Updated. The U.S. Department of Justice is going to let Verizon’s acquisition of the cable companies’ 4G spectrum fly, though it’s imposing some minor conditions on their plan to divvy up the wireline and wireless markets. Now Verizon(s vz) needs only the approval of the FCC to close the $3.9 billion deal.
For the last year Verizon has been trying to 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 treasure trove of new airwaves for its future LTE expansion. But those companies aren’t just swapping cash for spectrum. They also revealed so-called joint-marketing agreements, essentially deals to resell each other’s wireline and wireless services.
The Justice Department is imposing a five-year limit on those joint-marketing agreements, after which they’re presumably subject to additional antitrust review. The other condition isn’t much of a condition at all: Verizon has agreed to not to resell cable’s residential services in areas where it offers its FiOS fiber-to-the-home network, which Verizon was never planning to do in the first place. While it’s getting killed by cable in territories where it only has pokey DSL, Verizon can compete head-to-head with cable in its FiOS markets.
Surprisingly, spectrum concessions seemed to be the deciding factor for the DOJ. Antitrust lawyers said that Verizon’s agreement to sell T-Mobile a portion of its AWS haul was a key factor. Here’s the statement from Acting Assistant Attorney General Joseph Wayland, who heads up the DOJ’s Antitrust Division:
“By limiting the scope and duration of the commercial agreements among Verizon and the cable companies while at the same time allowing Verizon and T-Mobile to proceed with their spectrum acquisitions, the department has provided the right remedy for competition and consumers. … The Antitrust Division’s enforcement action ensures that robust competition between Verizon and the cable companies continues now and in the future as technological change alters the telecommunications landscape.”
Update: Now the ball goes to the FCC, and it looks ready to approve the deal as well. Thursday morning FCC chairman Julius Genachowski said he would begin circulating a draft order recommending the transaction be approved. We could see a final decision in the coming weeks.
The commission — which has regulatory authority over the spectrum part of the deal, but not the joint-marketing agreements – is demanding concessions on data roaming, which Verizon has agreed to meet in an FCC filing. Verizon said it would sell access to its LTE network at “reasonable rates” to roaming partners. That should put rural carriers worried about being shut out of Big Red’s 4G network partially at ease, though I’m sure they would have much rather Verizon spelled out specific rates.
The FCC also won a concession that really wasn’t much of a concession. Verizon has agreed to begin deploying LTE on those AWS frequencies within three years and to reach 70 percent coverage in seven years. Considering that those airwaves have already sat idle for six years and that Verizon has claimed it desperately needs more spectrum to meet mobile broadband demand, Big Red doesn’t seem to be in that big of hurry.
Here’s an excerpt form Genachowski’s statement:
“Specifically, Verizon Wireless has undertaken an unprecedented divestiture of spectrum to one of its competitors, T-Mobile, and has committed to accelerate the build-out of its new spectrum and enhance its roaming obligations. In addition, the companies’ commercial agreements will be modified to, among other things, preserve Verizon’s incentives to build out FiOS, increase wireless competition, and ensure that the proposed IP venture is pro-consumer and that its products cannot be used in anti-competitive ways.
“Approval of the substantially modified transaction will promote the public interest and benefit consumers in several ways. By advancing U.S. leadership in 4G LTE deployment, the transaction marks another step in our effort to promote the U.S. innovation economy and make state-of-the-art broadband available to more people in more places. The transaction will preserve incentives for deployment and spur innovation while guarding against anti-competitive conduct. And vitally, it will put approximately 20 megahertz of prime spectrum—spectrum that has gone unused for too long—quickly to work across the country, benefiting consumers and the