Verizon/Alltel Divestiture Carries Competitive Implications

Ahead of their Alltel acquisition regulatory review, Verizon filed a letter with the FCC outlining their wireless spectrum divestiture plans. In hopes of reducing “market dominance” fears, they plan on divesting of 85 markets, including all of North and South Dakota, and rural serving areas in California, Colorado, Idaho, Montana , Minnesota, Kansas, Illinois, Nevada, New Mexico, Utah, Wyoming, Georgia, Virginia, North Carolina, South Carolina, and Ohio. Larger markets in the divested territories include Billings, Great Falls, and Casper. The divested territories may include either Alltel or Rural Cellular territories. Verizon’s acquisition of Rural Cellular is expected to close later this year. Additionally, Verizon committed to maintaining all existing roaming agreements with “regional, small and rural carriers” for the length of those existing agreements. Of course, once those existing agreements expire, those regional, small and rural carriers will need to negotiate a new deal. Judging by most recent roaming agreements between large and small carriers, “negotiate” can be a very relative term.

This potential opening of 85 markets presents opportunities with competitive implications. The usual suspects of AT&T and T-Mobile will surely take a look at acquiring these markets, and so will smaller carriers like MetroPCS and Leap. But perhaps even smaller rural carriers may get an opportunity to gain a foothold in these markets and offer a true competitive option to the large national brands. Smaller carriers, many of whom currently lack wireless assets, probably have much more interest in serving these rural territories. Should public policy mandate that the divested properties be given preferential acquisition treatment to carriers other than the usual suspects? Or maybe a consortium of rural carriers (new or existing) should consider trying to gain these wireless assets. These are questions worth debating.