A Justice Department spokesperson told The Washington Post yesterday that the department is investigating the deal recently announced between Verizon Wireless and several of the nation’s largest cable companies.
In addition to purchasing $3.6 billion worth of wireless spectrum from the cable companies, Verizon Wireless and the cable companies also plan to develop products together and sell one another’s services. According to the Post report, the Justice Department is concerned about the combined market impact of the spectrum deal and the cross-marketing plans.
The Post reporter quoted an unnamed source familiar with the review: “There is a concern that this creates too cushy a relationship between companies that had been competing.”
It’s not surprising that the Justice Department is reviewing the deal, considering the size of the deal and considering that the department recommended against AT&T’s plan to acquire T-Mobile, which also would have put a large amount of spectrum in the hands of a single operator.
But the DOJ’s decision on AT&T/ T-Mobile, which came at the end of August, seems like ages ago, considering all that has happened in December, starting with Verizon’s spectrum and marketing deal with Comcast, Time Warner Cable and Bright House Networks. Just two weeks later, Verizon Wireless announced a similar deal with Cox—and just days after that, AT&T announced it would abandon plans to acquire T-Mobile.
The question now is whether Verizon will have any better luck than AT&T with the Justice Department and the FCC. The FCC also must approve the spectrum sale and, like the DOJ, the commission also declined to approve the AT&T/ T-Mobile deal.
The key difference may be that while AT&T’s move would have eliminated a wireless competitor, Verizon’s move only takes out potential wireless competitors that had not yet actually begun network construction.
But some might argue that the biggest threat of the Verizon deal is to video competition. Some industry observers have read a lot into recent remarks from Verizon CEO Lowell McAdam stating that the company foresees an end to its FiOS buildout. Influential telecom financial analyst Craig Moffett of Bernstein Research went so far as to argue that McAdam, who came from the wireless side of the business to head up all of Verizon just a few months ago, is essentially throwing landline and FiOS under the bus.
If an established wireless carrier like T-Mobile can’t justify the network investment required to effectively compete in the wireless marketplace, it’s not surprising that the cable companies have come to the same conclusion. But with FiOS construction coming to an end and with DSL continuing to lose ground to cable broadband, more and more people seem to be asking if Verizon itself is in the same position as T-Mobile with regard to potential network investment, but on the landline side.
T-Mobile apparently isn’t any more interested in upgrading its wireless network now than it was before the possibility of being acquired by AT&T came and went. I wonder if Verizon would feel the same way about its wireline network if the deal with the cable companies were to not happen.