FCC to Verizon and Cable Cos: Play by the Rules

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The orders the Federal Communications Commission (FCC) issued last week in its review of the big deal between Verizon, Comcast and assorted other cable players will force the companies to play by the rules, and will provide a good view into how the industry is trying to construct its own little cartel.  The FCC staff asked a number of detailed questions, and the answers could show how Verizon and its four cable partners want to divide the world among themselves.

In addition to carving up the market between wireless and wired service by transferring spectrum from the cable companies to Verizon, the companies are proposing to exclusively market each other’s products and to develop new technologies to lock out the competition. In issuing these orders, the FCC recognized: (1) the companies’ side agreements are inextricably intertwined with the proposed spectrum sale, and (2) the impact of these deals on the public interest is too important to let the companies continue hiding the substance of the deals from the public. 

In these orders FCC stepped up to the plate and demanded that Verizon and Comcast play by the rules. Although the FCC did not require them to reveal all of the information the companies had redacted from their original submission, the orders still expose significant information that parties will use to determine whether they think the deals will harm the public, and if so, what the FCC should do to prevent that.

The FCC's orders also show that the FCC understands that the spectrum, marketing, resale, and intellectual property agreements are part and parcel of the same overall deal. This means that when the FCC evaluates whether the spectrum sale serves the public interest, it should consider the entire deal, including the companies’ side agreements.

When Verizon and the cable companies submitted their agreements to the FCC, they redacted a lot of information in those contracts and tried to assure the FCC (and the public) that we should just trust their word that the information they refused to disclose was irrelevant and that they had nothing to hide. Obviously, many groups wanted to know what Verizon and Comcast were hiding, and have been urging the FCC to shine some light on the unnecessarily secret parts of the agreements. Last week, the FCC demanded more information from Verizon and the cable companies, including information about the agreements. 

The orders issued by the FCC fall into three categories:

  • Orders requiring Verizon and the cable companies to resubmit their side agreements with less information redacted.
  • Letters to each of the companies asking them for more information about the deals, including the companies’ negotiations, comparisons to other agreements, other companies interested in buying the spectrum, and why the cable companies decided to exit the wireless market.
  • An order giving the public more time to respond to Verizon and the cable companies’ Joint Opposition to the Petitions to Deny that PK and others filed in February urging the FCC to block the deal.

The FCC also announced that it is starting a separate proceeding to examine the marketing, resale, and intellectual property agreements, regardless of the fate of the spectrum sale. There are both potential benefits and potential disadvantages to this. On the one hand, the FCC seems to be taking seriously the concerns of groups opposing the agreements (like PK), and is now creating a forum for it to investigate all of the ramifications the deals will have on the public interest. On the other hand, this may also result in a proceeding of indefinite length that ultimately results in no action.

The FCC should use this opportunity to closely scrutinize these deals, understand how they will change our telecommunications landscape, and block the deals in their current form.  In the meantime, Public Knowledge will be paying close attention and will be advocating for the public’s interest every step of the way. Keep an eye out for PK’s and other’s replies to Verizon and Comcast’s opposition, which are due at the end of this month.

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