Verizon/Cable Spectrum Deals Good for Competition, Companies Say in Reply Comments

Verizon Wireless and cable companies shot back at critics of Verizon’s proposed buy of AWS licenses from SpectrumCo and Cox in a reply filed at the FCC. The companies said that by their calculations, in 98 percent of the counties covered the combinations will not push Verizon Wireless above the FCC’s spectrum screen, or the level at which the FCC would consider divestitures as part of any order approving the deals. Critics led by T-Mobile, small carriers, and public interest groups, took aim at the transaction last month, in various petitions to deny (CD Feb 23 p1). SpectrumCo is a joint venture of Comcast, Time Warner Cable and Bright House Networks.

"Commenters supply no factual or legal basis for the Commission to block or to impose conditions on the proposed transactions,” the filing said (http://xrl.us/bmw2nt). “Many of the allegations are mere speculation, wholly unsupported by facts or data.” Verizon said because of spiraling demand, it needs more spectrum. “The evidence ... demonstrates that Verizon Wireless will not be able to fully meet consumers’ growing demand for mobile broadband with its current spectrum holdings,” it said. “Despite the company’s significant investment in network efficiencies, skyrocketing demand will overtake its 4G LTE capacity absent additional spectrum resources.” Verizon said that without more spectrum it faces problems “as early as 2013” in some markets, and “in many more” markets by 2015.

"Government and industry experts concur that the demand for mobile data by 2015 will be 25 to 50 times greater than it was in 2010,” Verizon said. The filing notes that the typical smartphone uses 35 times as much data as a traditional mobile phone, a tablet 120 times as much. Actual Q4 2011 data traffic was double Verizon’s 2009 forecast, the filing said. Verizon recently revised its Q4 2012 forecast upward by some 700 percent. The deals also show a secondary market for spectrum that is working, the filing said, noting Verizon has been a seller as well as a buyer of licenses. “Even with the recent enactment of spectrum legislation, it will likely be years before additional spectrum is allocated, service rules are adopted, clearing processes for incumbents are set, and auctions are held.”

Verizon claimed it’s the most efficient of all wireless carriers in how it uses the spectrum it already has, serving 109 million wireless customer connections using an average of 89 MHz nationwide -- with each one MHz serving an average of 1.23 million customer connections. Verizon said with the extra spectrum from cable it would be second only to AT&T for spectral efficiency, tied with MetroPCS. A graph in the filing argues that, in contrast, T-Mobile, C-Spire and Leap Wireless serve only about 600,000 customers per MHz of spectrum. Verizon also said it already makes extensive use of cell splitting to make its network more efficient. “But the notion that cell splitting can solve Verizon Wireless’ future capacity constraints, given the massive increase in data demands, particularly in urban areas, is simply not realistic,” it said.

Verizon and the cable operators said the FCC should not consider in evaluating the spectrum sales the joint marketing agreements announced at the same time the spectrum sale was unveiled (CD Dec 5 p1). “The industry is replete with joint marketing agreements and other joint ventures, which afford reciprocal benefits to the participants and create benefits for consumers,” the filing said. “Requests for government-supervised resale and associated claims of harm arising from the Commercial Agreements are therefore both irrelevant and not appropriately addressed here.” Parts of the filing were heavily redacted, with key market data taken out of the publicly available version of the document.

The Competitive Enterprise Institute filed in support of the deal. “The acquisition of the spectrum at issue by Verizon Wireless would neither threaten consumer welfare nor hinder competition in the wireless marketplace,” CEI said (http://xrl.us/bmw2rg). “The Commission’s prompt approval of the Verizon Wireless applications will hasten the deployment of robust wireless services, spur greater competition among mobile operators, and help alleviate the capacity constraints facing wireless companies due to spectrum exhaustion."

Public Knowledge returned fire, in a statement released Monday which focused on the marketing agreements. “The argument from Comcast and partners that the FCC should stay out of the joint marketing deals with the country’s largest cellular company is, frankly, absurd,” PK said. “The cross-marketing deals are as much a part of this deal as the spectrum -- announced together in the same release, offered to other cable companies. As we explained to the FCC earlier, the side agreements create a real danger that our communications markets will move from competition to collusion to cartel. Rather than address these concerns, Verizon and its cable partners continue to withhold key parts of the agreements while insisting that the FCC has no role in approving them.”