The deal still must go before a federal judge, but since the US Department of Justice lifted all of its objections to the deal last week, it’s pretty much smooth sailing for Verizon, Comcast, Time Warner Cable, Cox Communications and Bright House from here on out.

Once it gets the final go ahead, Verizon will take possession of 20 MHz or more of pristine Advanced Wireless Services (AWS) licenses, which it plans to use to build a supplementary high-capacity LTE network parallel to its current near-nationwide 4G infrastructure. While the FCC dealt primarily with the spectrum transfer, the approval implicitly gives Verizon and its new cable buddies permission to divide the wireline and wireless markets between them. The cable companies will resell Verizon’s mobile service, and Verizon can now sell cable broadband and TV service in any area where it doesn’t offer its FiOS fiber-to-the-home connections.

Update: Verizon had made several concessions to grease the wheels Thursday’s approval. It has agreed to sell a large chunk of that new AWS spectrum to T-Mobile, which will use it for its own LTE rollout. Verizon also said it would sell unused licenses among its 700 MHz holdings to any interested buyer. While the FCC said it was satisfied with those spectrum divestitures, it imposed a couple of other conditions.

The big one is a requirement that Verizon open its LTE network to roaming partners, a key demand of rural operators. The second is that Verizon complete 70 percent of its network over the new bands. While billed as concession to the FCC, it seems more like a concession to Verizon. Big Red has said it will run out of capacity from its current spectrum holdings in 2015 if it doesn’t get these new licenses. Rather than hold Verizon to its word, the FCC gave it a four-year pass.

The bigger concerns are the joint-operating agreements that the DOJ signed off on last week and the implications they have for consumer competition. The deals basically allow Verizon to give up on DSL in remaining markets it doesn’t have FiOS. They allow cable and Verizon to pool their mobile and residential services together in all other markets, putting wireless-only and wireline-only carriers at a distinct disadvantage. And they allow cable and Verizon to jointly develop technology that integrates their two services. The DOJ placed a five-year restriction on those pacts (retroactive from December), but a combined cable-Verizon can lay waste to all of competitors in that timeframe. My colleague Stacey Higginbotham paints a frightening picture:

“In a pessimistic view, this means that the cable guys would no longer face competition nor a reason to keep pushing their wireline infrastructure. Today that’s not so bad, since most cable companies have deployed the faster DOCSIS 3.0 technology that can deliver up to 100 Mbps down to homes, but it is depressing to consider that five years from now we may still have that same infrastructure and little opportunity to go forward, unless the cable companies want to invest in fiber to the home. And without Verizon or AT&T pushing them forward, why would they? It’s worth noting that Verizon’s FiOS plans helped jump-start the deployment of DOCSIS 3.0 services in areas where Verizon laid fiber.”

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As a refresher, Verizon announced last year that it would buy the unused Advanced Wireless Services (AWS) licenses of Comcast, Time Warner Cable, Bright House and Cox Communications, giving it a broad and deep frequency base with which to expand its LTE network. But those companies weren’t just angling for a simple spectrum transaction. They also revealed so-called joint-marketing agreements, which essentially divvied up the wireline and wireless markets in territories where they overlapped.

We’ve already seen evidence of these pacts with Comcast outside of Verizon’s wireline operating territory, but the biggest danger is that in areas where Verizon now competes head-to-head with cable Big Red will just give up, ceding local monopolies to its cable partners.

According to the Journal, though, the DOJ is making Verizon scale back those marketing agreements in exchange for its blessing on the overall spectrum transaction. Instead of making the companies tear up the agreements entirely, the Justice Department would put time stipulations on them, requiring Verizon and Comcast to reapply for antitrust clearance after five years, the Journal reported.

In addition, the Journal’s unnamed sources said that Verizon and Comcast have agreed not to implement the agreements in areas where Verizon offers its FiOS fiber-to-the-home service. That really isn’t much of a concession since Verizon has said all along it would make its FiOS footprint the exception. In those markets it can offer the broadband speeds and the video programming to compete with cable head on.

It’s true, that Verizon is getting killed in markets where it only offers DSL, as new second quarter numbers from Leichtman Research Group show. But if Verizon effectively stops competing in residential broadband in those markets, there will be no incentive for it and the newly crowned cable dynasts to build faster networks and offer cheaper access.

The Journal’s sources also said the FCC isn’t letting Verizon breeze by on the spectrum side of the transaction. The commission is requiring that Verizon open up those new LTE airwaves to data roaming partners at reasonable rates. That may satisfy the demands of rural carriers whose biggest concern was that Verizon would shut them out. But there are still plenty of organizations such as the Communications Workers of America, Free Press and Public Knowledge, and companies like Sprint and Netflix still opposed to the deal. These concessions aren’t likely to satisfy them.

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Of course, Verizon’s deals with Comcast, Time Warner Cable, Bright House and Cox Communications are partnerships, not acquisitions, but the CFA said that the end results would be the same: Verizon would essentially cede the residential broadband market to cable, and the cable operators would give Verizon free reign in wireless. What’s more, the companies would market and sell each other’s services – in fact, already are – creating the same anti-competitive conditions as a full-bore merger, CFO Research Director Mark Cooper wrote in his analysis (pdf):

If Verizon had proposed to merge with Comcast in its service territory, or spin off all of its wireless businesses to the dominant cable operators across the country, we believe that the antitrust authorities would have been in full throated opposition.  In those service areas where Verizon and the acquiring cable companies overlap in wireline service, the antitrust authorities would have seen it as a merger of the number one and number two firms in a highly concentrated market for major services.  In service territories where the wireline assets do not overlap, it would be seen as a merger of two of the top three firms.

The parties to the transaction will insist that it is just a joint venture, not a merger and therefore should not be evaluated within this perspective.  We disagree. Both the antitrust laws and the Communications Act recognize that joint ventures can have many of the anticompetitive effects of mergers.  The analysis must take the nature of the collaborative agreement into account, but the fundamental premises and approach are the same.  Because the markets affected are so highly concentrated and the services supplied so vital to the growth of the digital economy a collaborative agreement can alter the incentives to compete sufficiently to result in a significant increase in market power and harm to competition.  Under these circumstances, a joint venture may be a clever way to get around the careful antitrust scrutiny and the obvious public policy implications that such scrutiny would arrive at.

The CFA is making its case in comments submitted to the FCC (pdf) and DOJ, laying out what it calls 12-point “roadmap” for rejecting the Verizon-cable deal based on guidelines laid out in the 1996 Telecommunications Act and U.S. antitrust law.

The Federation joins a growing chorus opposing the Verizon-cable deal. Organizations ranging from Communications Workers of America to public policy groups such as Free Press and Public Knowledge have attacked the deal from all sides, claiming it would only lead to collusion between already powerful telecom companies.

Verizon has dismissed those arguments, claiming the spectrum sale and its marketing joint venture are separate deals that, if pursued independently, would never raise such close scrutiny. Many carriers were also opposed to the deal originally, but Verizon has been luring some of those operators to its side by offering them some of its spectrum haul. One of the deal’s biggest critics T-Mobile switched sides last month, after it brokered a deal with Verizon to buy up some of its extra AWS airwaves.

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The new deal will see licenses in 218 markets change hands, the balance going to T-Mobile, which will pay Verizon an undisclosed sum of cash. In all, T-Mobile will gain licenses covering 60 million people, and, most importantly, T-Mo will be able to fill critical gaps in its future LTE network. Though T-Mobile gained a lot of Advanced Wireless Services (AWS) airwaves after its merger with AT&T failed, it still has the frequency holdings to only partially cover the country. For instance its original plans called for covering only three-quarters of the top 25 markets with the new LTE network.

The deal with Verizon can fill in those holes, giving it spectrum in Philadelphia; Washington, D.C.; Detroit; Minneapolis; Seattle; Cleveland; Columbus, Ohio; Milwaukee; Charlotte, N.C.; Raleigh-Durham, N.C.; Greensboro, N.C.; Memphis, Tenn.; and Rochester, N.Y., among other markets. In exchange, Verizon would receive licenses covering 22 million people.

It’s no coincidence that most of the licenses T-Mobile gains are east of the Mississippi. Verizon already has AWS holdings in the eastern half of the U.S., and the cable deal will only make it more flush in east coast airwaves. Meanwhile, T-Mobile’s received a lot of west coast airwaves from AT&T.

So why the change of heart from T-Mobile? It’s probably acknowledging reality. T-Mobile has been angling for those cable airwaves all along, which is why it has called for the Verizon-cable deal’s dissolution on anti-competitive grounds. But it likely realizes it has little chance of stopping the deal from going forward, so T-Mobile might as well deal directly with the airwaves’ eventual owner. You also could take the more cynical view that Verizon is simply buying a very vocal critic’s silence with some extraneous spectrum.

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Speaking at a T-Mobile media briefing, Illinois Institute of Technology Vice Provost and computer science research professor Dennis Roberson presented a study that accused Verizon of using flawed math when it made its efficiency calculations. He stated that once that math is corrected – surprise, surprise – T-Mobile comes out on top.

You can look at Roberson’s full regulatory filing and presentation on T-Mobile’s Website, but basically his argument is this: Verizon treats all of its connections as equals in its analysis without accounting for the number and usage levels of smartphones consuming most of the bandwidth; and Verizon treats all spectrum as equal though some frequencies are more efficient than others.

What it boils down to, though, is that Verizon is crunching its numbers one way, and T-Mobile is crunching them another way. I’m sure if he so chose, Roberson could finagle that data to correlate Verizon’s spectrum use to an increase in tooth decay.

The pathetic thing about this situation is that T-Mobile isn’t wrong. T-Mobile is the most efficient user of spectrum in the country, while Verizon is probably the most inefficient. T-Mobile’s argument is sitting right in front of it. Verizon is parked on loads of Advanced Wireless Service (AWS) and 700 MHz licenses that it has yet to touch and – in the case of 700 MHz – actually plans to sell. The Federal Communications has even started calling Verizon on its spectrum warehousing practices.

Meanwhile, T-Mobile has put practically every megahertz of spectrum its has every bought to use either in its GSM or HSPA+ networks. In fact, T-Mobile is so strapped for airwaves, it’s cannibalizing its 2G networks to make room for more efficient mobile broadband technologies such as LTE. T-Mobile couldn’t make a better argument than that to show it’s making the most of the limited resources it has.

T-Mobile is angling to get this deal killed so it can get a shot at buying up the cable operators’ penthouse airwaves. I have little doubt if T-Mobile were to prevail it would make immediate and good use of those frequencies, while its competitors might sit on them for several years.

But I also think T-Mobile is being a bit hypocritical here. T-Mobile today may be coming off as the consumer hero in magenta-colored tights, but a year ago things were very different. At the beginning of 2011, Deutsche Telekom had all but written off its U.S. operator, refusing to invest any more in spectrum or infrastructure. It threw in the towel completely when it agreed to sell T-Mobile USA to AT&T – which was perhaps the most anti-competitive action imaginable.

T-Mo has basically done a complete 180 in the space of a year, and now it’s asking the FCC to accommodate its new role as industry savior. It may be the everyman’s carrier today, and that’s great. But who knows what T-Mobile will be tomorrow.

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Verizon is trying to buy the cable operators’ Advanced Wireless Service licenses, which would give it a near nationwide footprint of airwaves for an LTE overlay to complement its current 4G network at 700 MHz. To sweeten the pot and gain regulators’ permission for the buy, Verizon has offered to sell off its spare airwaves in the 700 MHz band to other operators.

Carriers like T-Mobile and Sprint, along with a slew of consumer advocacy and telecom industry groups, have criticized the deal, claiming Verizon is merely trying to lock up the most valuable 4G airwaves in the market in order to keep them out of its competitors hands. The implication here is that Verizon locked down the A and B blocks, and now that much more valuable AWS frequencies are in play, it will do the same with the cable operators’ licenses.

In the letter (pdf), Kaplan points out that under the terms of the 700 MHz auction Verizon is required to build networks in the A and B blocks by no latter than June of 2013, yet it appears to have done nothing with those licenses. He asks:

“…what steps to date, if any, has Verizon Wireless taken to deploy mobile services using the Lower 700 MHz A of B block licenses (either or both)? On what timetable has Verizon Wireless been planning to deploy mobile service in these Lower 700 MHz blocks?”

Kaplan also wanted to know why the sale of those 700 MHz licenses was contingent on it grabbing the cable AWS spectrum. The FCC wants to how that’s relevant, if Verizon had tried to sell its extra 700 MHz licenses in the past, and whether Verizon truly plans to abandon the spectrum sale if the cable deal isn’t approved. Kaplan wants answers next Tuesday.

Verizon is in a tricky situation here. Those A and B block licenses don’t fit well into its LTE plans for multiple reasons: the goofy configuration of the 700 MHz band, the fact that they don’t form a nationwide footprint and interference concerns in A block. When Verizon bid on them and won them in 2008, it probably wanted them as insurance – or to keep them out of AT&T’s hands. It was hoping something better would come along, and it did — in the form of nice big gift-wrapped package of clean nationwide airwaves delivered by its new cable buddies.

The truth is that operators pull these kind of warehousing shenanigans all the time. AT&T, Verizon and the cable companies haven’t done squat with the AWS licenses they won them in 2006. But you don’t actually admit to your regulator that warehousing is what you planned to do along. It got Comcast in trouble a few months back. Now the FCC is asking Verizon the question directly, and a lot hinges on Big Red’s answer. If you’re trying to convince the FCC to approve a spectrum sale, it’s not a good idea to tell them you have been a lousy steward of the public airwaves so far.

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At a media call on Monday to kick off the alliance, members ticked off their objections to the deal. The Rural Cellular Association CEO Steve Barry said the RCA doesn’t actually oppose the spectrum sale. Instead, it wants to see the Federal Communications Commission impose conditions on the license transfer that would force interoperability in the LTE 700 MHz bands.

If Verizon gets hold of cable operators’ Advanced Wireless Services (AWS) spectrum, and then sells off its excess 700 MHz licenses as planned, Verizon and AT&T would effectively create private LTE bands, making it extremely difficult for other operators to get devices and sign roaming agreements, Barry said.

“They can almost create their own walled gardens within their own 4G network services,” Barry said.

Meanwhile T-Mobile wants to stop the spectrum sale itself, preventing Verizon from “warehousing” what little valuable 4G spectrum remains. Public Knowledge’s primary concern was the joint-operating entity that Verizon would create with Comcast and Time Warner Cable, which PK legal director Harold Feld said would allow the biggest mobile carrier and biggest cable operators to dictate de facto technology standards to the detriment of consumers. The American Antitrust Institute and Free Press – which aren’t official Alliance members, but participated in the kick-off – focused on the competitive and legal implications of Verizon and the cable operators dividing the wireline and wireless markets between them.

The Alliance almost resembles the Occupy Wall Street movement. While all of the Alliance’s members have legitimate gripes with the deal, they don’t seem to be in agreement over their demands — which parts of the deal should be killed or even if it should be killed at all. It makes me wonder if their individual efforts to block the deal would be far more effective than joining forces.

Verizon was fairly dismissive of the initiative, saying that the Alliance is merely trying to rehash old complaints by presenting them under a coalition banner. Verizon spokesman Rich Young told me an email statement:

“This faux-coalition is ‘old whine in a new bottle.’  The same companies and political groups, making the same claims, that have already been filed at the FCC on the SpectrumCo deal. In short, there is nothing new here. Verizon Wireless has responded to each of these claims in our filings on multiple occasions, has addressed them with the FCC, and is confident that we have a made a strong case on bringing unused spectrum to meet the needs of consumers is in the public interest. “

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The filing (pdf) is a routine affair, notifying the public that FCC Wireless Telecommunications Bureau Chief Rick Kaplan met with T-Mobile CEO Philipp Humm and other T-Mo execs to discuss the Verizon’s pending $3.6 billion purchase of airwaves from Comcast, Time Warner Cable and Bright House Networks SpectrumCo. The FCC made it clear that Humm and the rest of the T-Mo crew wanted to see that deal quashed:

“In particular, the T-Mobile Representatives discussed the fact that, unlike T-Mobile and other wireless carriers, Verizon Wireless has not used its existing AWS spectrum in any way in the six years it has held the licenses, and that the instant transactions would add even more AWS spectrum to Verizon Wireless’ unused spectrum inventory. They noted that given this dismal track record on utilization of its current AWS spectrum, it would make no sense, and would be inconsistent with the Commission’s charge to ensure that spectrum transfers serve the public interest, to allow Verizon to acquire additional AWS licenses, especially at this time of an industry-wide spectrum crunch. The T-Mobile Representatives further described the potential anti-competitive effects of permitting the largest carrier in the industry to accumulate a large preponderance of the only immediately available spectrum suitable for deployment of LTE, thereby foreclosing any opportunity for competitors to immediately put it to use in deploying LTE.”

Last week, Verizon offered up an olive branch in the increasingly incendiary regulatory and political war surrounding the cable deal. By selling off extra 700 MHz licenses to its competitors, carriers and other critics should have no reason to oppose its grab for the AWS airwaves – or at least that seemed to be the idea. T-Mobile, however, would have been one of the likeliest candidates to take Verizon up on its offer. It’s the most spectrum poor of all of the major operators and to get LTE off the ground in 2013 it’s being forced to cannibalize its 2G networks.

So why isn’t T-Mobile tantalized by Verizon’s offer? Two reasons: 1) The spectrum Big Red is selling just doesn’t fit with T-Mobile’s LTE plans, no matter how meager they might be, and 2) T-Mobile probably feels it has a shot at getting those same cable AWS licenses if it convince the FCC to put the kibosh on Verizon’s sweetheart deal.

The 700 MHz airwaves in question are some pretty choice frequencies in major markets, but they’re hardly nationwide (there’s no licenses in New York City Boston or Seattle, for instance). Meanwhile T-Mobile owns no 700 MHz of its own. Even if it were to buy up all of the spectrum Verizon was selling, it would spend a lot of time and money building infrastructure and procuring dual-band LTE handsets while receiving relatively little benefit – a powerful, but very piecemeal network.

The cable operators’ spectrum, however, is another story altogether. The SpectrumCo assets combined with Cox Communications’ separate AWS sale could be used to build a near-nationwide metro-area footprint. AWS also happens to be exactly where T-Mobile plans to deploy LTE, meaning that adding the cable airwaves to T-Mo’s already planned 4G systems would be relatively easy. That’s why T-Mobile is holding out for the bigger prize, which can only be gained if the Verizon-cable deal is sent to its grave.

It’s not that Verizon’s extra 700 MHz licenses aren’t valuable – they’re just more valuable to particular carriers depending on where they plan to put LTE. T-Mobile may not be interested in what Verizon is selling, but you can bet AT&T is.

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The move is the first Verizon Wireless has made with Time Warner to sell each other’s respective wireless and wire line wares, but Verizon and Comcast have already forged ahead on the west coast, working together in Portland, Ore.; Seattle and Spokane, Wash.; and San Francisco. In the Bay Area, Verizon and Comcast struck right in the heart of AT&T’s U-Verse territory, demonstrating just how powerful their tag team arrangement can be.

Time Warner and Verizon Wireless are kicking off their partnership in Cincinnati, Columbus and Toledo, Ohio; Kansas City, Kan.; and Raleigh, N.C., but plan to expand to other Time Warner markets in coming months. As in the Comcast arrangement, customers will be able to purchase a bundle of Time Warner cable TV, broadband and home phone and Verizon mobile services. They’re also sweetening the deal with a $200 prepaid debit card.

The Federal Communications Commission hasn’t yet approved the $3.6 billion spectrum sale the Verizon-cable partnerships hinge on, and the Justice Department is reportedly examining the implications of the pact on mobile and broadband completion. Congress has also gotten involved, calling Comcast and Verizon executives to task on what amounts to a cease-fire in the residential broadband market.

Verizon and the cable operators argue that their cross-selling venture and the spectrum sale are entirely unrelated, which explains why they’re moving forward with their marketing pact while the fate of their financial transaction is still in limbo. Though the FCC has authority on the license transfer, the Justice Department most likely will have to make the call on whether the partnerships amounts to collusion – and that will require an antitrust lawsuit. That leaves Verizon and the cable operators to press ahead until someone tells them they can’t.

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