T-Mobile (NASDAQ:TMUS) is the third-largest wireless carrier in the United States. It doesn’t offer anything besides wireless service for cell phones and connected devices like tablets and smartwatches. (It recently purchased Layer3 TV, so it has a small hand in the television distribution business through Layer3.)

Thus, when investors think of T-Mobile’s competition, the first companies that come to mind are probably AT&T (NYSE:T), Verizon (NYSE:VZ), and Sprint (NYSE:S). But in the press release announcing T-Mobile’s merger with Sprint, T-Mobile CEO John Legere said, “There are now at least 7 or 8 big competitors.”

So, where do those other competitors come from? There’s a growing number of companies offering wireless service through mobile virtual network operator (MVNO) agreements, including Comcast (NASDAQ:CMCSA) and Alphabet‘s Google, and Charter is set to launch a service of its own later this year.

The question for investors (as well as the Federal Communications Commission and the Department of Justice) is whether those companies can be considered true competitors to T-Mobile in order to gain regulatory approval for the proposed merger with Sprint.

Image source: T-Mobile.

Comcast is adding more wireless customers than AT&T and Verizon

Comcast launched its Xfinity Mobile service last summer, exclusively for customers of its in-home internet and video services. Since then, it’s managed to add 577,000 phone lines to its service, 196,000 of which it added in the first quarter this year.

By comparison, AT&T and Verizon both lost postpaid phone subscribers in the first quarter.

But Verizon is still benefiting from the 577,000 Xfinity Mobile customers. Comcast is relying on Verizon’s wireless network to deliver its service through an MVNO agreement struck in 2011 as part of a deal for Verizon to acquire wireless spectrum from several cable TV providers. Charter will use the same agreement to launch its service later this year.

Likewise Google’s Fi service relies on both T-Mobile’s and Sprint’s wireless networks. Every time Google signs up a new subscriber, both wireless carriers benefit to some degree.

These agreements make a gray area for whether to consider these MVNO service providers as competitors. On the one hand, they provide additional choices for consumers; on the other, they still benefit the same four major players in wireless (with small benefits for the MVNO service provider).

The case for considering cable companies a competitor

One thing that’s worth pointing out is that the wireless industry and the pay-TV industries are converging. That’s been evident for years now since AT&T and Verizon launched their U-Verse and FiOS pay-TV and home internet services. AT&T’s acquisition of DirecTV Now to become the largest pay-TV provider in the U.S. cemented that reality.

All three of the largest pay-TV providers — AT&T, Comcast, and Charter — will soon offer a wireless phone service to their customers. On the flip side, all three of the largest wireless service providers — Verizon, AT&T, and T-Mobile — will soon offer some form of pay-TV option after T-Mobile launches T-Mobile TV.

What’s more, AT&T, Verizon, and T-Mobile, are all talking about providing home internet access with their forthcoming 5G networks. Verizon and AT&T are testing fixed-wireless 5G connections this year with speeds that blow away those from their own in-home internet services as well as Comcast’s and Charter’s. They expect to be competitive in the home internet connection market.

One of the biggest focuses of the T-Mobile-Sprint press release was that it would accelerate the deployment of their 5G network, enabling average speeds of 15x their current LTE speeds, and up to 100x speeds in some cases. Those speeds would more than suffice for a home internet connection.

Comcast’s internet subscribers surpassed its video subscribers three years ago, and the gap gets wider every quarter thanks to cord-cutting. Since Comcast is now basically a high-speed internet company that also sells cable TV, that makes it a direct competitor to one of the future growth avenues for the major wireless carriers.

What will the authorities think?

There’s a lot riding on the merger between T-Mobile and Sprint. The two companies expect to save $6 billion per year in cost synergies, representing a present value of over $43 billion. Not only that, AT&T and Verizon investors stand to benefit from a merger as well, as it ought to reduce the competitive intensity that has dragged down their wireless business’s financial results over the last few years.

But the Department of Justice has historically looked at the competitive history for proposed mergers and acquisitions, not at the future competitive environment facing the companies. Since T-Mobile and Sprint have historically competed nearly exclusively with Verizon and AT&T, it casts a big shadow over prospects for approval. If the focus is shifted to where T-Mobile and Sprint are looking to compete next, however, there’s plenty of competition for approval.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Levy owns shares of Alphabet (C shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Verizon Communications. The Motley Fool recommends Comcast and T-Mobile US. The Motley Fool has a disclosure policy.

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