5G madness: why is Sprint suing AT&T?

Sprint is suing AT&T for falsely advertising its network as "5G." Verge editor-in-chief Nilay Patel chats with Sprint's legal counsel, Craig Whitney, about why Sprint is suing AT&T and why no one can seem to agree on what 5G is. Sprint is suing AT&T over '5G E' lies Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 0:00Speaker 00

  This episode is brought to you by On Investing, an original podcast from Charles Schwab. Each week, hosts Lizanne Saunders, Schwab's Chief Investment Strategist, and Colin Martin, Head of Fixed Income Research and Strategy for the Schwab Center for Financial Research, bring you fresh insights on what's happening in the markets and why, and what the implications might be for your portfolio. Join Colin and Lizanne as they explore questions like, how do you evaluate corporate bonds that look interesting? And what sectors are on the move right now? Download the latest episode and subscribe at schwab.com/oninvesting, or wherever you get your podcasts.

• 0:45Nilay Patel?

  Hey everybody, it's Eli from The Vergecast. We have an emergency episode drop. This one's kind of fun. Sprint today filed a lawsuit against AT&T in the Southern District of New York alleging that labeling LTE is 5G, which is what AT&T is doing on some Android phones and soon on the iPhone. Sprint says that is deceptive. They're filing a lawsuit. They're trying to get a judge to issue an emergency injunction to stop it, to make AT&T stop 5G ads, to pull the indicator off of phones. I talked to Craig Whitney, who is Sprint's lawyer, he's their outside counsel. I asked him why Sprint's doing this, what the argument is, what they want the judge to do in the case, and kind of got into it with basically why wireless carriers are able to pull these stunts. Super interesting interview.

• 1:27Nilay Patel?

  We're dropping it as an emergency episode. We've kind of never done this before, but let us know what you think, and let us know how you want us to follow up on the story. Check this out, it's Craig Whitney, Sprint's outside counsel. All right, we're here with Craig Whitney. He's outside counsel for Sprint. Craig, you, on behalf of Sprint, you filed a lawsuit against AT&T today saying their labeling of 5G is deceptive. Walk me through that.

• 1:48Speaker 02

  Well, it's pretty textbook false advertising. I mean, AT&T is claiming that its 4G LTE Advanced network is a 5G network, and it's not. It's a straight up lie. I don't even think that we need to even almost go further than that, but I'm sure that they're going to claim something to the effect of, well, we're not saying 5G, we're saying 5GE. And there's no difference there. I mean, 5G and 5GE mean the same thing to consumers' minds. If it wasn't already obvious, just from the statement, we have extensive evidence showing that. We did our research. We commissioned a survey. I mean, consumers see no difference. In fact, if anything, they think that what you're saying is it's better than 5G. And

• 2:32Speaker 02

  in reality, it's exactly the service that they were receiving. It's on the same 4G LTE Advanced network that they're now suddenly calling 5G, and that's false advertising.

• 2:42Nilay Patel?

  So what's the harm to Sprint? I just want to be, you know, in the American system, you know, there's no regulator who's saying, okay, use this label, use that label, the way that you might have in Europe. We kind of have the system of lawsuits. So Sprint is suing, but you have to articulate a harm to sue. What's the harm to Sprint of AT&T claiming their network is 5G?

• 3:02Speaker 02

  The harm is several-fold, actually. So the most immediate harm is the harm to the rollout of real 5G. Sprint has spent billions of dollars trying to upgrade in certain markets for its 5G rollout, which it's calling out in nine cities in the first half of 2019. And now AT&T is sort of usurping that and completely undercutting the commercial value of a legitimate 5G rollout by saying, hey, we already have 5G, when in fact, they don't. What they're claiming is 5G is actually 4G LTE Advanced, the same thing that all the wireless carriers are already offering. So that is a significant immediate harm. And

• 3:47Speaker 02

  then, in terms of looking at the consumer's perspective of it, consumers are going to think that what 5G is, is no better than 4G LTE Advanced, and that's not true. I mean, 5G is going to be revolutionary in terms of, you know, the increased speeds and performances, and it's just, it's a complete shift change in technology. It's probably the biggest development in wireless technology in a decade. And it's going to be completely undercut and significantly undermined by AT&T coming out and saying, oh, no, this is 5G. This is what we have right now is 5G. And it's not. It's 4G LTE Advanced, which is exactly the kind of technology that is already being offered. And so those are significant harms, and those are just

• 4:30Speaker 02

  the immediate harms. And then there's the bigger picture harms, which are the lost sales harms. And people will... Become, will, will subscribe to AT&T or remain AT&T customers on this false assumption that they are getting 5G coverage when, again, they're not getting 5G coverage, even though their phone says 5G.

• 4:49Nilay Patel?

  So, there's no standards body that says this is what 5G is, right? With, you know, Bluetooth 2.0 or Wi-Fi 6, you know, there are actual standards bodies that say, "These are the specs, this is what it means, here's the new version." There's not some, you know, international consortium that, that labels the G's, as far as I'm aware. Is there some, is there some reason AT&T can't just say, "This is our 5G network"?

• 5:16Speaker 02

  Uh, yes, and, and, Neil, actually, your, your premise is incorrect. There is a standard-setting body. That 5G is not a, a, a, sort of an arbitrary term. That 3GPP, the Third Generation Partnership Project, is the standard-setting body that sets forth all the different releases for the different types of technology. 5G has, has an actual standard. Release 15, it actually sets forth the standards for 5G, just like Release 8 set forth, I believe it's Release 8, and, and, uh, subsequent releases set forth the different standards for 4G and 4G LTE and 4G LTE Advanced Technology. So, in fact, there most certainly is a standard-setting body that says what these different types of technology is, and I think AT&T would be readily admit that they, what they're calling

• 6:00Speaker 02

  5GE does not meet the 3GPP standards for 5G.

• 6:04Nilay Patel?

  So, just, let me back you up. Once upon a time, Sprint was first to what they claimed was 4G. It was a totally different technology. It was WiMAX. Can you characterize the difference between Sprint saying, "We've put out our 4G WiMAX network, but it's not LTE, which is what most people were expecting 4G to be," and AT&T saying, "We can dramatically, you know, deploy these 4G LTE Advanced standards, and it, you know, the speed will be twice as much," which is basically their claim, and that's good enough to call it 5GE. Is there, is there a difference between sort of the WiMAX moment and the LTE Advanced moment?

• 6:39Speaker 02

  I'll, I'll be honest with you, I don't know anything about the WiMAX moment. Um, you know, this is, I'm... To be perfectly clear, I'm Sprint's outside counsel in this matter. So I am very familiar with the circumstances of this case. I don't profess to be able to speak to, you know, things that happened in the past, which obviously are not really relevant to this case, but I'm honestly not trying to avoid it, I just honestly don't know the facts behind it, so I can't really explain any further.

• 7:05Nilay Patel?

  I understand, it's just, it's, the 4G moment was also characterized by relabeling of 3G technologies as 4G. So one of the questions I think our audience is asking is, how is this any different this time? Right, AT&T, once upon a time, relabeled HSPA+ as 4G, T-Mobile did it, everyone kinda did it. Is this any, is this any different in kind?

• 7:26Speaker 02

  Well, like I said, I don't know how I can characterize it as any different, because I just don't know what the circumstances are, but I can certainly tell you why this is unlawful, because you're saying, you're offering a product that it's not. Perhaps that was the same case back then, I just don't know. And just because something happened once upon a time that was unlawful, that didn't get a lawsuit over it, doesn't mean that it suddenly, you're allowed to do it later. That's for sure. So I don't know the circumstances about how this is different from that, but I could tell you that for sure what's going on today, for sure what AT&T is doing now, which is characterizing a 4G network as 5G, is textbook Lan Mac false advertising violation.

• 8:09Nilay Patel?

  So walk me through that specifically. So what makes it textbook Lan Mac violation?

• 8:13Speaker 02

  So the Lan Mac prevents a company, you know, I won't go through the specific legal language, but sort of paraphrasing, you can't misrepresent your goods and services offered in commerce. And here, there's two types of falsities, I suppose. There's literal falsity, which means that it's on its face, you're lying, without any question, and then there's this... Concept of misleading, which is maybe you're being sort of cute in your language, but consumers are going to be confused and it's going to cause them harm. We're arguing really both is that issue here. I mean, I truly believe that calling something 5G E, sticking an E at the end of it, or Evolution

• 8:57Speaker 02

  or whatever, is really no different than saying 5G. But even if we say, okay, well, they do add another letter and consumers are going to understand that that doesn't mean 5G, well, we have very strong evidence that that's not the case. I mean, we've done surveying of a significant portion of consumers through very heavily scrutinized surveying that shows that, you know, upwards, I think our numbers are upwards of 54% of consumers are confused and they assume that 5G E service, that whatever AT&T is calling 5G E, is 5G or the same thing as 5G or better. Which is, in surveying world, in false advertising land, that is a remarkable number.

• 9:39Speaker 02

  The legal standard for confusion, when it's deemed to be, you know, too confusing to be allowed, is you're looking about 15% to 20% is usually what you're looking for because it's the, the courts hold that, you know, 15% to 20% of people are confused, that's pretty bad. That's a lot of consumers. Even not everyone, it's still enough that that's false advertising. Here, we have over 50%. And even estimating it very conservatively, because we wanted to be very cautious, we didn't want to run into any, you know, technical hurdles, it's more than that, but it's over 50%. It's truly remarkable.

• 10:13Nilay Patel?

  So, what kind of remedy are you looking for? You know, AT&T is deploying the logo now on some phones. We've seen that the, you know, the next build of iOS on iPhones apparently has some labeling. Are you asking, you pull it back and stop it, stop running the ads? Do you want money? What, like, what's the, what do you want the court to do here?

• 10:30Speaker 02

  Well, our initial remedy, and this part, I guess, is not necessarily known yet because it hasn't happened, we do plan on going into court, probably today, and seeking a TRO and a preliminary injunction. We need to actually wait for the legal process to play out. We've given AT&T notice and we need to wait for a judge to be assigned before we know who will be hearing the case, which is just a court process internally. We can't really do anything about speeding that up at this point. But, to that, our initial relief that we're going to be seeking is an injunction stopping AT&T from calling service that's not 5G, 5G. I mean, it's that simple. We're not- You know, we just want, we just want them to stop saying they have something that they don't. And that, that's our initial relief. And then, there, there is a damages component, of course.

• 11:14Speaker 02

  That usually comes later in the case because, you know, you need to prove up your damages and it's gonna have to do a lot with how many customers have, uh, purchased AT&T based on this false labeling and false advertising. So, I mean, we can need some information from AT&T on that. But, uh, you know, our initial, our initial relief is gonna be injunctive relief.

• 11:34Nilay Patel?

  So, you, you want them to stop using the 5G logo on phones? You want them to stop advertising?

• 11:39Speaker 02

  That's right. It, as, as long as they don't, as long as it's not 5G, we want them to stop calling it 5G.

• 11:44Nilay Patel?

  And are you saying to the court, this is the definition of 5G that Sprint wants to use and it's the definition the court should use?

• 11:50Speaker 02

  Well, the, there, the definition is, as set forth by 3GPP. I mean, there is a, a standard that needs to be, uh, complied with. The, uh, AT&T is not even claiming that that's what their service is. I mean, they're not gonna come back, I don't think, and say, what we are labeling 5G E is what we will ultimately call 5G when we eventually roll out 5G. I mean, they know that. There, this is not, this doesn't approach any of the advances that 5G will show. I mean, 5G is gonna, you'll be able to download movies, full-length HD movies in, in seconds under 5G as opposed to, you know, minutes or whatever. Streaming will be done without latency, without, you know, less buffering.

• 12:33Speaker 02

  It, it's gonna be a, a remarkable difference to consumers. Uh, it's gonna allow self-driving cars. I mean, all types of technological innovations and advances are gonna be running on 5G. That's not what AT&T is offering right now. And, and I honestly don't think they're gonna claim that it is. Uh, because it would only honestly affect the, the ability to then later say, you know, this is the same thing we had, what we called 5G E is the same thing we're gonna call 5G. I'm sure whatever comes out as 5G at some point in the future, you know, whenever they do have legitimate 5G will be dramatically different, I'd hope, for their sake, uh, than what they're now calling 5G E.

• 13:07Nilay Patel?

  Well, I can tell you AT&T is definitely not going to say that because I have their statement here. I'm sure you've seen it, but for the listener, AT&T says, "We understand why our competitors don't like what we're doing, but customers love it. We introduced 5G Evolution more than two years ago, clearly defining it as an evolutionary step to standards-based 5G." So defining it against standards-based 5G. AT&T goes on to say, "5G Evolution and the 5G indicator simply let customers know when their device is in an area where speeds are up to twice as fast as standard LTE. That's what 5G Evolution is, and we're delighted to deliver it to customers." So they're, I mean, they're already saying there's a difference. We're not trying to confuse people. It's obviously what they would say. But there's, they're making a very clear distinction between standards-based 5G and their 5GE.

• 13:51Nilay Patel?

  And you're saying that's just entirely too confusing.

• 13:53Speaker 02

  Well, I'm saying that consumers don't recognize that distinction, you know, and we have proof of it. I mean, if they, that's, I guess, what the lawsuit is, will come down to, to some extent. But it's clear that consumers assume that 5GE, as you just figured they would. I mean, it doesn't even require much more than just common sense. And that's why we'd even say this is literally false. When you see 5GE, you're thinking 5G. I mean, nothing about that says not 5G. They're calling it 5G for a reason. Any materials that they're referencing, and I'm not even sure what those are necessarily, but that certainly there, these distinctions that they're making in their statements are not the distinctions made in their ads, and that's, that's the problem.

• 14:35Speaker 02

  I mean, I guess one major development, which we haven't really touched on, is they're running the 5GE icon on consumers' phones when they're in LTE networks. So on your, on your phone, right now, I think it's only on certain Android phones, but my understanding is it's about to be rolled out to iPhones as well. So we're talking about, you know, tens of millions, if not more, consumers are about, are going to be getting this on their AT&T phones. It's going to say, instead of LTE, which it says right now, which is true, it's going to start saying 5GE. There's nothing about that that explains anything. It just says 5G. You're gonna look at your phone and you're gonna say, "Oh, cool, this is 5G."

• 15:20Speaker 02

  And then, you know, the problem is they're gonna be like, "Wow, this isn't any better than what I had before." And that's a problem, and that's false. It's almost remarkable that they're doing this. I guess they thought that they would just deal with the press on it and move on, but, you know, this is wrong.

• 15:39Nilay Patel?

  They seem very pleased that they've caused this much consternation. So they've got another line in their statement. I'm confused why they think that this is an argument, but this is what AT&T said. This is their public statement. "Sprint will have to reconcile its arguments to the FCC that it cannot deploy a widespread 5G network without T-Mobile while simultaneously claiming in the suit to be launching legitimate 5G technology imminently." So can you reconcile that?

• 16:06Speaker 02

  Yeah, everything we've said in our lawsuit is completely consistent with everything we've said in other contexts. I think this is posturing on their part, but there's nothing that we've said in our lawsuit that in any way contradicts what we've said elsewhere.

• 16:21Nilay Patel?

  So is Sprint imminently launching standards-based 5G?

• 16:25Speaker 02

  Yes, in nine major cities, correct, which is exactly what we're explaining in our lawsuit.

• 16:30Nilay Patel?

  And you're saying the merger claim is we can't go any wider than that unless we combine with T-Mobile?

• 16:35Speaker 02

  Yeah. I don't know the full breadth of what was said in the merger claim, but, and I don't know that they said we couldn't go any wider than that, but I know that anything we've said in our lawsuit is perfectly consistent with what we've said to the FCC and elsewhere.

• 16:49Nilay Patel?

  All right, so what are the next steps for consumers here? You sound like you're gonna go to court today, Southern District of New York. You're gonna try to get an injunction. What's the next thing that happens for the sort of consumer of wireless services here?

• 17:02Speaker 02

  Well, so it's kind of going to be up to the judge. We will be going to court possibly today, possibly Monday, depending on timing of when we get a judge. And the next step is AT&T will come and they will make their argument and the judge will set, will do what the judge is going to do. I mean, it could go a lot of different ways. It's hard to predict exactly how it's going to happen. The judge could stop everything right now, which is what we think should happen and what we will certainly be arguing for. Or the judge could give it a little time to play out, to give, you know, oral argument and hearings, etc. There's a lot of different ways it could go, frankly. But ultimately, what we're looking for is in the very near term, we need an order from

• 17:47Speaker 02

  the court, which frankly is a necessity in order to stop this harm that AT&T is throwing on the market. We need an order from the court telling AT&T to stop. Because, I mean, you've seen the press out there, you've seen the reaction when people are starting to realize what's going on. This is not a good thing. This is messing with the market. AT&T is taking their, these claims and they are just trying to leverage it and are even taking the publicity and trying to leverage it at all to the detriment of the consumers and to Sprint and other competitors. And I think the court will recognize that, I hope. And, you know, I think that we're looking for this to stop as soon as possible.

• 18:26Nilay Patel?

  Are you dual tracking this? Are you just in court or are you going to go to the FTC, FCC as well?

• 18:30Speaker 02

  Like I said, I'm their litigation counsel, so I have no plans to do any dual tracking. I don't, I don't think there's any discussion about that, but, you know, not that I'm aware. Like I said, let's put it that way.

• 18:41Nilay Patel?

  Okay. Well, Craig, thank you so much for your time today. This is super illuminating. I'm excited to hear how these arguments in court go and keep us up to date on what happens next.

• 18:50Speaker 02

  Terrific. Thank you so much.

• 18:52Nilay Patel?

  Hey, everybody, that was our emergency interview with Craig Whitney, Sprint's outside counsel. I hope you liked it. Let us know if you want us to do more emergency episodes. The regular Vergecast with me, Paul and Dieter, in the feed right now. Check that out. We asked a bunch of questions about what podcast app people use. That's all of my Twitter feed right now. And we'll be back on Tuesday with a huge guest on the regular interview episode. I can't give it away, but it's going to be exciting. Check that out on Tuesday.

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