FCC Verizon/SpectrumCo Approval Order Expected to Circulate This Week

The FCC’s review of the Verizon Wireless/cable deals has reached its final stage, agency officials said Friday. An order approving the deals could circulate as early as this week, agency officials said Friday. Meanwhile, Reps. Jerrold Nadler and Brian Higgins, both New York Democrats, urged federal regulators to give Verizon Wireless’s proposed buy of AWS licenses from SpectrumCo and Cox extra-close scrutiny. That’s especially so given accompany marketing and other agreements, they said during a call with reporters Friday sponsored by the Communications Workers of America. A Verizon Wireless spokesman questioned CWA’s motives in turning up the heat on the deal as an order nears.

FCC staff have taken a close look at the commercial agreements, with Department of Justice and FCC staff in tough negotiations with Verizon Wireless executives and the cable principals (CD Aug 6 p1). Commission staff had been committed to circulating an order on Verizon/SpectrumCo by Aug. 21, the 180-day unofficial deadline for FCC action.

Meanwhile, CWA organized a final call Friday, seeking tough conditions as part of any deal that is struck. “Verizon Wireless and these cable companies will work as agents and sell each others’ products,” said Nadler, a senior member of the Judiciary Antitrust Subcommittee. “In its stores, Verizon Wireless would market television from Time Warner Cable, for example, and Time Warner would offer Verizon Wireless cellphone service. We should be very careful about approving deals like this one, which makes collaborators out of competitors.”

Nadler said the deal should “raise red flags” for regulators. “We want firms to compete, not capitulate or collaborate,” he said. “Without vigorous competition we end up with unresponsive monopoly firms. We've seen that in field after field.” Verizon says FiOS is profitable and it will continue its buildout, he said. “If that’s true, there should be questions about why Verizon wants to help a competitor in that same business in the first place, to complete with its profitable product.”

"I just want to be very direct and tell you that this deal is anti-city, it’s anti-rural communities, it would render digitally challenged and inferior the cities of Upstate New York, including Buffalo and the rural communities of New York State,” said Higgins, who represents an upstate district. “A substantial consumer harm would occur if this deal between Verizon and the nation’s biggest cable companies were allowed to go through,” he said.

There is “growing concern” about the deals, CWA Telecommunications Policy Director Debbie Goldman said. By CWA’s count, 5,200 comments have been filed at the FCC expressing concerns, while 100,000 signed petitions circulated by the group. FCC rules that protect the business agreements from disclosure have “made it very difficult to really understand everything that’s part of this deal,” Goldman said. Goldman said she is “also hearing” that federal regulators “are reaching the end point of their review.” Officials have “deep concerns about the cross-marketing agreements as well as some of the provisions in the joint operating entity” and “there are intense discussions about remedies,” she said.

Verizon Wireless spokesman Ed McFadden said the company is working with FCC and DOJ to address their concerns (CD Aug 9 p1). McFadden questioned why CWA continues to turn up the heat on regulators. “First, this union campaign must be viewed through the filter of the ongoing labor negotiations between Verizon and the CWA, and these are tired and untrue arguments that have been addressed in a number of different forums and filings over that past few months,” McFadden said. “Second, the facts about our FiOS deployment are clear: several years ago we announced that our rollout of FiOS would end at 18 million households; with the vast number of build out commitments across our footprint, we continue to fully deploy in Washington, D.C., Philadelphia, New York, and communities across the region and are focused on meeting those build out commitments rather than seeking new franchise opportunities. Third, given that FiOS represents a large portion of the revenue for our wireline business, our billions of investment in the fiber network, and our ongoing success in taking market share from cable due to the superior product FiOS enables, our commitment to compete and offer customers the best products and services to choose from cannot be questioned."

David Balto, former FTC assistant policy director, said on the call the costs to consumers are difficult to gauge. “If these parties tried to merge, there isn’t a soul in the United States that wouldn’t realize that merger was anti-competitive and the Justice Department would just simply say no,” Balto said. “Instead of that, what they've done is create an elaborate arrangement, a joint operating entity, with several sophisticated arrangements, that fundamentally tie the hands of these otherwise rivals, so that they can find peace instead of having to deal with the forces of competition. But no matter how you try to dress this up, this is just simply a cartel in disguise.” Balto said the deal is comparable to Coke and Pepsi saying they want to cross-market each other’s products. “There isn’t a soul who wouldn’t see that … as being anti-competitive,” he said.

"We too think this is a very significant deal that could harm consumers, especially consumers’ pocketbooks,” said Parul Desai, communications policy counsel at Consumers Union. “The FCC itself has found that when it comes to high-speed Internet access, the majority of the country, 75 percent of the country, is going to face a monopoly, which is dominated by the cable company. Unfortunately, this transaction cements this trend.”

Meanwhile, 32 House Democrats said the Verizon/SpectrumCo deal “raises serious concerns” and urged the FCC to ensure that competition and public interest is protected as the agency evaluates the proposed agreement. The letter was sent in July, but released by the FCC last week. The deal “appears to turn the premise of the 1996 Telecommunications Act on its head” that would convert “formerly energetic competitors into business partners,” the letter said. Furthermore, the joint marketing agreements in the deal “appear to limit the availability of competitive services” in video, broadband, voice and wireless markets which could lead to “reduced investment in infrastructure, job loss, fewer choices, and ultimately higher prices for consumers,” it said. People of color and lower incomes “will be disproportionately affected by the decreased incentives to invest in FiOS” if the deal is approved, the lawmakers warned.

The letter was signed by Nadler, Higgins, Reps. Louise Slaughter, D-N.Y.; Robert Andrews, D-N.J.; Timothy Bishop, D-N.Y.; Robert Brady, D-Pa.; Bruce Braley, D-Iowa; Lacy Clay, D-Mo.; Emanuel Cleaver, D-Mo.; Peter DeFazio, D-Ore.; Donna Edwards, D-Md.; Keith Ellison, D-Minn.; Sam Farr, D-Calif.; Bob Filner, D-Calif.; Janice Hahn, D-Calif.; Maurice Hinchey, D-N.Y.; Dennis Kucinich, D-Ohio; Nita Lowey, D-N.Y.; Carolyn Maloney, D-N.Y.; Mike Michaud, D-Maine; Chellie Pingree, D-Maine; Nick Rahall, D-W.Va.; Charles Rangel, D-N.Y.; Lucille Roybal-Allard, D-Calif.; Niki Tsongas, D-Mass.; John Sarbanes, D-Md.; Janice Schakowsky, D-Ill.; Jose Serrano, D-N.Y.; Pete Stark, D-Calif.; Nydia Velazquez, D-N.Y.; Lynn Woolsey, D-Calif.; and Barbara Lee, D-Calif. Seven House Democrats signed a separate letter that urged FCC commissioners to ensure that the proposed deal aligns with the “pro-consumer, pro-competition provisions enshrined in the ‘96 Act.” Authors of that letter include: Massachusetts Democratic Reps. Ed Markey; Barney Frank; John Olver; John Tierney; Stephen Lynch; Niki Tsongas; and House Judiciary Committee Ranking Member John Conyers, D-Mich.