Verizon Wireless, Comcast Make Peace with Justice Department in Spectrum, Co-Marketing Deals

By Josh Long

The Department of Justice on Thursday announced it would allow Verizon Wireless to purchase $3.9 billion in spectrum from Comcast and three other U.S. cable operators after the companies agreed to make a number of concessions over related deals that had alarmed consumer groups and antitrust regulators.

Verizon Wireless and the cable companies — Bright House Networks, Comcast, Cox and Time Warner Cable — will limit the duration of a technology joint venture and commercial agreements to co-market each other’s services, alleviating Justice Department concerns that the pacts would diminish the companies’ incentives to compete with each other.

A proposed settlement agreement, filed in federal district court in Washington, D.C., also bars Verizon Wireless from selling cable company products like high-speed Internet and television in areas where its parent Verizon Communications offers competing FiOS services. The Justice Department filed the settlement agreement at the same time it lodged a civil antitrust suit to prevent the companies from enforcing their commercial agreements.

The Antitrust Divisions enforcement action ensures that robust competition between Verizon and the cable companies continues now and in the future as technological change alters the telecommunications landscape,” said Joseph Wayland, Acting Assistant Attorney General in charge of the Department of Justice’s Antitrust Division, in a statement.

Justice Departments officials reviewed the agreements in collaboration with the Federal Communications Commission. In a statement Thursday, FCC Chairman Julius Genachowski said he is in favor of approving the deals and would circulate an order to his fellow commissioners to do so following the companies’ commitments.

Specifically, Verizon Wireless has undertaken an unprecedented divestiture of spectrum to one of its competitors, T-Mobile, and has committed to accelerate the build-out of its new spectrum and enhance its roaming obligations,” Genachowski said. “In addition, the companies commercial agreements will be modified to, among other things, preserve Verizon’s incentives to build out FiOS, increase wireless competition, and ensure that the proposed IP venture is pro-consumer and that its products cannot be used in anti-competitive ways.”

Verizon Wireless has cited its need for spectrum to meet the skyrocketing demand for wireless data services. In a $3.6 billion deal, SpectrumCo, a joint venture between Bright House Networks, Comcast and Time Warner Cable, agreed to sell to Verizon Wireless 122 spectrum licenses that aren’t currently being used. Verizon Wireless also agreed to buy spectrum from Cox, which discontinued its wireless services at the end of March.

“As evidenced by the consent decree, we believe we have addressed the Department of Justice’s concerns,” said William Petersen, vice president, general counsel and secretary of Verizon Wireless, in a statement. “We now believe the consumer benefits of the transaction will be promptly realized, and look forward to the conclusion of the FCC review so that we can move forward with meeting the unprecedented consumer demand for innovative 4G LTE mobile and data driven products and services.”

The spectrum sales drew criticism from some Verizon Wireless rivals and other critics, though the cross-marketing agreements appeared to generate even greater opposition over fears that they would eliminate incentives to compete and lead to higher bills for Americans who purchase Internet, television and wireless services.

Consumers groups on Thursday claimed the agreements illustrate a dire fact in America: that broadband competition is weak. “By allowing Verizon and the cable companies to sell each other’s services, the DoJ and the FCC are acknowledging what has been clear for some time — that broadband competition policy in the United States has failed,” said Gigi G. Sohn, president and CEO of Public Knowledge, in a statement.