Report: DOJ to impose strong restrictions if Verizon's cable deal is approved

Verizon Wireless (NYSE:VZ) will likely need to agree to tough restrictions on its proposed commercial deals with cable companies, according to a Reuters report, part of the carrier's $3.9 billion purchase of AWS spectrum from the MSOs. 

The Reuters report, citing unnamed sources familiar with the matter, said the Department of Justice wants to impose strict limits on the commercial deals, which, along with the spectrum purchases, were proposed late last year. The agreements between Verizon and SpectrumCo--a joint venture of cable companies Comcast, Time Warner Cable and Bright House Networks--and Cox Communications allow for the companies to be able to cross-market their services and for the MSOs to become MVNOs of Verizon Wireless. The companies also intend to set up a technology development joint venture.

Reports from last month indicated the FCC was likely to approve the deal so long as Verizon provided data roaming at reasonable rates to its competitors and the company put its spectrum to use within a short time. However, the reports from the Wall Street Journal and Reuters had indicated that the DoJ was putting up more opposition. That still appears to be the case. 

According to the Reuters report, the DoJ is concerned that the commercial deals and technology joint venture will harm competition. Critics have expressed worries that the joint venture's potential technology innovations, especially on ways to move between and connect to wireless and wired networks, could be limited to Verizon and the cable companies.

The DoJ, FCC and Verizon declined to comment, according to Reuters.

Currently, some Verizon Wireless stores offer service from Comcast, Time Warner Cable and other cable companies in markets where Verizon doesn't offer its FiOS service. The companies have said that they plan to extend the cross-marketing deals into additional FiOS markets. According to the report, Verizon would agree to a Justice Department order that would prohibit the cross-marketing deals where Verizon sells FiOS service, and that the marketing deals and joint venture would be allowed but only for a limited period of time.

In June, T-Mobile USA and Verizon struck an agreement to swap AWS spectrum--contingent upon the Verizon deal with the cable companies getting approved. That swap effectively turned T-Mobile from an opponent of the deal into a supporter, and T-Mobile has since argued that getting the additional spectrum will benefit consumers by allowing it to deploy LTE service more robustly. Verizon has also agreed to sell its 700 MHz Lower A and B Block spectrum if the cable deal goes through.

For more:
- see this Reuters article

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