Concerns About Anti-Competitive Factors Remain

By Wayne Rash  |  Posted 2012-06-25

Verizon Wireless, T-Mobile Spectrum Deal Fails to Curb Critics' Concerns

The joint announcement by Verizon and T-Mobile that both companies had agreed to a complex spectrum purchase and swap arrangement will apparently eliminate T-Mobile€™s objections to the purchase by Verizon of Advanced Wireless Services spectrum from a group of cable companies.

Statements made by T-Mobile to eWEEK indicate that the deal is contingent on regulatory approval. However, the regulatory approval has been challenged by T-Mobile, among other entities, to Verizon€™s plans to buy AWS spectrum from a group of cable companies.

In a statement provided to eWEEK by a T-Mobile spokesperson, the company noted that it had been saying that Verizon€™s deal with the cable companies wasn€™t in the public interest, but that now T-Mobile€™s position had changed. All of that happened when Verizon agreed to sell some of that spectrum to T-Mobile, the spokesperson said.

€œWe believed the transaction represented an unfair concentration of spectrum in the hands of the nation€™s largest wireless carrier,€ the spokesperson said in a statement to eWEEK. €œThe significant spectrum divestitures by Verizon announced today are good for competition and consumers.€

The spokesperson also noted that while the T-Mobile agreement to purchase and swap AWS spectrum is a separate transaction from the Verizon deal to buy cable company spectrum, it is contingent on the approval of the cable company deal. €œOur agreement with Verizon is subject to separate FCC review and approval,€ the spokesperson said, adding, €œbut it is contingent upon completion of Verizon€™s transaction with the cable companies since much of the spectrum we are acquiring is now held by the cable companies.€

While T-Mobile has not explicitly said that it would withdraw its current objection before the FCC, it would be necessary for that objection to be disposed of, and the fastest way for T-Mobile to make that happen would be to withdraw its objection. T-Mobile, it should be noted, has said it will have refarmed its existing Evolved High-Speed Packet Access (HSPA+) spectrum to 1,900MHz and implemented a 4G Long-Term Evolution (LTE) technology systemwide by the end of 2013.

The HSPA+ system refarming will be necessary if T-Mobile is to offer the Apple iPhone 5 when it ships in the fourth quarter. T-Mobile has already begun supporting iPhones by selling accessories in its stores and providing technical support. Furthermore, the company has said that by offering the new frequencies it will support iPhones as well as international GSM phones in the United States. T-Mobile€™s first iPhone-friendly data cell saw service at Apple€™s Worldwide Developers Conference (WWDC) in San Francisco in mid-June when the company launched test service there.

However, despite T-Mobile€™s probable withdrawal of objections from Verizon€™s cable company spectrum deal, other groups remain opposed. Rebecca Mark, spokesperson for the Alliance for Broadband Competition, said in a prepared statement that the group€™s objections to Verizon€™s agreements with the cable companies are about a lot more than spectrum.

Concerns About Anti-Competitive Factors Remain

She said that it€™s about the agreement by Verizon and the cable companies not to compete. €œThe deal is a far-reaching non-compete agreement between two huge competitors,€ Mark said in her statement. €œWhile it's nice that Verizon will cede a small portion of its vast spectrum holdings to T-Mobile, that does nothing to mitigate the fact that Verizon and Cable want to stop competing, stop investing, and stop innovating to the great detriment of consumers and the American economy.€

Cathy Sloan, vice president of Government Relations for the Computer & Communications Industry Association told eWEEK that most observers had expected a spectrum divestiture from Verizon Wireless as a condition of the FCC€™s approval of the cable company spectrum deal.  But she said that a number of other issues are really a lot more important, including WiFi offload, especially in urban areas where cable companies could provide data services, but favor some carriers€™ phones over others. She also noted that the CCIA was concerned about backhaul services, since nearly all of those service are provided by AT&T and Verizon, the two largest players in the wireless space.

For the Communications Workers of American, the concern is all about jobs. According to a statement released by the CWA, the €œVerizon Wireless-Big Cable proposal€ would allow Verizon and the cable companies to agree not to compete with each other.

€œThe threat of job loss and higher consumer prices from the proposed Verizon Wireless-Big Cable deal remains, even if today's announcement resolves some of the FCC's concerns about one piece of the agreement," said Debbie Goldman, telecommunications policy director for the CWA in a prepared statement.

"The CWA€”along with major consumer groups and elected officials€”continues to voice concerns with federal regulators about the monopolistic cross-marketing arrangement and urges regulators to put conditions on this deal to ensure it is in the public interest.€

€œVerizon has cut 14,750 jobs of frontline wireline workers in the eight states and Washington, D.C., in its East Cost landline footprint since 2010, and the proposed deal would cost more jobs as the company loses the incentive to expand its FiOS service to new areas,€ the CWA noted in its statement.

In reality, the Verizon deal with the cable companies consists of two only slightly related issues. One is spectrum availability and concentration of spectrum by one company. The other issue is whether that deal necessarily includes the agreement not to compete or whether the spectrum deal between Verizon Wireless, T-Mobile and the cable companies is separate from any cross-marketing deal and its possible effect on competition. At this point, no one has presented conclusive evidence that they are necessarily linked despite the concerns. But this is one issue that the U.S. Department of Justice needs to sort out.

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