The Justice Department today announced its approval of the T-Mobile/Sprint merger as part of a settlement that requires the merging companies to spin off several assets to Dish Network.

The DOJ decided against filing a lawsuit to block the T-Mobile US purchase of Sprint, even though it reduces the number of major mobile network providers from four to three. In exchange for its approval, the DOJ convinced the companies to sell Dish spectrum licenses, wholesale network access, and Sprint's prepaid business including subsidiaries Boost Mobile and Virgin Mobile. Boost and Virgin both resell Sprint network access instead of operating their own networks.

Dish would use its newfound assets to resell T-Mobile/Sprint service and to build its own network. The building-its-own-network part is far more crucial for Dish to effectively replace the competition eliminated by the merger, but this is expected to take several years.

The DOJ's approval is not the last one T-Mobile and Sprint need, because 13 states and the District of Columbia sued the companies to block the merger.

Dish “a faux competitor, not a real one”

Consumer advocates are rooting for the states in their lawsuit.

"This deal [with the DOJ] creates a faux competitor, not a real one, which is why I would bet on the states in their forthcoming court challenge," attorney Andrew Schwartzman of the Benton Foundation told media outlets in a statement. Schwartzman led the Media Access Project, a public interest telecommunications law firm, from 1978 to 2012.

Schwartzman continued:

Dish is buying Boost, a brand which sells prepaid service to low-end consumers. Dish will start with none of the lucrative postpaid customers, no brand name and no retail network. Even if Dish successfully builds out its own network, that could not happen for several years, during which time the three big wireless companies will be able to lock in their customer and introduce their 5G technologies. In other words, rather than having Sprint as a weak fourth competitor, the combined companies will now face an extremely weak fourth competitor.

The DOJ convinced five states to sign on to the settlement, namely Nebraska, Kansas, Ohio, Oklahoma, and South Dakota. But none of these are among the 13 states suing to block the deal.

Terms of the settlement as announced by the DOJ are as follows:

T-Mobile and Sprint must divest Sprint’s prepaid business, including Boost Mobile, Virgin Mobile, and Sprint prepaid, to Dish Network Corp., a Colorado-based satellite television provider. The proposed settlement also provides for the divestiture of certain spectrum assets to Dish. Additionally, T-Mobile and Sprint must make available to Dish at least 20,000 cell sites and hundreds of retail locations. T-Mobile must also provide Dish with robust access to the T-Mobile network for a period of seven years while Dish builds out its own 5G network.

New York Attorney General Letitia James vowed to continue the states' lawsuit against the merger. “The promises made by Dish and T-Mobile in this deal are the kinds of promises only robust competition can guarantee,” James said in a statement. "We have serious concerns that cobbling together this new fourth mobile player, with the government picking winners and losers, will not address the merger’s harm to consumers, workers, and innovation."

DOJ defends settlement

DOJ antitrust chief Makan Delrahim said that the "settlement will provide Dish with the assets and transitional services required to become a facilities-based mobile network operator that can provide a full range of mobile wireless services nationwide."

The DOJ acknowledged that the "combination of T-Mobile and Sprint would eliminate head-to-head competition between the companies and threaten the benefits that customers have realized from that competition in the form of lower prices and better service." But the department argued that the required divestitures will allow Dish to replace the lost competition, ensuring that Americans will still have four facilities-based choices nationwide.

Federal Communications Commission Chairman Ajit Pai announced his support of the T-Mobile/Sprint merger in May. The FCC approval, which still needs a commission vote, is contingent on the divestiture of Boost Mobile and a guarantee that Boost will have access to the T-Mobile/Sprint network. Transferring licenses to Dish would likely require a further FCC approval, however.

Today, Pai said he's ready to move forward with a final FCC approval. "I plan to present my colleagues soon with a draft order, consistent with the [Justice] Department’s filings, favorably resolving the FCC’s review of the transaction," Pai said in a statement. He said that the merger will result in T-Mobile and Sprint "deploy[ing] a 5G network that would cover 99 percent of the American people."

But many critics of the merger are not convinced by the DOJ and FCC arguments. "If the merger goes forward, it would leave the United States with only three viable nationwide wireless-service providers even with these divestitures," advocacy group Free Press said. "Approving the merger would crush competition, raise prices and eliminate thousands of jobs, according to union estimates. It would disproportionately harm low-income people and communities of color, who rely on robust competition among T-Mobile and Sprint and their subsidiaries to keep access affordable."

The Rural Wireless Association, an industry group that represents small, rural carriers, also criticized the DOJ action.

"The conditions imposed on New T-Mobile by the consent decree are drastically insufficient to protect against the clear harms this market-consolidating merger would bring," the RWA said. "Expecting Dish, a startup mobile carrier in its infancy, to be able to compete as a fourth nationwide network, with divested wireless assets from Sprint and T-Mobile and Boost's MVNO customers, and subject only to a handful of requirements that will expire, spells disaster for American consumers."