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US Gov concerned about foreign-controlled Sprint, centers around SprintLink


Conan Kudo
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The government is quite worried about SoftBank gaining 70% equity of Sprint-Nextel Corporation. From what I've read, much of the fuss is not actually over Sprint PCS and Nextel assets (which is collectively known these days as Sprint Wireless). Most of it seems to be over the SprintLink assets, which comprise of a Tier 1 backbone provider for the Internet, IP/MPLS services for enterprises, and Peerless IP for the government.

 

It's the first and last parts that concern the government. Peerless IP, if you didn't already know, is used to offer an IP network that is totally separate from the Internet, but equally reliable. There is also an entire division of SprintLink that has top secret clearance to manage government accounts and handle sensitive data.

 

Because of what SprintLink does, it has a permanent seat in security committees that allow it to wield considerable influence in how cyber-security is handled in the United States. Its peers are mainly Level 3, AT&T, and Verizon Communications.

 

The government does not want this to pass over to a foreign company.

 

So my question to you all is: How well would Sprint function after yet another divestment? This time, the divestment would be all the remaining parts of its wireline business (SprintLink). Would the Sprint-Nextel Corporation still be able to function and maintain profits? Would it still be desirable to SoftBank (who has never really mentioned SprintLink before)?

 

Dish is now attacking the SoftBank-Sprint deal through SprintLink. It's talking up the security concerns on yet another website. I won't link to it because I don't want to legitimize it, but it's easy enough to find.

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I don't think divestment will be required. There is a way to insulate that position from their Japanese owners, and I believe the precedent for that already exists with other telecoms. Why was no one concerned over Vodafone and their reach into the backbone and ILECS? Do we value Anglo skinned allies more than yellowish skinned? This is rubbish, IMHO.

 

Robert via Nexus 7 with Tapatalk HD

 

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Do we value Anglo skinned allies more than yellowish skinned?

Why. yes, yes we do. America has had an intense fear of Asia since at least the 80's.

 

Your average American doesn't know the difference between China and Japan, which only makes it worse. Sometimes, I think that Americans see non-Americans as a strange sort of alien creature, as non-humans, something different to be feared. Something unknowable.

 

Rememeber that Senator Orrin Hatch's reservations about Sprint-Softbank can be summarized as: "Softbank is Asian. And they've bought from Huawei before. Who has ties to the Chinese government. Who might have tried to hack us. Therefore, Softbank is probably evil."

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Do we value Anglo skinned allies more than yellowish skinned? This is rubbish, IMHO.

 

Robert via Nexus 7 with Tapatalk HD

The Western nations have always valued each other over their Eastern allies, even before the 1980s. There's always been a large fear of the Eastern cultures overwhelming the Western ones. And of course, dey turk urr jeebs!

 

In general, America values the UK and Germany more than it values China and Japan. Remember that Hawaii was admitted to the US (as a territory, and later a state) only out of fear of the Japanese taking it over (through the mass of contract labors entering and immigrating into the Republic of Hawaii).

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“So there is an odd set of incentives for the U.S. government, where they might actually have more regulatory authority if they let [the SoftBank] transaction go through,”Stewart Baker, former head of the Committee on Foreign Investment in the United States (CFIUS), the agency that reviews foreign mergers, told Gardner this week at the House Energy and Commerce Committee hearing.

 http://www.washingtonpost.com/business/technology/dish-network-campaigns-against-softbank-in-bid-for-sprint/2013/05/24/1863f81a-c3dd-11e2-9fe2-6ee52d0eb7c1_story.html

 

 

I think this could actually backfire on Dish.  Softbank has now promised to remove all Huawei equipment at their expense, promised to not use Chinese equipment in the future, and given the US Government veto to one of New Sprint's board members, who is in change of national security compliance.  That is just what Softbank has promised, the CFIUS could ask for more stipulations. Dish has not made these promises, nor could the government impose these rules as a part of their merger with Sprint.

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Japan has been a close ally since the end of ww2, this is nothing more than protectionist bs in my opinion.

Good point. Are they going to ban iphones next? After all, they are made in china aren't they?

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Good point. Are they going to ban iphones next? After all, they are made in china aren't they?

 

BINGO!  There are more activated Iphones in America than there are Sprint customers total.    Even post CIQ, the carriers are still selling their "less specific" user data.  Wanna go on a "everything Asian" witch hunt? Fine.  But EVERYTHING has to be up for consideration, not just what Captain Howdy is paying gophers to chase you around DC about. 

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This is Japan we're talking about, not North Korea. I thought we were really tight with Japan over the last 50 years?

 

I'd be far more worried about the UK, just due to the seeming desire they have to want to watch "the colonies" fail.

 

They didn't seem concerned about Vodafone and Verizon. And doesn't Level 3 have significant backing out of European investors?

 

 

 

Sent from my Tricorder aboard the Enterprise

 

 

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Good point. Are they going to ban iphones next? After all, they are made in china aren't they?

Oh no. You misunderstand. America has no problems exploiting those countries. They just don't want those countries to get involved in our infrastructure. Don't forget, the government okayed Huawei and ZTE phones, tablets, and data sticks. They put a stop to anything remotely close to network infrastructure for them, though.

 

 

This is Japan we're talking about, not North Korea. I thought we were really tight with Japan over the last 50 years?

 

I'd be far more worried about the UK, just due to the seeming desire they have to want to watch "the colonies" fail.

 

They didn't seem concerned about Vodafone and Verizon. And doesn't Level 3 have significant backing out of European investors?

 

 

 

Sent from my Tricorder aboard the Enterprise

 

Let me reiterate: America (especially Congress) does not care if Europeans invest in our infrastructure. Only if Asians do.

 

It doesn't help that most people in Congress can't differentiate beyond the Indo/Sino peoples. All the Sino peoples get grouped as "Chinese" even though there's a wide variety of Sino peoples. The Indo peoples are commonly known as Indians, but even those of European descent carry Indo traits because the Indo traits came from ancient Germans who trekked across Eurasia and spread the genes, so to speak. 

 

 

However, even when Europeans invest, the CFIUS imposed rather annoying conditions on them. They did the same for Deutsche Telekom's acquisition of the VoiceStream Wireless Corporation as well. However, the government is dead set against Asians having access to infrastructure the government relies on.

 

Vodafone's involvement in the US is limited to pleading to Verizon Communications to do something with Verizon Wireless, and then Verizon Communications ignoring them. Vodafone has no teeth in the US market. Level 3 has significant backing by Europeans, largely through its Global Crossing acquisition a few years ago. However, Level 3 is a domestic company owned principally by Americans.

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I have already advocated that Sprint spinoff their Internet backbone division. Too many competitors to make any money in the business. Let them merge with Level 3 and or XO communications who seem to have a lot more metro loops than Sprintlink.

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I have already advocated that Sprint spinoff their Internet backbone division. Too many competitors to make any money in the business. Let them merge with Level 3 and or XO communications who seem to have a lot more metro loops than Sprintlink.

 

I'd rather SprintLink get spun off and remain a company in its own right. SprintLink has loops in areas that no one else does, and it is a viable option for affordable Tier 1 access.

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Is it me or did anyone else yell at their phone/tablet/computer/or any other internet device while reading the story and then again and want to punch the people who commented or am I just too stressed out right now

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I thought it brought up a lot of good points like how the government would have more oversight with CFIUS involved compared to Dish and how vodafone and DT are both using Huawei equipment overseas. I especially liked how they exposed the ties that dish has to the senators who have been voicing their "concerns".

 

The comments were annoying, but I am sure Ergen has a team of people who just spam his BS fear mongering.

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I thought it brought up a lot of good points like how the government would have more oversight with CFIUS involved compared to Dish and how vodafone and DT are both using Huawei equipment overseas. I especially liked how they exposed the ties that dish has to the senators who have been voicing their "concerns".

 

The comments were annoying, but I am sure Ergen has a team of people who just spam his BS fear mongering.

And the problem is those don't matter. Sprint is not a wireless-only company. It is also the only non-Bell company with significant influence in the government, and has works very closely with various divisions of the US military on a regular basis.

 

Deutsche Telekom was barred from using infrastructure equipment from vendors of certain origin when it bought VoiceStream Wireless Corporation. Vodafone never got a say in anything with Verizon Wireless. There are many things that Vodafone lost the fight on with Verizon Wireless, and CFIUS never imposed anything on Cellco Partnership because Vodafone wasn't the majority owner.

 

The analysts are also missing the point of CFIUS: the government doesn't want to involve itself to that level. It doesn't want oversight over Sprint. It doesn't want to effectively do what it did pre-Bell breakup. The arguments that analysts keep making are invalid because they are based on the false premise that the government wants to control Sprint. It doesn't.

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And the problem is those don't matter. Sprint is not a wireless-only company. It is also the only non-Bell company with significant influence in the government, and has works very closely with various divisions of the US military on a regular basis.

 

Deutsche Telekom was barred from using infrastructure equipment from vendors of certain origin when it bought VoiceStream Wireless Corporation. Vodafone never got a say in anything with Verizon Wireless. There are many things that Vodafone lost the fight on with Verizon Wireless, and CFIUS never imposed anything on Cellco Partnership because Vodafone wasn't the majority owner.

 

The analysts are also missing the point of CFIUS: the government doesn't want to involve itself to that level. It doesn't want oversight over Sprint. It doesn't want to effectively do what it did pre-Bell breakup. The arguments that analysts keep making are invalid because they are based on the false premise that the government wants to control Sprint. It doesn't.

 

Tomorrow is the supposed day, so we will likely find out then.  I do not think anyone is proposing that the government would control Sprint. They are only proposing that they would prefer to put in stipulations than outright ban the deal.  I still do not believe Softbank is the main target in all of this security concerns. If their main goal is to prevent ZTE or Huawei equipment, then promoting the Softbank deal while putting in terms to not use ZTE/Huawei equipment would be the best option, since they could not put those terms in on a Dish-Sprint deal.

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I believe the 180 day clock is nonbinding. I have a bad feeling that we wont have an answer for the FCC for a little while longer

I was referring to the CFIUS. According to a SoftBank SEC filing, it was estimated to be announced today. I am sure the FCC is waiting on the CFIUS before releasing its verdict. I also have very little doubt that the FCC will vote in favor of the deal as long as the CFIUS supports it. 

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I was referring to the CFIUS. According to a SoftBank SEC filing, it was estimated to be announced today. I am sure the FCC is waiting on the CFIUS before releasing its verdict. I also have very little doubt that the FCC will vote in favor of the deal as long as the CFIUS supports it. 

Does the fact that the FCC only has 3 commisioners and is lacking a chairman delay its vote on the Softbank/Sprint merger?

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According to this bloomberg article, CFIUS is close to clearing Softbank of all national security concerns. 

 

 

 

Key terms of the agreement include the appointment of a national-security director to the board and provisions that will allow the government to approve non-U.S. vendors, the person said. The agreement also has a provision to remove equipment from Clearwire’s network made by vendors that haven’t won national-security approval, if Sprint concludes a separate transaction to acquire full ownership of Clearwire.

SoftBank has also agreed to separate the operations of a small subsidiary company that would handle classified government work under a related national-security agreement, the person said.

SoftBank has said it’s open to relieving national-security concerns by letting the U.S. government have veto power over one nominee on Sprint’s board. The SoftBank transaction is also under review by the Federal Communications Commission.

http://www.bloomberg.com/news/2013-05-28/softbank-said-close-to-national-security-approval-for-sprint.html

I wonder if the the small subsidiary company would be all of SprintLink? 

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According to this bloomberg article, CFIUS is close to clearing Softbank of all national security concerns. 

 

 

 

http://www.bloomberg.com/news/2013-05-28/softbank-said-close-to-national-security-approval-for-sprint.html

I wonder if the the small subsidiary company would be all of SprintLink? 

 

 

Looks like clearance has been given.  Here's the Sprint press release: http://finance.yahoo.com/news/sprint-softbank-receive-clearance-committee-113000359.html

 

Yeah, it looks like SprintLink operations are going to be separated internally for CFIUS approval.

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