Verizon and cable make concessions to close $3.9B deal
Verizon Wireless and SpectrumCo cable companies agree to scale back joint marketing arrangement to win OK from Department of Justice and FCC, says The Wall Street Journal. Approval for deal to be announced within weeks.
Verizon and a consortium of cable companies have struck a deal with regulators to scale back their joint marketing arrangement to gain approval for their $3.9 billion wireless-spectrum deal, according to sources in a Wall Street Journal report.
Verizon and the cable consortium -- which includes Comcast, Time Warner Cable, and Bright House Communications -- have supposedly agreed to terms put forth by the Department of Justice that will limit the joint marketing agreement to five years and will prevent Verizon and cable operators from reselling each other's services in markets where their broadband, television, and phone services compete, according to unnamed sources in the Journal story. Approval for the deal could be announced in a few weeks, the sources said.
Verizon and a group of cable companies called SpectrumCo announced in December a deal in which Verizon Wireless would buy about 20 megahertz of Advanced Wireless Spectrum the cable companies had bought in a 2006 Federal Communications Commission auction. The companies also agreed to a co-marketing deal that would have let cable companies resell Verizon's wireless phone, broadband, home phone, and TV services. And it would have allowed Verizon to resell cable TV, phone, and broadband services in Verizon Wireless stores.
From the start, consumer advocates, labor unions, and some wireless competitors have opposed the deal. Wireless rivals accused Verizon of hoarding wireless spectrum and said the company shouldn't be allowed to buy more of this scarce resource. Labor unions and consumer advocates have been most concerned with the co-marketing deal, which these opponents say is basically an agreement for the companies to not compete in certain markets.
Earlier this summer, Verizon appeased opponents of the spectrum sale by striking a separate agreement with T-Mobile USA. In this side agreement, if Verizon gets regulatory approval for the cable deal, T-Mobile will buy some of Verizon's spectrum. As a result of the deal, T-Mobile has backed off of its opposition. And sources close to the FCC say the regulator is generally pleased with Verizon's concessions.
Once Verizon had figured out a way to win approval on the spectrum side of the deal, it had to focus on a solution to the co-marketing arrangement that was being reviewed primarily by the DOJ. But there was a sense that this might unravel the entire deal. David Cohen, head of Comcast's regulatory affairs, emphasized to CNET in an interview earlier this year the importance of the marketing arrangement as a part of the overall deal.
"There is no secret that our interest is not just in selling spectrum," he said. "This is a strategic asset to enable us to develop a complete wireless strategy. When our Plan A of building our own network didn't work out, we still planned to leverage this valuable asset to help us strategically. That's what the Verizon deal gives us."
But now it looks like Verizon and the cable companies have agreed to concessions that should placate opponents. Specifically, The Wall Street Journal reports that Verizon and the cable operators have agreed to not implement the joint marketing agreement in areas where the two companies currently compete for Internet, TV, and phone service customers. In places where Verizon has not deployed Fios, the companies may resell and jointly market each other's services for five years. After that, regulators will re-evaluate the deal to ensure it is not anticompetitive.
The Wall Street Journal sources say the deal could be approved in a few weeks. The FCC will still likely have a few more conditions that must be agreed to in order for the deal to close, the newspaper adds. Officials from Verizon, Comcast, and the FCC each declined to comment.