Cox, Verizon Spectrum Deal Shows What Might Have Been for ATandT

 
 
By Wayne Rash  |  Posted 2011-12-17
 
 
 

Cox, Verizon Spectrum Deal Shows What Might Have Been for ATandT


In the world of "could of, should of, would of" you have to ask yourself what might have happened if events had played out in some other way. For example, what might have happened if AT&T, finding itself low on spectrum, had decided to buy some from companies that had it but didn't need it. For example, suppose it had bought the spectrum holdings from Cox Communications.

On Dec. 16, Verizon Wireless did just that. Cox has agreed to a $315 million deal with Verizon that will transfer all of its 20MHz Advanced Wireless Services (AWS) spectrum licenses to Verizon. This deal gives Verizon access to 28 million new customers, and it gives Cox and Verizon the ability to sell each other's services. In other words, you'll be able to go into a Cox Wireless store and buy a Verizon Wireless phone. You will also be able to buy Cox services at a Verizon store.

Right now, that's about all that this agreement does, but out of it comes more access to Verizon Wireless for its 4G customers, and Cox gets another outlet and another stream of revenue. It's all pretty low-key. While the Media Access Project is claiming that this is a cartel of some kind, that doesn't seem to be the case. Cox had already dropped its efforts to become a wireless provider long before the deal with Verizon, and my discussions with Cox executives indicate that they're not expecting to take over Verizon's FiOS bundled telephone, Internet and television service.

In fact, Todd Smith, director of media relations for Cox, sees things much differently. "Our 3G wireless venture with Sprint had a lack of wireless scale, and we didn't have 4G," he said. But Smith added that there was obviously a demand for wireless among Cox's customers and the company wanted a way to accomplish that. The result is that each is selling the services of the other. Currently, Cox isn't selling wholesale services for Verizon, however, although that might happen in the future.

While the deal has been signed, it won't take effect for a while. "The spectrum deal has to go through the regulatory process," Smith said. "The joint sales agreement is something we'll be working on over the next few months." This means that the sale of the Cox spectrum has to be approved by the Federal Communications Commission.

Verizon, Cox Deal Doesnt Set Off Antitrust Alarm Bells


 

FCC approval of the spectrum sale is likely. It's very similar to the deal AT&T made to buy spectrum from Qualcomm earlier in 2011, which the FCC approved in October. There's nothing particularly remarkable about this sale, except that it takes Cox out of the realm of wireless operators, but it had already removed itself from that realm anyway.

Now, contrast this with AT&T's fumbled attempt to buy T-Mobile by claiming it was a spectrum deal. Had it really been about spectrum, AT&T could have purchased spectrum from companies such as Cox when their plans changed, just as it did from Qualcomm. Had AT&T chosen this route, it would have cost far less than the $39 billion price tag that it was offering to pay for T-Mobile. Its chances of success would have been much higher, and it probably would have already been using that spectrum instead of finding itself in the nether world of "could of, should of, would of."

So now, Verizon Wireless grows even bigger, has access to more customers, and manages to do all of this without breaking the law or even raising too many eyebrows. While it remains to be seen how useful it becomes to sell each other's products, it does give Verizon something to sell for customers who can't-and probably never will-get FiOS. It also gives Cox a way to offer wireless products and services, which is something that never really got off the ground with Sprint.

While there are critics who see something nefarious in this deal, I don't see it. For one thing, the deal is too limited for it to mean anything as sweeping as critics claim. For another thing, none of the companies involved seems to be overreaching. Cox is simply selling something it doesn't need to Verizon Wireless, which needs it. While there is a joint sales agreement, it doesn't seem to be giving either company a major market advantage. In fact, I'm not convinced it's going to do a lot for either company's bottom lines.

Cox's Smith sees it on a more positive note. "This gives us the ability to meet the wireless demand of our customers," he said. "Our intention is to offer our customers their full spectrum. The benefit is that customers can get it all from one place. [Verizon] would sell Cox products and services in their sales channels, and we would sell Verizon in our channels."

Now, imagine how it might have been if AT&T had conducted business in the same way.


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