Verizon-SpectrumCo Draft Order in Works


WASHINGTON — Sources inside
the Federal Communications
Commission expect the agency
to circulate an order this week approving Verizon
Wireless’ proposed purchase of wireless
spectrum from a group of major cable operators
known as SpectrumCo.

The agency is widely expected to OK the
deal with conditions, most likely related to the
associated cross-marketing agreements that
allow Verizon and the cable ops to sell each
other’s services.

Agency sources said a draft of the order is
expected to be circulated by midweek (Aug.
16), with a vote possibly by early the next week,
which would get the deal in under the FCC’s
unofficial 180-day shot clock deadline for vetting
the merger, Aug. 21.

Look for the FCC to propose disallowing
Verizon to sell Comcast video services where
parent firm Verizon Communications has
built out its FiOS TV service. One of the FCC’s
main concerns is that the deal should not provide
a major disincentive for Verizon to compete
with Comcast in those markets.

“[Verizon] needs to make money,” said the
FCC source. “If they think there is a place
where it is economic and they can make the
right deal to lay fiber [and provide video service],
they’ll build it out. And there are some
places where that could be the case.”

“They decided in 2009 they didn’t want to
put any more capital into it,” the source said,
but added that in the event Verizon could
change its mind, the commission wants to
ensure it has an incentive to do so.

Deal critics had wanted even more incentives
for a FiOS buildout, but the source said
the commission is not going to force Verizon
to build out a nationwide video competitor to
cable when Verizon has said there is no business
case for it.

Verizon has been saying for the past couple
of years that it does not plan to build out
FiOS beyond its current plant. But just in case
it changes its mind, the commission wants to
make sure the marketing agreements don’t effectively
foreclose that option.

Verizon is paying roughly $3.9 billion to
Comcast, Cox Communications, Time Warner
Cable and Bright House Networks for advanced
wireless spectrum they bought as a
group — the SpectrumCo consortium — in
an FCC auction six years ago.

The deal is not a merger, so it does not have
the same concentration issues as the union of
wireless providers AT&T and T-Mobile, which
the agency shot down last December. In addition,
it frees up 4G wireless spectrum for almost
immediate use, the sort of secondary-market
deal that will get the spectrum into use far
more quickly than, say, the years-long process
of freeing it up from broadcasters. SpectrumCo
and Cox, which pulled out of the
consortium, ultimately concluded there was
no business case for building out a competing
wireless broadband network.

It also helps the deal that, contingent on its
approval, Verizon is spinning off some of that
newly acquired cable spectrum to competitor
T-Mobile. That will reduce to a handful the
number of markets where Verizon’s concentration
of spectrum holdings raises red flags
with the FCC.