A pair of high-ranking senators expressed sharply contrasting views on Verizon Wireless' (NYSE:VZ) pending $3.9 billion purchase of AWS spectrum and commercial deals with cable companies, with Sen. Herb Kohl (D-Wis.) delivering a strong statement of skepticism about the deals and Sen. Mike Lee (R-Utah) expressing his support for them.
Kohl, left, and Lee.
Kohl, the chairman of the Senate Judiciary Committee's subcommittee on antitrust, said in a letter to FCC Chairman Julius Genachowski and Attorney General Eric Holder that he thinks the deals raise "serious competition concerns" and that they should receive close examination. The subcommittee held a hearing on the deal March 21.
In December, Verizon agreed 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. The cable companies can also become MVNOs of Verizon. A decision on the deals is expected in late July or early August.
Kohl's letter, which drew praise from a variety of public interest groups opposed to the deal, said that the spectrum purchases might be used as a strategic tool by Verizon to "entrench its market position" and "suppress competition." He also wrote that if the cable companies become MVNOs of Verizon it would be "plainly a shadow" of more direct competition.
In contrast, Lee, the subcommittee's ranking member, said in his own letter to Genachowski and Holder that the spectrum purchases and commercial agreements will not lead to less competition. "'[T]he evidence suggests that these agreements are primarily pro-competitive and will benefit consumers by putting previously fallow spectrum to efficient use, expanding consumer choice ... and spurring innovation," he wrote.
Regardless, most independent analysts think that Verizon will have to divest some spectrum to obtain regulatory approval. "If you read the tea leaves, they [the FCC] will approve the deal," Sanford C. Bernstein analyst Craig Moffett told CNET. "And they'll use the conditions as leverage points."
Verizon already owns around 20 MHz of AWS spectrum around the country, including in top markets where SpectrumCo owns AWS spectrum. By combining the two sets of AWS spectrum, Verizon would be able to devote around 40 MHz of prime AWS spectrum to its LTE network for extra capacity. Verizon, which operates LTE now on its 700 MHz Upper C Block spectrum, has agreed to sell its 700 MHz Lower A and B Block spectrum if the deals go through. Verizon has conceded that the AWS spectrum is more valuable to it than its Lower 700 MHz holdings.
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