More Scrutiny Called For On Verizon Wireless Spectrum Bid
May 25, 2012

More Scrutiny Called For On Verizon Wireless Spectrum Bid

Enid Burns for

In the world of real estate, it is often said it's about location, location, location. In the world of wireless communication, it's currently about spectrum, spectrum, spectrum.

Housing starts may continue to struggle, but where there seems to be little vacancy right now is the wireless spectrum - and matters may only get worse. Senator Herb Kohl [D-WI] issued a letter jointly addressed to Eric Holder, the U.S. attorney-general, and Julius Genachowski, chairman of the Federal Communication Commission, calling for the two agencies to "carefully scrutinize" the Verizon Wireless bid to acquire wireless spectrum in the 700 Mhz range for $3.9 billion.

The letter, while it doesn't pose a reason to turn down the sale, asks for those involved at the U.S. attorney-general's office and the Federal Communication Commission to go over the proposed sale, which he claims is possibly due to a controversial cross-marketing agreement built into the sale.

"Without reaching any final judgment as to the legality of these transactions under antitrust or other Communications Act, I believe these transactions present serious competition concerns, which should be examined closely by your agencies," said Kohl, in the letter. Senator Herb Kohl is chairman of the Senate antitrust subcommittee.

A number of cable companies currently hold the 700 Mhz spectrum, which is up for sale under the government's directive. Sellers include SpectrumCo, a joint venture from Comcast, Time Warner Cable and Bright House Networks; individual members of the SpectrumCo joint venture, and Cox Communications.

If the purchase goes through, Verizon Wireless has said it will auction off portions of the acquired 700 Mhz spectrum that it will not use. As many as 36 parties have expressed interest in purchasing chunks of the 700 Mhz band from Verizon Wireless, according to a report from PC Magazine.

The head of the Federal Communication Commission, Julius Genachowski, said earlier this month in a keynote at CTIA, the wireless industry trade show, that spectrum auctions were a tremendous source of revenue for the government, as well as crucial way to advance the wireless industry. If the government turns Verizon Wireless down on this $3.9 billion sale, the government will have to look elsewhere for that kind of revenue.

This isn't the first wireless deal Senator Kohl has stood against. The antitrust committee chairman opposed AT&T's proposed acquisition of Deutsche Telekom's T-Mobile USA unit. Actions taken by Senator Kohl, and the antitrust committee, ultimately shuttered the deal. The Senator stands behind his opposition.

"Your agencies made the correct decision to preserve competition by your courageous decision last year to block the AT&T/T-Mobile USA merger," Senator Kohl said in his letter, reported by the Financial Times. "We must be especially vigilant this year to ensure that this transaction does not jeopardize a competitive wireless market for consumers that your agencies recently worked so hard to preserve."

While the 700 Mhz band spectrum auction, if it all goes to Verizon Wireless, will give the wireless company - a joint venture between Verizon Communications and the U.K.'s Vodafone - all the spectrum until it divvies it out to smaller buyers. Blocking the sale will hold up availability of the spectrum space and stifle innovation. Blocking the sale could also cut down on revenues from the 700 Mhz spectrum auction, if the band is broken down into smaller pieces and sold ad-hoc.