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Verizon spectrum deals spark criticism

by Lisa Allen In Washington  |  Published March 22, 2012 at 8:49 AM
Verizon-Wireless227x128.jpgSenators on Wednesday, March 21, expressed strong concerns that two Verizon Wireless deals to buy $4 billion worth of advanced wireless spectrum from four big cable providers and then cross-sell products of those firms would decrease cable and wireless competition.

"Many now wonder if these agreements will roll back advances in competition and even amount to a truce between one of the two largest phone companies and over 70% of the cable industry," said Sen. Herb Kohl, D-Wis., chairman of the Senate Judiciary Committees Subcommittee on Antitrust.

Sen. Al Franken, D-Minn., suggested agreements in which Verizon would buy licenses of Comcast Corp., Cox Communications Inc., Time Warner Cable Inc., and Bright House Networks LLC and also of SpectrumCo LLC, a joint partnership unit several of the cable firms are participating in, "seem to abandon the goal" of the 1996 telecom act, which was to increase competition though deregulation. The arrangement would reduce competition, he said, because Verizon would be marketing cable firms' TV service rather than expanding its FIOS, or fiber optic service, TV package.

The senators' criticism was echoed by a consumer group and a representative of smaller cellular companies, which also warned that Verizon's spectrum expansion would put the country on a path to reviving telecom monopolies but without the regulatory protections in place before the 1996 law.

They said the expansion would enhance Verizon Wireless' position as the nation's biggest wireless company and prevent smaller rivals from ever acquiring the advanced spectrum they need to compete with the giants.

"It will further cement the power of the big companies to the detriment of every other carrier," said Steven K. Berry, president-CEO of the Rural Cellular Association. He called the arrangement "elegantly contrived," suggesting it will end effective competition for millions consumers and represent "a manipulation of spectrum resources in a way to cut off the lifeblood of competition."

Both the Federal Communications Commission and the Justice Department are reviewing the deals. The FCC is reviewing both the spectrum and the marketing agreements, which allow Verizon Wireless and the four cable companies to cross-sell each others services. The Justice Department is reviewing the marketing agreements.

Some witnesses urged the agencies to either kill the deals outright or require Verizon to sell some of the spectrum. But Kohl said only that officials of both agencies should take Wednesday's hearing into their considerations.

Verizon Wireless and cable company officials strongly defended the deals . They argued many of the concerns are based on incorrect assumptions.

Randal S. Milch, executive VP and general counsel of Verizon Communications, said the deals don't lessen the chance that Verizon would roll out FIOS competition to other cable markets because Verizon had decided in 2009 not to further expand FIOS under any conditions.

"Wall Street punished us for investing in FIOS," said Milch.

He said Verizon remains committed to expanding FIOS in its existing markets and making those markets profitable. He said the marketing agreements are nothing more than a customary agreement to co-market.

David L. Cohen, executive VP of Comcast, said its deal doesn't end chances that Comcast could start its own rival cellphone service, because Comcast long ago realized it was far short of the amount of spectrum needed to compete.

Milch also denied that the deals would give Verizon too much of the nation's spectrum, saying Comcast is one of the most efficient users of spectrum and would quickly put the currently unused spectrum to work.

Those assurances didn't placate those worried about the deals . "Verizon's deal threatens the very structure of competition in the wireless industry," warned Timothy Wu, a Columbia University law professor.

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Tags: 1996 telecom act | Al Franken | Bright House Networks LLC | Comcast Corp. | Cox Communications Inc. | David L. Cohen | FCC | Federal Communications Commission | fiber optic service | FIOS | Herb Kohl | Justice Department | Randal S. Milch | Rural Cellular Association | Senate Judiciary Committees Subcommittee on Antitrust | SpectrumCo LLC | Steven K. Berry | Time Warner Cable Inc. | Verizon Wireless | wireless spectrum

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