Bloomberg News

FCC Is Asked to Block Verizon’s Purchase of Cable Airwaves

February 22, 2012

(Updates with Verizon statement in fourth paragraph.)

Feb. 21 (Bloomberg) -- U.S. regulators shouldn’t let Verizon Wireless buy airwaves from cable companies because the deal would eliminate possible competitors and enrich sellers that hoarded airwaves, a New Jersey state agency said.

A $3.6 billion spectrum purchase from companies led by Comcast Corp. and Time Warner Cable Inc. and a separate $315 million deal with Cox Communications Inc. aren’t “competitively benign,” the New Jersey Division of Rate Counsel said in a Feb. 17 filing with the Federal Communications Commission ahead of a deadline today for comments.

Verizon, the largest U.S. wireless provider, proposed buying airwaves on Dec. 2 from top U.S. cable operator Comcast, No. 2 Time Warner and Bright House Networks LLC, and announced the deal with Cox two weeks later. Under the transactions, Verizon and the cable companies are to market and sell each other’s services.

Ed McFadden, a Verizon spokesman, said in an e-mailed statement that the deals are “clearly in the public interest” and support FCC goals to re-allocate underutilized spectrum.

The New Jersey rate counsel, which advocates for consumers during rate-setting proceedings for public utilities, said the airwaves appreciated by more than $1 billion as they were held by the cable companies, and should be returned to the FCC and auctioned “rather than rewarding the cable companies for stockpiling spectrum.”

The cooperation and marketing agreements “could lead to collusion and higher prices for consumers,” the state agency said.

Smartphone Demand

Verizon, based in Basking Ridge, New Jersey, wants to add airwaves as customers increasingly adopt smartphones such as Apple Inc.’s iPhone to watch video and browse the Web. Verizon Wireless is owned by Verizon Communications Inc. and Newbury, England-based Vodafone Group Plc.

AT&T, the second-largest U.S. wireless operator, is seeking new ways to add airwaves after it abandoned its proposed acquisition of T-Mobile USA Inc. in December after government opposition.

Cable companies may offer wireless services to their customers through Verizon Wireless without investing in their own network or acquiring a wireless company, Neil Smit, a Comcast executive vice president, said in an interview.

The FCC shouldn’t review the marketing agreements, which aren’t contingent upon the spectrum deals, the Free State Foundation said in comments to the agency, according to an e- mail from the Rockville, Maryland-based group, which advocates for free markets and limited government.

The deals don’t decrease the number of competitors, the Free State Foundation said. The group said it wasn’t endorsing the proposed transactions.

--with assistance from Alex Sherman in New York. Editors: Michael Shepard, Steve Walsh

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net


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