The long Verizon-cable saga may soon be over. According to the Wall Street Journal, Verizon(s vz) and the U.S. government have come within spitting distance of terms that would make the transfer of the cable companies 4G licenses to Big Red palatable to regulators – though not necessarily to the numerous advocacy groups, carriers and tech companies that oppose the deal.
As a refresher, Verizon announced last year that it would buy the unused Advanced Wireless Services (AWS) licenses of Comcast(s cmsca), Time Warner Cable (s twc), 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(s s) and Netflix(s nflx) still opposed to the deal. These concessions aren’t likely to satisfy them.