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Tech / Technology

Verizon-Cable Deals Advance With Settlement

FCC Chairman Julius Genachowski gives thumbs up.(AP Photo/Jacquelyn Martin)

photo of Juliana Gruenwald
August 16, 2012

The Justice Department announced on Thursday that it has reached a settlement with Verizon Wireless and a group of cable companies that will allow their spectrum and joint marketing agreements to go forward subject to conditions aimed at addressing concerns that the transactions could harm competition in the wireless and wireline markets.

Federal Communications Commission Chairman Julius Genachowski said on Thursday he also is recommending that the full commission approve the deal in light of the proposed settlement hammered out with Verizon and the cable firms.

“In response to the agencies’ objections, the parties have made a number of binding pro-competitive commitments and will also make fundamental changes to their agreements,” Genachowski said in a statement. “Because of these substantial undertakings and in light of the consent decree the companies executed with the Justice Department today, I believe the commission should now approve this transaction, and I will be circulating a draft order to my colleagues that would do so.”

 

Verizon announced in December that it planned to buy spectrum from a joint venture made up of Comcast, Time Warner Cable, and Bright House Networks, and from Cox Communications as part of a separate deal. In addition, Verizon said it would enter into cross-marketing and technology research agreements with the cable firms that called on the companies to sell each other’s services.

Critics raised concerns with both the spectrum sale and the marketing and technology agreements. They argued that the marketing agreements amounted to a truce between Verizon and the cable companies in competing for wireline Internet, phone, and video customers. At the same time, some rivals and public-interest groups said that the spectrum sale would allow Verizon, the nation’s biggest wireless provider, to warehouse valuable spectrum that could be better used by smaller rivals.

As part of the proposed settlement, which was filed in federal court in Washington on Thursday, the Justice Department said it is requiring Verizon and the cable companies to make substantial changes to the joint marketing and technology agreements, saying the deal as originally proposed would have provided the firms with less of an incentive to compete aggressively against each other.

“We think the ultimate result is pro-competitive and would not inhibit competition in any way,” Joseph Wayland, acting assistant attorney general for antitrust, said in a conference call with reporters.

The changes called for in the settlement would bar Verizon from reselling the cable companies Internet, video, and phone services where Verizon offers its own FiOS broadband service. In addition, the settlement only allows Verizon to resell the cable companies’ Internet, television, and phone services in areas where Verizon offers its DSL Internet service until the end of 2016, though the companies can seek Justice approval to extend this part of the agreement. Under the settlement, the proposed technology research agreement also would expire in December 2016, though the companies can request that it be extended.

Justice, however, did not require that Verizon continue building out its FiOS service, which was a key condition demanded by the Communications Workers of America. CWA employs thousands of Verizon wireline workers and voiced concern that Verizon and the cable firms were agreeing not to compete for wired customers anymore. CWA and other critics note that in many areas, FiOS is the only alternative consumers have to the cable companies' broadband services.

Justice also said it would allow Verizon to buy spectrum from the cable firms as long as it moves forward with a spectrum swap it proposed earlier this summer with rival T-Mobile USA, which had originally opposed the deal. T-Mobile dropped its opposition in June after Verizon said it would sell some of the spectrum it is acquiring through the cable deal to T-Mobile. Verizon also has pledged to put the airwaves it is obtaining to use quickly by committing to a specific timetable for deployment.

“As evidenced by the consent decree, we believe we have addressed the Department of Justice’s concerns,” Verizon Vice President and General Counsel William Petersen said in a statement. “We now believe the consumer benefits of the transaction will be promptly realized, and look forward to the conclusion of the FCC review so that we can move forward with meeting the unprecedented consumer demand for innovative 4G LTE mobile and data-driven products and services.” 

Comcast Executive Vice President David Cohen said in a blog post that despite the concessions, he believes the settlement “still preserves the most important goals of the agreements, including Comcast's ability to market Verizon Wireless services throughout our footprint in order to offer our customers a wireless option.”

Critics said while the conditions did address some concerns, they didn’t go far enough.

“The proposed conditions on this transaction attempt to alleviate some of the harms that will arise from a lack of competition, and policymakers deserve credit for trying to make the best of a bad deal,” Public Knowledge President Gigi Sohn said in a statement. “However, it is not enough for the anti-competitive cross-selling agreement to be limited in time or scope—it should not happen at all.”

Public Knowledge and others said they worry that as a result of the deal, consumers will still have limited or no choice for wired broadband services. “There is still no meaningful competition—and that will mean higher prices for everyone,” Free Press Policy Adviser Joel Kelsey said in a statement.

The FCC must still approve the spectrum and marketing agreements, which means critics will have more opportunity to press commissioners for additional changes. An FCC official did not give a timeline for when the commission would vote on Genachowski’s proposed order.

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