FCC Presses Verizon Wireless for Details on AWS Sale
FCC Wireless Bureau Chief Rick Kaplan wants to know if Verizon Wireless would abandon its plans to sell its lower 700 MHz licenses if the commission doesn’t approve the acquisition of AWS licenses from SpectrumCo, Cox and Leap. The carrier has less than a week to answer that and several other questions about the proposed sale of its 700 MHz A- and B-block licenses, said a letter sent Tuesday to Verizon Wireless Vice President John Scott (http://xrl.us/bm74mz). Kaplan also asked what the acquirer has done to build out its lower 700 MHz spectrum, and how the sale relates to the proposed acquisition of the AWS licenses.
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Verizon noted in an April 18 news release that its plan to sell the licenses are contingent upon the close of its pending purchases of AWS licenses from Cox, Leap, and SpectrumCo -- a venture of Bright House Networks, Comcast and Time Warner Cable. “Please explain the relevance, if any, of Verizon Wireless’s announced sale of its Lower 700 MHz spectrum to the Commission’s consideration of Verizon Wireless’s proposed acquisition of this AWS spectrum,” Kaplan wrote. He also asked Verizon Wireless to “describe any and all efforts” it’s undertaken to sell its lower 700 MHz spectrum licenses prior to the news release, and asked whether FCC rejection of the AWS purchase would scuttle its own 700 MHz sale. A spokesman for Verizon Wireless had no comment.
Verizon Wireless obtained the lower 700 MHz A- and B-block licenses at auction in 2008, covering about 175 million people, but according to interim status reports filed in January, the carrier hasn’t deployed service in the lower 700 MHz band, Kaplan said. “In light of the fact that lower 700 MHz A and B Block licensees are required to build out a specified portion of their licenses by June 2013 or face a reduction in their license term, what steps to date, if any, has Verizon Wireless taken to deploy mobile services using the Lower 700 MHz A or B Block licenses (either or both?),” he asked. “On what timetable has Verizon Wireless been planning to deploy mobile service in these Lower 700 MHz spectrum blocks?” Kaplan asked for the carrier’s “current assessment” of 700 MHz A-block challenges that it previously identified.
T-Mobile commended the FCC for Kaplan’s letter. “We are especially pleased that the FCC raises the question of divestitures of AWS-1 spectrum in this context, which suggests the Commission understands that such divestitures are critical in addressing the negative impacts on competition from Verizon’s wholesale acquisition and removal from the market of the last remaining swath of nationwide spectrum for LTE services,” a spokesman said. “T-Mobile USA is pleased that the Commission is focused squarely on the public interest and in maintaining a competitive landscape for mobile broadband services in the future. We believe the answers to these very thoughtful questions will shed new light in this proceeding.”
Public interest groups generally gave little significance to the additional questions, other than their being a clear indication the FCC continues to closely review all aspects of the transaction, and is trying to get a bead on Verizon Wireless’s intentions. “I don’t think they show one thing or another regarding a final disposition,” said Art Brodsky, spokesman for Public Knowledge. Communications lawyer Andrew Schwartzman said it would be “foolhardy” to speculate on the outcome based on one letter, “but it surely indicates that the staff is looking very closely at every aspect of this matter.” Consumers Union Policy Counsel Parul Desai approved of the close review. Because of the “significant implications on competition,” it’s “critical the FCC continue to probe the impact of every aspect of Verizon’s” intentions, she said.
Not everyone was as sure of the letter’s innocuousness. “They're being thorough, yes, but my sense is they have reservations about it,” Jeff Silva, analyst at Medley Global Advisors, said of the FCC. He thinks it’s important not to look at the letter in a vacuum. In the context of the “lost spectrum opportunity” with regard to LightSquared, which deprived spectrum-challenged carriers of a potential wholesaler, and the real-world challenges ahead for repurposing broadcast and government spectrum, “I think it ratchets up the stakes of the Verizon/cable deal in the context of the challenges with the other proceedings,” Silva said.
Free State Foundation President Randolph May characterized the questions as an indication that the FCC is “not really attuned” to accommodating the workings of a secondary market in spectrum. “I don’t have a problem, of course, with the agency determining whether the applicants in a transaction are in compliance with all existing rules,” he said by email. “But when the Commission’s questions to applicants move into the realm of assessments concerning the market and future intentions, they have the unfortunate effect of signaling the agency may not be open to allowing the secondary market to function.”