Verizon exec criticizes FCC's handling of SpectrumCo deal

Verizon CTO Tony Melone says the FCC's review of its deal to buy unused spectrum from cable companies is taking too long. And he's urging the agency to revamp its license transfer process.

DALLAS--A top Verizon executive urged regulators here Thursday to get out of the way so that wireless operators can more easily buy and sell wireless spectrum on the secondary market.

Verizon CTO Tony Melone addresses an audience at the TIA 2012 tradeshow in Dallas. CNET/Marguerite Reardon

During a speech today at the Telecommunications Industry Association trade show, Verizon Chief Technology Officer Tony Melone said that the Federal Communications Commission should make it easier for companies to buy and sell wireless spectrum licenses that they've bought in government auctions.

His sentiments echoed comments made by AT&T's CEO Randall Stephenson who spoke at the conference here on yesterday.

Melone said the FCC needs to speed up the process for approving spectrum sales and license transfers in the secondary market. He used his company's own bid to buy wireless spectrum from a consortium of cable companies -- collectively known as SpectrumCo -- as an example. In December, Verizon promised to pay $3.6 billion for nearly 20 MHz of wireless spectrum in the AWS band.

The FCC and Department of Justice are reviewing the transaction, which also includes a co-marketing deal, which some critics say is anti-competitive. The agencies have been reviewing the deal since December when it was announced and are expected to finish up their inquiry by the end of July.

Melone said that he thinks the process, which is expected to take a little over six months, is too long. And he said it's a barrier to getting unused wireless spectrum into companies that can put it into use. And he criticized the agency for taking too long to evaluate the transaction.

"A deal that will allow us to acquire spectrum from companies that have had it for 10 years and have not used it one iota, is getting far more scrutiny than it should," he said.

He went onto say that it he realizes the FCC is charged with approving such transactions. But he said that regulators have made the process "onerous" and "unfriendly," making it difficult to get spectrum in the hands of companies that can use it.

"The FCC needs to let the commercial markets work a little freer," he said.

While Melone would like to see the process move more quickly, the reality is that so far it hasn't exactly been slow by comparison. Other spectrum transfers, such as AT&T's purchase of spectrum from Qualcomm took nearly a year to complete. In that deal, AT&T was looking to buy 12 MHz of spectrum. In Verizon's deal with cable, it wants to buy more than 20 MHz of spectrum. In fact, the deal is one of the largest spectrum license transfers it's ever reviewed outside of an acquisition.

What's more the Verizon/SpectrumCo deal includes more than just spectrum. It also has a marketing arrangement that is tied to the deal. As part of the arrangement, Verizon has agreed to resell the SpectrumCo cable companies' Internet and TV services in its retail stores. And the cable companies will have the opportunity to bundle Verizon Wireless service with their broadband packages.

Some consumer advocates have criticized the marketing arrangement as anti-competitive, since Verizon will be reselling its competitors' broadband and TV services even in markets where these services are competing with its own Fios TV and broadband services.

Verizon's Melone said today that the FCC shouldn't trouble itself with evaluating the marketing deal. He said this was a separate deal that has nothing to do with Verizon's transaction to buy wireless spectrum. Instead, he said the agency should focus only on the spectrum issues, which he thinks are pretty straightforward.

"These are separate and distinct deals," he said.

But Comcast's head of regulatory affairs, David Cohen, has already testified before Congress that the spectrum sale and joint marketing agreement are in fact a single deal. If one aspect of the deal is changed too much, it could jeopardize the entire deal.

In a recent conversation with CNET, Cohen reiterated the importance of the marketing piece of the 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."

At the end of the day, Melone's criticisms may fall on deaf ears. Most experts believe that the FCC will approve the spectrum deal and that the DOJ will also give its blessing. But there will likely be hefty conditions put on the transaction that could force Verizon to divest some of its AWS spectrum in concentrated markets. And these concessions may include some changes to the marketing deal. The big question is whether Verizon and the cable companies can live with these concessions.

 

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