The Department of Justice (DOJ) dropped its antitrust investigation into T-Mobile US’ pending purchase of smaller telecommunications rival UScellular, but warned the deal could mark an anticompetitive turning point for the domestic wireless telecommunications industry.

Gail Slater, assistant attorney general for the DOJ’s Antitrust Division, noted in a statement that its investigation “raised concerns about competition in the relevant markets for mobile wireless services and the availability of wireless spectrum needed to fuel competition and entry.”

“Specifically, as part of the investigation, the Department considered the potential impact on consumers resulting from the elimination of UScellular from the market, the potential for consumer benefits, and the potential impact of the further consolidation of wireless spectrum,” Slater wrote.

To the first two points, the DOJ investigation noted that UScellular did provide services that were more targeted at what the carrier termed “heartland families” and “farmtown frugals.” This allowed the carrier “to the chagrin” of its nationwide rivals to maintain “a sizable customer base within its network footprint by virtue of its strong emphasis on transparency, integrity, and localized customer service.”

Despite that localized win, the DOJ also noted UScellular was a sinking financial ship.

“Due in part to its limited regional footprint and unique structural limitations, UScellular simply could not keep up with the escalating cost of capital investments in technology required to compete vigorously in the relevant market,” the DOJ report noted. “This would, in turn, lead to the slow degradation of its network quality.”

The latter beat out the former in the DOJ’s ruling.

“UScellular’s inability to maintain its competitive position would result in declining value to its subscriber base, whereas the transaction offers them hope that they will be able to experience the benefits of a more robust cellular network,” the DOJ concluded in dropping the investigation.

DOJ warns of slippery slope

However, the DOJ did warn that the deal continues “a decades-long trend toward consolidation-by-acquisition that has now left most consumers with meaningful choices among just the ‘Big 3’ national carriers.”

“Economists and historians, appropriately, will debate whether this trend ultimately redounded to the benefit of competition and consumers, but the stark facts of today merit our immediate attention: together, the Big 3 account for more than 90% of the roughly 335 million mobile subscriptions in the United States,” the DOJ report noted.

T-Mobile US is set to inherit approximately 4.5 million UScellular customers. That number does make UScellular the nation’s fifth-largest facilities-based network operator, but pales in comparison to the more than 100 million customers each of the three largest wireless operators serve.

The deal itself was first announced just over a year ago, with the DOJ launching its investigation last November, shortly after the U.S. presidential election. The DOJ at that time told the Federal Communications Commission (FCC) that it wanted to investigate the transaction due to potential national security conflicts.

German telecom giant Deutsche Telekom (DT) holds a controlling interest in T-Mobile US, though it should be noted that a similar inquiry was conducted nearly 25 years ago when DT initially moved to acquire then-named VoiceStream Wireless and fellow regional wireless operator Powertel.

The DOJ’s consolidation concern is most pointed in terms of spectrum ownership, which underpins the operational viability of wireless telecommunication networks. This was tied to a pair of $1 billion deals UScellular has constructed with nationwide operators Verizon and AT&T.

The Verizon deal involves UScellular selling licenses in the 850 MHz, 1.7/2.1 GHz (AWS band), and 1.9 GHz (PCS band) for $1 billion. That deal recently hit an approval milestone with the FCC’s Wireless Telecommunications Bureau.

The AT&T agreement was announced shortly after, and involves UScellular selling spectrum licenses in the 700 MHz and 3.45 GHz bands.

“This transaction, and two other deals contingent on its closing, will consolidate yet more spectrum in the Big 3’s oligopoly, which controls more than 80% of the mobile wireless spectrum in the country,” the DOJ warned. “The Department investigated these spectrum transfers and concluded that they would not result in sufficient harm to competition to warrant an enforcement action, yet the risks to future competition due to further spectrum aggregation by the Big 3 are acute.”

The DOJ has in the past required carriers to divest spectrum holdings prior to approving an acquisition, most notably in approving T-Mobile US’ acquisition of Sprint in 2019.

The DOJ’s decision to drop its investigation into the T-Mobile US-UScellular deal without seeking any concessions was in contrast to its recent approval of Hewlett Packard Enterprise’s (HPE) $14 billion acquisition of smaller rival Juniper Networks. The DOJ did receive modest concessions as part of approving that transaction.

T-Mobile concedes DEI to the FCC

The FCC has yet to provide its final ruling on the T-Mobile US-UScellular acquisition. However, T-Mobile US this week did file paperwork with the communications regulator stating it’s ending its diversity, equity, and inclusion (DEI) program, “not just in name, but in substance.”

T-Mobile US EVP and General Counsel Mark Nelson noted in the filing that the move followed on a “comprehensive review” of the company’s DEI policies that it initiated earlier this year. That initial review was tied to T-Mobile US’ eventually successful attempt in acquiring fiber provider Lumos.

“As T-Mobile indicated earlier this year, we recognize that the legal and policy landscape surrounding DEI under federal law has changed and we remain fully committed to ensuring that T-Mobile does not have any policies or practices that enable invidious discrimination, whether in fulfillment of DEI or any other purpose,” Nelson wrote in the filing.

T-Mobile US’ Nelson further explained that the carrier’s hiring policy involves casting “a wide net to attract the best people based on their skills, aptitude, and growth mindset.”

“Once we have attracted a large applicant pool, we try to find the best person for the job, period,” Nelson explained. “We don’t favor one demographic group over another. We don’t use hiring quotas, goals, or percentages based on race, sex, sexual orientation, or other protected characteristics. We don’t reward employees with bonuses, incentives, or other benefits related to hiring members of any particular group – in fact, we don’t track candidate pools based on protected characteristics.”

That explanation is targeted at FCC Chairman Brendan Carr, who has stated he was prepared to block mergers and acquisition proposals from companies that promote “invidious” DEI policies.

“Any businesses that are looking for FCC approval, I would encourage them to get busy ending any sort of their invidious forms of DEI discrimination,” Carr told Bloomberg in an interview earlier this year.

“We can only under the statute move forward and approve a transaction if we find that doing so serves the public interest,” Carr said. “If there are businesses out there that are still promoting invidious forms of DEI discrimination, I really don’t see a path forward where the FCC could reach the conclusion that approving the transaction is going to be in the public interest.”

The views echo those of President Donald Trump's administration, which is looking to bring an end to DEI policies across the federal government, as well as in corporate America.