Verizon/SpectrumCo: What’s the Deal?

The largest wireless service provider, Verizon, and the largest cable companies (Cox, and SpectrumCo, which is made up of Comcast, Time Warner Cable, and Bright House) have proposed a series of transactions that will harm consumers, inhibit competition, and stifle technological innovation. The transactions would move spectrum away from the cable companies and to Verizon, already the largest wireless provider. But that’s not the worst of it —the companies are also proposing to divide the market and not to compete with each other by exclusively marketing each other’s products and jointly developing new technologies. Essentially, Verizon and AT&T get wireless; cable gets wireline; and consumers get nothing.

These sorts of cease-fire agreements—cartels, essentially—will leave customers unprotected from the whims of a few large companies by denying them the benefits of a fully competitive and fair marketplace.

That’s why Public Knowledge joined forces with Media Access Project, New America Foundation Open Technology Initiative, Benton Foundation, Access Humboldt, Center for Rural Strategies, Future of Music Coalition, National Consumer Law Center, on behalf of its low-income clients, and Writers Guild of America, West to protect the public interest in a healthy communications marketplace by asking the Federal Communications Commission (FCC) to block the transactions.  

Here are the nuts and bolts of what’s going on and why you should be concerned:

Why transfer spectrum? 

The cable companies bought this spectrum a few years ago but haven’t been able to put it to good use.  So they’ve decided to give up trying to compete with Verizon and sell it the spectrum instead. 

Why is the spectrum transfer bad?  

The spectrum transfer is contrary to the public interest because it will not effectively promote wireless competition.  The largest wireless service provider in the country will get even more spectrum, and Cox, Comcast, Time Warner Cable, and Bright House will have surrendered their ability to enter the market as competitors.  

Competition, on the other hand, benefits the public by lowering prices and offering more options, technological innovations, and better services. 

What are the other agreements?  

In addition to SpectrumCo’s potential license transfer to Verizon, the companies want to enter into various agreements if the FCC permits the license transfer. 

First, there are agency agreements where Verizon and SpectrumCo will be the exclusive resellers of each other’s products. 

Second, there are joint operating entity agreements where Verizon and SpectrumCo will exclusively control any new technologies that stem from their joint venture. 

Why are these agreements bad?

The agency agreements are bad for competition because Verizon and SpectrumCo are agreeing not to compete with each other and essentially dividing the wireless and cable markets between each other.  A customer in a Verizon store to buy a cell phone plan could also walk out with a new Comcast cable subscription.  This will make it difficult for other market participants to compete with Verizon and SpectrumCo companies and could increase prices for consumers. 

The joint operating entity agreements are bad because Verizon and SpectrumCo will likely not license their new technologies to competing service providers.  Without the ability to build on existing technology, service providers will have a hard time competing and consumers will have fewer options when choosing technological devices in the future.

Why must the FCC review the proposed spectrum transfer and accompanying agreements?  

As explained above, the spectrum transfer, agency agreements, and joint operating entity agreements are all bad for independent reasons, but together, they are that much worse.  It is essential that the FCC defends the public interest as companies want to consolidate and integrate their services.  Companies cannot transfer spectrum licenses without the FCC’s consent and the FCC also has the authority to look at agreements that coincide with the proposed transfer. 

Although the FCC can fix the most egregious harms posed by a spectrum transfer or contractual agreement, remedies will not work here.  We don’t even have access to most of the contents of the agreements, and anyway, the greatest threats may come down the road when the companies modify their agreements.

The bottom line? 

If the FCC allows these transactions to go forward, the companies will find collusion easier than ever, and consumers will pay the price.

The Latest