Regulators Eye Verizon's Proposed Airwaves Deal
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Verizon is trying to buy a big chunk of the public airwaves. The spectrum in question is now owned by a group of cable TV companies. The deal here would involve billions of dollars. And it faces opposition from public interest advocates who say it would be bad for consumers. NPR's Joel Rose explains.
JOEL ROSE, BYLINE: For the last few years, Verizon has gone toe to toe with local cable companies to sell its own high-speed Internet and video service.
UNIDENTIFIED MAN: Switch to Verizon FIOS, and you can get 100 HD channels. And up to 150 dollars back. This is FIOS, this is big.
UNIDENTIFIED WOMAN: Don't fall for FIOS. Comcast - better HD, and the fastest Internet around.
ROSE: But in December, Verizon announced it had reached a deal with some of the biggest cable companies in the country, including Comcast, to buy the rights to $3.6 billion dollars worth of wireless spectrum the cable operators no longer plan to use. Verizon already has the most spectrum and the most customers of any wireless carrier. But the company says it needs more airwaves to keep pace with the fast-growing demand for data.
Immediately, public interest groups and smaller carriers cried foul. Here's Steven Barry of the Rural Cellular Association telling members of Congress, last month, that he's worried Verizon is trying to squeeze his members out of business.
STEVEN BARRY: Spectrum is the lifeblood of the wireless industry. You cut off the lifeblood and the heart does not pump for long.
ROSE: Federal regulators have shown they're willing to reject a deal - like AT&T's proposed merger with T-Mobile - when they think it would concentrate too much power in a single wireless company. So Verizon offered them a deal: it would auction off some of its other spectrum holdings, if federal regulators approve its proposed agreement with the cable industry. Verizon Wireless executive Philip Junker explains the auction this way.
PHILIP JUNKER: This announcement means that a wide variety of carriers who have expressed concerns about having access to good quality spectrum will have an opportunity to come to us and gain access to those assets.
ROSE: Verizon wants to unload those assets because that spectrum doesn't fit well with its plans to improve its network, and the cable industry's spectrum does. And Sanford Bernstein analyst Craig Moffett says there's an unspoken negotiation going on here with regulators at the Federal Communications Commission.
CRAIG MOFFETT: That says they've got to divest some other spectrum in order to get the approval to buy what they want from the cable industry.
ROSE: But even if Verizon does unload some spectrum, critics of the deal with the cable industry say it could create a cartel that would have the power to dictate what consumers pay for Internet access.
GIGI SOHN: You know, you can talk spectrum all you want. But it's the agreements to collude, to lay down our arms and stop competing, that is the most problematic.
ROSE: Gigi Sohn is the president of the Washington, D.C. non-profit Public Knowledge. She's talking about a series of side deals that Verizon Wireless and the same cable companies also reached. The details of those agreements are secret. So far, the companies have only said they plan to work together to market their current products and develop new ones.
SOHN: If this is good for consumers, if this is not an agreement not to compete, or set prices or determine products, why are you trying to hide that information?
ROSE: The FCC asked Verizon and the cable companies to supply more information about the side deals. And the Senate Judiciary Committee summoned officials from Verizon and Comcast to Capitol Hill last month, to answer questions like this one, from Al Franken of Minnesota.
SENATOR AL FRANKEN: It is almost as if your companies got in a room with the other big cable companies, and you agreed to throw in the towel and stop competing. And I fear that will mean consumers will just keep seeing their cable rates rise. How can we be assured that won't happen?
ROSE: To which David Cohen of Comcast responded that, yes, his company does have a joint marketing plan with Verizon Wireless. But at the same time, Cohen says Comcast is still competing against Verizon's home Internet service, known as FIOS.
DAVID COHEN: There's just nothing in these transactions that is going to stop us from trying to beat the brains out of FIOS, continuing to compete against FIOS on quality and on price.
ROSE: That answer didn't seem to satisfy Franken. But the real question is how it will play with regulators at the FCC and the Department of Justice who are still reviewing the deal.
Joel Rose, NPR News, New York.
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