U.S. regulators want Verizon Wireless and Comcast Corp. (CMCSA:US) to limit their cooperation as a condition of letting the largest U.S. mobile provider buy airwaves from cable companies, three people with knowledge of the negotiations said.
Federal officials are seeking to limit the time that Verizon and the cable companies could jointly develop new products and services and withhold them from competitors, the people said. The transaction proposed in December for the cable companies’ unused spectrum also includes joint marketing and development agreements.
Officials also want to bar Verizon Wireless from marketing cable service in places where corporate cousin Verizon Communications Inc. (VZ:US) offers its FiOS high-speed Internet service, said the people, who spoke on condition of not being identified because confidential talks are continuing. The idea is to preserve incentives for Verizon to maintain and build FiOS, which competes with cable companies.
Cable providers including largest U.S. provider Comcast and No. 2 Time Warner Cable Inc. (TWC:US) want to sell frequencies they don’t use to Verizon Wireless in a $3.6 billion deal. U.S. officials are seeking conditions that would preserve competition in a U.S. telecommunications market characterized by locally exclusive cable companies and a wireless sector dominated by four players, with 60.7 percent of the market held by Verizon and No. 2 AT&T Inc. (T:US)
The Federal Communications Commission, which has an Aug. 21 target date for finishing its review, is vetting the deal along with the Justice Department. Verizon Chief Executive Officer Lowell McAdam in a June 28 meeting urged FCC Chairman Julius Genachowski to approve the deal, and said the transaction would help meet surging demand for high-speed wireless service, according to a filing posted July 3 on the agency’s website.
The FCC, which regulates frequencies, probably will accept the airwaves sale with few if any changes, the people said. Verizon Wireless in June said it would sell some airwaves to T- Mobile USA Inc., and the fourth-largest U.S. wireless operator switched from opposing the cable deal to supporting it.
The Communications Workers of America, a union that says less competition will mean fewer jobs, said in an e-mailed statement yesterday that the Justice Department and FCC “seem to have lost their focus on competition.”
“This deal will allow former competitors to become partners, will kill jobs and hit consumers with higher prices,” the union said in its statement.
Neil Grace, an FCC spokesman, and Gina Talamona, a Justice Department spokeswoman, in e-mails declined to comment.
According to the people with knowledge of the talks, other conditions being sought in negotiations between regulators and the companies include an earlier date for Comcast to be able to market Verizon Wireless services under its own brand.
Such a requirement would aim to create fresh competition for other wireless providers including AT&T and No. 3 Sprint Nextel Corp. (S:US) Under the companies’ agreement, Comcast can’t market Verizon Wireless under its own name for four years and the revised limitation hasn’t been determined, one person said.
Regulators also may seek to ensure that Comcast can market other providers’ wireless services sooner than allowed by the four-year prohibition set out in the companies’ agreements, the people said.
Sena Fitzmaurice, a spokeswoman for Philadelphia-based Comcast, declined to comment in an e-mail.
“We continue to work constructively with the FCC and DOJ to resolve the remaining issues,” Ed McFadden, a Washington- based Verizon spokesman, said in an e-mail. “We are confident that we will receive the necessary approvals this summer.”
Verizon Wireless, based in Basking Ridge, New Jersey, is 55 percent owned by New York-based Verizon and 45 percent-owned by Vodafone Group Plc (VOD), based in Newbury, England.
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