FCC Approves Sprint/Shentel/NTELOS Transaction

The Commission has released a Memorandum Opinion and Order granting consent, with conditions, to the application of Sprint, Shentel, and NTELOS (“applicants”) for the transfer and control and assignment of a number of AWS-1, PCS, BRS, and EBS spectrum licenses from NTELOS to Shentel and Sprint.  The applicants sought approval of the assignment or lease of a maximum of 135 MHz of spectrum covering 153 counties in all or parts of thirty-eight CMAs in portions of Kentucky, Maryland, North Carolina, Ohio, Pennsylvania, Virginia, and West Virginia.  The proposed initial assignment covers approximately 5.5 million people or approximately 2 percent of the population of the United States.

In its review, the Commission applied its two-part screen, and found that the Herfindahl-Hirschman Index (“HHI”) screen was triggered in 12 of the thirty-eight CMAs.  When applying the total spectrum screen, on a county-by-county basis, the Commission found that Sprint newly triggered 29 counties in all or parts of 9 of the thirty-eight markets.  The Commission also asserted that Sprint owns 200.5 megahertz of spectrum in Perry County covering approximately 20 percent of the market’s population, and would increase its holdings further to 215.5 megahertz as a result of the transaction.  The applicants argued that in twelve of the thirty triggered counties, the screen is exceeded by 10 megahertz or less and that there would be no competitive harm.

The factors considered by the Commission in its analysis include but are not limited to:

  • the total number of rival service providers;
  • the number of rival firms that can offer competitive service plans;
  • the coverage by technology of the firms’ respective networks;
  • the rival firms’ market shares;
  • the combined entity’s post-transaction market share and how that share changes as a result of the transaction;
  • the amount of spectrum suitable for the provision of mobile telephony/broadband services controlled by the combined entity; and
  • the spectrum holdings of each of the rival service providers.

The Commission found that there was potential for certain competitive harms.  More specifically, Sprint’s spectrum aggregation raised some competitive concerns, particularly in a cluster of Virginia markets.  Of the 15 Virginia markets, six triggered the HHI and spectrum screens, two triggered the HHI screen, and one triggered the spectrum screen.  In the seven Virginia markets triggered by the spectrum screen, Sprint, post-transaction, would hold a maximum of 240.5 MHz of spectrum in total.  The Commission mitigated these concerns by requiring, as a condition, the applicants to divest some of the spectrum being acquired by Sprint from NTELOS in certain markets in Virginia.  The Commission also had concern about the exit of NTELOS as an independent facilities-based service provider in certain markets in Virginia and West Virginia.

The Commission applied its public interest “sliding scale approach”, under which, if potential harms appear “both substantial and likely, a demonstration of claimed benefits also must reveal a higher degree of magnitude and likelihood than we would otherwise demand.”  When the opposite case is true, the Commission accepts a lesser showing.  The applicants asserted that the public interest benefits, including enhanced wireless coverage through network densification and expansion, outweighed any harms.  After imposing the below deployment commitments as conditions to help ensure that the claimed public interest benefits are achieved, the Commission applied its sliding scale test and approved the transaction.

The applicants are required to meet the following conditions:

  • within six months of the transaction closing, file applications with the Commission to assign or transfer control of spectrum (identified in Appendix 1 of the Order);
  • during the five years immediately following the transaction closing, invest approximately $350 million in network-related capital improvements to reduce coverage gaps in the current NTELOS service area and to accelerate the on-going 4G LTE upgrade and expansion of the existing NTELOS network;
    • complete a network-wide deployment of 4G LTE service in Band Class 25 (1900 MHz), as well as commits to complete a network-wide deployment of 4G LTE and voice services in Band Class 26 (800 MHz) in the current NTELOS service area;
    • deploy 4G LTE service in Band Class 41 (2.5 GHz) in current NTELOS service areas with greater population density;
    • deploy 4G LTE service to improve wireless data speeds and capacity in NTELOS service areas that require additional 4G LTE capacity due to their greater population density, such as Charlottesville and Roanoke in Virginia, and Charleston and Morgantown in West Virginia;
  • within 36 months after the transaction closes, add approximately 150 new cell sites in the NTELOS service territory, which will result in a higher cell site density level and improve the customer experience;
  • upgrade the 857 existing NTELOS cell sites that were active as of December 31, 2015; and
  • substantially complete the 4G LTE upgrades for the 857 existing cell sites within twenty-four months after the transaction closes.

Please contact us if you have any questions or concerns.

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