Verizon Spectrum/Cross-Marketing Deals Hit FCC Roadblock

Published March 27, 2012

In a late-February filing, Verizon requested Federal Communications Commission approval of a $4 billion purchase of cable company wireless-spectrum licenses. In a separate FCC filing, Verizon requested permission to enter into cross-licensing agreements with the cable companies to sell each other’s services.

Public Knowledge, a Washington, DC-based public interest group, subsequently filed with the FCC, claiming the FCC should consider the cross-marketing agreements and spectrum sale as the same transaction.

But Devon Herrick, a senior fellow with the National Center for Policy Analysis, a Dallas, Texas-based public policy think tank, disputes that position. He says Public Knowledge is asking the FCC to further overstep its regulatory authority by requiring Verizon to file for the agency’s approval of the cross-licensing agreement.

“When Verizon indicated it reached an agreement to purchase additional spectrum, implausibly the FCC demanded proof Verizon needed the additional capacity on its network,” Herrick said. “In just about every other market, companies do not have to seek permission from a regulatory body to expand. Neither are they required to seek permission to advertise.”

More Wireless Spectrum Needed
T-Mobile has asked the FCC to scotch Verizon’s $3.6 billion spectrum purchase from Comcast, Time Warner, and other cable companies on the grounds it would allow Verizon an “excessive concentration” of wireless spectrum.

T-Mobile received $1 billion of spectrum as stipulated in its failed acquisition by AT&T earlier this year.

Verizon says it needs the additional spectrum to expand its 4G long-term-evolution smartphone services. The telco currently provides services to 109 million U.S. customers.

Cross-Marketing Deals Separate
“The argument from Comcast and partners that the FCC should stay out of the joint marketing deals with the country’s largest cellular company is, frankly, absurd,” said Harold Feld, Public Knowledge’s legal director.

“The cross-marketing deals are as much a part of this deal as the spectrum—announced together in the same release, offered to other cable companies,” said Feld.

Feld’s assertions are refuted by Ed McFadden, Verizon’s vice president of policy communications. McFadden says getting previously unused spectrum into the hands of consumers is strongly in the public interest.

“We have been clear that the cross-marketing agreements are separate, and we will continue to respond completely and rapidly to the questions about both the spectrum transfer and the separate cross-marketing agreements at the FCC and Department of Justice, thereby demonstrating the benefits they bring to consumers,” McFadden said.

Beneficial to Consumers
Ryan Radia, associate director of technology studies for the Competitive Enterprise Institute, says critics like Feld are too worried about market concentration and not enough about consumer benefits.

“[Feld] believes that when large companies get more market share, then that’s harmful to consumers. He shares this popular opinion with a lot of people on Capitol Hill, only in this case, the Verizon deal benefits consumers,” he said.

“Feld has not shown that the deal causes a pervasive threat to consumers. More importantly, the country is facing a wireless spectrum crunch and Verizon has taken spectrum that has lain fallow for six years and they want to use it to increase the available spectrum for their users. This seems beneficial to me,” explains Radia.

Putting Spectrum to Good Use
Gennady Stolyarov II, editor-in-chief of The Rational Argumentator, an online journal championing Western principles of reason, rights, and progress, says it is always beneficial to consumers when an unused resource gets harnessed and is made available to individuals.

“Verizon’s proposal to acquire unused spectrum from Comcast and Time Warner represents just this,” Stolyarov said. “Capacity that would otherwise have continued to languish would be put to good use, and the benefits of this are apparent. The FCC should take the opportunity to evaluate each arrangement on its own merits, rather than tying approval of the spectrum acquisition to the resolution of concerns surrounding a simultaneous but rather distinct deal,” he said.

“I cannot agree with Howard Feld’s insistence that the spectrum acquisition and the cross-marketing deals should be treated as one inextricable package,” Stolyarov added. “When one proposal offers a clear benefit and the other is ambiguous, it makes no sense to inject the ambiguity into the transparently beneficial proposal.”

Kenneth Artz ([email protected]) writes from Dallas, Texas.