Verizon is close to getting FCC approval for its proposed spectrum deal with four cablecos, but the Department of Justice may be another matter.
According to Reuters sources, the regulator is poised to give the green light to the complex agreement, which would see Verizon buying AWS licences from SpectrumCo (a consortium of Comcast, Time Warner and BrightHouse) and Cox Communications, as well as engaging in cross-marketing deals with them. If that is approved, Verizon will divest some of its AWS spectrum to T-Mobile USA to assuage regulatory concerns, and has also offered to sell off licences in the 700MHz A and B Blocks too.
However, the DoJ, which examines antitrust issues, still needs convincing, says Reuters, as the agency will take a broader view, beyond spectrum arrangements, including the impact of the cross-marketing arrangements on broadband and wireless competition. The DoJ is understood to be concerned about the collaboration between the US’s largest cellco, and the biggest cable operator, Comcast, and whether this will reduce competition and drive up prices. Previously, the cablecos’ broadband activities were seen as a stimulus to Verizon to invest more heavily in its FiOS services, while the cable firms were a potential new source of wireless competition, until they pulled away from providing their own mobile offerings in favor of the Verizon alliance.
The source also said the DoJ would look closely at the creation of a “joint operating entity” between Verizon and the cable companies, which is planned to develop new technologies, such as platforms to support wired/wireless roaming and offload. However, this could result in the group building services on highly competitive, but proprietary, systems.
“The Justice Department has big concerns about what mischief could be done in undefined agreements that would lock out competitors,” said the source. The agency could opt for one of three courses of action ‘ sue to block the cross-marketing and technology deals; impose restrictions on these to guard against collusion; or take a period of time to monitor how the cross-marketing deals (most of which are already activated) are being implemented.
The DoJ’s doubts are likely to delay any final decision until August at the earliest, with the FCC unlikely to sign off the deal unless Justice approval is also forthcoming. A Verizon spokesperson said talks were ongoing but he expected the transaction to close ‘some time later this summer’.