Verizon Wireless and Comcast executives were questioned March 21 by the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights, regarding whether an agreement that Verizon and several cable companies have made is a threat to competition and consumers.
The deal includes the sale of wireless spectrum to Verizon, which like its competitors is desperate for more spectrum to increase its ability to roll out its 4G network, as well as a marketing arrangement. The latter includes plans for Verizon and the cable companiesnot just Comcast but also Time Warner, Bright House Networks and Cox Communications, which collectively cover more than 70 percent of the nation’s cable marketto sell each others’ products in bundled offerings. However, specific details aren’t known. Concerned about those specifics, consumer rights’ groups and other carriers have appealed to the Federal Communications Commission to press the partners for clarity.
Leading the hearing, Sen. Herb Kohl (D-Wisc.) said in a statement that the deal will give Verizon what is “likely the last swatch of crucial spectrum available for years to come,” keeping it out of the hands of competitors. He noted:
“The basic premise of the landmark Telecommunications Act of 1996 was that cable companies and phone companies would enter each other’s markets and compete. And this vision was well on the way to being realized … In addition, recent years have seen a tremendous expansion of cell phone service and wireless devices as a way both to make phone calls and access the Internet. Many now wonder if these agreements that we are examining today will roll back these advances in competition and even amount to a truce between one of the two largest phone companies and over 70% of the cable TV industry.“
Sen. Al Franken (D-Minn.) wondered the same, asking Comcast Executive Vice President David Cohen, “This deal seems to completely abandon the goals of the Telecom Act and seems to signify the promises that Comcast made in 1996 will no longer come to fruition. Do you disagree with me on that?”
Comcast Said It Spoke With Virtually Every U.S. Wireless Carrier Before Striking the Deal With Verizon
“I don’t think we’ve changed the goal [of 1996]. I think we’ve changed the tactics to be able to get to the goal,” Cohen answered. He added that Comcast “engaged in discussions with virtually every wireless carrier in the nation” before striking the deal with Verizon.
Sen. Amy Klobuchar (D-Minn.) wondered whether the bundles could lock consumers into higher rates and result in less competition.
“No one is constrained to buying in bundles ¦ There’s nothing to get from these bundles other than convenience or a discount of sorts that the consumer can choose or not choose,” Randal Milch, Verizon executive vice president and general counsel, assured her.
Franken asked Joel Kelsey, a policy advisor with the Free Press, what the downside would be for consumers, should the deal go through.
“There is such a trend towards duopoly in the wireless market that would be exacerbated by putting close to a third of the nation’s broadband spectrum, measured by value, into the hands of Verizon,” said Kelsey.
Kelsey went on to liken the deal to New York State giving 80 percent of its farmland to two farmersand how the price of corn would naturally be expected to rise as a result. The state could step in to protect consumers, but that would be “a whole lot of government.”
“We would rather,” said Kelsey, “the FCC reject these deals in favor of more competition within the marketplace, and we think that there’s a number of items before the commission that they could do to ensure that there are stronger competitors there.”
The same day, the FCC, following its monthly meeting, seemed to pursue a few of these, announcing the formation of an Incentive Auction Task Force, led by Ruth Milkman, as well as a Notice of Proposed Rulemaking (NPRM) to “promote interoperability and encourage the efficient use of spectrum in the commercial Lower 700MHz band.”
The NPRM, the FCC said in a statement, “explores possible next steps that the FCC should take to promote interoperability in the Lower 700MHz band should it find that there is limited or no harmful interference, or such interference can be reasonably mitigated through industry and/or regulatory measures.”
The spectrum has been controversial, with smaller carriers arguing that larger ones can block certain of their devices from operating within the spectrum.
Steven Berry, president and CEO of the Rural Cellular Association, who was called as a witness in yesterday’s Verizon hearing, said in a statement the RCA released the same day that he’s pleased the FCC has taken up the NPRM.
“For over four years, rather than attempting to solve this spectrum-suffocating problem, AT&T has been allowed to develop its own private band plan, shutting out competition and harming consumers,” said Berry. “The sooner this is resolved, the faster customers all across the country will have access to 4G LTE [Long-Term Evolution] devices and services.”