compete aggressively to “fill up” the network.404 This increased pressure to make use of added capacity appears in New T-Mobile’s financial plan, which calls for the company to provide a combination of greater value and lower cost for conventional data services and to continue offering subscribers more data each year without increasing prices. 402 Sievert Decl. at ¶26. 403 See Ray Decl. at ¶4. 404 Ewens Decl. at ¶14. 119 REDACTED – FOR PUBLIC INSPECTION The Applicants have already described how the added network capacity created by New T-Mobile’s 5G network will impact the market, citing work done by Dr. Evans. Dr. Evans showed that the direct economic impact of the New T-Mobile 5G network would be to increase capacity and he concludes that the transaction would result in as much as a 55 percent decrease in cellular data prices and an 120 percent increase in cellular data supply.405 Dr. Evans’ work also found substantial benefits in quality-adjusted price, recognizing that the increased investment in 5G, and the resultant increase in 5G coverage means the connection quality aspects of New T-Mobile, including speed, latency, and configurability will be a substantial improvement over the combined standalone case. With additional and higher quality capacity, New T-Mobile will be able to compete more aggressively. New T-Mobile’s continuation of T-Mobile’s disruptive presence in the mobile market, and its ability to bring that same disruption to new markets in the future, are documented in the company’s financial planning documents. As he has done for other new ventures undertaken by T-Mobile in the ordinary course of business, Mr. Ewens and his team developed a financial plan for New T-Mobile, a plan that models key performance metrics—factors such as ARPU, churn, and share of gross adds (“SOGA”)—to allow the company to project revenues and costs through 2024. The financial plan for the merged company identifies major cost synergies that will enhance the company’s ability to compete. Mr. Ewens notes that the transaction will result in “an estimated $43.6 billion in total net present value cost synergies, mainly reflecting reductions from the avoided duplication of network costs, like sites and backhaul, and nonnetwork costs like retail and advertising savings and integration savings from combining and de- 405 Evans Decl. at Section V.C., ¶¶220-44. 120 REDACTED – FOR PUBLIC INSPECTION duplicating information technology systems.”406 The financial plan also shows that the company plans to pass these savings on to subscribers—New T-Mobile “projects passing scale benefits on to customers in the form of an over 6 percent reduction in ARPU, going from to by 2026,” all the while providing vastly superior speed, throughput and latency on its new 5G network.407 The business declarations also demonstrate that the merger provides New T-Mobile with the ability and incentive to supercharge T-Mobile’s Un-carrier movement, which has historically provided significant price and non-price benefits to the public.408 As Mr. Ewens notes, “there are many aspects of the Un-carrier movement that everyone can identify—no service contract (service plans without lock-in service contracts), Binge On (video streaming without data charges), Simple Global (allowing the use of data abroad without extra charges), Music Freedom (music streaming without data charges), and T-Mobile ONE (elimination of tiered data plans in favor of unlimited),” but “one of the most important tenets of being the Un-carrier is continuing to deliver more value and more data, year over year, without increasing plan rates.”409 As Mr. Ewens documents, “[m]easured by revenue yield per GB on average, for the past several years T-Mobile has given its subscribers 37 percent more data each year per dollar spent on their wireless plans while at the same time lowering their package prices (a data dividend), thereby passing on the benefits of capacity upgrades the company makes to its network at no added cost 406 Ewens Decl. at ¶7. See also Sievert Decl. at ¶13. 407 Ewens Decl. at ¶8. 408 The Un-carrier benefits are not restricted to T-Mobile customers—as Mr. Ewens notes, T-Mobile had a “leadership [role] in driving unlimited rate plans,” and “[a]s it became apparent that HSPA+ and later 4GLTE network upgrades would drive huge increases in capacity, T-Mobile moved to make Unlimited its core offer,” which, in turn, “eventually forc[ed] AT&T and Verizon to make unlimited rate plans broadly available.” Id. at ¶4. 409 Id. 121 REDACTED – FOR PUBLIC INSPECTION to subscribers.”410 Another tangible example of this practice was T-Mobile’s decision to keep more than its original target of MetroPCS sites following the merger so that it would have more capacity—a benefit passed on to subscribers without increasing rates.411 Because of these types of consumer-centric policies, T-Mobile’s unlimited subscribers use, on average, over much data as industry estimated norms (over GB/mo versus as GB/mo).412 But, as Mr. Ewens discusses, “T-Mobile does not have the capacity, resources, or capital to sustain that added annual data dividend indefinitely.”413 The proposed transaction gives New T-Mobile the capacity to continue providing that value in an era where data usage is predicted to compound at over 30 percent annually.414 Importantly, Mr. Ewens also notes that the data dividend “benefit extends to all customers,” emphasizing the practical social welfare benefits for value subscribers.415 T-Mobile has observed that cost-conscious customers, in particular, continue to use their data plans extensively, even if they exceed usage limits and their traffic is limited to 3G network speeds during periods of congestion. He observes that “on average, value subscribers on unlimited plans use GB/mo., more than the GB/mo. used by other unlimited customers.”416 In fact, the data dividend may matter the most for value customers, since “[d]ecreased data costs (and other initiatives to help customers manage data costs, such as Binge On and Music 410 Id. at ¶5. 411 Id. at ¶25. 412 Id. at ¶5; Evans Decl. at ¶93 (citing Ericsson, Ericsson Mobility Report at 8, 12 (Nov. 2017), https://www.ericsson.com/assets/local/mobility-report/documents/2017/ericsson-mobility-report-november2017.pdf). 413 Ewens Decl. at ¶5. 414 Id. at ¶14. 415 Id. at ¶5. 416 Id. 122 REDACTED – FOR PUBLIC INSPECTION Freedom) are especially impactful and tangible to cost-conscious customers, since many such users’ smartphones are their exclusive lifeline to the Internet.”417 In addition to supercharging T-Mobile’s Un-carrier initiatives for wireless consumers, the added capacity and capabilities of the combined network create the opportunity and capability for New T-Mobile to enter, disrupt, and deliver additional consumer benefits in adjacent lines of business, as discussed in the Declaration of Mike Sievert.418 For example: • The speed and capacity of New T-Mobile’s network will have vast ramifications for in-home broadband services, including consumer distribution of video and audio content; • New T-Mobile’s network will enable a variety of new consumer uses, including Augmented/Virtual Reality applications, in-car entertainment, and online gaming; • New T-Mobile intends to aggressively pursue opportunities in enterprise and commercial areas, including “smart mobility” applications (autonomous and connected vehicles, asset tracking and fleet management) and “smart community” applications (automation and security applications for buildings, campuses, and municipalities); and • New T-Mobile expects to support other 5G use areas that are still evolving, such as drone control and payload communications, support for utilities, private networks, telemedicine and health applications, back up connectivity, and other industrial uses. These industries have many customer “pain points” and are ripe for Un-carrier disruption. Notably, New T-Mobile has the same competitive incentives with respect to, and will bring the same network benefits to, its relationships with MVNOs. As an initial matter, MVNOs operate with long term contracts that will allow them to continue to flourish post-merger, because the contracts are generally at wholesale rates and provide for added capacity that will allow MVNOs to compete and expand their subscriber bases. As Mr. Ewens notes, T-Mobile has historically been supportive of its MVNO partners, because, among other reasons, “MVNOs 417 Id. 418 Sievert Decl. at ¶¶27-43. 123 REDACTED – FOR PUBLIC INSPECTION have marketing and distribution advantages in attracting and reaching customers from particular segments.”419 Moreover, New T-Mobile will have significant added network capacity, and therefore will have no incentive to impair MVNOs’ ability to put subscribers on New T-Mobile’s network. Indeed, New T-Mobile will encourage the launch of new MVNOs that can offer unique value propositions or better reach unique customer segments. Moreover, the Applicants believe the transaction will allow New T-Mobile to enhance the value proposition of MVNOs that use its network—the benefits that accrue from the new, advanced network to New TMobile’s subscribers are advantages that New T-Mobile’s MVNO partners can also use to compete more effectively. In sum, this proposed merger and the powerful 5G network it creates will provide New TMobile with substantial added network capacity and significant cost-savings over what would be possible for T-Mobile and Sprint to achieve on their own. As Dr. Evans substantiates, added capacity has historically reduced unit prices for consumers, and it will do so here.420 Armed with added capacity and low average costs, as well as a qualitatively superior network, New T-Mobile has every incentive not only to continue T-Mobile’s disruptive conduct in the mobile industry, but to extend that maverick behavior to a variety of adjacent services. Based on New T-Mobile’s financial plan, that is exactly what the Applicants intend to do. 2. New T-Mobile Will Be a Maverick While Its 5G Network Is Being Deployed, and There Is No Credible Short-Term Threat of Harmful Unilateral Conduct Many of the incentives for New T-Mobile to compete aggressively in a 5G era also give New T-Mobile an incentive to compete aggressively today. The combination of T-Mobile and 419 Ewens Decl. at ¶28. 420 Evans Decl. at ¶¶66-71. 124 REDACTED – FOR PUBLIC INSPECTION Sprint’s spectrum and sites will immediately provide New T-Mobile with more capacity for 4G LTE while simultaneously freeing up more spectrum for 5G.421 New T-Mobile’s incentive will be to use that 4G LTE capacity, rather than let it sit idle. In addition, New T-Mobile’s costs to serve 4G LTE subscribers will be subject to the same synergies identified for 5G, as many of those savings are technology-agnostic, non-network savings that “will start to accrue in the first year after close, lowering our cost structure even before full deployment of the 5G network.”422 As a result, New T-Mobile will be a stronger competitor for 4G LTE subscribers, a benefit that emerges in the near term, even in advance of 5G deployment. Beyond that, Peter Ewens’ declaration also documents that New T-Mobile will have, during the 5G deployment, compelling business incentives to compete aggressively to grow its customer base in anticipation of cross-selling 5G services to existing customers. New T-Mobile is projecting it will invest nearly $40 billion over the next three years to bring the company into the 5G era. New T-Mobile has incentives to monetize the added capacity of that network through the broadest possible base of subscribers, spreading what will be substantial sunk network investment costs.423 A plan predicated on offering low prices to consumers during the 5G transition, so that New T-Mobile will continue to increase the size of its customer base, thus advances New T-Mobile’s long-term financial interests. In economic terms, as noted in the declaration of Prof. Salop and Dr. Sarafidis, mobile demand is “dynamic.”424 “A wireless carrier’s demand in a particular period depends upon the carrier’s subscriber base in previous periods,” which means that when “a firm . . . expects to 421 Ray Decl. at ¶62. 422 Ewens Decl. at ¶7. 423 Id. at ¶20. 424 Salop/Sarafidis Decl. at ¶55. 125 REDACTED – FOR PUBLIC INSPECTION have lower marginal costs in the future (and hence a higher margin) [the firm] will have an incentive to reduce its prices in the present as well as the future.”425 Prof. Salop and Dr. Sarafidis also discuss how “a carrier’s success in growing its subscriber base can create momentum and become self-reinforcing for a period of time, thus leading to more subscriber gains in a virtuous cycle,” because, among other reasons, “[s]ubscribers are imperfectly informed about the relative network quality of each carrier (or, more generally, the desirability of each brand) and may look at the choices of other consumers as a guide.”426 When demand is dynamic, “a firm has an incentive to set its price below short-term profit-maximizing level” on the basis that “[t]he profits earned on the higher future output demand more than offset the initial decrease in short-term profits,” a strategy commonly referred to as “penetration pricing.”427 In other words, “[t]he anticipation of future cost and quality efficiencies reduces the opportunity cost of expanding output and lowering price even before actually realizing those efficiencies.”428 Mr. Ewens reinforces Prof. Salop and Dr. Sarafidis when he notes that “[h]aving scale, both nationally and locally, is a benefit in attracting new subscribers.”429 In this regard, Mr. Ewens discusses word-of-mouth effects and general customer perceptions that occur with broad scale. He notes that “[t]he first individual to get T-Mobile service in a group of peers is a risk taker, since they have no one to corroborate advertising claims with real-world performance,” but with “every new T-Mobile subscriber in that peer group, the risk is less and less, because the 425 Id. 426 Id. at ¶67. 427 Id. at ¶56. 428 Id. at ¶51. 429 Ewens Decl. at ¶23. 126 REDACTED – FOR PUBLIC INSPECTION advertising message is anecdotally reinforced by trusted sources.”430 He further notes that retail presence in a market has a similar effect, in that “the number of retail stores in a market, and the number of times potential customers see those stores, reinforces the perception that the provider has a committed presence in the market, which also legitimizes their advertising message.”431 The economics of dynamic demand discussed by Prof. Salop and Dr. Sarafidis are borne out by other aspects of Mr. Ewens’ declaration. New T-Mobile will have an incentive to maximize its customer base for the 5G transition because “those who are most likely to adopt new value-added services, like the potential offerings enabled by 5G technology (e.g., home broadband replacement or substitution, or new consumer-oriented IoT offerings), are existing customers.”432 Mr. Ewens continues, noting that “[c]onvincing a customer who is already happy with network quality and value to adopt a new offering will always be easier than attracting a customer from another provider who is likely to fear the unknown.”433 The process of maximizing subscribers before the transition requires that “New T-Mobile . . . incrementally add subscribers—starting the day after the merger is completed.”434 The requirement to add incrementally is underscored by the cost per gross add (“CPGA”) metric, which “reflects incentives, promotions, sales commissions, and other costs” and which “rises with every new subscriber.”435 In other words, as Mr. Ewens states, “the CPGA of the marginal net additional customer rises.”436 As a practical matter, this means that “New T-Mobile 430 Id. 431 Id. 432 Id. at ¶21. 433 Id. 434 Id. at ¶22. 435 Id. 436 Id. 127 REDACTED – FOR PUBLIC INSPECTION cannot simply forego growth today and expect to make up that growth at some arbitrary date in the future once the 5G network is deemed ‘complete.’”437 Beyond these factors, competitors will take advantage of merger implementation and the post-merger transition period to attempt to take market share, which New T-Mobile will have to offset with aggressive competition. Lowell McAdam, Verizon’s Chief Executive Officer, has already publicly stated that Verizon intends to “make the most” of New T-Mobile’s integration period.438 While New T-Mobile’s long-term incentives to compete aggressively are evident, because unaddressed declines in SOGA will result in loss of subscriber share, New T-Mobile will be highly incentivized to compete aggressively in the short term as well to combat any attempt by competitors to take advantage of any potential customer apprehension about merger implementation. In urban areas and established markets where market shares are more evenly distributed, New T-Mobile will seek to use merger efficiencies to allow it to create further competitive inducements for potential customers by delivering more value for less money. New T-Mobile will also be incentivized to use merger efficiencies to enhance its ability to compete in areas where it has a lower customer share and greater SOGA growth is possible, such as rural areas and with enterprise customers. In both cases, New T-Mobile will be a more aggressive competitor. 3. There Is No Credible Threat of Coordinated Action in Today’s Mobile Marketplace, Particularly Given New T-Mobile’s Network Plans As demonstrated in the Declaration of Prof. Salop and Dr. Sarafidis, there is no credible threat that the merger would increase the risk of coordination in the mobile broadband 437 Id. 438 Todd Bishop, Q&A: Verizon CEO Lowell McAdam on 5G wireless, T-Mobile/Sprint, net neutrality and acquisitions, GEEKWIRE (May 4, 2018), https://www.geekwire.com/2018/interview-verizon-ceo-lowell-mcadam-on5g-wireless-t-mobile-sprint-and-net-neutrality/. 128 REDACTED – FOR PUBLIC INSPECTION marketplace, given its structure and dynamics.439 Prof. Salop and Dr. Sarafidis reach this conclusion after examining the potential for coordination with respect to both investment and price/quality. Coordinated action with respect to 5G network investment is implausible because there are massive benefits to defecting from a tacit agreement, defection is very difficult to detect, and, even if detected, defection would be difficult to punish. Carriers have different spectrum portfolios, both in terms of licensed bands and in terms of geographic areas of licensing, which produce different capacity outcomes for a given level of investment and therefore “translation from dollars invested to network performance levels is difficult and cannot be easily or rapidly monitored.”440 In fact, deploying added spectrum and sites for 5G has a multiplicative effect on network capacity, which magnifies the benefits from defection. These factors are further aggravated by the different non-network assets that competitors bring to the table—competitors may have asymmetric incentives because of motivations to leverage existing infrastructure (e.g., cable fiber network) differently, or even to package content or use wireless to support related lines of business. Even if carriers were not highly incentivized to defect, there are additional dynamics that make coordination exceptionally difficult. Defection, for example, would be very difficult to detect. Some high-level network investment data may be publicly available, but such data are not specific or local. As a result, the difficulty in monitoring increases the incentives to defect.441 And, as Prof. Salop and Dr. Sarafidis observe, network investments are an irreversible 439 Salop/Sarafidis Decl. at ¶9. 440 Id. at ¶38. 441 Id. at ¶37-38 (also noting “[t]hese impediments to successful coordination would apply both to coordination through common understanding and coordinated parallel accommodating conduct.”). 129 REDACTED – FOR PUBLIC INSPECTION arms race. Even if there were a tacit agreement to limit investment, there would be no effective way to punish defectors—a critical element of any coordinated conduct—because the facilities cannot pragmatically be deconstructed. And beyond destroying any possibility of collusion, competitive dynamics in the wireless arena would leave the other competitors no choice but to respond with investment of their own.442 Indeed, the DOJ Merger Guidelines note that “[f]irms are also less likely to be deterred by whatever responses occur if competition in the relevant market is marked by leapfrogging technological innovation, so that responses by competitors leave the gains from successful innovation largely intact.”443 This is especially true here, where there are other new entrants that are leveraging different assets in an effort to make a substantial impact on the market. Relatedly, there are also many reasons why there is “not a credible basis to conclude that the merger would increase the likelihood of coordination in pricing and quality after 5G technology becomes established.”444 As noted in the declaration of Prof. Salop and Dr. Sarafidis: 442 • New T-Mobile Will Have Massive Network Capacity Available at a Low Marginal Cost, Which Incentivizes It to Compete Rather than Capitulate. Given the capacity and quality of the New T-Mobile network, New T-Mobile “will have the incentive to use this additional capacity to gain subscribers (thus also reinforcing its reputation as a disruptive competitor), rather than settle into a coordinated effects outcome at a lower market share.”445 • New T-Mobile’s 5G Deployment Will Create Market Instability that Will Make Coordinated Action Unprofitable. As documented in the Declaration of Neville Ray, New T-Mobile will rapidly be deploying a 5G network with capabilities that Id. at ¶¶38. 443 U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines, at 26 (Aug. 19, 2010), http://www.justice.gov/atr/public/guidelines/hmg-2010.pdf. 444 Salop/Sarafidis Decl. at ¶13. 445 Id. at ¶42. 130 REDACTED – FOR PUBLIC INSPECTION are superior to other market participants at a time when its market share is relatively low. “This asymmetry between [New T-Mobile’s] superior network quality and lower profitability will give [New T-Mobile] an incentive to grow its market share, rather than coordinate in a way that maintains the status quo.”446 446 Id. at ¶43. 447 Id. at ¶44. 448 Id. at ¶45. 449 Id. at ¶46. • The Introduction of 5G Will Create Widely Diverse Service Packages that Will Make Coordination Difficult. With the deployment of 5G, carriers are ploughing new ground in terms of creating new service offerings for the public, since 5G offers the ability to vary connection characteristics like latency and guaranteed bandwidth. At a minimum, “competitors likely will offer differentiated service packages that involve differences in throttling thresholds and properties, zero rating content, and bundled packages, as well as prices, as they search for the right combination to fit their network properties and competitive positioning,” which “will make it more difficult to reach a common understanding and deter defections.”447 Notably, the divergent strategies among carriers and new entrants go well beyond pure network factors—they include the ability to offer content (e.g., AT&T and DirecTV/Time Warner) or to package wireless as part of larger dual-play, triple-play, or quad-play offerings. • National Pricing and Localized Variations in Service Will Make Coordination Difficult. Even though firms use national pricing for mobile services, there will be service quality differentiation (capacity, throughput, and latency) on a local basis due to variations in licensed spectrum and network density. This will make it exceedingly difficult to achieve a common understanding and coordinate activities448—barriers that would be even more insurmountable if competitors did price locally. • Substantial Emergent Competitors, Such as Comcast, Charter and DISH, Would Make Coordination Difficult. There are credible, emergent entrants with substantial scale that are already aspiring to take share in the mobile market, which completely destabilizes any coordinated equilibrium that today’s players could achieve.449 Not only would coordinated action implicate more players, but entrants like Comcast, Charter and DISH would have even more incentive to defect if included or to take advantage of market complacency by traditional carriers if not included. 131 REDACTED – FOR PUBLIC INSPECTION Thus, “a conclusion that there will be higher risk of coordination after this merger cannot be supported.”450 New T-Mobile will have compelling incentives, given its current market position and the potential of its new network, to compete aggressively and grow its customer base to utilize the full extent of its network and position itself to cross-sell new services, especially since established players would not be able to punish New T-Mobile for doing so. * * * * * In sum, New T-Mobile will have significant incentives advance highly competitive, maverick behavior in a post-merger environment for the short-, medium- and long-term. While the Commission’s traditional analyses consider whether carriers might delay investment because of unilateral market power, New T-Mobile is already planning massive, industry-leading network investments and upgrades that will unlock huge customer benefits. In addition, the need to maintain the broadest possible subscriber base in order to make the massive investments in network infrastructure will drive New T-Mobile to reduce prices, compete effectively, and live up to the Un-carrier brand promise. E. The Transaction Will Not Harm Competition in Local Markets The proposed transaction will also not harm competition at the local level. In the merger context, the FCC has used a series of “screens” to determine the extent of competitive review. These preliminary screens, if triggered, do not create a presumption of competitive harm, but rather the opposite—the purpose of the screens is “to identify those local markets in which no competitive harm clearly arises from the transaction.”451 The screens currently employed for transaction review include: (i) a spectrum screen that assesses whether the transaction would 450 Id. at ¶9. 451 AT&T-Centennial Order, 24 FCC Rcd at 13931 ¶34. 132 REDACTED – FOR PUBLIC INSPECTION result in the aggregation of more than one-third of the available spectrum for mobile broadband services; (ii) a screen based on the Herfindahl-Hirschman index (“HHI”) that is triggered if the transaction results in a post-closing HHI of 2800 or more with a change of 100 or more points or a change of 250 or more points, regardless of the post-closing index; and (iii) a millimeter wave screen that is triggered if the applicants aggregate more than one-third of the available millimeter wave spectrum. Relatedly, the FCC has also indicated that it will “treat certain further concentration of below-1-GHz spectrum as an enhanced factor in our case-by-case analysis of the potential competitive harms posed by individual transactions.”452 When reviewing competition in local markets for a transaction, the FCC has generally taken the opportunity to consider whether adjustments are needed to what the agency has considered the input market for spectrum.453 Most recently, the FCC formally adjusted the spectrum screen in the Mobile Spectrum Holdings Order.454 Since that time the FCC has conducted its 600 MHz auction, and further time has elapsed in the progress of clearing the AWS-3 band. The input market for spectrum should thus include: 452 Policies Regarding Mobile Spectrum Holdings, 29 FCC Rcd 6133, 6239 ¶283 (2014) (“Mobile Spectrum Holdings Order”). 453 Specifically with respect to the AWS-3 band, the FCC noted that “in the context of the Commission’s competitive review of a proposed spectrum acquisition, the applicants or interested parties can make arguments regarding how the status of coordination with non-relocating Federal incumbents in a particular market should affect the Commission’s case-by-case review of the proposed acquisition in that market.” Id. at 6178 n.322. 454 See generally id. 133 REDACTED – FOR PUBLIC INSPECTION Band MHz 600 MHz Band 70 Lower 700 MHz Band 48 Upper 700 MHz Band 22 800 MHz Cellular 50 800 MHz ESMR 14 AWS-1/AWS-3 155 2.1 GHz PCS 120 G Block 10 H Block 10 AWS-4 40 2.3 GHz WCS 20 2.5 GHz BRS 67.5 2.5 GHz EBS 89 Total: 715.5 One-Third of Total: 238.5 Table 11: Input Market for Spectrum The FCC previously stated it would “count the 1755-1780 MHz and 1695-1710 MHz [part of AWS-3] bands in the spectrum screen in a particular market once all relocating Federal incumbent systems in that market are within three years of completing relocation, according to the Transition Plans.”455 Based on NTIA’s most recent transition status data, the overwhelming majority of Federal systems will have completed their transition within the next three years.456 At this point, however, these few remaining operations do not warrant separate analyses, and the band should uniformly be considered available for use. 455 Id. at 6178 ¶102. 456 The remaining operations (and then operating in only the uplink portion of the AWS-3 band) are limited to certain Department of Defense telemetry and “other” operations in California, Florida, and Maryland. See NTIA, Status of Transition (as of Apr. 18, 2018), https://www.ntia.doc.gov/files/ntia/publications/transition_status_17551780_mhz_band_18-apr-18.xlsx (last visited June 16, 2018). 134 REDACTED – FOR PUBLIC INSPECTION The Applicants have provided, in Appendix L, aggregation data for the spectrum screen analysis, but do not have the data to conduct the related HHI analysis.457 The combination of these complementary assets is central to the merger. The aggregation of this spectrum, when combined with New T-Mobile’s increased scale and resources, will result in consumer benefits; a world-class, high-capacity, nationwide 5G network; enhanced service in rural areas; more American jobs; and intensified competition among wireline and wireless broadband providers. New T-Mobile will not be able to ignite that competition and other public interest benefits without the combined spectrum assets of both T-Mobile and Sprint. Moreover, post-transaction, competitors to New T-Mobile will continue to have access to sufficient spectrum to compete. At the same time, as the Applicants have demonstrated at length above, the transaction will result in no competitive harm. Thus, there is no concern with the issue at the core of the Commission’s post-screen analysis. The Applicants also have provided, in Appendix M, charts showing the carriers licensed in each county for each band. After analyzing the CMAs involved in a proposed transaction under the screen, the FCC’s competitive review then typically considers the number of “genuine” competitors in each CMA where competitive review is triggered. For such purposes, the FCC has taken a narrow view of what is a “genuine competitor,” which is somewhat inconsistent with its statement that it will consider, for example, MVNOs and adopt a forward-looking view of the marketplace. Even under a restrictive view, however, where a “genuine competitor” is defined as a carrier that owns the physical infrastructure used to provide service and has at least 50 457 The FCC has traditionally used Number Resource Utilization Forecast (“NRUF”) data to calculate HHIs for purposes of the HHI screen. That data is usually only made available to applicants pursuant to a protective order after the filing of the proposed Transaction. 135 REDACTED – FOR PUBLIC INSPECTION percent geographic market coverage,458 the transaction should not raise significant competitive concerns. Based on the FCC Form 477 mobile coverage data for the end of 2016, Applicants calculated the number of competitors in each CMA. With only one exception, Applicants found that there were no markets where both T-Mobile and Sprint were considered competitors, but where Verizon and AT&T were not also both considered competitors. That one exception was in Puerto Rico, where Verizon does not have a presence but the Puerto Rico Telephone Company is a strong competitor. Accordingly, the transaction would not cause the number of genuine competitors to be reduced below three in any local market. Applicants have also provided, as Appendix J, an analysis of the markets where they will hold more than one-third of the available low-band spectrum (68 MHz). In past transactions, the low-band enhanced review was necessary because “low-band spectrum is less costly to deploy and provides higher quality coverage than higher-band spectrum, and the two leading nationwide providers hold most of the low-band spectrum available today.”459 The Commission has further opined that if Verizon and AT&T “were to acquire all, or substantially all, of the remaining lowband spectrum, they would benefit, independently of any deployment, to the extent that rival service providers are denied its use.”460 Thus, enhanced review was initially a tool to provide extra scrutiny to transactions involving “the two leading nationwide providers,” not companies like Sprint or T-Mobile. Nonetheless, the FCC’s Mobile Spectrum Holdings Order requires that 458 The Commission typically requires a “genuine competitor” also to cover at least 70 percent of the population in the CMA and to have a market share of at least 2 percent. The FCC Form 477, however, does not contain that information. In the absence of that information, in the Applicants’ view, it is reasonable to rely on the 50 percent coverage test as a proxy for the population and market share criteria. It appears likely that any carrier that covers at least 50 percent of a CMA would also cover at least 70 percent of the population and possess a minimum share of 2 percent. 459 See, e.g., Application of AT&T Mobility Spectrum LLC and North Dakota Network Co. for Consent to Assign License, Memorandum Opinion and Order, 32 FCC Rcd 163, 166 ¶8 (2017). 460 Id. at 166-67 ¶8. 136 REDACTED – FOR PUBLIC INSPECTION applicants proposing to acquire more than one-third of the available low-band spectrum in a market provide “a detailed demonstration regarding why the public interest benefits outweigh harms.”461 V. PROCEDURAL CONSIDERATIONS A. Additional Authorizations The list of call signs and file numbers included in the Applications is intended to include all of the licenses, authorizations, and spectrum leases held by the respective licensees or lessees that are subject to the transaction. However, Sprint licensees or lessees or T-Mobile licensees or lessees may now have on file, and may hereafter file, additional requests for authorizations for new or modified facilities that may be granted, or they may enter into new spectrum leases before the Commission takes action on these Applications. Accordingly, the Applicants request that any Commission approval of the Applications filed for this transaction include authority for T-Mobile to acquire control of: (1) any authorization issued to Sprint or its subsidiaries or TMobile or its subsidiaries while this transaction is pending before the Commission and the period required for consummation of the transaction; (2) any construction permits held by Sprint or its subsidiaries or T-Mobile or its subsidiaries that mature into licenses after closing; (3) any applications or lease notifications filed by Sprint or its subsidiaries or T-Mobile or its subsidiaries that are pending at the time of consummation; and (4) any leases of spectrum into which Sprint or its subsidiaries or T-Mobile or its subsidiaries enter as lessees while this transaction is pending before the Commission and the period required for consummation of the transaction. Such action would be consistent with prior decisions of the Commission.462 461 Mobile Spectrum Holdings Order, 29 FCC Rcd at 6240 ¶286. 462 See, e.g., T-Mobile-MetroPCS Order, 28 FCC Rcd at 2359 ¶96; Applications of SoftBank Corp, et al for Consent to Transfer Control of Licenses and Authorizations, Memorandum Opinion and Order, Declaratory Ruling, and 137 REDACTED – FOR PUBLIC INSPECTION Moreover, because T-Mobile is acquiring control of Sprint and all of its FCC authorizations and there will be a pro forma transfer of T-Mobile and all its subsidiaries’ authorizations, the Applicants request that Commission approval include any authorizations that may have been inadvertently omitted. B. Exemption from Cut-off Rules Pursuant to Sections 1.927(h), 1.929(a)(2), and 1.933(b) of the Commission’s Rules, to the extent necessary, the Applicants request a blanket exemption from any applicable cut-off rules in cases where the licensees in this transaction file amendments to pending applications in order to reflect consummation of the proposed transaction. This exemption is requested to prevent amendments to pending applications that report the change in ultimate ownership of the licenses involved in these applications from being treated as major amendments. The nature of the proposed transaction demonstrates that the ownership changes would not be made for the acquisition of any particular pending application, but as part of a larger transaction undertaken for an independent and legitimate business purpose. Grant of this request would be consistent with prior Commission decisions that have routinely granted a blanket exemption in cases involving multiple-license transactions, such as this one. C. Unconstructed Facilities The FCC Form 603 requires that parties to an assignment or transfer of control of radio station licenses identify whether those licenses are “constructed.”463 This question is rooted in the FCC’s inquiry into trafficking, which is described as “obtaining or attempting to obtain an Order on Reconsideration, 28 FCC Rcd 9642, 9693 ¶124 (2013); Applications of VoiceStream Wireless Corporation, Powertel, Inc. and Deutsche Telekom, AG, for Consent to Transfer Control of Licenses and Authorizations et al., Memorandum Opinion and Order, 16 FCC Rcd 9779, 9854 ¶¶125-26 (2001) (“DTVoiceStream Order”). 463 FCC Form 603, Main Form Item 118. 138 REDACTED – FOR PUBLIC INSPECTION authorization for the principal purpose of speculation or profitable resale of the authorization rather than for the provision of telecommunication services to the public or for the licensee's own private use.”464 T-Mobile has generally attempted to ascertain the construction status of the many, many microwave authorizations held by its subsidiaries. However, T-Mobile has also used “Yes” as a default response to the construction question because the question is plainly not relevant for purposes of the pro forma transfer of control of its license.465 D. Unjust Enrichment No unjust enrichment concerns are implicated by this transaction as all installment payments applicable to any of the licenses subject to this transaction have long ago been paid. Nevertheless, as required by Section 1.2111(a) of the Commission’s rules, the Applicants are filing the Business Combination Agreement in the form in which it was filed with the Securities and Exchange Commission. All of Sprint’s licenses are freely alienable without designated entity transfer restrictions or unjust enrichment payments. E. 600 MHz Band Information The pro forma transfer of T-Mobile’s licenses that results from the proposed transaction involves some reserved spectrum licenses in the 600 MHz band. Since the Transferor and Transferee of these licenses is the same entity, the Transferee plainly would have qualified to bid on the reserved spectrum licenses in Auction 1002 as of February 10, 2016. 464 47 C.F.R. §§1.948(i)(1). See also 47 C.F.R. §101.55(a). 465 Further, the Commission has clearly stated that, in the context of larger merger transactions, “even if any of the point-to-point microwave facilities are not constructed, sections 101.55(a) and (d) of our rules make clear that unconstructed point-to-point microwave facilities may be transferred where the transfer is incidental to a sale of other facilities or merger of interests.” Applications of Cellco Partnership d/b/a Verizon Wireless and AT&T, Inc., 25 FCC Rcd 10985, 11018 ¶83 (2010). That would plainly be the case here. 139 REDACTED – FOR PUBLIC INSPECTION F. Environmental Impact As required by Section 1.923(e) of the Commission’s rules, the Applicants state that the transfer of control of licenses and leases involved in this transaction will not have a significant environmental effect, as defined by Section 1.1307 of the Commission’s rules. A transfer of control of licenses and leases does not involve any engineering changes and, therefore, cannot have a significant environmental impact. G. National Security Agreement Both Sprint and T-Mobile currently have separate mitigation agreements with the national security agencies as a result of their non-U.S. ownership.466 The Applicants recognize that their contemporaneously filed Section 310(b) petition for declaratory ruling (copy attached) will be referred to Team Telecom and the Applicants will also be submitting a formal notice to the Committee on Foreign Investment in the United States (“CFIUS”). The Applicants expect that those processes will result in a new mitigation agreement for the combined company and that the FCC will condition its grant of the transfer of control applications on continued compliance with such agreement. The Applicants have no objection to such a condition. H. Related Governmental Filings As noted above, this transaction is subject to review by CFIUS. The transaction is also subject to notification and/or review by other governmental agencies, including the Department of Justice, which will conduct its own review of the competitive aspects of this transaction 466 See DT-VoiceStream Order, 16 FCC Rcd at 9853, Appx B (including the Deutsche Telekom AG National Security Agreement); Sprint-Nextel Corporation, Form 8K, at Item 8.01 (May 29, 2013), https://www.sec.gov/Archives/edgar/data/101830/000119312513238554/d545797d8k.htm (describing the National Security Agreement entered into by Sprint as a condition for approval of SoftBank merger). See also Applications of T-Mobile USA, Inc. and SunCom Wireless Holdings, Inc. For Consent to Transfer Control of Licenses and Authorizations and Petition for Declaratory Ruling that the Transaction is Consistent with Section 310(b)(4) of the Communications Act, Memorandum Opinion and Order, 23 FCC Rcd 2515, 2529-37, Appx. B (2008) (amending the DT NSA); T-Mobile-MetroPCS Order, 28 FCC Rcd at 2363-72, Appx. B (further amending the DT NSA). 140 REDACTED – FOR PUBLIC INSPECTION pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976467 and the rules promulgated thereunder. The transaction is additionally subject to approval by certain state public utility commissions. VI. CONCLUSION For the foregoing reasons, the proposed license transfers clearly satisfy the Commission's standards for approval, generate substantial public interest benefits for the customers of TMobile and Sprint and for U.S. wireless customers as a whole, and do not give rise to any competitive harms. The benefits of this merger, however, do not stop at the boundaries of traditional wireless services. The merger unlocks the door to new broadband choices and capabilities for consumers across the country while accelerating the arrival of transformative 5G services that will produce innovation, jobs, and economic growth for our country. So that consumers can promptly realize these benefits, the Applicants seek expedited review and grant of the Applications. 467 15 U.S.C. § 18(a). 141 REDACTED – FOR PUBLIC INSPECTION APPENDIX A: DECLARATION OF JOHN LEGERE Chief Executive Officer, T-Mobile US, Inc. REDACTED – FOR PUBLIC INSPECTION DECLARATION OF JOHN LEGERE Chief Executive Officer, T-Mobile US, Inc. I. BIOGRAPHICAL INFORMATION 1. My name is John J. Legere. I have been Chief Executive Officer of T-Mobile US, Inc. since September of 2012. I have a long history in the telecommunications industry, having previously spent nearly 18 years at AT&T, several years as an executive at Dell, and then more than a decade at Asia Global Crossing and Global Crossing, where I was CEO. I received a B.B.A. from the University of Massachusetts, an M.S., as an Alfred P. Sloan fellow, from the Massachusetts Institute of Technology Sloan School of Management, and an M.B.A. from Fairleigh Dickinson University. I also completed Harvard Business School’s Program for Management Development. 2. As CEO of T-Mobile, I have been responsible for all aspects of the proposed merger with Sprint, including review and approval of the proposed business plan for the merged company. Upon approval of the merger and its consummation, I will serve as the CEO of New T-Mobile. 3. II. I hereby make this declaration. SUMMARY 4. T-Mobile’s track record as the Un-carrier speaks for itself. Only six years ago, wireless customers dealt with onerous service agreements, unnecessary termination fees, and penalties for over-usage, just to name a few ridiculous restrictions that consumers simply accepted and lived with. Today, thanks to T-Mobile’s consumer-first approach, U.S. wireless customers have true freedom to choose the plans and options that work best for them. The Uncarrier approach developed under my leadership has forced dramatic change in the wireless industry, and we have no plans to stop changing the market. In our view, being pro-consumer REDACTED – FOR PUBLIC INSPECTION and pro-competition means lower prices, more value, better service, and more choices for consumers in every corner of the country. 5. I am proud that T-Mobile puts our customers first. There’s no doubt our Un- carrier strategy has been great for consumers across the entire industry. We pursued this approach for very real and significant business reasons—we need to attract, sign up and retain customers in order to be successful. We have intentionally differentiated ourselves from our competitors in new and exciting ways and, as a result, customers have come to T-Mobile, embraced our blazing fast network, and stayed with T-Mobile. Our customer satisfaction has leapt up, our churn numbers have gone down and we have shown that being the Un-carrier is a successful business strategy for us and a win for U.S. consumers. 6. From my first day at T-Mobile, I realized that if we were truly going to put the customer first, we needed to dramatically improve our network. On my arrival in September of 2012, T-Mobile had not yet begun deploying 4G LTE technology. We had no LTE. We were behind all of the competitors in the market and our network was uncompetitive. We were hemorrhaging over two million customers a year, the financial position of the company was strained, and the implications of not investing in new mobile technologies was painfully obvious. If I was going to effectively execute my strategy, it was abundantly clear that we would not only have to build out the network capability that would put us on even footing with the competition, but we really needed to build and operate a network that was second-to-none. Many thought that impossible; but through a combination of sheer determination, a financial foundation with an ability to raise capital, and a highly skilled team with a clear mission to build the best and fastest network in the country, I believed it was possible. As we sit here today, that has been accomplished and now we face an even greater opportunity and challenge with the advent of 5G. 2 REDACTED – FOR PUBLIC INSPECTION 7. A significant part of what helped us achieve a best in class network was our acquisition of MetroPCS just five years ago. Since then, we have added over one million total customers every single quarter for the past five years—that’s 20 quarters. Along with the launch of Un-carrier, this acquisition was a watershed event that allowed us to grow, add scale, directly access the capital markets and have a bigger impact in the U.S. marketplace. Despite skeptics at the time, we more than doubled MetroPCS distribution across the country, increased the number of MetroPCS FTEs by 50 percent, achieved our run-rate synergy targets one year earlier than planned, and beat our NPV synergy targets by more than 40 percent—all while doubling the number of customers in 4½ years. We migrated the MetroPCS customers and network seamlessly, painlessly, and quickly to the benefit of consumers. Our ability to effectively execute on this acquisition sets the stage for similar consumer benefits to come from our merger with Sprint. 8. Our proposed merger with Sprint will provide New T-Mobile with the added scale and assets to supercharge the Un-carrier model, taking it to new levels and increasing our ability to compete with and win customers from the largest wireless players: AT&T, Verizon, and the large well-capitalized companies—like Comcast—now competing in the wireless industry. We’re going to hit the ground running by building the first and best nationwide 5G network as quickly as possible, bringing unprecedented capacity gains for consumers, jumpstarting even more advanced innovation, and forcing our competitors to invest more to keep up with us. 9. When I say “hit the ground running,” I am not just talking about big markets and big cities. We are going to go aggressively into parts of the United States that other wireless carriers shy away from. This includes rural America, where we are finally going to create real choices for consumers. We will deliver improved broadband, higher quality service, and boots 3 REDACTED – FOR PUBLIC INSPECTION on the ground to serve towns and communities that have long been neglected. This will include 600 new retail stores to serve rural areas and small towns—communities that need them most. 10. The transaction will also enable us to expand our Un-carrier strategy into new industries and markets, making it possible for New T-Mobile to bring innovative service offerings, lower prices, and increased competition to in-home broadband, video and entertainment, as well as to the enterprise segment of wireless—areas where real competition is generally lacking today. Plus, New T-Mobile’s broad and deep nationwide 5G network will help to propel the U.S. forward in global technology leadership, allowing the country to be a first in 5G technology and innovation. 11. I have read that opponents of our transaction suggest that, once we complete our merger, T-Mobile and I will start to raise prices, stop innovating, and basically start to act like the big boys in our industry. Nothing could be further from the truth. That’s not the way I operate, that is not how my management team operates—and it is definitely not the path to success for New T-Mobile. III. THE BIRTH OF UN-CARRIER 12. When I took over as CEO of T-Mobile in 2012, one of the things that was clear to me about the wireless industry was that people hated it. They hated being locked into contracts. They hated being gouged by extra fees for things they didn’t understand or couldn’t fully control, such as data and roaming. They hated the high or hidden costs associated with monthly fees and device upgrades. Honestly, other than the mobility that wireless service allowed, there was almost nothing about the industry that consumers liked. 13. At the time, T-Mobile was struggling. The business was stagnant—people were trying hard, but not gaining any ground. Frankly, they were losing ground. The company was just a smaller version of the market leaders. To me, it was clear that the best way to succeed was 4 REDACTED – FOR PUBLIC INSPECTION to do things as differently as possible from the existing carriers. In fact, we had to do the complete opposite: we had to become the Un-carrier. So, I laid out a plan to reinvent T-Mobile, drive our business forward, and differentiate ourselves from the other guys—putting consumers first. I framed our strategy in a “manifesto,” which I closed by saying “We are T-Mobile. The Un-carrier. And we will be un-relenting.” We have been unrelenting, and consumers have taken notice. 14. In the manifesto, I explained that “consumers don’t need another AT&T. What consumers need is a company to stop acting like AT&T. They don’t need another wireless carrier that’s modeled itself after a utility company—they need a wireless carrier with a recognizable pulse that their customers can feel in the palm of their hand. A wireless company kept alive and nimble with the belief of being a better carrier, not simply another carrier.” It was this philosophy that was the start of the strategy we named Un-carrier. 15. As the Un-carrier, our goal is to make the whole industry better for consumers forever. We listen to customers, solve their pain points, and we give more to customers without asking more from them. We got rid of long-term service contracts and replaced them with a transparent pricing model—freeing 180 million customers from service contracts in the process. We made it easier to upgrade to a new smartphone and eliminated charges for global roaming, which often led to giant bills for our competitors’ customers. Since then, customers have been free to upgrade when they want, not when they are told and more than three hundred times more data has been consumed internationally than before we started. We offered to reimburse customers for competitors’ early termination fees and equipment loans if they wanted to switch to T-Mobile. We made it easy to call free over Wi-Fi networks. As streaming video became more popular, we created Binge On, which allowed customers to watch YouTube, Netflix, and 5 REDACTED – FOR PUBLIC INSPECTION other video without hitting their data buckets. In addition, it was T-Mobile that ushered in the era of Unlimited data amounts by forcing AT&T and Verizon to do something they said they never would do, offer Unlimited plans! And along the way, we kept investing in our network to continually give customers a better experience. 16. The Un-carrier changed the wireless market not just for our own customers, but for customers in the whole U.S. wireless industry. Every time we make a move that the other guys follow—that is success for us and for U.S. consumers. As T-Mobile began to stand out in the market, other carriers had no choice but to follow suit and tried to copy our pioneering initiatives, particularly in abandoning long-term, restrictive service contracts and making it easier for customers to switch wireless providers without being shackled by unnecessary contract terms. Customers have recognized and responded to our disruption and our value. Over the last five years, T-Mobile has had 20 consecutive quarters with more than 1 million net adds. In addition to our steady customer growth, customers are also staying with T-Mobile longer. Our postpaid churn rate was a record low 1.07 percent in the first quarter of 2018—half of what it was 5 years ago. And, T-Mobile recently earned the highest score ever recorded in J.D. Power’s 2018 U.S. Wireless Customer Care Study. This track record will only improve when we have the combined assets to truly compete with some of the largest players in the industry. 17. Since I took over as CEO, I have been devoted to the Un-carrier. I’m not afraid to mix it up and go after our competitors. In fact, I once commented that I saw more honesty on a Match.com ad than on one competitor’s coverage maps. I spend a lot of time on my phone and my tablet echoing this sentiment, but I also tweet about our company and listen to customers, without a filter. If someone complains about T-Mobile, I personally try to address their issues. I’ll tweet him or her my e-mail address and make sure we follow up. When I’m not tweeting or 6 REDACTED – FOR PUBLIC INSPECTION in meetings, I spend time in our call centers, listening to our employees talk about what is working and what is not. This brand is my life—I wear magenta T-Mobile gear 24 hours a day, seven days a week. I truly believe in our company, our people and our Un-carrier approach. 18. My employees are also proud brand ambassadors both on and off the job. When we combined with MetroPCS in May of 2013 and became a public company, I believed deeply in the mission that I was on and believed that to be successful it would take the support of every single person in the company. After all, my frontline employees touch millions of customers every day and each of these interactions is a “moment of truth”. To address the importance of this we have made every single employee an owner of T-Mobile and each year each employee receives an additional grant of equity in the company. Over the past five years, we have made more than 330,000 unique stock awards to employees resulting in nearly 62 million units awarded. I deeply believe that the pride of ownership makes a real difference in the way we serve our customers: we listen more carefully, we take the extra step and are always looking to improve and do better. Ownership is a philosophy that I believe makes a difference and I intend to continue with this approach. IV. NEW T-MOBLE WILL CONTINUE THE PRO-CONSUMER UN-CARRIER APPROACH 19. While we have moved from number four to number three in terms of wireless subscribers, we have not been able to make much of a dent in the about two-thirds market share held by the two leading carriers, AT&T and Verizon. They are much larger than T-Mobile and more diversified so they have a better cost structure. The stubbornness of Verizon and AT&T’s combined share is incredibly irritating to me since we think we offer customers better options and some of AT&T and Verizon’s policies are just dumb—you know my feelings on this if you read my Twitter account. But scale and a top quality 5G network for the future are critical assets 7 REDACTED – FOR PUBLIC INSPECTION to our ability to truly compete on a broader scale with everyone in this market—that is why this transaction is so important to our business, and to American consumers. 20. Scale and a leading 5G network will become even more important since we aren’t just running up against traditional wireless carriers anymore. When it comes to new entrants like cable companies and others, I’ve been somewhat dismissive. In fact, I once referred to Comcast and Charter’s wireless businesses as “irrelevant, and . . . irrelevant squared.” But the truth of the matter is that the numbers are starting to show everyone that they are making progress. In the first quarter of 2018, Comcast added more postpaid phone customers than AT&T and Verizon combined. Some estimates have Comcast and Charter adding five million customers in the next two years. And the net present value of their wireless business has been estimated at $20 billion. So, these companies clearly are striving to be major players in the wireless market, they have the assets to drive forward and they are truly investing together to grow their wireless businesses. Now even DISH has begun to build out its own wireless network and put its considerable spectrum assets into use. 21. On top of new, well-capitalized companies expanding into wireless, the nature and structure of the market is also changing. Whether or not you believe it, AT&T is the largest MVPD in the U.S. right now. With its purchase of DIRECTV and acquisition of Time Warner, AT&T has become a content behemoth, leveraging its traditional wireline and wireless businesses to offer consumers a bundle of services that meet their needs. Verizon has followed suit, not only acquiring content, but also entering agreements to deliver certain content over its wireless network to meet consumer demand for mobility. And with the existing infrastructure that companies like Comcast, Charter, and DISH already have in place, they are well positioned to deliver an attractive bundle of services as the transition to innovative 5G networks occurs. So 8 REDACTED – FOR PUBLIC INSPECTION there is an adjacent and converging industry game that’s going on, with players that have deep pockets, built-in customer bases, and the ability to bundle. It’s not just wireless. It’s not just cable. It’s connecting people with content, which is a space we definitely want to play in. 22. The proposed transaction with Sprint will give us the scale and network we need to compete with these larger and more diversified competitors. Make no mistake—even after the transaction, we will still be the little guy among these giants. We won’t have an existing cable or fixed broadband base of customers to cross-sell or other services to cross-subsidize our network costs. That means we will still need to offer more value to consumers to get their attention, keep them as customers and be successful. 23. New T-Mobile will take our Un-carrier strategy into the 5G world and beyond. As CEO, my plan is to put that same disruptive, pro-consumer strategy into overdrive to benefit our combined business. We are committing nearly $40 billion to bring this company into the 5G era over the first 3 years, with the majority of this investment focused on the rapid enhancement of the network, in order to retain our existing customer base, attract new customers, and benefit from being first to deliver transformative 5G services across the country. That’s why we plan to expand T-Mobile’s unique customer service model to Sprint while we subsequently deliver better coverage, reliability, and speed. And that’s why we will keep prices low for consumers, who are vital to our ability to build out 5G infrastructure across the country. When it comes to changing how the wireless industry operates, we’re only getting started. 24. To be clear, we aren’t merging to be like AT&T and Verizon. As T-Mobile learned prior to my arrival, trying to act like those bigger, more diversified companies is not a recipe for success in this business. Rather, we need to take their customers. The network synergies resulting from our proposed transaction and the capacity we will have on the New T- 9 REDACTED – FOR PUBLIC INSPECTION Mobile network create an opportunity for us to take market share from the marketplace leaders— but taking advantage of that opportunity requires us to be agile, innovative and aggressive to give consumers great pricing and additional value. Not to operate like the AT&Ts and Verizons of the world. No. This merger is about being able to go toe-to-toe with them and all comers to provide aggressive, disruptive competition that is anything but the ‘status quo’—well into the future. 25. Combining T-Mobile and Sprint will also allow us to extend the Un-carrier model into new areas. New T-Mobile’s nationwide 5G network will allow us to enter new markets and segments, like truly giving businesses and enterprises new options and delivering on real consumer IoT capabilities. We will have the ability to deliver true in-home wireless broadband alternatives, and video solutions to compete with both traditional and non-traditional offers. We will be able to expand the choices and create competition for rural consumers and for businesses of all sizes. New T-Mobile will give customers the ability to say goodbye to their traditional ISPs and MVPDs with the first wireless-only bundle for TV and home broadband. We’ll deliver unmatched 4K-quality video to all markets via our nationwide 5G network and allow customers to choose TV packages that actually meet their needs. We’ve already taken the first step by adding Layer3 TV to our family, but this merger will give us the scale in network, costs, and financial resources to really disrupt the video market for consumers. 26. We are serious about the potential to grow, disrupt and deliver new solutions and alternatives to consumers from one end of the country to the other. Only our Un-carrier strategy can get us there. Being a maverick is in my DNA and T-Mobile’s DNA. Everyone at T-Mobile has put too much blood, sweat, and tears into this brand and philosophy to abandon our Uncarrier ways. It matters to us, it matters to consumers and it works for shareholders. We fully 10 REDACTED – FOR PUBLIC INSPECTION REDACTED – FOR PUBLIC INSPECTION APPENDIX B: DECLARATION OF NEVILLE R. RAY Executive Vice President and Chief Technology Officer, T-Mobile US, Inc. REDACTED – FOR PUBLIC INSPECTION DECLARATION OF NEVILLE R. RAY Executive Vice President and Chief Technology Officer, T-Mobile US, Inc. I. BIOGRAPHICAL INFORMATION 1. My name is Neville R. Ray. I serve in the T-Mobile US, Inc. (“T-Mobile”) technology organization in the capacity of Executive Vice President and Chief Technology Officer. I joined T-Mobile (then VoiceStream) in April 2000 and since December 2010 have served as its Chief Technology Officer, responsible for the national management and development of the T-Mobile wireless network and the company's IT services and operations. 2. I have more than 30 years of experience in the design, deployment and operational management of wireless networks in the United States and worldwide. Prior to joining T-Mobile, I served as Network Vice President for Pacific Bell Mobile Services. I currently serve on the Board of Directors of Next Generation Mobile Networks Alliance, a mobile telecommunications association of mobile operators, vendors, manufacturers and research institutes. I also serve as the Chairperson of the 5G Americas, the industry trade association and voice of 5G and LTE for the Americas. I have also served as a member of the National Telecommunications and Information Administration's Commerce Spectrum Management Advisory Committee and the Federal Communications Commission's Communications Security, Reliability and Interoperability Council. I am an honors graduate of The City University of London and a member of the Institute of Electrical and Electronic Engineers and the Institution of Civil Engineers. 3. II. I hereby make this declaration. SUMMARY 4. The proposed transaction will allow New T-Mobile to create a broad and deep nationwide 5G and LTE wireless network faster and more efficiently than either company could REDACTED – FOR PUBLIC INSPECTION on its own. The combination will allow New T-Mobile to increase network density, deploy complementary spectrum resources across that dense network, and enhance spectral efficiency by faster spectrum refarming to 5G which will multiply the overall network capacity of the standalone networks and deliver world-class speed and user experiences to consumers. Existing Sprint customers will be rapidly migrated to the New T-Mobile network (which will be anchored on the existing T-Mobile system) over an approximately three-year period. Absent this transaction, T-Mobile would be unable to match the throughput and capacity needed to deploy a fully capable 5G network as quickly or as cost efficiently as New T-Mobile. III. T-MOBILE’S CURRENT NETWORK 5. T-Mobile is currently the third-largest wireless provider in the United States, serving approximately 72.6 million customers under the T-Mobile and MetroPCS brands. TMobile’s wireless network currently supports voice and data services predominantly using LTE technology. There are some legacy subscribers that rely upon UMTS/HSPA technology for a small amount of voice and data traffic. At the end of 2017, T-Mobile had approximately 61,000 macro cell sites and 18,000 small cells and distributed antenna systems (“DAS”).1 The majority of these cell site locations are leased from third-party tower companies such as American Tower Company, Crown Castle, and SBA. 6. Our network utilizes licensed spectrum in the 600 MHz, 700 MHz, 1900 MHz (PCS), and 1700/2100 MHz (AWS) bands and will extend to the millimeter wave spectrum bands (28 and 39 GHz) in the future.2 We hold approximately 30 megahertz of 600 MHz spectrum nationally, which we are in the process of deploying while working with television 1 T-Mobile SEC 10-k filing at 7 (found here: http://investor.t-mobile.com/Cache/392104903.pdf). 2 T-Mobile also uses some unlicensed spectrum in the 5 GHz band using the Licensed Assisted Access 3GPP standard technology to supplement its existing licensed network 2 REDACTED – FOR PUBLIC INSPECTION broadcasters to clear the spectrum, some of whom will remain in the band until 2020.3 This spectrum provides an excellent coverage layer for the T-Mobile network, along with the approximately 10 megahertz of 700 MHz spectrum that we have already deployed in many markets for LTE. In the mid-band range, we have access to approximately 30 megahertz of PCS spectrum and 40 megahertz of AWS spectrum where we support our legacy UMTS/HSPA users in a small portion of the AWS and PCS band (spectrum band used varies by market but does not exceed 10 megahertz on average) and the rest of the spectrum is used to support LTE services, including VoLTE for voice services. Finally, we have some millimeter wave band spectrum rights (from 100 to over 800 megahertz) in certain urban markets that we will deploy for 5G services in the upcoming years. As of April 2018, we had approximately devices on our PCS network, subscriber subscriber devices on our AWS network, and subscriber devices on our 700 MHz network. 7. We use two network equipment vendors to support our cell site radio equipment infrastructure, Nokia and Ericsson. However, we restrict our use of vendors so that we only use one vendor’s equipment at a site and, to drive further efficiencies into the network, generally rely upon a single vendor within an operating market. Our two-vendor strategy creates competition on pricing and drives cost efficiencies, despite the use of only one vendor within a given market. In addition, we have found that this dual sourcing allows the wireless network to operate more consistently and ensures that all equipment features will be supported and synchronized. 8. In the past several years, we have aggressively expanded the network spend and coverage footprint to compete with other national wireless providers and established a track record of quickly deploying spectrum resources. Initially, in 2014, we purchased 700 MHz 3 All spectrum holdings discussed below are based on national averages. 3 REDACTED – FOR PUBLIC INSPECTION spectrum from Verizon for about $3.35 billion in cash and spectrum assets and deployed this spectrum (along with some additional 700 MHz spectrum acquired from secondary markets) to cover 185 million POPs (out of a possible 190 million POPs) by the end of 2015. We have continued to both purchase and deploy additional 700 MHz spectrum which now covers 272M POPs. In 2017, we purchased approximately 30 megahertz of 600 MHz spectrum nationally for roughly $8 billion in the Federal Communications Commission’s incentive auction process. Within two months of license grant, we had deployed this 600 MHz spectrum in some markets.4 By the end of 2017, we had deployed in nearly 600 cities and towns, and continue to rapidly extend this coverage—now to more than 900 cities and towns.5 We currently plan to spend approximately $25.9 billion in network CapEx between 2018 and 2022 to continue this forward progress, with a focus on completing our 600 MHz build (which will include radios that are capable of supporting both LTE and 5G), densifying our existing network, and increasing inbuilding and rural coverage to our existing subscriber base. By the end of 2021, we will have approximately macro cell sites and small cells, with approximately of these sites utilizing 5G technology. While these investments have vastly improved our network over time, we will face increasing challenges in meeting the capacity demands of our customers as we transition to 5G. IV. 5G WILL PROVIDE INNUMERABLE BENEFITS FOR AMERICAN CONSUMERS. 9. Over the years I have been involved in the wireless marketplace, it has been characterized by rapid technological shifts. To put this into context, in the slightly more than 30 4 T-Mobile Lights Up World’s First 600 MHz LTE Network at Breakneck Pace (Aug. 16, 2017), https://newsroom.tmobile.com/news-and-blogs/cheyenne-600-mhz.htm. 5 T-Mobile 600 MHz Extended Range LTE Now Live in 900+ Cities and Towns, Coming to Puerto Rico (June 6, 2018), https://www.t-mobile.com/content/t-mobile/corporate/news/articles/2018/06/extended-range-lte-puertorico.html. 4 REDACTED – FOR PUBLIC INSPECTION years since wireless providers initiated service in the United States, the wireless industry has already deployed four generations of technology, with the next generation on the imminent horizon.6 5G and its affiliated air interface standard which was recently approved will expand the capabilities of wireless systems dramatically, unleashing even more uses for mobile wireless than the previous generations.7 Service providers and manufacturers are developing plans and laying the groundwork for deploying this new technology.8 These new advanced networks will surpass the performance capabilities of today’s networks bringing advanced telecommunications services to consumers and enterprise customers. 10. Each generational transition in wireless technology (e.g., 3G to 4G) has led to a dramatic increase in wireless data consumption. As can be seen in the figure below, the transition from 2G to 3G technology resulted in a 21X increase in gigabytes consumed by a subscriber per month while the 3G to 4G change led to a 7.6X increase.9 Figure 1: Increase in Subscriber Data Consumption 11. Given the transformational changes that 5G will bring, I anticipate this pattern to continue—and at a greater pace due to an expected tsunami of new data-intensive use cases 6 See, e.g., Thomas K. Sawanobori, The Next Generation of Wireless: 5G Leadership in the U.S., CTIA (2016), https://www.ctia.org/docs/default-source/default-document-library/5g_white-paper_web2.pdf. 7 See, e.g., Georg Mayer, 3GPP system standards heading into the 5G, 3GPP (June 13, 2017). http://www.3gpp.org/news-events/3gpp-news/1614-sa_5g. 8 See, e.g., Juan Pedro Tomás, 5G trials in the U.S, RCR WIRELESS NEWS (Feb. 16, 2017). https://www.rcrwireless.com/20170216/carriers/5g-trials-u-s. 9 These values are based on average consumption on T-Mobile’s postpaid network. 5 REDACTED – FOR PUBLIC INSPECTION enabled by 5G. 5G promises to bring myriad benefits to users and provide for a multitude of new applications and use cases beyond what can be supported by today’s most advanced 4G networks and provide a richer user experience, increased engagement time, and new and innovative methods of consumption. These noticeable upgrades over 4G (e.g., IMT-Advanced or LTE) include superior capacity, faster data rates, and much lower latency. Further, 5G will offer enhancements in energy efficiency leading to longer battery life and the capability to connect a much greater number of devices. More specifically, 5G could potentially offer:10 • • • • • • • 12. A tenfold increase in connection density from approximately 100,000 connections per square kilometer to 1,000,000 connections per square kilometer; A tenfold improvement in latency; A tenfold improvement in the typical user experienced data rate from 10 Mbps to 100 Mbps (or more); A twentyfold increase in peak downlink data rates; A tenfold improvement in network energy efficiency; Three times greater spectral efficiency; and Longer battery life (up to 10 years for some IoT devices).11 The figure below graphically demonstrates the transformative changes expected from new 5G (e.g., IMT-2020) networks as compared to LTE (IMT-Advanced). 10 See Recommendation ITU-R M.2083-0 (09/2015), IMT Vision – Framework and overall objectives of the future development of IMT for 2020 and beyond, https://www.itu.int/dms_pubrec/itu-r/rec/m/R-REC-M.2083-0-201509I!!PDF-E.pdf. 11 5G Systems: Enabling The Transformation of Industry and Society, ERICSSON (Jan. 2017), https://www.ericsson.com/en/white-papers/5g-systems--enabling-the-transformation-of-industry-and-society/whitepaper--5g-systems--enabling-the-transformation-of-industry-and-society. 6 REDACTED – FOR PUBLIC INSPECTION Figure 2: 5G Network Improvements 13. The improvements inherent in 5G will usher in a new wave of applications and spawn new business opportunities and customer benefits. It will not only be an evolution of mobile broadband networks, it is also envisioned to enable new unique network and service capabilities. The connectivity increase supported by 5G networks will be essential to support fiber-like data speeds, low latency for real-time interactivity, more consistent performance and user experience, and massive capacity for unlimited data (for things like 4K video streaming, online gaming and other capacity hungry applications) that cannot be served across a substantial number of users by 4G. The new 5G ecosystem will enable new forms of mobile media and entertainment—no longer will consumers be required to subscribe to multiple network providers 7 REDACTED – FOR PUBLIC INSPECTION to watch television and movie content wherever and whenever they want. Subscribers will be able to develop and share rich user-generated content, regardless of file size or location. Congested environments, such as sporting events, concerts, and large enterprises, will no longer be constrained. Commuters will have high-speed data available—allowing video streaming of state-of-the-art 4K content and the ability to download any file nearly instantaneously while traveling on public transit. And novel and innovative new applications such as virtual and augmented reality, connected vehicles and highways, real-time translation, and drone control/monitoring could dramatically reshape the way consumers engage and enjoy new content and experiences.12 14. These are not the only examples. 5G will also provide the ability to connect a massive number of Internet of Things (“IoT”) devices and sensors to monitor, among other things, the electric grid to instantly detect surges and outages so that repair crews can be immediately deployed to where they are needed; industrial processes to create more efficiencies within factories and notify maintenance crews before a machine fails; or biometric data to alert doctors when a patient’s diagnostic readings are approaching critical levels so that action can be taken before larger issues develop.13 15. All these new 5G applications will dramatically accelerate the increase in capacity demands on the wireless network. As I describe in more detail below, New T-Mobile, using the combination of the complementary spectrum and network assets of T-Mobile and Sprint will unlock the potential in both the existing and future use cases envisioned for 5G and provide the capacity needed to carry the oncoming wave of data consumption and user engagement that will 12 See McKinsey & Company, McKinsey Global Institute. The Internet of Things: Mapping the Value Beyond the Hype (June 2015). Available at: https://goo.gl/HtAZRF. 13 Id. 8 REDACTED – FOR PUBLIC INSPECTION be unleashed. T-Mobile alone, given its network assets and capacity, will not otherwise be able to keep up with the explosive growth in new use cases and associated data requirements. V. ON A STANDALONE BASIS, T-MOBILE CANNOT BUILD A COMPARABLE 5G NETWORK TO NEW T-MOBILE 16. We are building 5G in 30 markets in 2018 and preparing for the launch of a 5G network in 2019 to remain competitive with other wireless providers in the United States. As a precursor to offering 5G service, we are installing 600 MHz equipment at our cell sites that is upgradeable to 5G. On average, we have procured licenses for over 30 megahertz of 600 MHz spectrum nationwide (some markets have even more 600 MHz spectrum licensed to T-Mobile; some have slightly less). In the past year and a half, we have been aggressively deploying these new spectrum holdings to supplement our coverage for the LTE network. However, we have reserved megahertz of 600 MHz spectrum (more in some markets, depending on the amount of available spectrum in the particular market) for future 5G services. Additionally, we will use up to megahertz of millimeter wave spectrum licensed in a number of key major markets (and in one market up to 850 megahertz) to supplement the 600 MHz spectrum for 5G operations. 17. We have publicly announced that we will commence building the T-Mobile 5G network in 30 cities, including New York, Los Angeles, Dallas, and Las Vegas, during 2018. Because 5G-capable devices are not yet available, we do not anticipate offering 5G mobile services until sometime in the first half of 2019. This network build will include approximately cell sites and will provide an average throughput of 25 Mbps,14 a peak throughput of 900 Mbps, and maximum offered traffic of per month by 2021. These numbers will 14 Average data rate is not equivalent to the actual user experience. The user experience will be affected by a number of variable factors, including received signal strength, location of the mobile device and base station, and whether the device is in motion, among others. 9 REDACTED – FOR PUBLIC INSPECTION increase to 5G sites, an average throughput of 76 Mbps, a peak throughput of 2700 Mbps, and maximum offered traffic of 18. per month in 2024. On a standalone basis, we will deploy a nationwide 5G network, but will lack the bandwidth to deliver upon the full data rate and capacity gains possible for 5G. Our lack of access to significant amounts of available mid-band spectrum that is not encumbered with LTE subscribers (as well as a lack of large amounts of high-band spectrum nationally) will significantly limit our ability to provide a nationwide 5G system that can handle the most demanding high capacity 5G applications. This is depicted graphically in the figures below: Figure 3: 5G Speed vs. Covered Population Distribution 10 REDACTED – FOR PUBLIC INSPECTION Figure 4: 5G Speed vs. Covered Population Distribution 19. Based on the output of our engineering modeling,15 by 2021 only 31.5 million covered POPs on the T-Mobile standalone 5G network will receive average data rates above 100 Mbps, only 10.8 million covered POPs will receive average data rates above 150 Mbps, and no covered POPs will receive average data rates above 300 Mbps. In contrast, New T-Mobile’s 5G network will deliver average data rates above 100 Mbps to 208.8 million covered POPs, average data rates above 150 Mbps to 193.4 million covered POPs, average data rates above 300 Mbps to 96.5 million covered POPs, and average data rates above 500 Mbps to 16.2 million covered POPs. 20. The differences between the networks will continue in 2024. 102.8 million covered POPs on the T-Mobile standalone 5G network will receive average data rates above 100 Mbps, only 66.6 million covered POPs will receive average data rates above 150 Mbps, and there still will not be any covered POPs receiving data rates above 300 Mbps. In contrast, New T-Mobile’s 5G network will deliver average data rates above 100 Mbps to 292.3 million covered 15 The modeling is discussed in paragraph 25 below in more detail. 11 REDACTED – FOR PUBLIC INSPECTION POPs, average data rates above 150 Mbps to 278.1 million covered POPs, average data rates above 300 Mbps to 252.4 million covered POPs, and average data rates above 500 Mbps to 208.7 million covered POPs. VI. THE TRANSACTION WILL ALLOW NEW T-MOBILE TO DEPLOY NATIONWIDE 5G SERVICES FASTER AND WITH LESS COST, WHILE SIMULTANEOUSLY ENHANCING LTE SERVICES 21. As discussed above, 5G represents a major advance for the wireless industry in terms of performance, efficiency, service flexibility, and latency. The increased performance that 5G offers in terms of average and peak throughput, capacity, and latency will directly translate to a superior end-user experience meaning more value for consumers’ money. In light of consumers’ ever increasing data usage and the 5G economy emerging quickly, to compete in broadband services, a deep and broad 5G network is imperative in this highly competitive environment. Therefore, it is unsurprising that the two largest wireless providers (AT&T and Verizon) have vigorously asserted that they will lead in the development and deployment of 5G services. 22. For a successful 5G network, the key pillars are access to spectrum, cell sites, and spectral efficiency. When combined together, these three factors deliver the capacity needed to deliver the throughput and services that consumers expect from their wireless service. As new technologies like 5G are introduced, T-Mobile must continue to provide our existing customers using LTE with the same or better quality of service they are accustomed to, while simultaneously setting aside spectrum resources to allow for the development of new technology. The merger will give New T-Mobile the spectrum and infrastructure resources to expedite its deployment of a superior 5G network than either company could do on a standalone basis, while improving the existing service quality for T-Mobile and Sprint customers. 12 REDACTED – FOR PUBLIC INSPECTION 23. Driving the benefits of the merger is the ability to enhance the network capacity available to existing T-Mobile and Sprint customers. The combination of the two companies does not simply double the network capabilities, but instead provides a multiplicative effect for the overall capacity of the New T-Mobile network. A basic formula for determining wireless network capacity is: 24. Unpacking these variables, if we are able to: (1) access more cell sites, (2) utilize more spectrum across those sites, and (3) achieve higher spectral efficiencies from faster refarming of spectrum from LTE to 5G, the overall capacity of the new network will improve extensively. As described in detail below, combining T-Mobile and Sprint and anchoring upon the T-Mobile cell site infrastructure will allow New T-Mobile to employ more sites faster than either company could on a standalone basis. Additionally, New T-Mobile will have low-, mid-, and high-band spectrum resources to apply to each cell site as needed, increasing the amount of spectrum deployed per site dramatically. Finally, the transaction will enable much faster deployment of 5G over more spectrum—5G has substantially better spectral efficiency as compared to LTE. In sum, New T-Mobile will have the depth and breadth of network to deliver incredible amounts of capacity to consumers that could not be matched by the standalone companies. 25. In the ordinary course, we utilize an engineering model that predicts when our network may face congestion (relying upon busy hour calculations that occur when the network load is the highest). When congestion is predicted, we evaluate all potential methods to resolve it, including adding more cell sites to enable greater spectrum reuse to increase capacity, 13 REDACTED – FOR PUBLIC INSPECTION supplying additional spectrum resources, or improving spectral efficiency. With the combination of T-Mobile and Sprint, New T-Mobile will have more resources at its disposal and more flexibility to use the best method available for reducing congestion and providing additional capacity where it is needed. I discuss each of these factors in detail below. A. The Merger Will Lead to Immediate Availability of Additional Cell Sites for New T-Mobile 26. A primary challenge to deploying a wireless network is obtaining access to sufficient cell site locations to deploy spectrum resources in the most effective and complete manner. Below, I discuss the process for adding new cell sites and the benefits that New TMobile will enjoy by being able to effectively start using retained Sprint sites in addition to TMobile’s anchor sites to augment capacity for the combined company. 27. On a standalone basis, we (as well as other wireless providers) rely heavily upon independent tower companies such as American Tower and Crown Castle for tower space. Tower companies will either commission a tower for an individual lessee or will build infrastructure with sufficient space for multiple tenants. The wireless company enters into a lease agreement with the tower companies for space and power infrastructure, but the individual wireless providers are responsible for providing the relevant radio equipment, power supply (in some instances), and backhaul. 28. Each of these individual components has varying associated costs. Cell site space leases generally require payments per square inch of leased space on a site. We will also generally enter into lease agreements with backhaul providers that are based on the volume of traffic transported from the cell site. As the data traffic from a particular site will vary by cell site and by market, these backhaul contracts are optimized accordingly. Moreover, there are generally discounts provided as part of backhaul leases based on volume (discounts for greater 14 REDACTED – FOR PUBLIC INSPECTION traffic). Similarly, the radio equipment that we must self-provision has costs, and minimizing the number of radios to support the wireless communications traffic is desirable to the extent possible, as the radio access network (“RAN”) accounts for approximately 80 percent of the total network costs. By combining spectrum resources into contiguous blocks that can be managed by a single radio (instead of multiple radios), costs for radio equipment are reduced. 29. In addition to the costs associated with the various leases to support individual cell sites, there are also substantial logistical barriers to cell site access. If T-Mobile requires a cell site in a particular location, but no tower companies have an existing structure or space on an existing tower, there will be a need for new construction. New construction requires a number of time-consuming and costly steps. Initially, obtaining local zoning approvals can take as long as 18 months for a new cell site. And, as part of that process, there are costs associated with obtaining the new tower permits that are typically borne by T-Mobile. Finally, there will be a need to confirm the availability of backhaul for the site and, in some cases, the need to bring new backhaul (fiber or Ethernet) to the site, which can also cause delays and add costs. 30. These cell site challenges are mitigated by the transaction as it will allow the combined company to immediately engage in “cell splits” to densify the network infrastructure and reuse spectrum more intensely. A cell split replaces a single cell site with multiple cell sites in the same coverage footprint. The effect is to multiply the capacity available to the network (if the same amount of spectrum is used in each new cell site as on the original single cell) by the number of new cell sites. However, in the New T-Mobile context, not only will there be multiple new cell sites in a coverage area, each of those cell sites as well as T-Mobile’s anchor sites will also have additional spectrum resources deployed on them, further multiplying the capacity gains for the network. Importantly, New T-Mobile, in spite of adding density to its network, will also 15 REDACTED – FOR PUBLIC INSPECTION create significant cost-saving synergies related to on-site expenses in comparison to the combined site spend of T-Mobile and Sprint in the standalone world. 31. Normally, a wireless provider seeking a cell split would need to work with a tower company to obtain access to a new site. However, New T-Mobile will implement cell splitting by anchoring on the existing T-Mobile cell site infrastructure and augmenting the density of deployed cell sites by retaining approximately 11,000 cell sites from Sprint (the retained cell sites will be selected to optimize coverage and capacity for the New T-Mobile network). In many instances, this will obviate the need to work with the tower companies for new site leases. So long as New T-Mobile can replace existing antennas and radio equipment at existing T-Mobile and Sprint cell sites with new equipment (in most cases, improved equipment that can handle more spectrum bands and more capacity) without increasing the amount of physical space or mass (weight of the equipment) used at a site, it may only incur limited new lease payments and may be able to avoid new zoning approvals. The ability to nearly immediately create cell splits in this fashion, in many cases without incurring substantial new costs or delays, will allow New T-Mobile to more rapidly deploy a wider and deeper network while simultaneously reducing the cost of adding incremental capacity. 32. In light of the challenges in obtaining new cell sites, cell splitting in this fashion would be infeasible without the transaction. To match the modeled throughput performance of New T-Mobile, our standalone network would require as many as approximately 162,400 cell splits by 2024. At the end of 2017, we only had slightly more than 61,000 macro cell sites, so matching the available capacity of New T-Mobile would require more than double the existing number of macro cell sites in the next several years. From an operational perspective, it would be impossible to obtain this many site leases and/or construct any needed new sites in this short 16 REDACTED – FOR PUBLIC INSPECTION period of time. Moreover, even if it were feasible, the costs associated with such an effort would be economically unviable. Deploying more than double the number of macro cell sites would also more than double the operational expenditures needed to support the network along with substantial increases in the costs to provide backhaul from these sites. The capital expenditures to enter into this many new tower leases or payments to construct new sites would also be impractical. B. The Spectrum Depth of the Combined Company Allows More Spectrum To Be Deployed Per Cell Site 33. New T-Mobile will be able to leverage Sprint’s and T-Mobile’s complementary spectrum and sites to provide immediate enhanced LTE benefits, while deploying and transitioning to a 5G network. Deploying a robust 5G experience requires spectrum across multiple frequency bands and the infrastructure to support such spectrum use. Sprint’s and TMobile’s combined spectrum assets span the low-, mid-, and high-bands. Combining their existing infrastructure will enable New T-Mobile to deploy denser and more capable enhanced LTE and 5G networks than either company could on a standalone basis. 34. While we are rolling out a 5G network supported by spectrum in the 600 MHz and limited millimeter wave bands, including the Sprint spectrum and infrastructure assets will allow New T-Mobile to more rapidly create a truly nationwide 5G network that will have the depth and breadth to help the U.S. lead the world and continue its success as an innovation pool for start-ups and other businesses in the coming 5G era. As discussed above, our 5G network build is focused on the 600 MHz spectrum band, supplemented by limited spectrum holdings in the millimeter wave bands (covering 100 million people in most major metropolitan areas). New T-Mobile will build upon this T-Mobile plan, by adding the 2.5 GHz spectrum (and other mid- 17 REDACTED – FOR PUBLIC INSPECTION band spectrum as available as it is refarmed from LTE) held by Sprint, along with additional cell sites that will be retained and used for the New T-Mobile network. 35. The ability of New T-Mobile to more quickly deliver a deeper 5G network and user experience than standalone T-Mobile is driven in part by the complementary spectrum assets of T-Mobile and Sprint. A full range of spectrum for 5G is important to guarantee a robust 5G network. Low-band spectrum (below 1 GHz) allows for broader coverage, both inbuilding and in rural areas. Spectrum below 1 GHz can support cell site operating radii of up to 18 miles, allowing for broad coverage without the need for as much capital expenditure, especially in rural markets. 36. Mid-band spectrum (from 1 to 6 GHz) provides high capacity with some reduction in coverage capabilities as compared to sub-1 GHz spectrum bands. Because there is more spectrum in the mid band, there is more capacity that can be delivered from a single cell site, and it is well-suited for urban and suburban markets where consumer demand for more capacity is highest. Because the propagation in the mid-band is more limited (operating radii of approximately up to 4 miles around cell sites) the band is not optimized for rural area coverage, as it requires more capital expenditures to cover those geographies. 37. High-band spectrum (above 20 GHz) is best utilized in dense urban markets where there are extreme capacity demands, need for low latency, and surging use of high-speed data applications. High-band spectrum cell operating radii are significantly less than one-half of one mile, making use of this spectrum only economical in very densely populated areas. The positive attributes of high-band spectrum are that it has large bandwidths available, enables the use of very small antennas, and can be readily reused within a market area. These features 18 REDACTED – FOR PUBLIC INSPECTION enable high-band spectrum to deliver much higher data rates and lower latency than mid-band or low-band spectrum. 38. New T-Mobile will leverage the variety of spectrum at its disposal to deploy greater quantities (more spectrum per cell site) more densely (to more cell sites throughout the network). While standalone T-Mobile will have similar coverage, New T-Mobile will be able to deploy a capacity layer of 2.5 GHz spectrum to provide much higher 5G data rates to consumers. Moreover, the combined company will be able to deploy more spectrum in more cell sites, providing a much more consistent signal strength throughout the coverage area than T-Mobile could on a standalone basis. Signal strength is one of the best approximations of the actual user experience—the stronger and more consistent the signal strength, the more likely the consumer will have a steady and robust data and voice connection. For this reason, signal strength is directly related to the actual data rates delivered to a customer. 39. This ability to provide a more consistent signal translates to greater 5G coverage reliability for New T-Mobile. As can be seen in the table below, New T-Mobile will greatly improve the coverage footprint for Sprint overall (nearly 145 million more covered POPs in 2021; 130 million more in 2024),16 as well as for Sprint’s PCS and 2.5 GHz coverage (66.2 million more covered POPs in 2021; 88.2 million more in 2024). Moreover, nearly 2 million more POPs will be covered by New T-Mobile than standalone T-Mobile in 2021, and 1.1 million more in 2024. 16 Because the low-band coverage overlaps the mid-band coverage, the 145 million difference in covered POPs is calculated as the difference of New T-Mobile’s total covered POPs in 2021 (319.6 million) minus Sprint’s total covered POPs in 2021 (174.7 million). Similarly, the 130 million difference in covered POPs in 2024 is the difference between New T-Mobile 600 MHz coverage and Sprint’s total covered POPs. 19 REDACTED – FOR PUBLIC INSPECTION Table 1: 5G Coverage Comparisons 40. Without access to the 2.5 GHz spectrum provided by the transaction, we would be forced to redeploy our PCS and AWS spectrum from existing LTE services to 5G—further constraining our LTE capacity and bandwidth during the critical transitional period from 4G to 5G. Repurposing existing spectrum away from LTE and other legacy services is very difficult and requires careful coordination, which can be greatly helped if the operator has a broad and deep spectrum portfolio. Refarming of spectrum resources is accomplished by repurposing frequency assets that have historically been allocated to a preceding technology (e.g., LTE) to accommodate a new technology (e.g., 5G). Refarming depends upon two critical factors: (1) new technology device penetration levels and (2) service continuity (the need to continue to support existing customers with legacy devices). Based on past experiences with device penetration, we have estimated that New T-Mobile will be able to drive 5G capable device penetration rates up by 10 percent, year over year (e.g., if standalone T-Mobile would have 50 percent of customers with 5G devices, New T-Mobile would have 55 percent). This more rapid transition to new 5G devices will enable New T-Mobile to refarm more spectrum from LTE to 20 REDACTED – FOR PUBLIC INSPECTION 5G in a much more expeditious fashion. Moreover, this will leave much fewer New T-Mobile customers on the LTE network—easing LTE demand and ensuring that the user experience for remaining LTE customers will not suffer during the 5G spectrum refarming process. The refarming process is depicted in the figure below. Table 2: Spectrum Holdings and Refarming Plan 41. Absent the merger, we would begin to migrate some of our PCS spectrum in 2021 to 5G, while maintaining of our AWS and the remaining PCS spectrum to support existing LTE services. This would deliver only shared portions of of mid-band spectrum for 5G by 2021, and we would not be able to increase that amount of spectrum until 2023. Similarly, we would only be dedicating of 600 MHz spectrum in 2020 and some of our AWS spectrum in 2021 for 5G services and would not be able to increase that 21 REDACTED – FOR PUBLIC INSPECTION amount until 2024 at the earliest. In sum, on a standalone basis, we would have only of spectrum dedicated to 5G and in 2021, and only of spectrum split between LTE and 5G of spectrum dedicated to 5G and of spectrum split between LTE and 5G by 2024, and limited amounts of millimeter wave spectrum in select markets.17 42. In contrast, by 2021, New T-Mobile will have spectrum and of mid-band 2.5 GHz of 600 MHz spectrum dedicated for 5G services, and of AWS and PCS spectrum split between LTE and 5G. Moreover, by 2024, the combined company will have of mid-band spectrum and spectrum dedicated for 5G services and of low-band of AWS spectrum split between LTE and 5G. In total, New T-Mobile will have dedicated for 5G in 2021 and dedicated for 5G in 2024. In short, New T-Mobile’s broader spectrum portfolio will allow it to devote substantial spectrum resources to 5G immediately while also enhancing the coverage and capabilities of the existing LTE network, as discussed in Section E below in more detail. C. Expedited Deployment of 5G Will Deliver Spectral Efficiency Gains 43. The ability to rapidly migrate consumers from LTE to 5G provides immediate efficiency benefits because 5G has much better spectral efficiency. An increase in spectral efficiency translates to a proportional increase in the number of users supported at the same load per user—or, for the same number of users, an increase in throughput available to each user. 5G delivers spectral efficiency improvements due to four main factors: (1) lean carrier design; (2) 17 Spectrum that is split between LTE and PCS means that in some markets, the spectrum is used for LTE services and in some markets it is used for 5G. 22 REDACTED – FOR PUBLIC INSPECTION high bandwidth utilization; (3) improved massive MIMO and beamforming; and (4) inter-cell coordination. 44. Lean Carrier Design. The 5G New Radio (“NR”) standard is designed to operate with lower control signaling overhead, which translates to increased mobile system capacity. Lean carrier design also translates into energy efficiency as control signals are only transmitted when needed. In 5G NR, the control signaling has a duty cycle that is designed to be 100 times lower than LTE.18 This reduced control signal overhead frees up more capacity to carry customer traffic and reduces inter-cell interference to neighboring cells, which increases the overall system capacity. 45. High Bandwidth Utilization. The LTE radio standard requires a static 90 percent occupied bandwidth utilization requirement. This means that if there is a 30 megahertz LTE radio channel, only 27 megahertz can be used for radio communications. In contrast, the 5G NR standard does not have a static 90 percent bandwidth utilization requirement. This enables 5G NR to deliver more capacity in the same bandwidth as compared to LTE. For 5G NR channel bandwidths greater than or equal to 20 megahertz, the bandwidth utilization can vary between 95 and 98 percent depending on the carrier bandwidth and subcarrier spacing.19 Therefore, that same 30 megahertz channel would not have a full 3 megahertz reserved for a guard band, but instead would have only 0.6 to 1.5 megahertz of spectrum reserved for guard bands. For larger blocks of contiguous spectrum beyond 20 megahertz,20 these spectrum blocks will typically be able to have even higher bandwidth utilization because the guard band represents a smaller percentage of the overall carrier bandwidth. 18 Control signaling duty cycle in 5G NR will be as low as 0.5% versus 50% for LTE. 19 See 3GPP TS 38.101-1 (which dictates the bandwidth utilization requirement for 5G NR). 20 Spectrum blocks smaller than 20 megahertz with the same subcarrier spacing as LTE have bandwidth utilization rates of 90 to 95 percent. 23 REDACTED – FOR PUBLIC INSPECTION 46. Additionally, larger contiguous spectrum blocks will allow for gains in statistical multiplexing. As the size of a radio channel increases, the available routes for communication traffic to flow increases more than proportionally due to the uneven nature of the traffic load. The Commission has previously found that a single 20 x 20 megahertz LTE carrier can carry 20 percent more traffic due to this factor than could two 10 x 10 megahertz carriers.21 Depending on the type of data traffic and the system load, the overall trunking efficiency gain can vary between 7 and 40 percent.22 47. Massive MIMO (“mMIMO”) and Beamforming. mMIMO technology uses a larger number of elements (greater than or equal to 16) to focus and direct radio wave energy using beamforming to a given user, delivering faster speeds and higher capacity.23 MIMO combined with beamforming techniques allow the radio energy to be focused where needed as a user moves and therefore reduce the interference within the system—leading to gains in capacity and network efficiency. For frequencies below 6 GHz, MIMO will help to improve spectral efficiencies. However, for spectrum bands above 6 GHz, MIMO and beamforming are required or mobile communications will not be achievable. When applied to high-band spectrum (like millimeter wave spectrum bands), mMIMO and beamforming will boost the coverage and reduce inter-site interference, which will lead to better performance and higher capacity. Implementation of mMIMO in the 5G NR standard improves upon MIMO technologies in LTE in several ways. First, improved feedback via Channel State Information (CSI) in 5G NR 21 See The Broadband Availability Gap: OBI Technical Paper, Chapter 4 at 73 (rel. April 2010), https://transition.fcc.gov/national-broadband-plan/broadband-availability-gap-paper.pdf. 22 Impact of Spectrum Aggregation Technology and Frequency on Cellular Network Performance, IEEE Dyspan, 2015. 23 Beamforming is a signal processing technique that allows the radio signal to be directed between two points. Beamforming is used both at the transmitting and receiving ends of the communication path and helps improve the robustness of the radio signal. 24 REDACTED – FOR PUBLIC INSPECTION translates into improved interference measurements with better link adaptation. This enables higher multiuser MIMO system gains. Next, mMIMO as standardized in 5G NR also has an optimized MIMO codebook. This change enables the support of a larger number of antenna elements, which creates improvement in system capacity due to reduced inter-cell interference and more focused beamforming. 48. Inter-Cell Coordination. Inter-cell coordination allows for coordination of cell edge signal transmissions to reduce interference within the network. This in turn provides improvements in coverage, cell edge throughput, and spectral efficiency. The 5G NR standard is designed as a beam-based technology, which makes it better suited to utilize cell edge coordination. Inter-cell coordination will capitalize on the native spatial domain system platform of 5G NR that provides improvements in system performance much greater than can be achieved with LTE. 49. Each of these improvements contributes to the significant spectral efficiency improvements shown in the table below for 5G. Greater efficiency gains will be provided in the high-band spectrum because this spectrum has smaller wavelengths. Smaller wavelengths mean that antennas that are optimized for that frequency can be smaller—meaning that more antenna elements can be placed in a given area or form factor. More antennas will typically improve coverage and capacity in the network. 25 REDACTED – FOR PUBLIC INSPECTION Percentage Increase Average Spectral Efficiency (bps/Cell) Spectrum Antennas LTE 5G Low band 4x2 MIMO 2.1 2.5 19% Mid band 4x4 MIMO 2.5 3.8 52% mmWave mMIMO N/A 7 N/A Table 3: Spectral Efficiency Comparison24 50. As can be seen, low-band spectrum will achieve a 19 percent improvement in average spectral efficiency (2.1 bps/Hz to 2.5 bps/Hz) and mid-band spectrum will achieve a 52 percent improvement in average spectral efficiency (2.5 bps/Hz to 3.8 bps/Hz) moving from LTE to 5G. New T-Mobile’s ability to rapidly migrate spectrum and users to 5G will allow it to capitalize on these significant improvements in spectral efficiency. D. The Combined Company Will Provide Unmatched 5G Data Rates and Capacity Faster and on a Much Wider and Deeper Basis 51. When multiplying the effects of the benefits contributed by the increased number of cell sites, the amount of low-band and mid-band spectrum available per cell site, and the spectral efficiency gains, the performance benefits of this combination are dramatic. My technical team has performed extensive technical throughput modeling of the standalone and combined networks and these models project, based on our ordinary course traffic modeling, that the New T-Mobile 5G network will be substantially faster than either standalone network. The figure below summarizes the comparison between New T-Mobile and the standalone 5G networks by 2024. 24 The spectral efficiency improvements are derived from equipment vendor simulations, internal T-Mobile analysis, and ITU requirements. 26 REDACTED – FOR PUBLIC INSPECTION Figure 5: New T-Mobile Network Comparison to Standalones (2024) 52. By combining the spectrum resources of T-Mobile and Sprint, New T-Mobile will be uniquely positioned to roll out a 5G network that can provide both coverage and capacity throughout the country, including in rural markets. New T-Mobile will be able to deploy a multi-faceted 5G network that provides the full array of features and improvements envisioned by the new 5G standard throughout the country in terms of improved data rates, capacity, latency, and device density that will meet the consumer demand for new 5G services. 53. As the tables below demonstrate, the dramatic improvements in average and peak data rates for New T-Mobile as compared to the standalone networks will drive substantial benefits to subscribers. New T-Mobile will be able to deliver data rates that will compete with wired connections and greatly exceed current wireless data rates. These improvements will allow the combined company to enable the wide variety of new 5G applications and use cases described above in Section III.C.2. 27 REDACTED – FOR PUBLIC INSPECTION Average 5G Data Rates (Mbps) Peak 5G Data Rates (Mbps) T-Mobile 25 900 Sprint 55 300 New T-Mobile 149 1500 Entity Table 4: Average and Peak Data Rate Comparisons (Year 2021) Average 5G Data Rates (Mbps) Peak 5G Data Rates (Mbps) T-Mobile 76 2700 Sprint 113 700 New T-Mobile 444 4100 Entity Table 5: Average and Peak Data Rate Comparisons (Year 2024) 54. In a similar manner, the overall capacity on New T-Mobile’s 5G network will greatly exceed the combined capacity of the two standalone companies. As noted above in more detail, these capacity gains are driven by the greater number of cell sites, more available spectrum, and improvement in spectral efficiency that are not achievable for T-Mobile and Sprint on their own. While the offered capacity numbers for the combined network have been developed using a robust set of assumptions and associated calculations, we also know that the offered capacity of the network today is materially greater than what is consumed by our customers. The reasons for this difference include: • Advance Planning – Network capacity is created in advance of future demand materializing, with the typical planning assuming being 18 months ahead of demand; • Traffic Distribution - Traffic not manifesting itself uniformly relative to the deployed resources, resulting in some sites being more loaded than others; • Non-uniform Capacity – Supply not always sized up to meet the demand – in lightly loaded sites or sites built for coverage, all spectrum that the radio access hardware supports is deployed regardless of the actual demand; 28 REDACTED – FOR PUBLIC INSPECTION • Increments of Deployed Radio and Spectrum Ahead of Consumption – this translates to speed benefits until the capacity is consumed and speeds drop; • Coverage – Some sites built for coverage and have only sporadic demand; • Stochastic and Random Nature of Traffic – temporal changes in traffic patterns result in need to over-index supplied capacity in some cases; and • Busy Hour Effect – Need to dimension for the busy hour of the network, resulting in lower capacity utilization during non-busy hours. 55. For the years of 2016 and 2017, our network carried traffic is offered traffic and is percent of the percent for standalone Sprint.25 While we believe that we will be able to deliver greater efficiency in the 5G network, we have made a conservative assumption that the efficiency of today’s network will be the same in future years. This is conservative for several reasons: • Topology – New T-Mobile will continue to improve precision in how it deploys cell sites and the overall network alignment with customer generated traffic; • User-behavior - we believe that higher bandwidth applications such as 4K video will be heavily consumed in lower mobility environments. (Mobility based consumption is less efficient than static consumption because of error correction overhead necessary to support mobility); • 5G Technology – we believe that enhanced 5G network functionality, such as beamforming, will provide more precise delivery of required traffic and thereby enhance efficiency; and • New Use Cases – increasing the monthly consumption per user. 56. The unpredictability of wireless data traffic provides further reason that the ratio of carried to offered traffic is likely to be higher in the New T-Mobile network relative to the stand-alone networks. Averaging stochastic demand over the combined usage of Sprint and TMobile subscribers rather than over each user base individually has the effect of smoothing out the distribution of traffic and thereby increasing the “effective” capacity of the network. 25 Saw Decl. at ¶7. 29 REDACTED – FOR PUBLIC INSPECTION 57. The tables below demonstrate the estimated gains in available capacity (both offered and carried): Entity 2021 5G Monthly Capacity (Exabytes) 2024 5G Monthly Capacity (Exabytes) 6.8 20.3 T-Mobile Sprint New T-Mobile Table 6: 5G Monthly Offered Capacity (in addition to LTE) 2021 5G Monthly Carried Capacity (Exabytes) Entity 2024 5G Monthly Carried Capacity (Exabytes) T-Mobile Sprint New T-Mobile Table 7: 5G Monthly Carried Capacity Per Month (in addition to LTE) 2021 LTE Available Capacity (Exabytes) Entity 2024 LTE Available Capacity (Exabytes) T-Mobile Sprint New T-Mobile Table 8: LTE Available Capacity Per Month 30 REDACTED – FOR PUBLIC INSPECTION Entity 2021 LTE Carried Capacity (Exabytes) 2024 LTE Carried Capacity (Exabytes) T-Mobile Sprint New T-Mobile Table 9: LTE Monthly Carried Capacity Per Month 58. To derive the carried capacity, we applied the percent factor to the offered capacity values we have calculated for T-Mobile and New T-Mobile. This factor for Sprint is percent based on calculated values from 2016 and 2017. New T-Mobile will deliver more than twice the carried 5G capacity of T-Mobile and Sprint in 2021 ( exabytes versus exabytes for the combined standalone companies) and more than three times the carried 5G capacity by 2024 ( 59. exabytes versus exabytes). Finally, New T-Mobile will produce much more densified LTE and 5G cell site networks that will provide greater service benefits to consumers. The table below highlights the sites deployed by the standalone entities as well as the broader infrastructure that will be possible with New T-Mobile. 31 REDACTED – FOR PUBLIC INSPECTION Table 10: 5G Site and Spectrum Comparison (Year 2021-2024) 60. This increased site density for New T-Mobile will provide a more consistent signal strength throughout the 5G network and a more consistent user experience, as discussed in detail in Section VI .B above. E. The Transaction Will Maintain Existing LTE Services Even as 5G Services Are Deployed 61. Importantly, the existing LTE network will also be maintained during the transition to 5G. To deploy a 5G network, New T-Mobile will be required to balance the existing spectrum and infrastructure resources necessary to maintain the LTE network for existing subscribers with the need for the same spectrum assets for 5G. Specifically, the combined company will need to optimize the use of the existing LTE spectrum resources (AWS, PCS, 600 MHz, 700 MHz, and 800 MHz) to provide enhanced LTE. As part of the transition 32 REDACTED – FOR PUBLIC INSPECTION process to 5G, Sprint’s 2.5 GHz LTE subscribers will be moved to New T-Mobile’s AWS spectrum rapidly, which will free up the 2.5 GHz spectrum for 5G more quickly. 62. Our network modeling projections demonstrate that there will be no negative effects on LTE performance throughput during the refarming process to 5G. At the same time, the Sprint and T-Mobile PCS and AWS spectrum will provide a dense LTE layer in combination with the Sprint 800 MHz and 2.5 GHz and T-Mobile 600 and 700 MHz spectrum assets and allow for 5G to be deployed without degrading the LTE experience. New T-Mobile’s enhanced LTE network would be able to maintain LTE average data rates without any network congestion and without a need for any additional costs for cell splits. In contrast, both standalone companies would have high levels of congestion absent additional cell splits or other network investments. In addition, there will be no increase in LTE congestion during the 5G refarming process. For a mature LTE network, congestion levels of 2 percent are regarded as the threshold for triggering investments to mitigate negative customer experiences. New T-Mobile will not approach this level of congestion for the LTE network. VII. RAPID CUSTOMER MIGRATION WILL RESULT IN NUMEROUS CONSUMER BENEFITS. 63. We plan an aggressive technology migration program for the combined company that will allow for a smooth and rapid expansion of capacity and enable customers to quickly experience the benefits of the transaction. Importantly, New T-Mobile will not be integrating the T-Mobile and Sprint networks; the combination will be accomplished through a network and customer migration. This migration plan involves: (1) accommodating Sprint’s existing LTE customers on the existing T-Mobile network as rapidly as possible after closing and (2) utilizing the freed up spectrum resources for 5G as soon as practical thereafter. 33 REDACTED – FOR PUBLIC INSPECTION 64. Sprint customers who (1) have handsets compatible with T-Mobile’s network (nearly 20 million devices or half of the branded customer base) or (2) upgrade to T-Mobilecompatible handsets will gain access to New T-Mobile’s nationwide network, improved coverage quality, higher performing devices,26 access to LTE VoLTE capabilities,27 and a broader choice of handsets. Importantly, improved coverage quality will be enabled for existing Sprint customers as they migrate to the combined network because T-Mobile’s network is broader and denser in terms of macro cell sites relative to the Sprint network. The coverage quality benefit of the retained Sprint capacity sites is additive and will further improve coverage satisfaction for both T-Mobile and migrating Sprint customers simultaneously. 65. We have engaged in extensive traffic modeling using our regular course traffic model and determined that during the transition, Sprint customers can be supported on the New T-Mobile network. The ability to support these customers will be enhanced through the use of Sprint macro cells retained by New T-Mobile for the purpose of providing capacity relief. New T-Mobile will aggressively migrate Sprint customers onto the existing T-Mobile network to improve the LTE functionality for all consumers and to increase the spectrum resources available for 5G. I expect that Sprint customers are likely to be completely migrated within three years. By undertaking this rapid migration, New T-Mobile will drive synergies to our existing LTE network and free up valuable spectrum for 5G use in a more rapid fashion than either company could accomplish on its own. 26 Sprint’s existing voice services are provided using CDMA technology. CDMA does not allow a voice and data connection at the same time – so a Sprint customer on the CDMA network must choose between these services. 27 While Sprint will begin deploying VoLTE in 2018, our experience is that this effort may take some time to roll out throughout the network. T-Mobile already has VoLTE available on its network and the nearly 20 million Sprint devices that are capable through a software update to use the New T-Mobile network will be able to rapidly have access to VoLTE and HD Voice capabilities. 34 REDACTED – FOR PUBLIC INSPECTION 66. Additionally, a built-in LTE feature known as Multi-Operator Core Network (“MOCN”) will allow us to unify the T-Mobile and Sprint radio access networks (“RANs”) almost immediately and allow Sprint existing customers with compatible devices to seamlessly access the best of both networks during integration.28 MOCN allows for a seamless migration to a virtual single core network by routing all services to the “home” network – which in this case will be the existing T-Mobile core. As Sprint customers are migrated off of the Sprint core, we will remove this requirement and collapse to a single New T-Mobile core network. 67. MOCN works by configuring a base station to transmit more than one network identity. MOCN can be defined on a site by site basis and is highly flexible. In idle mode, the phone decides which base station it camps-on to achieve attached status. In that status, the phone can transition to active mode to communicate with the network and be paged by the network. When a phone transitions to active mode (to make a call, receive a call or communicate data) the network manages the connection performance and hand offs. When a phone scans, it scans for bands that it remembers as being “home” and looks for a signal that has its home network code broadcasted. 68. If the signal can be decoded and the mobile phone finds a home, then it camps on that cell and starts to de-code the available system information. The phone then registers on the network and enters attached status. In some rare cases, the signal cannot be decoded because it is interfered with, and the phone will start to scan other bands for valid home signals. Phones get to choose their own towers according to policy burned into the device and SIM card. If a phone finds multiple signals from multiple sites and finds that they are all home, then the phone selects and camps on the one with the highest signal quality. In the case where a base station is 28 MOCN is defined in the 3GPP standards TS 23.251 and TR 22.951. 35 REDACTED – FOR PUBLIC INSPECTION operating MOCN for Sprint, for example, Sprint phones will see a home signal at the same time that T-Mobile phones will also see home. 69. As a result, legacy Sprint subscribers with compatible devices can access the T- Mobile network. This flexibility to access both networks has the potential to benefit all customers, not just those with compatible devices. This is because when some customers migrate to the network with the higher signal quality, capacity is freed up for the network with lower signal quality. 70. Our existing subscribers should have minimal disruptions during the transition to New T-Mobile. As part of the transition process, the Sprint PCS spectrum will be used for LTE services and most existing T-Mobile devices are compatible with that spectrum band (69 million devices as of April 2018). Therefore, there is no need for a change in handsets. Additionally, New T-Mobile in the first few years after closing will continue to utilize some of its 2.5 GHz spectrum for LTE services. As of April 2018, approximately 26.6 million T-Mobile devices were compatible with the 2.5 GHz spectrum for LTE and will be able to take advantage of the existing Sprint 2.5 GHz spectrum holdings. Moreover, T-Mobile subscribers who upgrade handsets during this time will obtain devices that are also able to use the 2.5 GHz spectrum— bringing improvements to data speeds and capacity for LTE services. 71. I am confident this migration process will be successful based on our experience in migrating MetroPCS customers to the T-Mobile network. Following our transaction to acquire MetroPCS, we projected that the entire migration of approximately 9 million MetroPCS subscribers, utilizing a market-by-market transition, would be completed in 24 months. In reality, we fully completed this process within 26 months after the deal closed, and with the majority of markets completed well ahead of schedule. Further, the MetroPCS customers were 36 REDACTED – FOR PUBLIC INSPECTION using an incompatible technology (CDMA) that required handset changes for all existing subscribers to access the T-Mobile network. Despite this, we radically expanded: (1) coverage for MetroPCS customers (and retained more MetroPCS cell sites than our original target to increase capacity); (2) retail doors; and (3) dealers. Through this process, 70 percent of MetroPCS subscribers migrated to HSPA+ or LTE within 15 months and this enabled a more accelerated refarm of the MetroPCS spectrum to LTE (from CDMA). And, importantly we utilized the MOCN technique described above to combine the two RANs on Day One without any adverse effect to MetroPCS subscribers. All these efforts allowed us to realize the synergies we estimated a year ahead of schedule and, in reality, achieve 40 percent higher synergies than planned. 72. We expect to utilize a similar approach for migrating Sprint customers. By migrating Sprint customers to the New T-Mobile network, we will provide a similar expansion in coverage for these subscribers as well as increased voice performance. The two companies both have spectrum assets in the PCS band which will greatly aid the integration of Sprint’s existing customers onto our new network. A substantial portion of the Sprint customer base (approximately 20 million or nearly one-half of the branded customer base) can have their existing devices updated through over-the-air software to allow almost immediate access to the New T-Mobile network. Further, we integrated the sites retained from MetroPCS much in the same way we will do here with the retained sites from Sprint and T-Mobile, on a market-bymarket basis. Finally, the success of the MetroPCS integration provides a good indication of what will occur in the New T-Mobile migration plan—the cost savings were ahead of schedule, the synergies achieved were better than expected, and the MetroPCS customer base doubled in the 4.5 year period since the transaction. As we will utilize many of the same tools and team for 37 REDACTED – FOR PUBLIC INSPECTION the migration of the Sprint customer base, I am confident we will again deliver on the cost savings, synergies, and timing for this proposed transaction. VIII. NEW T-MOBILE WILL ENABLE NEW AND IMPROVED BROADBAND SERVICES TO RURAL AMERICA. 73. From a network perspective, I believe that New T-Mobile will generate significantly improved and expanded services to currently unserved and underserved portions of America. The combined network, built with the 600 MHz band as the foundational coverage layer and the 2.5 GHz band as the primary capacity layer, will have the spectrum available to provide competitive broadband data rates throughout the country. In addition, the breadth of the new cell site infrastructure, with approximately 84,000 macro cell sites blanketing the country, will allow New T-Mobile to provide reliable signal strength levels to more areas than either standalone company. The data throughput improvements will be felt by underserved consumers in rural areas. 74. The improvement in rural coverage for New T-Mobile is substantial. By 2024, our network modeling indicates that New T-Mobile will provide service to 59.4 million outdoor rural POPs out of 62 million available rural POPs. New T-Mobile’s network also will provide service to 31 million indoor rural POPs by 2024. New T-Mobile’s increase in coverage is due largely to the enhanced signal strength that will be enabled by the combined spectrum portfolios of T-Mobile and Sprint as well as the increased cell site density of New T-Mobile. 75. By 2024, New T-Mobile will provide wireless service with download speeds of 10 Mbps or greater to 45.9 million POPs over 2 million square miles of rural America, delivering service meeting the FCC’s baseline download speed for wireless broadband to 74 percent of rural POPs in the United States. 38 REDACTED – FOR PUBLIC INSPECTION 76. In addition to bringing new, quality mobile services to rural areas, the complementary spectrum assets of T-Mobile and Sprint will allow 5G deployment to deliver higher speeds and additional capacity on a wide-scale basis for fixed services. As a result, New T-Mobile will provide rural America with a true in-home, high-speed wireless alternative to existing fiber and cable offerings. By 2024, New T-Mobile will deliver fixed broadband service meeting the FCC’s speed definition for broadband of 25/3 Mbps to a total of 52.2 million rural POPs over 2.4 million square miles, reaching over 84 percent of rural POPs in the country.29 77. These service improvements and New T-Mobile’s targeted efforts to obtain new subscribers will allow the combined company to expand services more broadly into rural communities, as it will be able to spread the costs of expansion across an increased customer base. Moreover, New T-Mobile’s increased scale will enable it to obtain better pricing for infrastructure and may allow more bang for the buck to purchase equipment that T-Mobile would not otherwise be able to as a standalone company 78. I have reviewed the technical statements and findings in the Public Interest Statement and agree with the methodology and conclusions reached in that document. 29 For fixed in-home services, the subscriber will utilize a fixed access point, similar to what is used by many consumers to transmit Wi-Fi signals in their house, that will have better gain and power available than would a mobile device. Therefore, coverage to these areas will be better than would be the case for mobile services. 39 REDACTED – FOR PUBLIC INSPECTION REDACTED – FOR PUBLIC INSPECTION APPENDIX C: DECLARATION OF G. MICHAEL SIEVERT President and Chief Operating Officer, T-Mobile US, Inc. REDACTED – FOR PUBLIC INSPECTION DECLARATION OF G. MICHAEL SIEVERT President and Chief Operating Officer, T-Mobile US, Inc. I. INTRODUCTION 1. My name is G. Michael Sievert and I am the President and Chief Operating Officer for T-Mobile US, Inc. I have been with T-Mobile since 2012. Together with T-Mobile’s Chief Executive Officer John Legere, I was directly involved in the acquisition of MetroPCS and the development of T-Mobile’s Un-carrier business plan. Prior to joining T-Mobile, I had over two decades of experience at several Fortune 500 companies and as an entrepreneur. I received a Bachelor of Science in Economics degree from the Wharton School of the University of Pennsylvania, where I graduated magna cum laude. 2. In my capacity as T-Mobile President and COO, I have been engaged in the evaluation of T-Mobile’s proposed merger with Sprint Corporation, and the discussions concerning the business plans for the merged entity, New T-Mobile. I will be President and Chief Operating Officer for New T-Mobile. 3. I have reviewed the Public Interest Statement being filed with the applications for transfers of control being submitted to the FCC for approval of the license transfers attendant to the merger. In support of the Public Interest Statement, I am providing information with respect to (1) T-Mobile’s disruptive DNA and its competitive position; (2) the merger synergies and plan to invest nearly $40 billion in New T-Mobile’s 5G network and related capital projects; (3) plans to use the massive capacity gains, lower costs, and other synergies from the 5G Network to deliver value and capture wireless broadband market share; and (4) New T-Mobile’s plans for expanded or new service offerings made possible by the merger. REDACTED – FOR PUBLIC INSPECTION II. T-MOBILE’S DISRUPTIVE DNA AND ITS COMPETITIVE POSITION 4. In recent years, T-Mobile has achieved a remarkable level of success. There have been two key contributors to our progress over the past five years. They are the launch of our disruptive and successful Un-carrier approach to customers and our merger with MetroPCS in 2013 that provided critical additional scale and resources. With the benefits of both brands, we have improved our competitive market position and gained market share. That momentum, plus T-Mobile’s Un-carrier obsession with customer service, has enabled T-Mobile to charge ahead and force its competitors to lower prices and offer more benefits to customers. In doing so, TMobile has built its brand on the ability to identify and relieve consumer pain points in the wireless marketplace. 5. It is in T-Mobile’s DNA to act disruptively in the marketplace. Our Un-carrier manifesto puts the consumer first. It is also good business as it distinguishes T-Mobile in the marketplace and attracts customers. 6. Despite our recent success, however, T-Mobile continues to face significant challenges in competing against substantially larger nationwide carriers with superior scale and spectrum advantages for 5G. In this declaration, I review the challenges facing T-Mobile due to its smaller size, subscriber share, and spectrum resources. I also discuss how the proposed transaction with Sprint helps address those issues, allowing New T-Mobile to be a more effective competitor against current market leaders and other emerging competition. 7. The transaction will allow New T-Mobile to supercharge its disruptive ways by giving the company the scale and assets to take the Un-carrier model to new levels, and to increase our ability to compete with and take customers from AT&T, Verizon, and the well- 2 REDACTED – FOR PUBLIC INSPECTION situated media and Internet companies that T-Mobile competes with in the rapidly converging wireless broadband and content delivery industries. 8. For many years, AT&T and Verizon have dominated the mobile wireless market. Although both T-Mobile and Sprint have competed aggressively and seen success in recent years, the combined market share of AT&T and Verizon has not significantly decreased over the past five years. T-Mobile’s current share of the wireless market is far less than either of Verizon or AT&T, which together hold about two thirds of the market. AT&T and Verizon service revenues are about twice those of T-Mobile. And T-Mobile’s total consolidated revenues, EBITDA, net income, and cash flows remain just a fraction of those financials at the much larger AT&T or Verizon. In other words, although T-Mobile and Sprint have been aggressively attacking AT&T and Verizon for the past five years, the two leading companies of the past decade are still the two leading companies—with approximately two thirds of the market and greater than 80 percent of the EBITDA, net income, and cash flows from operations in this market. 9. Because of their greater size, AT&T and Verizon can also realize scale efficiencies that are unavailable to T-Mobile, Sprint, and any other smaller competitor. Most importantly, AT&T and Verizon Wireless have higher asset utilization measured by the number of customers supported per unit of fixed cost network (e.g., cell towers). T-Mobile must instead allocate the largely fixed costs of its network over a significantly smaller subscriber base compared to AT&T or Verizon, so T-Mobile’s costs-per-subscriber are substantially higher. Greater scale also provides Verizon and AT&T an increased ability to acquire diverse assets and invest in new lines of business. For example, both AT&T and Verizon have recently sought to acquire content companies and companies with valuable mmWave spectrum holdings. The latter 3 REDACTED – FOR PUBLIC INSPECTION acquisitions provide AT&T and Verizon with a further advantage: they now hold more mmWave spectrum than any other mobile wireless provider, which amounts to a head start in the race to 5G. Armed with valuable spectrum holdings and financial and other advantages, AT&T and Verizon will be uniquely positioned to outbid T-Mobile and other competitors for new spectrum licenses with 5G applications that the FCC will eventually put to auction. AT&T and Verizon have been able to consolidate spectrum resources and, without a large and wellresourced challenger, they will remain unchecked and able to further distance themselves from any meaningful competition in the 5G era. In sum, AT&T and Verizon have been able to take advantage of these and other scale efficiencies which impact bottom lines, and therefore, competitiveness. New T-Mobile will be able to achieve similar scale efficiencies, thereby closing that competitive gap. 10. As a standalone company, T-Mobile would not independently have the type of spectrum resources that would enable it to launch a robust and deep 5G network during the next few years—the critical early years of the 5G innovation cycle. T-Mobile now has a thin layer of (600 MHz) spectrum that it can use to deploy a nationwide 5G network. However, this spectrum has limited capacity compared to other bands being considered for 5G deployments, and it is best suited for providing coverage over large areas. T-Mobile also faces competitive pressure from other sources, including big cable providers. Cable’s recent entry into the wireless marketplace should not be underestimated: like AT&T and Verizon, they have extensive high-speed broadband networks and the scale and resources to adapt those networks to support next generation communications, access to a large customer base, and the ability to offer attractive, high-value bundled services. Comcast already signed on 577,000 wireless subscribers in its inaugural year, and Charter is launching its service this summer. In addition, DISH just 4 REDACTED – FOR PUBLIC INSPECTION announced that its planned narrowband IoT network will serve as the first step to deploying a full-fledged 5G network. 11. While its Un-carrier ethos and unlimited data plans have earned T-Mobile its customer-friendly reputation and improved market position, T-Mobile continues to face significant competitive challenges in the wireless marketplace, and more challenges can be expected in the 5G era. In particular, as customer demand for mobile data continues to grow and more subscribers seek unlimited data plans, T-Mobile’s current standalone network will likely struggle to meet these demands. Without the proposed transaction, T-Mobile’s ability to continue exerting competitive pressure on Verizon and AT&T is likely to plateau because of its smaller subscriber share, revenue base, and longer-term spectrum constraints. III. THE TRANSACTION WILL GENERATE SYNERGIES TO FUND AN INVESTMENT OF NEARLY $40 BILLION INTO BUILDING A 5G NETWORK AND DEPLOYING NEW SERVICES 12. Our merger with Sprint will create an estimated $43.6 billion in total net present value cost synergies, and New T-Mobile will use those synergies to fund an investment of nearly $40 billion to build a 5G network (and fund related capital projects) by 2024 that has times the capacity of T-Mobile’s standalone 5G network in 2024. New T-Mobile will use that capacity and the resulting lower marginal costs per customer to deliver lower prices and to accommodate increased customer data usage at the same or lower prices. Our goal for the merger is to be the first, fastest, and best in the 5G race and to capture market share with the Un-carrier combination of value and quality. 13. In our financial analysis, there are three principal sources of merger-related synergies (i.e. net present value (“NPV”) cost savings). First, there are the network synergies gained by eliminating the massive and inefficient duplication of T-Mobile’s and Sprint’s existing networks. These synergies consist of (1) synergies from decommissioning duplicative or 5 REDACTED – FOR PUBLIC INSPECTION otherwise unneeded network sites, and (2) reduced capital expenditures resulting from the scale benefits of combined network assets. Together, network synergies amount to $25.7 billion in NPV cost savings. Second, there are sales, service and marketing cost-related synergies. These synergies consist of: store consolidations (partly offset by store expansions); consolidating advertising and marketing assets; increased equipment purchasing power and efficiency savings; and improved repair and logistics practices. Together sales, service and marketing synergies amount to $11.2 billion. Finally, there are back office synergies from I.T. and billing improvements and other general and administrative synergies. Together, these synergies amount to about $6.1 billion. 14. As explained in the declaration of T-Mobile’s Chief Technology Officer Neville Ray, Sprint’s customer base will be rapidly migrated to New T-Mobile’s expanded network.1 Upon completion, this will permit New T-Mobile promptly to decommission duplicative cell sites and backhaul, achieving significant cost savings. New T-Mobile is expected to be able to eliminate approximately 35,000 redundant Sprint cell base station sites, generating substantial cost savings from elimination of leases, backhaul, utilities, upgrades, maintenance, and other recurring site-related expenses. The decommissioning of these cell sites and the ability to avoid building roughly 20,000 macro sites and 40,000 small cells through the network integration will result in projected run-rate synergies of approximately by 2024. Meanwhile, those sites that are retained will provide added network capacity during the transition and help defer spectrum congestion in urban areas and ensure Sprint customers migrating to the New T-Mobile network have the same or better coverage everywhere. New T-Mobile will save further by eliminating future individual network builds and upgrades. 1 Declaration of Neville Ray, Executive Vice President and Chief Technology Officer, T-Mobile US, Inc., at ¶¶6372 (“Ray Decl.”). 6 REDACTED – FOR PUBLIC INSPECTION 15. The merger synergies will free up financial resources that can be invested back in new network technology, innovation, and operations. Specifically, New T-Mobile plans to invest nearly $40 billion within three years to build (and fund related capital projects) a worldleading, nationwide 5G network with more capacity than any network in existence today, or currently planned for the future. New T-Mobile’s business plan calls for capital expenditures of $14 billion in 2019, $12.3 billion in 2020 and $13.3 billion in 2021. The investments, of course, are focused on building and deploying the 5G network. However, they also include added investments for development of new services, the IoT business and $500 million for the expanded push into video. This investment is about three times the combined investment that TMobile would have made on its own. 16. Our plan is to invest nearly $40 billion in building a world-leading 5G nationwide network and business model, which involves expanding our retail footprint and entering into new business sectors, such as in home broadband Internet distribution and cable television service. This investment and expansion is expected to translate into more jobs, especially in rural areas. New T-Mobile plans to bring on board new employees to build the network, provide customer care, and support marketplace initiatives in in-home broadband, video, IoT and enterprise services. 17. We also plan to make a significant economic investment in the future of rural America as a result of the transaction. New T-Mobile will continue the long history of T-Mobile and Sprint partnering with rural carriers to further wireless deployments in rural areas. Specifically, we plan to extend an offer to become the Preferred Roaming Partner for rural carriers, providing long-term roaming access to our new network at industry-leading terms. This will include a roaming program that offers carriers with existing roaming rates with either T- 7 REDACTED – FOR PUBLIC INSPECTION Mobile or Sprint to determine which rates will govern their relationship with New T-Mobile after the transaction closes. New T-Mobile will cooperate with rural partners on their 5G roll-out, including providing technical assistance and advice on 5G deployments. In addition to roaming, New T-Mobile expects to open 600 or more new stores—at least 500 dealer stores and 100 corporate stores—to serve small towns and rural areas, directly resulting in approximately 5,000 new retail jobs. New T-Mobile also expects to create approximately 1,800 new jobs dedicated to transitioning the T-Mobile and Sprint networks in rural areas and expanding rural coverage. It also anticipates needing to add approximately 1,000 new jobs to take advantage of New TMobile’s enhanced competitiveness in the enterprise sector. 18. New T-Mobile also expects to substantially increase its domestic customer care workforce to ensure it maintains T-Mobile’s industry-leading standard of customer care. For example, we anticipate opening up to five new technologically advanced Customer Experience Centers in small towns and rural communities to implement the company’s innovative “Team of Experts” customer care and business model, directly resulting in approximately 5,600 new jobs. Employees will benefit from significant management preparation experience and qualify for college tuition reimbursement. In total, New T-Mobile expects to create over 12,000 new jobs to serve small towns and rural communities as a direct result of the transaction. 19. Indeed, our plan calls for the merger to be jobs positive from Day One. Within a year of closing, New T-Mobile is expected to employ 3,600 more direct internal employees than the two standalone companies would have absent the merger.2 Under our plan, New T-Mobile’s number of direct internal jobs will continue to increase—relative to what the standalone companies’ combined employee base would have been every year for the foreseeable future. As 2 “Direct internal” employees are on-payroll jobs (e.g., a badge-carrying employee who would receive a W-2 from the New T-Mobile). “Direct external” employees are jobs that perform a core function of the New T-Mobile, but are outsourced to a dealer or contractor. 8 REDACTED – FOR PUBLIC INSPECTION described in the table below, the incremental job increases relative to the standalone companies’ baselines are, or will be, at or above the combined employer baselines: Direct Internal Incremental Jobs 2019 2020 2021 2022 2023 2024 3,625 3,755 5,045 5,010 8,115 11,060 In addition, the incremental increases for the combined direct internal and external employees will be 9,600 more jobs relative to the standalone companies’ baselines for 2021.3 20. These estimates are conservative and likely understate the merger’s effects on company employment. T-Mobile has a track record of significant job creation in connection with mergers. In 2013, T-Mobile acquired MetroPCS, then the fifth-largest mobile provider in the United States. At the time, T-Mobile conservatively projected that MetroPCS would employ roughly the same number of people after the merger. But, since the date of closing, MetroPCS has expanded into multiple new markets and more than tripled the number of employees and contractors who support the MetroPCS brand. IV. NEW T-MOBILE’S NATIONWIDE 5G NETWORK CREATES MASSIVE CAPACITY AND LOWER COSTS THAT SUPERCHARGE THE UN-CARRIER REVOLUTION 21. The result of the planned investment will be to create the largest, most robust 5G network in the United States with greatly expanded capacity. The massive capacity expansion will result from New T-Mobile deploying the unique combined spectrum portfolios of both TMobile and Sprint across New T-Mobile’s combined sites and accelerating the use of spectrum for 5G. Rather than simply adding the capacity of the two networks, the combination of two companies will increase capacity by a factor of four, as compared to the standalone companies. 3 These projections were developed using a model that starts with a detailed assessment of the New T-Mobile business plan, which incorporates an analysis of internal as well as contractor and dealer employment across the full range of employment functions, including engineering; retail; back-office and other administrative functions; customer care; enterprise support; and infrastructure installation, operations, repair and maintenance. 9 REDACTED – FOR PUBLIC INSPECTION In other words, the merger will double capacity compared to the combination of what the standalone firms would do on their own. As New T-Mobile expands its capacity, this will greatly reduce the cost of delivering each gigabyte of data to customers—capacity will double and the cost of delivering data will plummet. We will compete aggressively with lower prices to take market share from Verizon and AT&T, allowing more customers to enjoy the benefits of our increased capacity. More than 20 years of history in this industry shows that when providers increase capacity, consumers use the capacity and prices go down. We at New T-Mobile will deliver greater capacity at a lower price, to the benefit of our customers and to the benefit of competition. 22. By combining with Sprint, T-Mobile will be able to advance its Un-carrier strategy in several key ways. First, the combined spectrum assets acquired through the proposed transaction will allow New T-Mobile to deploy a broad, deep nationwide layer of 5G years before AT&T and Verizon could do, which is something neither Sprint nor T-Mobile could otherwise achieve alone. By enhancing and diversifying T-Mobile’s spectrum and selected network assets, the transaction will not only provide customers with improved network coverage (including enhanced in-building coverage) and capacity, but also allow New T-Mobile to more efficiently use its spectrum.4 The strength of New T-Mobile’s 5G data network will allow it to continue to ambitiously pursue customers looking for smartphone plans or other data-intensive service offerings and enhance its ability to submit competitive bids for enterprise customers. In particular, the enhanced 4G LTE and emerging 5G capabilities will inure to the benefit of New T-Mobile in the eyes of consumers. 4 See Ray Decl. at ¶4. 10 REDACTED – FOR PUBLIC INSPECTION 23. New T-Mobile’s 5G speeds and unprecedented capacity will benefit consumers by enabling new use cases and will have the potential to revolutionize the wireless user experience and existing consumer and business applications; supercharge a wide range of commercial growth areas, particularly through the Internet of Things (“IoT”); and push connectivity to new consumer and business horizons. Indeed, the New T-Mobile 5G network will also provide fertile ground for cycles of innovation out of which new services and products for consumers and businesses will grow. 24. The combined company will help T-Mobile’s efforts to become the value leader in the U.S. market. New T-Mobile can capitalize on both companies’ proven abilities to develop attractive and competitive service offerings and achieve stronger penetration in specific customer demographics in an effective manner, including areas that were previously underserved by the nation’s largest wireless carriers. New T-Mobile will also continue the Lifeline services currently provided by T-Mobile and Sprint. Moreover, adding Sprint’s unique spectrum holdings and key assets to T-Mobile’s existing network will enable New T-Mobile to offer enhanced products and services that will drive further competition—and therefore benefits—for consumers. 25. Because New T-Mobile’s combined network will have massive speed and capacity improvements without having to pass on additional costs to consumers, the proposed transaction will serve to affirm New T-Mobile as a value leader in the rapidly converging wireless marketplace. In true Un-carrier fashion, we will engage in continued maverick challenges that are sure to evoke competitive responses from AT&T, Verizon, and all other competitors in the mobile wireless market. By combining T-Mobile and Sprint, the transaction will ultimately benefit all wireless consumers by increasing wireless market competition overall. 11 REDACTED – FOR PUBLIC INSPECTION 26. We are planning to spend nearly $40 billion building a superior network experience and product offers, in order to retain our existing customer base, attract new customers and benefit from being the first to deliver transformative 5G services nationwide. Once we go down this road there is no turning back from the Un-carrier path of delivering value and quality to our customers. If we broke faith by raising rates, cutting back benefits and acting like the other guys, we would lose our base and destroy our future. We would have spent billions in capex to build a beautiful network, only to be left with tons of idle capacity and billions of dollars in unrecovered investment. It would be economically irrational and contrary to shareholder interests for New T-Mobile to raise prices and/or restrict output as a result of this merger. Our success was and will be centered around delivering more to consumers for less. V. THE MERGER WILL ENABLE NEW T-MOBILE TO COMPETE IN NEW AND EXPANDED SERVICES IN WAYS NOT POSSIBLE ON A STANDALONE BASIS 27. New T-Mobile’s 5G network will offer speeds and unprecedented capacity that will benefit consumers by enabling otherwise impossible uses. It will have the potential to revolutionize the wireless user experience and existing consumer and business applications; supercharge a wide range of commercial growth areas, particularly through the IoT; and push connectivity to new consumer and business horizons. The New T-Mobile 5G network will also provide the fertile soil for cycles of innovation out of which will grow new services and products for consumers and businesses. We will provide much-needed competition in key market segments that today lack competitive pressures and/or are known for low customer satisfaction, like in-home broadband; video distribution; and enterprise services. 28. Internet of Things. 5G technology is expected to accelerate the development and deployment of consumer and commercial IoT systems, with massive growth projected across verticals like connected homes and workplaces, connected healthcare, connected cities, and 12 REDACTED – FOR PUBLIC INSPECTION connected vehicles. What’s more, every major competitor in the wireless market has identified IoT as a central component of their 5G strategy; there is no doubt that 5G networks will prompt tremendous advancements in IoT. As such, the more quickly 5G networks can be built and deployed, the faster these networks will be able to capture IoT’s potential and maximize the benefits flowing to consumers, businesses, and the broader economy. 29. T-Mobile currently offers a range of basic consumer IoT products, with a focus on smart and connected home devices (e.g., home security devices, lighting, speakers), basic connected car solutions (e.g., SyncUp Drive), wearable devices (e.g., smart watches), and mobile hotspots. However, New T-Mobile’s 5G network will enable it to turbocharge existing IoT product lines, attract more customers, and facilitate innovation in terms of new consumer IoT products. 30. The New T-Mobile 5G network will also create opportunities for commercial IoT applications, with a focus on “smart mobility” and “smart community” applications. We also expect to invest in private wireless networks, distributed computing, telehealth, and backup connectivity. Through emerging commercial IoT applications, New T-Mobile’s 5G network and associated capabilities will enable it to spark and accelerate new parts of the value chain. 31. “Smart mobility” means using New T-Mobile’s 5G network to provide IoT solutions that will help Americans transport themselves, and/or their goods, in a faster, safer, more efficient, and more cost-effective manner. For New T-Mobile, this translates into leveraging its new 5G network to provide reliable high-speed and low-latency connectivity for autonomous and connected vehicles, in order to compete for a share of the growing vehicular connectivity market. Smart mobility also means using the 5G network’s superior nationwide coverage to offer better asset tracking services and, because of the network’s vast capacity, to 13 REDACTED – FOR PUBLIC INSPECTION provide these services at a lower cost to the consumer. Finally, smart mobility means improved connectivity for IoT fleet management services to enable business customers to optimize their commercial vehicle fleets by tracking fuel consumption, trip and route efficiency, driver behavior, and other critical factors. 32. “Smart communities” mean using New T-Mobile’s 5G network to provide IoT solutions that will help connect, manage, and optimize community infrastructure. New TMobile’s IoT solutions can be good for business while making our communities safer, healthier, more efficient, and generally nicer places to live, visit and work. This translates into partnering with cities around the nation to provide products targeted to their needs, such as lighting optimization, traffic management, utilities, and public safety. Smart communities also mean providing solutions on a smaller scale, for smart campuses and even smart buildings. New TMobile’s 5G network will enable IoT solutions for smart building and campus needs ranging from energy efficiency and climate control to security and elevators. 33. New T-Mobile’s 5G network will also provide IoT solutions for numerous and diverse other applications for which its unique balance of high speed, high capacity, low latency and coverage will be particularly well-suited. Some of these applications include private networks, connected manufacturing and agriculture, supply chain logistics, transportation, telehealth, and backup connectivity. Others have not yet been identified, but will be spurred by the availability of a broad and deep 5G network such as the one made possible by the transaction. 34. While both Sprint and T-Mobile hold valuable spectrum assets, neither company’s assets would be sufficient to independently roll out competitive 5G IoT capabilities in the near term, during the crucial formative years of the new IoT marketplace. By combining 14 REDACTED – FOR PUBLIC INSPECTION our complementary assets and spectrum, we will supercharge the Internet of Things and bring the Un-carrier approach of enhanced customer value to this segment. 35. In-Home Broadband Competition. In-home broadband today is not a competitive market segment, and a significant percentage of Americans lack a competitive choice of residential broadband service. The merger enables New T-Mobile to offer an attractive high-speed in-home broadband option in some areas in direct competition with existing incumbent wired broadband services. The merger also increases the attractiveness of New TMobile’s mobile wireless service as a substitute for existing incumbent in-home broadband. New T-Mobile’s 5G network will provide speeds sufficient to support HD and 4K video streaming to tomorrow’s handsets, tablets, desktops and other in-home and mobile screens. Furthermore, the 5G network’s improved performance will allow New T-Mobile to deliver costeffective in-home broadband services without compromising the quality of its core wireless service offerings. New T-Mobile’s supercharged 5G network will, for all practical purposes, close the speed differential that currently exists between mobile and in-home broadband, and make the company a strong competitor to other in-home broadband providers for millions of households across the country. 36. New Direct Competition. New T-Mobile will be a direct competitor in the in- home broadband market. The New T-Mobile 5G network will provide data rates in excess of 100 Mbps to two-thirds of the U.S. population by 2021. These speeds are fast enough to enable New T-Mobile to compete successfully with landline broadband services in these areas. New TMobile will have an opportunity to expand its subscriber base through competitive equipment, service packages and products that will serve as a substitute for traditional, subscription-based— and often costly—fixed in-home broadband. New T-Mobile will attack the opportunity to serve 15 REDACTED – FOR PUBLIC INSPECTION this market and provide consumers with an alternative choice for their in-home broadband service and a better value. 37. By 2024, New T-Mobile is expected to provide in-home broadband service to 9.5 million households nationwide, equating to approximately 7 percent market penetration, and making New T-Mobile potentially the fourth largest Internet service provider in the U.S. by subscribership. Of particular importance, T-Mobile estimates that 20-25 percent of these new subscribers for in-home broadband service will be located in rural areas. These estimates for service penetration and network capacity assume that the average monthly mobile subscriber data consumption would increase eight-fold from today’s 9.8 GB to approximately 80 GB by 2024, and that the capacity needed for providing in-home broadband, including high quality video services, would be approximately 500 GB per month/household. New T-Mobile’s 5G network will be able to handle capacity increases of this magnitude for millions of customers, but the standalone T-Mobile and Sprint 5G networks could not. 38. Mobile Substitution for In-Home Broadband. In addition, New T-Mobile will cause more people to use mobile service as a substitute for in-home broadband, eliminating their need for in-home broadband entirely. New T-Mobile’s broad and deep mobile 5G network will provide network performance that will meet or exceed the in-home needs of many consumers. With unlimited plans and New T-Mobile’s lower prices, substituting mobile wireless service for in-home broadband will provide many consumers with an economical option of using their mobile service as their only broadband subscription, instead of paying for separate mobile wireless and in-home broadband subscriptions. This solution enables consumers to avoid paying for both in-home and mobile broadband and allow them to save the significant amount of money that would otherwise be spent on in-home service. Today, 19 percent of households could 16 REDACTED – FOR PUBLIC INSPECTION eliminate their home broadband subscription entirely by using tethering on a T-Mobile two-line plan. By 2024, we estimate this number would be 15-20 points higher, meaning that 35-40 percent of households could completely eliminate their home broadband subscription and rely on New T-Mobile for all their broadband needs. This option of having only one Internet service, a viable mobile service that can meet all of your connection needs, rendering in-home broadband unneeded, provides the most benefit to lower-income households who may not be able to afford both. And further, this ability to substitute mobile service for in-home broadband, created by the enhanced capacity of the New T-Mobile network, would become even more important and accelerated in the event of an economic downturn. 39. The transaction thus will enable in-home and mobile broadband options that are beyond the currently planned 5G capabilities of T-Mobile or Sprint as standalone companies. The transaction will, therefore, alter the fundamental dynamics that have left millions of customers with few choices for in-home broadband services, resulting in slow speeds and high prices. 40. Video Services. As with in-home broadband services, New T-Mobile sees video services as offering an opportunity to both deepen relationships with its existing wireless base and open up a fruitful new avenue through which the company can generate revenue as the technology industry converges. As consumers increasingly want content available on mobile devices, they have warmed to the idea of getting television service from non-traditional providers. New T-Mobile will leverage the benefits of scale in network, costs, and financial resources to disrupt television viewing by offering best-in-market TV packages that will allow customers to break-up with their ISPs with the first 5G wireless-only bundle for TV and home Internet. This is something that standalone T-Mobile would not likely be in a position to 17 REDACTED – FOR PUBLIC INSPECTION provide. T-Mobile’s recent acquisition of Layer3 puts it in a strong position to generate more revenue and attract subscribers, particularly when combined with the expanded network capabilities of New T-Mobile. 41. In the near term, the customer and retail scale created by the transaction will enable T-Mobile to more rapidly expand the current Layer3 model than possible without the transaction. This scale should allow the company to acquire content at lower rates and on better terms than T-Mobile and Layer3 can do on their own. Layer3 estimates that its content acquisition costs will decrease by percent as a direct result of the transaction and the increased customer scale, allowing the company to price its service offerings to provide more affordable options for consumers. The competitive imperative will demand that Layer3 pass these cost savings on to consumers through lower prices and more flexible rate offerings. 42. New T-Mobile’s 5G network will allow us to offer the nation’s first 5G-delivered in-home and mobile video services. This will include high-quality video content—including HD and 4K—to in-home and mobile locations in markets across much of the country. The merged company will create a multi-billion dollar business that is more than double the size of their standalone ambitions, due to the combined network and financial resources. The merger produces a quantifiable opportunity for New T-Mobile and resulting benefits for many more consumers than otherwise possible. 43. Enterprise Services. Finally, T-Mobile is not a significant competitive factor in the enterprise segment of the market today. It has only a very small share of the business market segment (including small businesses), and only a 4 percent share of the large enterprise and government portion of the segment. Historically, T-Mobile has been focused on the consumer segment of the market and has been limited in the enterprise segment because the old T-Mobile 18 REDACTED – FOR PUBLIC INSPECTION network generally failed to meet the technical requirements demanded by enterprise and government clients. On its own, T-Mobile does not have the scale, network, or resources to compete optimally in the enterprise segment, which is currently dominated by AT&T and Verizon, which together have almost three-quarters of the enterprise segment. New T-Mobile will have the ability to use its 5G network to offer an attractive alternative in the enterprise segment by providing superior quality traditional data and voice products, as well as advanced IP-based services and Ethernet-related products, to large, medium, and small businesses; federal, state, and local governments; and wholesale customers. The New T-Mobile will compete with both traditional wireless and wireline providers in the business segment, bringing significant competition to many customers to an extent not likely for standalone T-Mobile. 44. New T-Mobile’s superior 5G network will unlock these opportunities, as it will be able to meet or exceed enterprise customer technical and operational requirements and surpass the performance of many competitor networks, whether wireless or wired. Additionally, the network’s increased capacity and lower costs per unit will address the specific challenges we face as a standalone company and enable us to compete on pricing in the enterprise market segment by providing greater value to enterprise customers and exerting pricing pressure in a market segment dominated by AT&T and Verizon. New T-Mobile’s unmatched network will also allow it to expand and diversify its voice and data offerings and develop innovative enterprise solutions. Furthermore, New T-Mobile will be able to use its more robust resources to expand its enterprise sales force and offer a broader portfolio of products. As noted above, these advantages will cause New T-Mobile to immediately invest in adding approximately 1,000 new jobs in the first year or two after the transaction closes, to bring much more meaningful competition to today’s established players. 19 REDACTED – FOR PUBLIC INSPECTION 45. Last, but not least, enterprise customers are likely to be early experimenters and participants in IoT adoption, and would thereby provide meaningful points of early entry into IoT business lines. An expanded suite of enterprise IoT solutions, facilitated by the combined talent at both Sprint and T-Mobile, will allow New T-Mobile to quickly jumpstart these IoT business segments. 20