Agency OKs Verizon deals with cable companies

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August 17, 2012

Agency OKs Verizon deals with cable companies

Anonymous Staff Wire Reports The Daily Star Fri Aug 17, 2012, 03:30 AM EDT

The Justice Department's antitrust division Thursday approved deals between Verizon Wireless and four of the nation's largest cable companies but applied conditions.

Most significantly, the agency said it will not allow Verizon Wireless stores to sell TV and broadband services from the cable companies -- Comcast, Time Warner Cable, Bright House Networks and Cox -- in areas where Verizon sells its own TV and broadband service.

In home broadband services, Verizon Communication Inc.'s FiOS provides the only significant competition to cable in many areas. Yet FiOS is costly to build out, and Verizon's commitment to the technology has faltered. Consumer groups who opposed the deal between the cable companies and Verizon said it showed that Verizon was further giving up on FiOS and yielding the home broadband market to cable.

The Justice Department agreed, saying the agreements would harm competition by reducing incentives to compete, resulting in higher prices and lower quality for the public.

Last week, Oneonta Mayor Dick Miller and members of the Common Council sent a letter to federal officials, joining a movement by other cities statewide, to voice concerns about the impact of providers' spectrum and commercial agreements.

"The Justice Department's decision seems to be generally responsive to the concerns we, and other upstate communities, raised," Miller said Thursday. "We wanted Verizon held to its commitment to build out the FiOS home broadband network, and it appears that will be the case."

The Federal Communications Commission and the New York state attorney general's office were involved in the review of the deal. FCC Chairman Julius Genachowski cited as a major reason for allowing the deal that Verizon has pledged to sell some spectrum to T-Mobile USA, the No. 4 U.S. cellphone company.

Verizon Wireless announced deals to buy spectrum from the cable companies late last year. Analysts called it an epochal deal between companies that have been enemies for decades. In total, Verizon Wireless is paying $3.9 billion for the spectrum, which will allow it to add capacity to its high-speed "4G LTE" wireless broadband network.

Regulators saw the transfer of the unused spectrum to Verizon as a positive one for consumers. The co-marketing agreements, signed at the same time, raised concern.

Genachowski said in a statement issued Thursday that "the companies' commercial agreements will be modified to, among other things, preserve Verizon's incentives to build out FiOS, increase wireless competition, and ensure that the proposed IP venture is pro-consumer and that its products cannot be used in anti-competitive ways."

Approval of the substantially modified transaction will promote the public interest and benefit consumers in several ways, Genachowski said.

However, the Communications Workers of American said the Justice Department's decision was "exactly the wrong one for workers, consumers and communities" and will result in a massive monopoly, job cuts, higher prices and fewer choices."

The conditions on cross-marketing set by the Justice Department are weak, the CWA said in a media release issued Thursday, and will "do little to continue competition." Verizon Wireless will abandon further investment in FiOS, its high speed network, which also will result in a loss of jobs, the union said.

Apart from limiting the areas where Verizon Wireless stores can sell cable, the agreement between the parties and the Justice Department puts a five-year limit on the co-marketing agreement in other areas.

Comcast, Time Warner Cable and Bright House bought the spectrum they now want to sell Verizon with loose plans to start a wireless company or form a joint venture with one, the Associated Press said. Those plans never came to fruition. Cox had started setting up its own wireless service but gave up last year, saying it would be too small to compete against the big cellphone companies.

Officials with public-interest groups Free Press and Public Knowledge said they believe conditions on the deal will help consumers, but they said regulators did not go far enough. They called on the government to deal with the underlying problems of the broadband industry, where landline phone companies like Verizon are being beaten by cable companies, who can offer higher download speeds cheaply.

"Congress and the FCC should pursue new policies to stimulate competition in wireline Internet access service -- or resign themselves to regulating a broadband monopoly," Gigi Sohn, president of Public Knowledge, said.

In the April to June period this year, the country's eight largest phone companies together lost a substantial number of broadband customers, while cable companies kept posting increases.