Now that the AT&T
That agreement Verizon made with the cable companies that make up the SpectrumCo consortium, Comcast
The deal calls for the cable companies to turn over their wireless spectrum holdings to Verizon in return for not only the money, but also the rights to resell Verizon's wireless services. Verizon will also be able to resell the cable companies' video and broadband services.
Verizon's bigger footprint
Verizon's receiving 122 wireless spectrum licenses alone gives the carrier a much stronger hand in competing with its major rival, AT&T. It already has its 4G LTE network available in 179 cities, compared to only 15 cities for AT&T. And this increase in spectrum will give Verizon a dominant position in seven out of the eight major wireless markets, an increase from its current five out of eight.
But if the proposal comes undone, it will probably not be because of the spectrum alone. Andrew Schwartzman of the Media Access Project issued this statement: "No matter how forcefully Verizon claims that this is 'a spectrum-only transaction,' it is much more than that ... This [transfer] raises serious questions about the state of competition in both the wireless and video markets."
He was referring to the ramifications of the marketing agreement in the proposal, the details of which, according to Free Press' policy director, Matt Wood, were lacking in Verizon's filing of the deal with the Federal Communications Commission on Monday: "The document sheds no light on the joint marketing deals that Verizon Wireless is forging with the cable cartel. There may be provisions within these deals that would reduce the participating companies' incentive to compete with one another as they work to resell each other's products rather than rolling out their own services and battling for customers."
But Verizon claimed in the FCC filing that the marketing arrangements in the proposal are not subject to agency review. Because it is not buying another enterprise and only acquiring spectrum from companies that don't use it, Verizon argues that the usual antitrust benchmarks should not be used. "Consumers will continue to have all the same choices among wireless providers that they do today" and therefore review "should be limited," the company said in its filing.
Tell that to the DOJ
But what about that other institution that oversees potential antitrust violations? Bloomberg reported yesterday that the Verizon deal with the cable companies is now being investigated by the Department of Justice. DOJ spokeswoman Gina Talamona would give no details, other than confirming that the department was examining the transaction.
However, Reuters reported a DOJ source as saying, "Comcast has decided not to compete and is handing spectrum over to Verizon ... Instead of us seeing facilities-based competition, it appears that we're seeing collaboration."
Consumer groups are also concerned about collaboration. Mark Cooper of the Consumer Federation of America said this "turns rivals such as Verizon and Comcast into partners."
Another AT&T-type deal gone wrong?
No matter how Verizon paints the marketing agreements, this deal is indeed quite a turnaround in Verizon's relationship with the cable companies. At the time the deal was announced in early December, analyst Craig Moffett of Sanford Bernstein & Company wrote that this is a "complete reordering of the competitive universe as we know it today," calling the deal, "a partnership between formerly mortal enemies."
Perhaps if Verizon's deal had come around before the failed AT&T/T-Mobile merger proposal raised the country's anticompetitive awareness, it could pass muster with hardly a glance. Now it seems that there may be no easy way to slip something past without scrutiny -- at least it's supposed to work that way.
Maybe Verizon should have waited to purchase that $315 million worth of wireless spectrum from Cox Communications, just to make sure it doesn't look like an embarrassment of riches to the FCC and the DOJ.
When the AT&T merger proposal was announced last March, Sprint Nextel
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Fool contributor Dan Radovsky owns shares of AT&T. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.