Verizon to Tell U.S. Comcast Deal Causes No Consumer Harm

Tech Weekahead
Verizon Wireless proposes to buy airwaves from cable companies to meet the growing demand for smartphones and tablet computers such as Apple Inc.’s iPhone and iPad products. Photo: Joe Raedle/Getty Images

Verizon Wireless plans to tell a congressional panel vetting its proposed $3.6 billion purchase of airwaves from cable companies led by Comcast Corp. that the deal would solve a critical need without reducing competition.

“No customer will see fewer choices or increased prices as a result,” Randal Milch, general counsel of Verizon parent Verizon Communications Inc., said in testimony submitted to a Senate antitrust panel for a hearing today.

Verizon Wireless agreed to share marketing with Philadelphia-based Comcast, the largest cable provider, and other sellers of unused airwaves, a group that includes Time Warner Cable Inc., the second-biggest operator, and closely held Bright House Networks LLC.

Opponents said yesterday the accord announced Dec. 2 would result in less competition and higher prices. The Justice Department and Federal Communications Commission are examining the deal, and a similar $315 million agreement between Verizon Wireless and Cox Communications Inc. Both agencies must approve the transactions before they can close.

The Justice Department probe is focused on whether the transactions concentrate too much control of airwaves in Verizon’s hands and whether the marketing agreements between Verizon and the cable companies could hurt competition, a person familiar with the investigation said in December.

Spectrum Sale

The FCC, which regulates airwaves use, said on March 8 it will consider the marketing agreements. Verizon officials earlier said the agency’s review should be limited to an analysis of the spectrum sale.

Today’s session before a Senate antitrust subcommittee led by Senator Herb Kohl, a Wisconsin Democrat, carries the title, “The Verizon/Cable Deals: Harmless Collaboration or a Threat to Competition and Consumers?”

Kohl urged regulators last year to prevent the second-largest U.S. wireless provider, AT&T Inc., from buying the fourth-biggest, T-Mobile USA Inc. AT&T abandoned the deal after the Justice Department sued to block it.

Verizon Wireless said the spectrum purchase will bring it airwaves needed to meet demand that’s soaring as consumers buy more smartphones and data-hungry tablet computers such as Apple Inc.’s iPad. Basking Ridge, New Jersey-based Verizon Wireless is 55 percent-owned by Verizon and 45 percent-owned by Vodafone Group Plc, based in Newbury, U.K.

‘Every Incentive’

The marketing agreements let Verizon Wireless and cable companies act as sales agents for each other’s services. Verizon Communications will have “every incentive” to compete against cable companies with its FiOS high-speed wired service, Milch said in his testimony.

More than 85 percent of households served by the cable companies aren’t in areas reached by FiOS, he said.

The deal would create an “unchecked monopoly by the nation’s largest cable and wireless companies,” the Communications Workers of America and the International Brotherhood of Electrical Workers said yesterday in a statement. The unions said they obtained 75,000 signatures on an online petition opposing the deal.

“This lucrative deal will kill Verizon’s incentive to compete with cable and end FiOS development to new areas,” the unions said. Cities bypassed by Verizon FiOS such as Boston and Baltimore, as well as Buffalo, Albany and Syracuse in New York State, and any rural areas will never get the network, the groups said.

‘Divide the Market’

The deals would let Verizon and the cable companies “divide the market for at-home wireline broadband,” or high-speed Internet service, the policy group Free Press said in written testimony.

“Allowing for further consolidation in this marketplace will only drive prices higher, reduce consumer choice, and have drastic consequences on the rate of innovation as the companies involved are freed from competition,” according to the testimony by Joel Kelsey, Free Press policy adviser.

Comcast plans to tell lawmakers the deal benefits consumers, according to prepared testimony by Executive Vice President David Cohen.

The marketing agreements “give the cable companies a path to quickly and efficiently offer wireless services” in competition with bundles offered by AT&T and DirecTV, Cohen said in his written remarks.

“They also enable Verizon Wireless to offer its customers new options for subscribing to wired video, voice and high-speed Internet services,” Cohen said.

Wireless Networks

The cable companies decided not to build wireless networks before the agreements, and Verizon decided not to expand FiOS before the deal, Cohen said. One-time marketing fees to Verizon Wireless for signing up a new Comcast customer “would not come close” to the continuing revenue from a new FiOS customer, preserving incentives for Verizon Communications to compete with cable companies, Cohen said.

The transaction will concentrate too much spectrum in Verizon’s hands, said Steve Berry, president and chief executive officer of the Rural Cellular Association, which represents more than 100 wireless providers, including rural and regional carriers.

“If the deal is approved as proposed, Verizon will add even more spectrum to its warehouse while competitive, spectrum-starved carriers are left behind,” Berry said in his prepared testimony. He called for regulators to impose conditions including spectrum divestitures if they decide to approve the deal.

Tim Wu, a law professor at Columbia University, agreed in his testimony that putting more spectrum in Verizon’s hands would affect “the very competitive structure of the communications market,” raising the specter of a “creeping duopoly” of Verizon and AT&T.

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