There is some thinking, in some quarters, that Verizon’s purchase of wireless spectrum from Comcast, Time Warner Cable, Bright House Networks and Cox Communications, plus deals to allow resale of cable produces, plus reciprocal rights for the cable companies to resell Verizon services, has implications for the state of communications competition in the United States.
At some level, it is hard to contest that notion: almost anything any of the largest service providers does has some competitive implications.
But the specific concern about the Verizon deals with cable is a de facto carving up of the U.S. communications business, with the cable companies acknowledging Verizon’s dominance in wireless, while Verizon acknowledges cable’s advantages in fixed line broadband.
In this line of thinking, the danger is that the market is losing a number of competitors: cable in wireless and Verizon in fixed line broadband. Again, there is some truth here, and some potential for some amount of now-unknown reduction in priorities and therefore, competition.
There are several key variables, one might argue. First, there is the question of whether the deals primarily reflect what each of the contenders will do “in territory,” where all of the firms have fixed-line networks, or primarily affect what each firm can do “outside its fixed network footprint.
That question is hard to assess in the abstract. There will be some circumstances where one of the firms might choose to resell services even in territory. The obvious example is Verizon reselling fixed network broadband where it does not have FiOS facilities, or cable firms reselling FiOS where DOCSIS 3.0 might not be warranted.
By definition, cable companies will be most interested in having a wireless component to their bundles, and of greatest value for customers of the fixed line networks “in territory.” Though many cable customers primarily will use wireless services “in territory,” the ability to roam nationally will be an important feature for many, a requirement for some.
Others might argue the greatest value for Verizon might be the ability to create an “out of region” capability, largely, though not exclusively, for business customers. Conversely, cable operators might want to be able to bundle Verizon’s enterprise-focused services primarily for in-region customers who have “out of region” connectivity needs, for example.
Some will argue that Verizon will now have fewer incentives to build out FiOS. But Verizon already has halted the expansion of the FiOS network upgrades. Some will simply note that the traditional cable operator insistence that the hybrid fiber coax network provides higher bandwidth at lower cost seems to continue to be true.
Others might note that both AT&T and Verizon now already derive most of their revenue, and get most of their growth, from wireless services, while noting that cable operators have struggled since at least 1994 to crate a viable wireless strategy.
Beyond that, some might note that telecom service providers routinely buy services from other firms. The new element here is that the cable companies and Verizon will formalize wholesale agreements that otherwise would exist in less developed form, and which in any case would simply be standard operating procedure for a large carrier. Verizon’s Worrisome Cable Deals