The “horse trading” effect was strong at the Portals, headquarters of the FCC, today. Today’s historic FCC meeting was delayed by over four hours as dealmaking between commissioners took place before their votes were counted on issues with significant competitive implications. One of those decisions will potentially create the largest wireless service provider in the U.S., as Verizon’s merger with Alltel was approved. Assuming it still makes financial sense, Verizon will surpass AT&T as the biggest wireless kid on the block, with 70 million+ subscribers. Conditions that were placed on the merger include divestiture of additional markets, including the entire states of North and South Dakota and guaranteed roaming requirements.
The roaming requirements are of particular interest because of their impact on the wireless sector competitive environment. Roaming revenue is crucial to the cash flow of smaller rural and regional wireless carriers. These same carriers feared that the market power of a company the size of the new Verizon could simply change the rules on roaming and dictate unfavorable, and perhaps crushing, terms. Those interests pushed for hardline roaming requirements to be attached to any merger approval. What they got was four years. The FCC’s approval of the merger is contingent on the new Verizon guaranteeing that both Verizon’s and Alltel’s current roaming agreements will remain in place for at least four years. The devil is in the details, and the exact terms of these contingencies won’t be fully understood until the final ruling is examined. Some will ask that while four years does provide some stability, what happens in year five?