FCC to Approve Spectrum Transfer Deals Between Verizon, Cable Companies

By Wayne Rash  |  Posted 2012-08-16

FCC to Approve Spectrum Transfer Deals Between Verizon, Cable Companies

The Federal Communications Commission will approve the sale of spectrum by a group of cable companies to Verizon Wireless, according to a statement released Aug. 16 by FCC Chairman Julius Genachowski.

The announcement follows the completion of an antitrust review by the U.S. Justice Department and a consent agreement by Verizon and the cable companies that made fundamental changes to their respective spectrum transfer agreements and a number of binding pro-competitive commitments.

Genachowski said that the "unprecedented" divestiture of spectrum to T-Mobile, as well as a commitment to build out new spectrum and enhance roaming obligations played a major role in the decision by the FCC to allow the sale to move forward.

"Approval of the substantially modified transaction will promote the public interest and benefit consumers in several ways. By advancing U.S. leadership in 4G LTE [Long-Term Evolution] deployment, the transaction marks another step in our effort to promote the U.S. innovation economy and make state-of-the-art broadband available to more people in more places," Genachowski said in a prepared statement.

"The transaction will preserve incentives for deployment and spur innovation while guarding against anti-competitive conduct. And vitally, it will put approximately 20MHz of prime spectrum-spectrum that has gone unused for too long-quickly to work across the country, benefiting consumers and the marketplace."

Genachowski said that his office will be distributing a draft order Aug. 16 to the other members of the FCC for their votes. Three of the five commission members are required to vote in favor of the spectrum deal to approve it.

Approval of the sale of the SpectrumCo cable company AWS spectrum hinged on the acceptance of a series of commercial agreements between Verizon and the cable companies involved. Initially, those commercial agreements limited Verizon's sales of its own FiOS service and required the cable companies to sell Verizon Wireless devices and services. The new agreement with the DOJ eliminated any restriction on the sale and build-out of the FiOS service, and added incentives to continue the build-out of that service. FiOS is a combination of Internet access, telephone, and cable television service, which operates over a fiber-optic network

In addition, Verizon Wireless agreed with the FCC to allow significantly increased data roaming by its competitors on Verizon's wireless network. While Verizon filed suit in April to stop the FCC from requiring such roaming, the company subsequently filed an ex parte agreement saying it would follow the FCC's roaming requirements for the next five years.

Verizon Wireless also consented with the FCC to build out its currently unused spectrum aggressively. This spectrum build-out will include spectrum that the company plans to use for LTE, including the spectrum it's buying from the cable companies. A number of groups had expressed concern that Verizon Wireless would allow the spectrum to remain unused for years.

FCC Sorted Out Highly Complex Spectrum Deal

In a press background briefing held by the FCC Aug. 16, the FCC staff said that when the deal came to them that it was the most complex that the FCC had seen. Part of the complexity was in the spectrum license transfers and much of it was in the commercial agreements. According to staff members speaking on background, the commission divided the proposal into two parts, so that the commission and the DOJ could review the commercial agreements separately.

As part of the process of approving the commercial agreements, the Justice Department and the Attorney General of the state of New York filed an antitrust suit against Verizon and SpectrumCo, followed immediately with the consent decree that then settled the suit.

Ultimately, the spectrum deal involved a three-way spectrum swap and sale. Leap Wireless had previously filed a spectrum sale with the FCC. During the review of that deal, Verizon agreed to engage in a spectrum sale and transfer with T-Mobile. The FCC combined all of the deals into a single package.

The package, if approved by the full commission, will allow the Leap Wireless spectrum deal to go through. The T-Mobile deal includes the swap of some spectrum with both companies getting spectrum from the other in order to rationalize their respective spectrum holdings. In addition, Verizon Wireless will sell about 20MHz of Advanced Wireless Service (AWS) spectrum to T-Mobile to allow that company to continue the build-out of its LTE services while also re-farming its existing Evolved High-Speed Packet Access (HSPA+) service, a process which is already under way.

The FCC staff noted that it completed its review of the Verizon spectrum deal within the commission's 180-day "shot clock." However, final approval of the total spectrum deal is in the hands of the full commission and currently there is no schedule for action by the full commission.

Comcast executive vice president David L. Cohen released a statement expressing appreciation of the DOJ approval of the antitrust issues involving the commercial agreements. "We appreciate the timely completion of the antitrust review by the government of the proposed sale of spectrum and associated commercial agreements between Verizon Wireless, Comcast and the other cable companies," Cohen said in a prepared statement. "And, we are pleased that the consent decree that we have negotiated with the Department of Justice preserves the most important goals of the agreements."

The FCC will be releasing the full text of its draft order late in the day Aug. 16.

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