In a 678-page FCC filing outlining its case to merge with Sprint, T-Mobile said the deal is a vital component of its plan to expand its recently purchased Layer3 asset into nationally distributed 5G video service.
“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,” the FCC filing reads. T-Mobile estimated that Layer3’s content acquisition costs are 20% to 30% higher than its larger rivals for accessing the same programming.”
Furthermore, T-Mobile said expansion of Layer3 is hindered by the service’s need for existing in-home broadband service, most often from cable operators.
“Without these offerings, which are expensive and often contain monthly usage caps, Layer3 customers cannot access the company’s services,” the filing continued.
Additionally, T-Mobile argued that its “relatively thin 5G deployment” is inadequate to support mobile video services over 5G. Using figures that are redacted in the publicly available filing, T-Mobile said video usage among its customers is rising fast.
“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,” the filing said.
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T-Mobile also argued that Sprint doesn’t have the spectrum, assets or scale needed to provide significant video competition for wireless leaders Verizon and AT&T, in addition to leading cable companies.
“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,” T-Mobile said.
T-Mobile also gave the FCC a specific estimate as to how much its content acquisition cost would decrease should the merger go through. However, that figure was also redacted.
“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,” the filing added. “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.”
T-Mobile is asking the FCC to OK its parent company, Netherlands-based Deutsche Telecom, to become the owner of the combined T-Mobile and Sprint.
T-Mobile bought niche pay TV service Layer3 TV late last year with plans to create a nationally distributed OTT programming service.