Bloomberg News

Verizon-Cable Deal’s Terms Questioned as FCC Approves

August 23, 2012

The Federal Communications Commission’s approval for Verizon Wireless to buy airwaves from cable companies came with conditions that Democrats said would preserve competition and Republicans, while voting to approve the deal, called excessive.

The FCC didn’t have authority to impose requirements for Verizon, the largest U.S. wireless provider, to share airwaves with rivals on commercial terms, Ajit Pai, a Republican commissioner, said in a statement released today as part of the agency’s order unanimously approving the $3.6 billion deal.

Verizon’s agreement to share airwaves, to allow data roaming, serve a core FCC duty to preserve competition, Julius Genachowski, the agency’s Democratic chairman, said in a statement. “The commission makes the right choice today in exercising our responsibilities and taking strong action,” Genachowski said.

Verizon is buying unused airwaves from competitors including largest cable provider Comcast Corp. (CMCSA:US) and No. 2 Time Warner Cable Inc. (TWC:US), and has agreed to cooperate with the cable companies in marketing services and devising new products. Antitrust officials at the Justice Department approved the deal Aug. 16 with limits on cooperation, and the FCC’s action is the final regulatory clearance needed for the transaction.

Verizon’s airwaves-sharing agreement isn’t voluntary, Pai said. “The parties would not agree to it independently but know that its acceptance is a predicate for regulatory approval,” Pai said.

FiOS, Cable

Pai’s Republican colleague, Robert McDowell, in a statement today, said he also disagrees with the roaming condition, in part because he’d seen no evidence Verizon had failed to offer access to its airwaves.

Pai and McDowell both said the FCC had also improperly asserted authority over marketing-cooperation agreements between Verizon and its cable partners.

Genachowski said the cooperation agreements were modified to make sure Verizon had an incentive to keep building its own wired video and Internet service, known as FiOS, to compete with cable companies’ offerings. The change was part of rectifying a deal that posed “serious anticompetitive concerns” as proposed in December, he said.

The comments from the agency’s two minority-party members reflect a Republican theme that the FCC exceeds its powers during transaction reviews.

The agency’s order in January 2011 approving Comcast’s purchase of General Electric Co.’s NBC unit “goes too far” in setting conditions, McDowell said in a statement then.

Former FCC Commissioner Meredith Attwell Baker, in a speech delivered two months before she announced her departure from the agency to work for Comcast, called for “common sense limits on merger conditions” and said Comcast’s experience informed her views.

Limiting FCC

A bill to limit FCC review of mergers, H.R. 3309, passed the House in March, getting 235 of its 247 votes from Republicans. All 174 “no” votes came from Democrats. The Democratic-majority Senate hasn’t acted on the measure.

Under the bill, the FCC would be barred from imposing or accepting conditions on companies that aren’t related to the substance of a merger. According to a House committee report, the FCC has sought concessions that are outside of its authority to approve mergers, and companies propose unrelated concessions to improve their chances of gaining agency consent.

The administration of President Barack Obama opposes the bill, saying the measure could limit the ability of the FCC and the Justice Department to work together on telecommunications matters.

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

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $57.17 USD
    • 0.88
    • 1.54%
  • TWC
    (Time Warner Cable Inc)
    • $149.31 USD
    • 2.96
    • 1.98%
Market data is delayed at least 15 minutes.
 
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