The chairman of the Senate Judiciary Antitrust Subcommittee said Thursday that Verizon Wireless' bid to buy spectrum and enter into marketing agreements with a group of cable companies raises "serious competition concerns."
"Without reaching any final judgment as to the legality of these transactions under antitrust laws or the Communications Act, I believe these transactions present serious competition concerns, which should be examined closely by your agencies," subcommittee Chairman Herb Kohl said in a letter Thursday to Attorney General Eric Holder and Federal Communications Commission Chairman Julius Genachowski. Kohl's subcommittee held a hearing on the transaction in March.
The FCC is weighing whether to approve the sale of spectrum to Verizon from a joint venture involving Comcast, Time Warner Cable and Bright House networks and from Cox Communications as part of a separate deal. The Justice Department, meanwhile, is examining the marketing agreements between Verizon and the four cable firms, which would require them to sell each other services.
In considering the spectrum sale, Kohl urged both the FCC and Justice to consider whether selling a valuable chunk of spectrum to the nation's biggest wireless provider would harm competition. In weighing such transactions, the FCC must determine whether such deals are in the "public interest."
"The FCC should be guided by the principle that wireless spectrum is not simply a privately held commercial asset but consists of the public airwaves to be deployed in the public interest," Kohl wrote. "For this reason, the parties to the transaction bear the burden of proving that it will serve the public interest."
Verizon argues that the cable firms are not using the stretch of spectrum, called Advanced Wireless Services or AWS, now and that it would use it to build out its next-generation 4G wireless service. Verizon has pledged to sell two other spectrum licenses if its deal with the cable firms is approved.
Critics, however, counter that the spectrum Verizon has offered to sell is problematic and subject to possible interference in key markets. T-Mobile in particular claims Verizon is warehousing spectrum to keep other wireless operators from obtaining airwaves critical to serving new customers and launching their own 4G services.
Kohl appeared sympathetic to this argument. "Spectrum acquisitions can be a strategic tool employed by dominant wireless carriers to entrench their market position and suppress competition," he said. He also noted that there is "considerable precedent" for the Justice Department to block such a transaction if it would prevent rivals from competing.
Kohl applauded the FCC and Justice Department for opposing AT&T's bid last year to buy T-Mobile USA. He urged the agencies to remain "especially vigilant this year to ensure that this transaction does not jeopardize a competitive wireless market for consumers that your agencies recently worked so hard to preserve." Kohl was a vocal opponent of the AT&T/T-Mobile USA deal and may have helped give federal regulators some political cover in opposing that transaction.
However, if the FCC approves the spectrum sale, Kohl said the agency should consider requiring Verizon to sell off spectrum in some markets to preserve competition.
Kohl also raised issues with the marketing agreements, noting that Verizon and the cable firms are currently "fierce" competitors in the dozen states where Verizon offers its FiOS fiber Internet, phone and video service. Critics argue that the marketing deals amount to a truce between Verizon and the cable firms and could lead to higher prices and less choice for consumers for wired Internet, phone and video service.
Noting the "potential risks to competition," Kohl urged Justice to consider trying to block the marketing agreements from taking hold in areas where Verizon has deployed or is planning to launch its FiOS service if the agency determines that the deals would violate antitrust laws.
Despite Kohl's concerns, Verizon Executive Vice President Tom Tauke said he remained confident the transactions would be approved. Many analysts had been predicting prior to Kohl's letter that the deal would likely be approved though Verizon may have to agree to certain conditions.
"The issues raised by Senator Kohl are being thoroughly examined in the reviews by the Department of Justice and the Federal Communications Commission," Tauke said in a statement. "While Senator Kohl's letter recounts the arguments reviewed at the Senate hearing, it is another indication that this transaction is on the road toward approval this summer."
Kohl's GOP counterpart on the subcommittee, ranking member Mike Lee of Utah, does not appear to share Kohl's concerns about the spectrum and marketing deals.
"Based on available evidence, I do not believe the spectrum purchase or commercial agreements will restrict competition or otherwise harm consumers," Lee said in his own letter Thursday to Genachowski and Holder. "To the contrary, the evidence suggests that these agreements are primarily procompetitive and will benefit consumers by putting previously fallow spectrum to efficient use, expanding consumer choice through the introduction of a new bundled offering, and spurring innovation in the development of new technologies and products."