Competition concerns mount over Verizon-cable deal

Verizon Wireless's bid to buy spectrum from four cablecos for $3.6bn is raising serious concerns among regulators, according to reports. The US FCC and Department of Justice (DoJ) are conducting a probe into whether the deal would make it harder for Verizon's competitors to expand their own mobile networks and be competitive. They recently extended the deadline for a decision by 21 days and could push it further, or demand concessions such as spectrum divestments.

Three sources, including Steven Berry - CEO of the Rural Cellular Association (RCA), which is spearheading opposition to the transaction - told Bloomberg that the regulators are concerned at the possible impact on competition. These fears may prolong the review process for a series of deals which, when they were first announced last fall, were widely expected to be cleared without serious trouble.

Verizon is buying AWS spectrum from Comcast, Time Warner Cable, BrightHouse and Cox Cable, to bolster its capacity for deploying LTE. It is rolling out its current network in its 700MHz band and will also harness refarmed PCS frequencies. It has offered to put additional 700MHz holdings, which are incompatible with its national LTE band, on the market to sweeten the deal in the eyes of regulators, but some analysts think that will not be enough. Paul Gallant, an analyst with Guggenheim Partners, told Bloomberg: "The deal is more likely than not to get approved with some additional concessions."

Ed McFadden, a Verizon spokesman, said the telco was cooperating with the agencies' reviews and had provided written comments to the FCC explaining why the deal would not damage competition. But this is a sensitive issues in US telecoms at present, after the blocking of the AT&T/T-Mobile merger plan last year, on competition grounds. Opposition to any increase in the power of the big two carriers has become increasingly vocal and coordinated, as highlighted by the growing voice of the RCA, a small operator group which has now been joined by the third and fourth cellcos, Sprint and T-Mobile.

Berry said the two regulators are particularly concerned by the impact of the Verizon plans on T-Mobile and MetroPCS. Also under DoJ review are the joint marketing agreements between Verizon and the cablecos, which were announced at the same time as the spectrum sales and added a far more significant dimension to the plans than a straight trade of airwaves.

Verizon and Comcast have already started to cross-market one another's communications and entertainment services in nine markets - Portland, San Francisco, Seattle, Chicago, Atlanta, Kansas City Missouri., Colorado, Minneapolis/St Paul and Salt Lake City. The joint marketing effort has already been kicked off in with Verizon selling Comcast's Xfinity products in its stores, and Comcast offering Verizon Wireless services through its call centers and online sites. The partnership includes video, voice, internet and mobile options with a variety of discounts and incentives. However, the partners are currently steering clear of markets where Verizon offers its flagship FiOS fiber service. The first three new markets are AT&T territory, extending Verizon's quad play reach, while the other three are key regions where Comcast is head-to-head with CenturyLink.

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