NEWS ANALYSIS: Despite opposition from public interest groups and members of Congress, the FCC seems poised to approve a deal between Verizon Wireless and several cable companies.
The deal struck between Verizon Wireless and a consortium
of cable companies in which Verizon Wireless would buy unused spectrum from
them is on track despite opposition by several public interest groups and by
32 Democratic House members. In a decision just released, the Federal
Communication Commission announced
that it was denying
a motion by Public Knowledge and the Rural
Telecommunications Group to restart the Shot Clock, which sets a time limit
for considering actions such as spectrum sales.
We are not persuaded, under the circumstances outlined
in the Motion, that Public Knowledge and RTG have shown good cause that
granting the Motion for an extension of time would serve the public interest.
The Commission has an obligation to review the transactions proposed in the
Verizon Wireless/SpectrumCo/Cox Applications as expeditiously as possible,
consistent with the public interest, the FCC said in its statement.
Accordingly, pursuant to the authority contained in
sections 4(i)(j) and 5(c) of the
Communications Act of 1934, as amended, 47 U.S.C. Â§Â§ 154(i)(j), 155(c), IT IS
ORDERED THAT the motion by Public Knowledge and RTG for extension of time in
the above-captioned proceeding IS DENIED, the FCC concluded.
The decision by the FCC not to delay consideration of the
VerizonCable spectrum deal strongly indicates that the Commission plans to
meet its deadline of the end of August. That does not, however, mean that
Verizon or the cable companies will get exactly what they wanted.
During the course of the FCC consideration of the
spectrum deal, the FCC requested details of a joint marketing agreement between
Verizon and the cable companies in which they would sell each others
products. There was also an agreement not to compete with each other in regards
to broadband sales.
Currently, the U.S. Department of Justice is reviewing
the non-compete and joint marketing agreements to determine whether it amounts to
collusion, and therefore would be a violation of antitrust laws. While the
marketing agreements, according to the FCC, do not fall under the Commissions
purview, the FCC has said that it is working closely with the DOJ regarding the
What this means is the FCC can decide to approve the
deal for Verizon to buy spectrum from the cable companies regardless of the
joint marketing agreements. The DOJ can decide that the joint marketing
agreements violate antitrust laws and stop them. Theoretically, the two actions
shouldnt affect each other. But lets face it, nothing is that simple in
Thats not to suggest that things shouldnt be simpleat
least as simple as a multi-company, multi-tier spectrum deal can ever be. After
all, Verizon has said repeatedly in statements to the FCC that the spectrum
deal and the joint marketing agreements are separate from each other. On the
other hand, the cable companies have indicated that if they have to give up too
much, theyll back out of the spectrum deal.
So whats likely to happen? The spectrum deal has several
moving parts, and those parts operate independently of each other. The joint
marketing agreement isnt strictly a part of the spectrum sale, so the FCC can
simply ignore it. The Justice Department doesnt really have authority over the
sale of spectrum, since theres no merger involved, and Verizon Wireless isnt
in competition with the cable companies. But, of course, the reality is
But the FCC has great latitude in the conditions it
places on any agreement between companies to sell spectrum, and it has an
obligation to make sure such a sale is in the public interest. The spectrum
sale, taken by itself, is clearly in the public interest.
The cable companies arent using the spectrum, and they have no plans to use
it. If Verizon buys the spectrum, the company will be able to offer more
capacity and potentially higher speeds over its wireless network.
In addition, Verizon has agreed to sell T-Mobile some of
its spectrum and to make portions of its 700 MHz spectrum available for sale.
The sale to T-Mobile will help that company launch its Long-Term Evolution (LTE)
service nationally. The purchase of the spectrum from the cable companies will
help Verizon grow out its LTE service. So far, its all good.
But since the FCC is working closely with the Justice
Department, the Commission can also put conditions on the sale that Verizon and
the cable companies must agree to for the sale to be approved. One of those
conditions could be limits on those joint marketing agreements. Other
conditions that are floating around may be requirements for access to roaming
or agreements on backhaul for other carriers.
Right now, any such conditions are pure speculation.
However, the FCC seems determined to approve the spectrum
deal by its self-imposed deadline, and such conditions are the fastest way to
get agreements in place from all parties regarding the joint marketing
agreements. Now the biggest question is whether the cable companies will go
along with the FCC. Chances are good that the cable companies will acquiesce.
The cable companies are already worried that the FCC will try to regulate them,
and the last thing they want is a reason for the FCC to do so.