Verizon's Cable Deal Provokes Senators to Urge FCC for Careful Review

UPDATED: Verizon Wireless' deal with the cable companies could leave minorities and low-income households on the wrong side of the "digital divide," Maryland senators have warned the FCC and the Justice Department.

Verizon Wireless' deal with several large cable companies continues to be a source of controversy, ire and questions.

Senators Barbara Mikulski and Benjamin Cardin, both representing Maryland, have written to the Federal Communications Commission and the Justice Department, urging them to "consider most carefully" the concerns the senators have regarding the social and economic impacts that the deal could have on communities in Maryland and beyond.

In their July 26 letter, the senators noted that the 1996 Telecommunications Act promises consumers the benefits of "increased competition between cable and phone companies, driving investment in broadband networks, creating jobs, enabling new and improved services and applications, and lower prices."

The details of the agreement between Verizon and Comcast, Time Warner and BrightHouse Networks€”collectively referred to as SpectrumCo€”and Cox Communications, however, suggest the companies would become allies instead of competitors, wrote the senators, and "renege on that promise."

"Most significantly," they continued, "the joint marketing agreements appear to limit Verizon's incentive to invest in its all-fiber FiOS network, potentially depriving consumers of a competitive alternative to cable's broadband and video services. Such a development, our constituents fear, could leave many communities in Maryland on the wrong side of the 'digital divide.'"

They noted that Verizon's recent announcement that it will no longer sell stand-alone DSL leaves consumers with still fewer alternatives.

"People of color and lower-income households in urban and rural parts of Maryland," the letter continued, "will be disproportionately affected by the decreased incentives to invest in continued 'build out' of the FiOS network."

According to a July 30 announcement from the Communications Workers of America (CWA), nearly 10,000 Baltimore residents participated in a telephone town hall meeting the CWA held to discuss the Verizon agreement. According to the CWA, the deal could "eliminate as many as 72,000 middle class jobs in eight Eastern states, including Maryland."

Verizon Wireless responded to eWEEK's request for a response to the CWA acusations with the statement:

"Verizon Wireless has made a persuasive case that the marketing agreements with the cable companies are strongly in the public interest. We believe these agreements will enhance competition, allowing Verizon Wireless to take market share from other wireless companies, while allowing cable companies to more vigorously compete by enabling them to offer wireless services as part of a triple or quad-play package of services. As a result of these enhanced offers, Verizon believes consumers will benefit with a variety of new packages and services."

Verizon first announced the agreement in December 2011, emphasizing details related to the sale of wireless spectrum from the cable companies to Verizon. Much of the spectrum will be used to further the build-out of its Long-Term Evolution (LTE) 4G network, though it plans to sell a portion to T-Mobile€”which will likewise put the spectrum toward its LTE efforts.

During Verizon's July 19 second-quarter earnings call, CFO Fran Shammo told analysts that the deal is in "varying stages of review" by the FCC and Department of Justice, and that Verizon expects to receive approval and close the transactions "this summer."

The T-Mobile deal is contingent upon FCC approval of the spectrum, said Shammo, adding: "These transactions are good for all parties and the industry as a whole, and we facilitate the best first use of this spectrum for all players."

During an industry event in May, Shammo said he was "very, very confident" that the deal would go through.

The marketing aspect of the agreement has been called into question from the start, with interested parties asking the FCC to require Verizon to be less opaque about the details of the arrangement and even forming a group, the Alliance for Broadband Competition, to fight the deal.

In a statement on the Alliance's creation, Carri Bennet, general counsel for Alliance member the Rural Telecoms Group, described Verizon's deal with the cable companies as "creating an Axis of Broadband power that threatens competition and consumer choice to their very core."

Follow Michelle Maisto on Twitter.

EDITOR'S NOTE: This story was revised to include a statement from Verizon Wireless.