A coalition of consumer advocates, businesses and trade groups launched on Monday to oppose to Verizon Wireless’ proposed purchase of some $3.6 billion worth of spectrum licenses from a consortium of leading cable companies. The coalition, warning that the blockbuster deal would bring companies that currently compete with one another into collusion and make it all but impossible for smaller carriers to compete.
The Alliance for Broadband Competition counts rival carriers T-Mobile and Sprint as members, as well as the Rural Cellular Association, a trade group representing smaller regional and local providers, and public-interest groups such as Public Knowledge.
In a conference call with reporters announcing the launch of the new group, members of the alliance argued that Verizon — and AT&T through its own spectrum activities — have been solidifying a duopoly that would choke off other carriers’ efforts to build a robust 4G wireless network, either regionally or on a nationwide basis.
“Verizon would prevent competitive competitors from potentially obtaining the spectrum they need to meet consumer demand,” said Kathleen Ham, T-Mobile’s vice president of federal regulatory affairs. “As the industry’s moving toward LTE, it’s very important that there be spectrum available for everybody.”
Verizon’s deal with the cable companies, which have organized under the SpectrumCo entity, is currently under review at the Department of Justice and the Federal Communications Commission. The FCC recently extended the deadline for its review, which Verizon is now expecting to conclude mid-summer.
Verizon spokesman Paul Macchia declined to comment on the formation of the Alliance for Broadband Competition. “At this moment, this is something we will not be commenting on,” Macchia wrote in an email.
Spectrum Crunch or Verizon Crushing Little Guys?
Since announcing the deal, Verizon has positioned the transaction as an important step in addressing what it describes as a spectrum crunch that threatens the viability of robust mobile broadband service at a time when carriers’ networks have been strained by the proliferation of smartphones and tablets. More recently, the firm announced plans to sell off a portion of its 700 MHz spectrum licenses if it wins approval for the cable deal, through which it would obtain 122 licenses in the Advanced Wireless Services (AWS) band.
But that announcement drew sharp criticism from the groups opposing the cable deal that have accused Verizon of warehousing spectrum, a charge that Verizon has pointedly disputed.
The broader antitrust argument against the proposed agreement raises concerns both against the crowding out of smaller wireless players, as well as the elimination of competition between the converging wireless and cable sectors, where firms have been vying to attract customers to their voice, video and data services.
“One of the principal concerns of antitrust is that competitors will cease competing with each other by dividing up their markets,” said Bert Foer, president of the American Antitrust Institute, which is not a formal member of the new alliance but has been raising its own concerns about the antitrust implications of the deal.
Foer pointed to the proposed marketing agreement between Verizon and the cable companies, which would establish the respective players as agents to sell the others’ services, and could eventually lead to cable firms selling Verizon service on a wholesale basis. While he acknowledged that the details of the regulatory review and the potential implementation of such an agreement remain unknown, Foer said that the division of markets between competitors “resembles” a condition that could be in conflict with antitrust law.
“There is an odor here that suggests Verizon will cease to challenge the cable market or at least its competitive zeal will be reduced,” he said.
While some members of the Alliance for Broadband Competition are urging regulators to reject the Verizon-SpectrumCo transaction outright, others have taken a more moderate position. The Rural Cellular Association, for instance, is advocating for strong conditions that would preserve a healthy measure of competition within the industry.
Steven Berry, president and CEO of the group, argued that the regulators reviewing the transaction must include in any conditional approval requirements for Verizon to provide competitors reasonable terms for roaming agreements and network backhaul, as well as mandates for divestitures of certain assets and interoperability obligations.
“If this transaction is approved [without conditions] they’ll own a significant amount of AWS,” Berry said of Verizon’s market power should the deal win unconditional approval. “They could almost create a walled-garden network.”
Kenneth Corbin is a Washington, D.C.-based writer who covers government and regulatory issues for CIO.com.
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