Verizon Spectrum Purchase Approved
August 24, 2012

FCC Approves Verizon’s Cable Spectrum Deal

redOrbit Staff & Wire Reports - Your Universe Online

The Federal Communications Commission (FCC) on Thursday approved, with some conditions, Verizon Wireless' bid to purchase Advanced Wireless Spectrum from a group of cable operators.

Verizon Wireless, a joint venture of Verizon Communications and Vodafone Group Plc, plans to use the acquired spectrum to add capacity to its 4G LTE network.

The FCC approval means Verizon will be permitted to acquire nearly 20 megahertz of Advanced Wireless Spectrum (AWS) from SpectrumCo, a joint venture that includes Comcast, Time Warner Cable, and BrightHouse, and from Cox Communications.

The agency also gave Verizon the green light to transfer spectrum licenses from prepaid provider Leap Wireless, and from T-Mobile USA.

However, the FCC imposed some conditions on the deal, including roaming requirements on all AWS spectrum involved in these transfers, along with a requirement to report to the agency the status of DSL broadband competition.

The FCC's order follows last week´s approval by the Department of Justice for Verizon's $3.9 billion bid to buy SpectrumCo´s wireless spectrum. Verizon Wireless initially proposed the deal in December, which triggered anti-trust concerns over some of the commercial provisions contained in the bid, such as co-marketing, resale and technology development arrangements between Verizon and the cable operators.

The FCC also took issue with the fact that Verizon, which already owns 20 megahertz of AWS spectrum, would gain an additional 20 megahertz of spectrum, while rivals with far less spectrum were shut out of the opportunity to acquire these airwaves.

The Justice Department´s main concern was with the commercial agreements between Verizon and the cable operators, particularly with Verizon Wireless's agreement to resell cable services throughout the U.S., including areas where Verizon sells its Fios broadband and TV service that directly competes against cable services.

But Verizon and the cable operators ultimately agreed to concessions that satisfied these concerns.

To address the spectrum concerns, Verizon reached a separate deal with T-Mobile USA earlier this summer, which calls for Verizon to sell some of its AWS spectrum to a rival — an approached praised by the FCC.

That deal with T-Mobile was vital in winning the FCC's approval for the entire spectrum acquisition, and the agency is requiring Verizon to close its spectrum transfer with T-Mobile within 45 days of closing its deal with SpectrumCo, Cox, and Leap.

The FCC also accelerated the rollout requirements on the spectrum licenses Verizon will receive as part of these deals, requiring Verizon Wireless to offer service to 30 percent of those covered by its new AWS licenses within three years. Verizon will also need to cover 70 percent of the population with services from this spectrum within seven years.

Verizon also agreed to continue offering roaming agreements with other carriers in any areas it offers service using the newly acquired AWS spectrum. This condition was somewhat controversial considering Verizon is currently battling the FCC in court over a rule mandating that all carriers provide data roaming at reasonable rates to any carrier on any wireless spectrum.

Finally, Verizon agreed to provide semi-annual reports regarding DSL service and competition once the commercial agreements are enacted.

The FCC essentially allowed the DOJ to evaluate the commercial agreements contained in Verizon´s proposed deals. The agreement the DOJ reached with Verizon and the cable operators prohibited the companies from reselling each other's services in areas where Verizon sells Fios service. However, the DOJ did permit the companies to resell each other's broadband services in places where Verizon sells only DSL.

The Justice Department said it would re-assess the commercial agreement in five years.

The three Democratic FCC commissioners supported the FCC´s approval, while the two Republican commissioners supported most of the order, but disagreed with the additional restrictions involving required roaming and DSL reports.

"Two of my colleagues disagree with important elements of the commission's order," said FCC Chairman Genachowski in a statement.

"Although a large number of businesses and public interest groups raised strong concerns and urged commission action, my colleagues would not have adopted conditions relating to broadband roaming, they would not have reviewed or worked to revise the commercial agreements, and it is unclear whether they would have sought any spectrum divestitures. But protecting competition and incentives to build out wired and wireless broadband is core to the FCC's statutory responsibilities."

Verizon Wireless´ chief executive, Dan Mead, said the FCC´s approval was a major milestone, and assured the public that his company would make good use of the additional spectrum.

"We will work aggressively to ensure that we put this previously unused spectrum to use quickly to benefit customers," he said, adding that Verizon would now proceed with its previously announced plans to sell its 700MHz lower A and B block spectrum licenses.

"We expect a very robust sales process as more than 65 parties have requested and received information about the spectrum we are selling. Selling the A and B licenses will allow this spectrum to be used to the benefit of other carriers and their customers,” he said.

Some groups that had opposed the original deal are still unhappy with the concessions outlined by the DOJ and the FCC.

"The FCC's decision allowing Big Cable to virtually monopolize wireline and video connections to millions of homes will lead to job loss and hit consumers with higher prices," said the labor union Communications Workers of America (CWA) in a statement.

"It will slam the door on our country's high-speed future because it has destroyed any incentive for Verizon to continue the build out its high-speed Fios network. It is clearly an example of the FCC, just as the Department of Justice did last week, acting on behalf of corporate interests, not the public interest and clearly not jobs."

But chairman Genachowski disagreed, saying the move would advance the nation´s progress in harnessing 4G technology.

"By advancing U.S. leadership in 4G LTE deployment, the transaction marks another step in our effort to promote the U.S. innovation economy and make state-of-the-art broadband available to more people in more places. The transaction will preserve incentives for deployment and spur innovation while guarding against anticompetitive conduct,” he said.

“And vitally, it will put more than 20 megahertz of prime spectrum -- spectrum that has gone unused for too long -- quickly to work across the country, benefiting consumers and the marketplace."

The FCC´s full Transaction Order can be viewed here.