Verizon, Comcast, and the Patent Wars

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As the Federal Communications Commission (FCC) and Department of Justice (DOJ) continue their review of the proposed deals between Verizon, Comcast, and several other large cable companies, attention is turning to the companies' side agreements tied to the proposed spectrum transfer. From the very beginning of this proceeding Public Knowledge has focused on the ways that the side agreements threaten the public interest, in addition to potentially spelling the end of competition between wireline and wireless internet service providers.

For example, Verizon, Comcast, and the other cable companies have jointly created a new company called the Joint Operating Entity (JOE), which the companies will use to develop technology that integrates wireline and wireless service. Of course, for these companies, developing new technology will go hand-in-hand with obtaining new patents. As a result, the JOE could have a monopoly over foundational technologies for the next generation of internet access service.

This means that Verizon and Comcast in particular would have a new, particularly powerful weapon in the escalating patent wars that already cost tech companies obscene amounts of money in litigation costs and stand in the way of actual innovation. Given the scope of the JOE's stated purpose, its patents could likely reach other companies' efforts to come up with new offerings that deliver online video, voice, and data services.

The idea of these companies potentially controlling the patents that could effectively become the standard for the next generation of internet access service is even more worrisome when you actually read the details of the agreements, which have been submitted to the FCC under confidentiality protections. More than two months ago Public Knowledge challenged the companies' confidentiality claims over parts of the agreements that don't qualify for confidentiality protections but are still hidden from the public, but the FCC has not yet ruled on our challenge.

But even without being able to go into details on all of the ways the agreements, we can still broadly discuss how we can stop these agreements from stifling innovation and anointing a new communications cartel that would have enormous leverage against its competitors. The real answer that is that no combination of conditions on these deals can really prevent the public interest harms they would likely create, but there are some conditions that could somewhat lessen the public interest harms.

First, one of the more obvious tools that could help rein in the damage that will be caused by the JOE and its patent war chest is a condition that the JOE must license its technologies to other companies on reasonable and non-discriminatory terms (RAND terms). This could potentially prevent the JOE from withholding its technologies from other companies that are willing to reasonably license the patents, bundling the important technology with patents the licensees don't actually want, restricting licensees' deals with competitors, and requiring licenses to the other company's patents as payment. It would also stop the JOE from discriminating against certain companies trying to license the JOE's patents.

Of course, the JOE is just one (especially bad) part of the web of deals between these companies, which also include a spectrum transfer, joint marketing agreements, and wireless reseller agreements. This means that any package of conditions that even comes close to addressing the many public interest harms threatened by this deal would need to include conditions like spectrum divestitures, strong spectrum build-out requirements, a "use it or share it" condition on the transferred spectrum, limits on joint marketing deals where the companies currently compete on wireline service, and conditions that ensure Verizon could not try to prevent the cable companies from partnering with others to offer new services that rely on WiFi offload technologies.

These agreements are extraordinarily complex, deeply interconnected, and pose serious threats to competing companies and consumers. As they review these deals, the FCC and DOJ should stay strong to protect consumers from the many anticompetitive threats of these deals.

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