The Justice Department on Thursday approved Verizon Wireless’ $3.9 billion purchase of wireless spectrum from four of the nation’s largest cable companies but applied conditions to the deal to protect consumers from reduced competition and higher prices.
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.
When it comes to home broadband, 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.
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. It was the co-marketing agreements, signed at the same time, which raised concern.
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. After that period, the parties can apply to extend the deal, said the acting assistant attorney general for the antitrust division, Joseph Wayland.
Comcast, the country’s largest cable company, said it was pleased with the outcome of the Justice Department’s review.
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.
T-Mobile is strapped for space on the airwaves, and the deal with Verizon would let it compete more effectively by expanding its wireless data capacity.
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. 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.
Public-interest groups Free Press and Public Knowledge believe conditions on the deal will help consumers, but they said regulators did not go far enough.
“Policymakers can no longer pretend that the broadband market is competitive,” said Gigi Sohn, president of Public Knowledge. “Congress and the FCC should pursue new policies to stimulate competition in wireline Internet access service – or resign themselves to regulating a broadband monopoly.”