by Kenneth Corbin

Lawmakers Look to Block Verizon-Cable Spectrum Deal

Aug 10, 20123 mins

House members join with labor union to oppose a to blockbuster transaction that would give Verizon Wireless new spectrum and establish joint marketing and operating agreements with cable firms.

As Verizon Wireless’ $3.9 billion spectrum and marketing agreements with several of the nation’s largest cable companies near the end stages of a regulatory review, critics are urging antitrust authorities to block the transactions outright or attach significant conditions that they say are necessary to preserve competition and protect consumers.

Under the agreement, Verizon Wireless would acquire a swath of spectrum from Comcast, Time Warner Cable and Bright House Networks (as well as Cox, in a separate transaction) and the firms would enter into joint marketing and operating agreements through which they would promote and sell each other’s services.

But for critics who warn against greater consolidation in the telecommunications sector, the deal would further an alarming trend and erode competition, likely driving up prices.

“We should be very careful about approving deals like this which turns competitors into collaborators,” Rep. Jerrold Nadler (D-N.Y.) told reporters on a conference call. “This should raise serious red flags.”

In July, Nadler was one of 32 members of Congress who signed a letter to the heads of the Justice Department and Federal Communications Commission urging a close review of the transaction and suggesting that the deal violates provisions of the 1996 Telecommunications Act concerning marketplace diversity.

“We want firms to compete, not capitulate or collaborate,” Nadler said.

Rep. Brian Higgins, another New York Democrat, called the deal “anti-city” and “anti-rural communities,” adding that he “urge[s] a renegotiation or rediscussion of this deal.”

Of particular concern are the joint agreements that raise the prospect of Verizon ceding its television and broadband Internet businesses to the cable outfits while strengthening its position in the wireless market.

But that confuses Verizon Communications and its namesake wireless operator, in which it holds a majority stake, according to Ed McFadden, a spokesman for Verizon Communications. McFadden noted that the telecom giant’s FiOS service is hugely profitable and insisted that the firm will continue to compete aggressively should the proposed transactions win regulatory approval.

“FIOS has been taking market share from the cable companies consistently for years now. That’s not going to change,” he said. “Verizon FiOS will go head to head with cable anytime, anywhere.”

McFadden said that Verizon expects approval of the cable agreements before the end of the summer.

Among the most vocal opponents of the deal has been the labor union that represents more than 40,000 Verizon employees, the Communications Workers of America. That group is locked in a contract dispute with Verizon, and McFadden suggested that it has orchestrated its opposition campaign to the cable deal as a bargaining chip to gain leverage in those negotiations.

He pointed out that, in practice, Verizon Wireless stores would promote the services of the cable companies alongside Verizon FiOS, giving consumers a plain choice and intensifying, rather than eroding, competition between the providers.

Critics counter that, inevitably, the joint operating agreement will lead to a cessation of hostilities, partitioning the marketplace among entrenched wireless and cable providers. Any approval of the deal, they contend, must be conditional and include safeguards to protect competition in specific markets.

“Rather than trying to come up with better products or lower prices the cable companies and Verizon have entered into a sweetheart deal,” said David Balto, an antitrust expert and former assistant policy director at the Federal Trade Commission. “No matter how you try to dress this up, this is just simply a cartel in disguise.”