It is almost certain that Verizon’s move to buy unused wireless spectrum from cable companies will be approved by the Federal Communications Commission (FCC) although it may have to give up some of its existing spectrum. Comcast, Time Warner Cable, and Bright House Networks plus Cox Communications are looking to sell 20MHz in the Advanced Wireless Spectrum (AWS) frequency band to Verizon and have agreed to promote and sell each others services as part of the deal.
Concern has been raised by the Senate Antitrust Subcommittee Chairman Herb Kohl as to how Verizon’s move would affect competition and is the primary reason why it will have to give up its existing 700MHz spectrum in the A and B blocks. The issue will act as a road map for future deals according to Paul Gallant, an analyst with Guggenheim Partners. It was earlier uncertain if Verizon’s deal would be approved as it came up right after the rejection of the AT&T – T-Mobile acquisition. Due to increasing demand, it looks like it will be approved but only if Verizon divests some of its AWS spectrum in addition to the 700MHz spectrum it volunteered to give up. It is believed that this deal could shape the market.
It was revealed that Verizon already owned spectrum in the 20MHz frequency and it was questioned whether it should be allowed to buy more of the same frequency. Discussions led to Verizon revealing that it would initially store its new spectrum to increase capacity although it was to be bought to grow its 4G LTE network. T-Mobile argues that useful spectrum could be put to use right away and accused Verizon hoarding it. If the deal is approved, T-Mobile would also be allowed to get a piece of the pie.
The FCC is also concerned with the co-promotion aspects of the deal according to which Verizon Wireless will resell cable services and cable companies will resell Verizon’s wireless service to their customers. Verizon Wireless’ parent company, Verizon Communications will now have a monopoly as it will sell broadband, TV, and voice services. This might result in cable services overlapping with broadband Verizon Fios services. Gallant says that this imbalance will have to be accounted for by a revision of the deal.
CNET’s Cohen says that the Verizon deal will help in creating a complete wireless strategy to build the company’s network and further states that the spectrum acquisition and co-promotion are parts of the same deal.
