Verizon, Comcast Spectrum Deal Receives FCC Scrutiny

Verizon's deal with three cable companies will turn competitors into partners, which could hurt consumers, according to U.S. Sen. Al Franken. The FCC has agreed to hold a hearing.

The Federal Communications Commission (FCC) has once again been asked to protect the rights of smartphone-toting consumers from big-business spectrum deals. Following AT&T's nine-month process of trying to convince the FCC that allowing it to purchase T-Mobile would benefit Americans, it's now a Verizon Wireless deal that is the catalyst.

Verizon announced in early December that it had struck a deal with Comcast, Time Warner Cable and Bright House Networks. The cable companies plan to sell Verizon some of their spectrum for $3.6 billion. In return, Verizon will sell cable products, and bundles of cable and Verizon products will be offered together.

Comcast CEO Neil Smit, in a Dec. 2 blog post, explained that by the terms of the deal, in four years' time, Comcast, acting as a mobile virtual network operator (MVNO), will be allowed to resell Verizon's service at wholesale rates and market and sell it as its own. He added that Time Warner and Bright House were working on similar deals, which would ultimately create "more choices for consumers."

The Times' Bits blog reported Feb. 2 that U.S. Sen Al Franken (D-Minn.), finding the deals to "reek of collusion," sent a Jan. 31 letter to FCC Chairman Julius Genachowski, expressing his concern and urging the FCC to "closely examine all of the terms and conditions of these deals."

Franken explained that the deals include marketing agreements, in which each will promote the others' products and services.

"These joint-marketing agreements will turn these rival companies into partners, rather than competitors," wrote Franken. "I fear this will ultimately mean less competition, less choice, and higher prices for consumers."

Franken added that he urged Senator Herb Kohl (D-Wis.) to hold a hearing, "so that we can further analyze the competitive impacts of these deals." According to the Bits blog, on Feb. 1 Kohl agreed to a subcommittee hearing on the matter, though has yet to set a date or release a witness list.

One expects that those who believed, regarding AT&T's proposed purchase of T-Mobile, that the FCC was treading where it didn't belong, or else doing so in a willy-nilly manner, will continue to feel such sentiments.

AT&T CEO Randall Stephenson, during the carrier's fourth-quarter 2011 results earnings call, described the FCC as "intent on picking winners and losers rather than letting these markets work."

Stephenson described an industry pinched for spectrum and so struggling to support "explosive mobile broadband growth."

He continued:

This FCC has made it abundantly clear that they'll not allow significant [mergers and acquisitions] to help bridge their delays in freeing up new spectrum. So in the absence of auctions, our company and others in the industry have taken the logical step of entering into smaller transactions to acquire the spectrum we need to meet this demand. But even here, we need the FCC's action and leadership, and unfortunately, even the smallest and most routine spectrum deals are receiving intense scrutiny from this FCC, oftentimes taking up to a year and sometimes longer before these are approved.

Verizon and its new friends will no doubt be hoping their deal will move along more expediently.