It’s 5-0 for Verizon-SpectrumCo - Multichannel

It’s 5-0 for Verizon-SpectrumCo

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WASHINGTON — The FCC has given conditional
approval to Verizon Wireless’s $3.9 billion purchase
of advanced wireless spectrum from Comcast, Time
Warner Cable, Cox Communications and Bright
House Networks.

The Federal
Communications
Commission and
Justice Department
closely coordinated
their
reviews, so the
FCC order approving
the deal came
as no surprise after Verizon Wireless and the cable
operators agreed to a settlement with the DOJ
two weeks ago.

The Justice Department settlement adjusted
the partners’ associated cross-marketing agreements
to limit them in time and scope.

Verizon Wireless and the cable operators still
get to sell each other’s services, but with limits
that retain an incentive for Verizon to continue
to build out FiOS TV and Internet networks in its
current footprint, or to change its mind about not
building FiOS out further.

FCC chairman Julius Genachowski had signaled
those changes to the agreements were key
to the agency’s approval.

Under the modifications, Verizon can’t sell
competing cable service in FiOS TV markets.

In addition, the research-and-development
partnership between Verizon Wireless and the cable
operators — an effort to integrate wired and wireless
broadband — will be time-limited.

And the fruits of that research will be available
to all under a non-exclusive license that they are
free to sublicense to others.

The FCC order actually encompasses four
deals. One is with the current SpectrumCo partners;
one is with Cox Communications, which left
the consortium; a separate spectrum deal is with
Leap Wireless; and the fourth is FCC approval of
Verizon Wireless’s immediate spin-off of some of
the spectrum from this deal to T-Mobile.

The FCC order is essentially the same as the
Justice settlement, with the addition of a five-year
roaming agreement in which Verizon agrees to
abide by the FCC’s data roaming order even if it
is thrown out by the courts. Verizon is challenging
that order.

Verizon last week told the FCC it would abide
by such a requirement, according to highly-placed
agency sources. If that condition sounds familiar,
it is similar to the FCC’s stipulation in the Comcast-
NBCUniversal merger that Comcast abide by
network-neutrality rules even if they were eventually
overturned.

The FCC’s SpectrumCo-Verizon vote was 5-0, but
the Republican commissioners concurred — short
of approval — on the roaming agreement portion.

They also had reservations about the FCC’s authority
over the marketing agreements.

Unlike AT&T’s proposed purchase of T-Mobile,
which the FCC rejected, the Verizon-SpectrumCo
spectrum transaction was not a merger of rivals so
it did not raise the same consolidation red flags at
the FCC. The marketing agreements did raise issues
of an overly cozy relationships between Verizon
and cable operators, which the FCC appeared
to feel were addressed by the limiting conditions.

Verizon also sweetened the pot when it said it
would spin off some of the SpectrumCo spectrum
to rival T-Mobile, reducing to a handful the number
of markets where adding the spectrum from
the cable operators would push it over a concentration
threshold that could trigger further FCC
scrutiny.

The deal was always in the FCC’s sweet spot in
terms of the National Broadband Plan because it
frees up secondary-market spectrum — some 20
MHz worth — for almost immediate use, a point
the chairman also made in backing the conditioned
deal.

Cable operators bought the spectrum at an FCC
auction, but later said they had concluded there
was no business case for building out a competing
wireless broadband network.

TAKEAWAY

In approving Verizon Wireless’
purchase of spectrum from
four cable operators, the FCC
placed limits on a deal in
which the parties would market
each others’ services.

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