Senate Antitrust Leaders Spar Over Verizon Wireless-SpectrumCo Deal
Senate Antitrust Subcommittee Chairman Herb Kohl, D-Wis., slammed the proposed AWS license transfer from cable operators to Verizon Wireless, in a letter sent Thursday to FCC Chairman Julius Genachowski and Attorney General Eric Holder. The pending purchases of AWS licenses from Cox, Leap, and SpectrumCo -- a venture of Bright House Networks, Comcast and Time Warner Cable -- raises “serious competition concerns which should be examined closely,” Kohl said. But Subcommittee Ranking Member Sen. Mike Lee, R-Utah, suggested otherwise in a separate letter that said the agreements “are primarily pro-competitive and will benefit consumers."
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The proposed marketing agreements between Verizon and the cable companies do “not seem to be sufficient” in promoting competition, said Kohl. “Relying on carriers captive to Verizon Wireless is plainly a shadow of the competition that could be offered from an actual facilities based competitor,” Kohl said. He argued that that the acquisition of spectrum “can be used as a strategic tool employed by dominant wireless carriers to entrench their market position and suppress competition."
It’s “doubtful” that Verizon’s conditional offer to sell the licenses to its unused spectrum in the 700 MHz band in the A and B block can “significantly mitigate the competitive issues posed by its spectrum acquisition,” Kohl said. There are questions about the quality and scope of the spectrum licenses which are not national and only cover selected markets, he said. Furthermore, if the licenses were subsequently acquired by AT&T it would “simply further the trend towards a duopoly market."
T-Mobile said the 700 MHz spectrum is “extremely efficient” despite assertions otherwise, in an FCC filing. “The propagation of that spectrum into buildings is very high, so you don’t need as much cell splitting or build out that you would need from other types of spectrum,” the filing said. “Just yesterday Verizon Wireless’ Chief Financial Officer Fran Shammo refuted Applicants’ arguments when he stated that: ‘All spectrum is not created equal for all carriers.'"
Kohl urged Justice to “carefully scrutinize” the proposed deal and asked the FCC to follow a similar approach to its review of the AT&T/Qualcomm transaction last year. Though if the sale is indeed approved, Justice and the FCC should “require appropriate divestitures” to ensure that Verizon Wireless does not gain “excessive levels of spectrum concentration” and declare AT&T ineligible to purchase any of the divested spectrum, he said.
It’s crucial that the agencies ensure that nothing in the agreements “will cause or incentivize Verizon or the cable companies to lessen or stand down from this competitive battle,” Kohl said. The deal could “lessen” the companies’ incentive to compete against each other, particularly in the markets where Verizon has deployed FiOS, he said. This could “transform Verizon and the cable companies from fierce competitors into business partners."
In his letter, Lee refused to believe that the spectrum purchase or commercial agreements “will restrict or otherwise harm consumers,” (http://xrl.us/bm9ata). The agreements will benefit consumers by “putting previously fallow spectrum to efficient use, expanding consumer choice through the introduction of a new bundled offering and spurring innovation in the development of new technologies and products,” he said. Lee urged his colleagues not to oppose the deal: “It is improper for government agencies to pick winners and losers in the marketplace or to interfere with private enterprise where robust market forces are in operation.”
Verizon offered a restrained critique of Kohl’s letter, saying only that the issues are “being thoroughly examined” in the reviews by the Department of Justice and the FCC. In the same statement, Thomas Tauke, Verizon executive vice president-public affairs, policy and communications gave a full-throated endorsement of Lee’s “detailed analysis of the facts” and said his letter provides further evidence that the transactions are “on track for approval this summer.” Comcast did not offer any comment.
The Rural Cellular Association in a press release called for “appropriate spectrum divestitures under a properly revised spectrum screen.” Public Knowledge President Gigi Sohn said Kohl “hit all the right points” in his letter and Justice and the FCC “would be wise to pay attention."
TechFreedom said in a press release Kohl asks too much from the FCC and should leave antitrust law “to the expert economists and lawyers at the DOJ and FTC.” “Antitrust is a form of regulation and like all regulation it should be applied only with extreme caution under well-developed legal and economic doctrines, and never politicized,” the group said.