One day after the AT&T’s takeover bid for T-Mobile
collapsed, now it’s the other Bell that’s trying to eliminate competition.
Verizon is as aggressively ambitious as AT&T – it’s proposing to work
with the cable monopolies to significantly curtail competition in both the
wireless and fixed broadband markets.
According
to Bloomberg, Verizon’s recent deals to acquire spectrum from cable
companies are under investigation by the Department of Justice.
Since early December, Verizon has announced transactions to buy spectrum owned
by cable operators. On December 2 Verizon
announced it would pay $3.6 billion to Comcast, Time Warner, and
Bright House Networks to acquire the AWS spectrum owned by the cable firms.
And on December 16 Verizon
came to an agreement to pay $315 million to acquire 20 MHz of spectrum
owned by Cox Communications.
While these deals are good for Verizon, they are likely harmful to consumers,
innovation, and competition in both the fixed and wireless broadband markets.
As Bloomberg’s reporting notes, DOJ will focus on whether these deals
will lead to Verizon controlling too much spectrum.
CCIA encourages the Department of Justice to fully investigate how much of an
anticompetitive impact these transactions will have on the wireless and fixed
broadband markets. While this merger is not an obviously horizontal combination
in the same way the failed AT&T/T-Mobile transaction was, these deals
should alarm antitrust authorities.
First, DOJ should investigate whether post-transaction
Verizon will control such a significant amount of spectrum that it would stifle
competition. As the FCC Staff Report on the AT&T/T-Mobile merger
pointed out, an over-concentration of spectrum held by one carrier can be cause
for significant competitive concerns.
The second, and potentially more important matter DOJ should investigate is whether
these deals are effectively an illegal restraint of trade under Section 1 of
the Sherman Act. Specifically, do these deals mean that cable companies
and Verizon have an understanding to not enter the other’s markets?
For years, pro-competition groups like CCIA have lamented the fact that both
the wireless and fixed broadband markets are ultra-concentrated. In the
fixed broadband market there are effectively regional monopolies, with most
customers only having one cable provider to choose from. The wireless
market is slightly more competitive, but as we’ve noted previously, in both
2010 and 2011 the FCC has failed to conclude that wireless broadband is an
effectively competitive market.
However, the AWS spectrum auction in 2007 gave many hope that cable firms would
launch wireless networks to compete with AT&T and Verizon. And as
cable companies invested in wireless spectrum, Verizon began to build out its
FiOS service to compete with the cable companies on their own turf. In 2010
Cox entered the marketplace offering wireless services over Sprint’s network.
Finally, in 2011 DISH Network acquired wireless spectrum through
acquisitions of DBSD and TerreStar with the intention to offer wireless
broadband services.
Things were looking up for broadband competition. Cable firms would
compete in wireless markets and wireless firms would offer fixed broadband
services. We hoped the broadband market would become dynamically
competitive, spurring waves of innovation and lowering prices for consumers along
the way.
However, the timing of these deals, along with decisions by Cox to exit the
wireless market and Verizon to halt its entry into the cable markets is
curious.
Antitrust investigators should investigate the potential Section 1 questions
that these decisions raise before these deals are approved. Have cable
firms and Verizon colluded to split up the marketplace for broadband services –
Verizon taking the wireless market and getting access to sell wireless services
to cable customers in return for agreeing to cease and desist its encroachment
into monopoly cable markets along with the assurance that cable firms won’t
partner with other wireless carriers to deploy competing mobile broadband
services?
Competition benefits consumers in many ways and helps spawn the thousands of
companies which seek to disseminate their products and services widely and not
be vulnerable to a few dominant carriers. It needs to be preserved!
