Verizon, Cable Deal Likely Getting FCC Approval Soon

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 €œShot Clock,€ which sets a time limit for considering actions such as spectrum sales.

€œWe 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.

€œAccordingly, 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. §§ 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 Verizon€“Cable 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 other€™s 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 Commission€™s purview, the FCC has said that it is working closely with the DOJ regarding the deal.

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 shouldn€™t affect each other. But let€™s face it, nothing is that simple in Washington.

That€™s not to suggest that things shouldn€™t be simple€“at 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, they€™ll back out of the spectrum deal.

So what€™s likely to happen? The spectrum deal has several moving parts, and those parts operate independently of each other. The joint marketing agreement isn€™t strictly a part of the spectrum sale, so the FCC can simply ignore it. The Justice Department doesn€™t really have authority over the sale of spectrum, since there€™s no merger involved, and Verizon Wireless isn€™t in competition with the cable companies. But, of course, the reality is otherwise.

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 aren€™t 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, it€™s 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.