DOJ probes Verizon's AWS spectrum purchases

The Department of Justice is investigating whether Verizon Wireless' (NYSE:VZ) recently announced plans to spend more than $3.9 billion to buy AWS spectrum from cable companies will harm competition in the wireless and cable markets.

Gina Talamona, a Justice Department spokeswoman, confirmed to Bloomberg that the DOJ's antitrust division is looking at the proposed deals, but declined to comment beyond that. The investigation was also confirmed by the Washington Post, which reported, according to an unnamed source, that the DOJ has multiple concerns with the deal, especially as the communications and technology markets continue to blur.

It is unclear what the review will ultimately mean for the deal. The Justice Department routinely investigates transactions for potential competitive harms. However, in the wake of the collapse of AT&T's (NYSE:T) proposed $39 billion acquisition of T-Mobile USA, which the Justice Department sued to block on antitrust grounds, the spectrum deals are likely to get an extra dose of scrutiny.

In a statement sent to multiple media outlets, Verizon said that it has not received any information from the DOJ on which to comment.

Verizon agreed earlier this month to pay $3.6 billion for the nationwide AWS spectrum licenses held by SpectrumCo, a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks. Separately, Verizon said it will buy Cox Communication's 20 MHz of AWS spectrum covering 28 million POPs for $315 million. All of the deals include the option of Verizon reselling cable services and cable companies reselling Verizon service.

Public interest groups, fresh from their battle with AT&T over the T-Mobile deal, have come out against Verizon's spectrum purchases. 

"The cable cartel's partnership with Verizon Wireless might be convenient for business, but it will most certainly come with a high cost to consumers," Matt Wood, the policy director of Free Press, said in a statement that sums up the position of many groups. "Without real competition for cable or mobile phone service, there's no pressure to lower prices or innovate. For consumers that means no choice but skyrocketing prices and onerous contract agreements while the cartel rakes in exorbitant profits."

Verizon on Monday submitted its application for the SpectrumCo licenses to the FCC, and urged the commission to approve the deal quickly. Verizon argued that the cable companies are letting the spectrum sit unused. Verizon also said its agreements with the cable companies to resell each other's products and services should not be subject to regulatory approval.

"Consumers will continue to have all the same choices among wireless providers that they do today," Verizon wrote in its application, noting its proposed transaction wouldn't have the same affect--removing a wireless carrier from the market--as AT&T's proposed purchase of T-Mobile.

For more:
- see this Bloomberg article
- see this CNET article
- see this Washington Post article
- see this separate Washington Post article

Related Articles:
Verizon to buy Cox's AWS spectrum for $315M
Comcast to start reselling Verizon Wireless products in early 2012
Verizon Wireless to offer family data plans
Comcast, Time Warner to end wholesale deals with Clearwire in wake of Verizon agreement
Verizon to buy SpectrumCo's AWS spectrum for $3.6B

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