Verizon Spectrum Deals To Face More Scrutiny

By Josh Long Comments

For months, AT&T had to contend with scrutiny in Washington, D.C., for its now-defunct acquisition of T-Mobile USA.

Now, Verizon Wireless is facing the heat. Its deal to buy spectrum from a consortium of cable companies and enter into joint marketing arrangements has alerted regulators and lawmakers.

In the latest development, a U.S. senator in charge of an antitrust subcommittee has revealed plans to hold a hearing on the matter, reported.

"The subcommittee carefully examines questions about competition in the wireless and video markets, with the ultimate goal of protecting consumers and reducing their cable and cell-phone bills, and these deals are no exception," the report quoted Herb Kohl (D-Wis.) as stating.

Last month, the Federal Communications Commission opened a proceeding on the $3.6 billion deal that Verizon Wireless entered to buy 122 spectrum licenses from a joint venture among subsidiaries of Comcast Corp., Bright House Networks, LLC and Time Warner Cable Inc. The U.S. Department of Justice is reportedly investigating the deal as well. In a separate transaction, Verizon Wireless is buying licenses from Cox, the cable television provider that is getting out of the wireless phone business.

The spectrum licenses cover 120 markets, and the joint venture called SpectrumCo has 20 MHz of spectrum in each market except Houston (30 MHz), according to Verizon Wireless' application with the FCC. SpectrumCo is not currently using the licenses to provide service to customers, Verizon Wireless said in the filing.

Verizon Wireless, the largest U.S. mobile operator with 108.7 million connections based on fourth-quarter results, said the spectrum will enable it "to respond to customers' accelerating use of broadband applications and features."

"The license assignments ... raise no competitive concerns," asserted the mobile-phone giant, which is asking the FCC to limit its review of the deal. " Because only spectrum is being transferred, and not an operating entity, the proposed transaction will not result in any diminution in competition.

However, some skeptics of the transaction contend the transfer of the spectrum licenses is just one piece of a complicated and potentially dangerous transaction that deserves full regulatory review. The entire agreement, which includes commercial agreements that would enable the cable operators and Verizon Wireless to sell each other's products and services, "would weaken the incentives for each of these companies to compete with one another in the provisioning of high-speed Internet, wireless, and MVPD services, undermining the FCC’s mandate from Congress in the 1996 Telecommunications Act to increase competition," wrote Joel Kelsey of Free Press in a December letter to the FCC.

Last month, Comcast announced that the cable giant and Verizon Wireless had begun offering each other's services in areas in and around Portland, Ore. and Seattle. That marked the beginning of the companies' marketing arrangement. Comcast is the largest stakeholder in SpectrumCo with 63.6 percent ownership, according to Verizon Wireless' filing.

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