Verizon Wireless Is Said to Be Examined by U.S. Over Cable Spectrum Deals





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Verizon Said to Be Probed by U.S. Over Cable Spectrum Deals

Verizon Said to Be Probed by U.S. Over Cable Spectrum Deals

Verizon Said to Be Probed by U.S. Over Cable Spectrum Deals

Denis Doyle/Bloomberg

A Verizon Communications Inc. logo is seen on display at the Mobile World Congress in Barcelona.

A Verizon Communications Inc. logo is seen on display at the Mobile World Congress in Barcelona. Photographer: Denis Doyle/Bloomberg

Verizon Wireless’s deals for
spectrum with cable companies are under investigation by the
U.S. Justice Department for their potential to hurt competition
in the wireless and cable industries.

Gina Talamona, a Justice Department spokeswoman, said the
antitrust division is examining the transactions, declining to
comment further.

Verizon Wireless, the largest U.S. mobile-phone carrier,
struck a $3.6 billion alliance earlier this month with cable
companies led by Comcast Corp. that will change how customers
buy Internet, mobile and pay-TV services.

The Justice Department probe will focus on whether that
transaction and a subsequent one with Cox Communications Inc.,
concentrate too much control of airwaves in one company’s hands
and whether the marketing agreements between Verizon and the
cable companies violate antitrust laws, said a person familiar
with the investigation.

“This agreement is diminishing competition in every way,”
said Mark Cooper, director of research at Consumer Federation of
America, which opposes the deal. “It means the cable companies
are no longer trying to do their own thing in wireless, it
concentrates ownership of spectrum and it turns rivals such as
Verizon and Comcast into partners.”

Peter Thonis, a spokesman for Verizon Communications Inc. (VZ)
said “we have received no information on which to comment.”
Verizon Communications Inc. co-owns Verizon Wireless with
Vodafone Group Plc. (VOD)

Shares Drop

Verizon Communications shares dropped 1.2 percent on the
news before climbing 0.7 percent, to $39.32 at 1:08 p.m. in New
York trading.

Verizon Wireless is buying up spectrum as it seeks to
develop fourth-generation technology known as Long Term
Evolution to better compete with ATT Inc. (T), which is also
building out its LTE network. ATT, which yesterday dropped its
bid for T-Mobile USA (DTE) Inc., had argued it needed the airwaves the
T-Mobile purchase would have brought to improve service given
spiraling demand for digital data as consumers increasingly use
smartphones and other mobile devices.

Verizon Wireless and the cable companies will market and
sell each other’s services under the agreement. The Basking
Ridge, New Jersey-based mobile carrier will offer cable-TV
products in its retail stores and receive a percentage of
revenue for every cable customer it signs up, while cable
companies will receive fees for each wireless customer they sign
up, according to Time Warner Cable (TWC) Inc. spokesman Alex Dudley.

Cash for Spectrum

Under terms of the Dec. 2 deal, Verizon Wireless agreed to
pay the group of cable companies $3.6 billion for wireless
spectrum. Comcast Corp. (CMCSA), the country’s largest cable provider,
will receive $2.3 billion, while Time Warner Cable Inc. gets
$1.1 billion and Bright House Networks LLC gets $189 million. On
Dec. 16, Verizon announced a $315 million purchase of spectrum
from Cox Communications Inc.

Verizon is seeking approval for the transfer of spectrum
licenses from the Federal Communications Commission, according
to a Dec. 19 filing.

The FCC and Justice Department are likely to approve the
deal, though they may require the sale of assets in certain
markets, said Jeff Silva, senior policy director for
telecommunications, media and technology at Medley Global
Advisors LLC in Washington.

“There isn’t any indication that the cable companies were
going to become serious wireless competitors in their own
right,” Silva said. “They had that spectrum sitting there and
now they’ve found a good use for it. They’re not going to build
their own networks to compete.”

To contact the reporter on this story:
Sara Forden in Washington at
sforden@bloomberg.net

To contact the editor responsible for this story:
Patrick Oster at
poster@bloomberg.net

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Article source: http://www.bloomberg.com/news/2011-12-20/verizon-communications-said-to-be-probed-by-u-s-over-cable-spectrum-deals.html

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