Verizon/Cable Opponents See Parallels to AT&T/T-Mobile Fight

One big change is that the Verizon/cable transactions don’t take a popular player out of the mix, unlike AT&T/T-Mobile, so the debate has not been enlarged to attract grassroots response on either side. The number of filings at the FCC has been far lower than what was seen on AT&T/T-Mobile. As of late Friday, the number of filings in the main docket on the deals -- 12-04 -- tallied only 411 comments, far fewer than the AT&T/T-Mobile docket last year, which had nearly 45,000 filings in less than nine months.

T-Mobile, which has already invested heavily in AWS spectrum, has taken the lead fighting the Verizon/cable transactions. The company views the licenses as a natural fit for its network as it deploys LTE (CD April 2 p1). But many of the same groups opposed to AT&T/T-Mobile have mounted similar opposition campaigns.

Verizon Wireless agreed in December to pay about $3.6 billion for 122 AWS licenses from SpectrumCo (CD Dec 5 p1), a venture of Bright House Networks, Comcast and Time Warner Cable, and later to pay another $315 million for 30 AWS licenses from Cox Communications.

"Picking a fight over the [marketing] agreements was not smart” on Verizon’s part, said Public Knowledge Legal Director Harold Feld. “That only persuades people you have something to hide. Then, extending that fight with redactions was also not smart, especially when the FCC determined that there were redactions that were relevant to the transaction.” The fact that the deal involved Comcast also raises concerns, Feld said. “Comcast is very big,” he said. “Whenever Comcast does something it draws attention because Comcast is very big. … It just comes with the territory of being big.” Then too, the FCC is very concerned about spectrum and putting too much in any carrier’s hands, he said. The concerns have deepened since the December announcements, Feld said. “Looking back, it’s not that irrational to say the commission’s been signaling for about two years now, through the competition reports, and through some of the merger reviews, that it’s got concerns,” he said. “There is no new spectrum coming anytime soon. The FCC’s list of tools to handle that keeps getting whittled away."

Consumers Union Policy Counsel Parul Desai said the Verizon/cable deals raise some of the same issues as AT&T/T-Mobile. “Although this isn’t a mega-merger … I think the implications are the same: less competition, less choice which will likely result in higher costs for consumers,” Desai said. “Both the spectrum concentration and marketing agreements are worrisome. Just like with AT&T/T-Mobile, the consolidation of spectrum into Verizon Wireless’s hands will likely cement a wireless duopoly, making it even more difficult for other carriers to keep up and compete, especially when it’s not clear when additional spectrum will be cleared."

"The biggest difference is the marketing agreement” and the joint operating entity, said Andrew Schwartzman, senior vice president of the Media Access Project. “If approved, this is a game changer. Verizon and the cable companies will be making love, not war, and that is a matter of extremely great import. Even if that weren’t true, the spectrum sale alone requires intense scrutiny. The AT&T/T-Mobile deal helped a lot of people to realize the importance of combined AT&T/Verizon spectrum holdings. That, plus the fact that it looks like T-Mobile will be a competitor rather than an acquisition target, has made the spectrum sale much more important."

A Verizon spokesman defended the deal Friday. “Verizon has made a strong case in its filings and in its responses to others’ filings that Verizon Wireless’ purchase of SpectrumCo spectrum is in the public interest,” the spokesman said. “The approval of a license transfer is not the place to address the communications policy agenda that some companies and groups are pushing. Indeed, the FCC has open proceedings on virtually all of those issues. We remain focused on providing answers to the FCC about our spectrum purchase so we can get it into the hands of consumers to meet their demands for 4G LTE services."

"The only thing similar about these transactions is that they involve wireless spectrum,” a Comcast spokeswoman said. “Unlike the AT&T-T-Mobile merger, this transaction involves no consolidation of customers, jobs, assets or operating businesses. It will quickly take spectrum currently not being used and put it to work for consumers. Consumers will benefit from more choice, more competition, and more convenience.” Cox, Bright House and Time Warner Cable didn’t comment.

Other industry observers questioned the depth of the opposition to the Verizon/cable deals. “The opponents to the AT&T/T-Mobile deal, I think, drank from the punch bowl of self confidence very heavily after that deal was shut down,” said an industry analyst. “They feel that defeat of this transaction is within their grasp. However, this is a much different deal. This is a case of already licensed spectrum that has been lying fallow for six years, whereas AT&T/T-Mobile was about eliminating one of four national competitors.”

The commercial side arrangements have made it easier for some groups to oppose the spectrum buys, said Free State Foundation President Randolph May. “And, to some extent, there are interests that are just going to oppose almost anything Verizon and AT&T propose to do to acquire more spectrum,” May said. “But the FCC will be making a mistake if it gets distracted and fails to approve the deals because this would mean a good chunk of usable spectrum will continue to lie idle. The commission should want to get this spectrum repurposed promptly. As for the commercial cross-selling agreements, which apparently are already in effect, the FCC should defer to the antitrust authorities. If the Justice Department has concerns, they can be dealt with separately because Verizon and the cable companies have said approval of the spectrum acquisition is not contingent on approval of the commercial agreements."

"The critics of the Verizon/SpectrumCo transaction argue that the deal alters competitive dynamics of America’s broadband markets, but there’s no evidence to support their position because it leaves market shares and spectrum ownership rankings intact,” said Information Technology Innovation Foundation Senior Fellow Richard Bennett. “It appears that the critics are actually upset with the American consumer for making the wrong choices: Consumers prefer constantly-improving mobile networks over the traditional Internet, triple- and quad-play service bundles over discrete services, and Apple’s curated application model over the wide-open Android approach. Many public interest advocates believe that consumers will only do what’s best for them when every other option is foreclosed, so they're giving us the tough love treatment. It would be better for the activists to realize that the dynamics of 21st century networks are very different from those of the monopoly systems on which they cut their regulatory teeth.”

The transactions pose real questions for policymakers at the FCC and Department of Justice, who may have difficulty rejecting them outright, but could impose conditions that make the transactions far less attractive, said Jeff Silva, analyst at Medley Global Advisors. “When the Verizon/SpectrumCo deal was announced in early December and put side-by-side with a proposed AT&T/T-Mobile merger gasping for air at the time, a narrative swiftly emerged suggesting the former transaction probably wouldn’t have as tough a time winning government approval as the latter at least for no other reason than a national wireless carrier wouldn’t be eliminated from the market,” Silva said. “Then two weeks later the Verizon/Cox spectrum deal was announced, but even then folks were just beginning to digest what the possible stakes might be. Questions began to arise about the details of the Verizon/cable cross-marketing agreements and about what it meant in an overarching way for the future of competition in voice, data, wireless and pay-TV.”

Since, there have been a series of announcements that are bad news for carriers on the spectrum front, Silva said. “Taken as a whole as time passed in the four months since Verizon/SpectrumCo was first put in play, I think key industry stakeholders, interest groups, some lawmakers and other stakeholders -- who at a minimum seemed initially skeptical of the Verizon/cable deals -- may have begun to grow hostile toward the transactions. My sense is that’s where we are today.”