DOJ Approves Verizon Cable Deals

August 16, 2012. The Department of Justice's (DOJ) Antitrust Division and state of New York filed a complaint [19 pages in PDF] in the U.S. District Court (DC) against Verizon, Verizon Wireless, Comcast, Time Warner Cable, Cox Communications, and Bright House Networks that alleges violation of Section 1 of the Sherman Act in connection with a series of agreements between Verizon and cable companies.

Under these agreements, Verizon Wireless agreed to acquire unused Advanced Wireless Services (AWS) spectrum licenses from several cable companies, and Verizon and Verizon Wireless and cable companies agreed to market each other's services. Also, subsequently Verizon Wireless conditionally agreed to sell 700 MHz A and B block licenses to T-Mobile USA.

Nominally, the complaint seeks court injunction of the agreements. However, the parties simultaneously announced that they have settled this action. Verizon Wireless will acquire the AWS spectrum. The cross marketing agreements are allowed, but must be amended, and be of limited duration -- four years. See, Stipulation and Order and proposed Final Judgment.

The proposed settlement must be approved by the District Court.

The DOJ stated in a release that "the proposed settlement protects competition and consumers by removing provisions that would lessen the companies' incentives to compete aggressively in the areas where Verizon’s FiOS services offer a critical competitive alternative to the cable companies’ video and broadband products. The proposed settlement also limits the duration of the companies’ collaboration to December 2016 in important respects, ensuring that they retain incentives to compete against one another.

The complaint states that in December 2011 Verizon Wireless, which is a joint venture of Verizon Communications and Vodafone, and the cable defendants "entered into a series of commercial agreements ... that allow them to sell bundled offerings that include Verizon Wireless services and a Cable Defendant's residential wireline voice, video, and broadband services, including ``quad-plays.´´ In addition, the Commercial Agreements allow the Defendants to develop integrated wireline and wireless telecommunications technologies through a research and development joint venture."

David Cohen, EVP of Comcast, stated in a release that "We appreciate the timely completion of the antitrust review by the government of the proposed sale of spectrum and associated commercial agreements between Verizon Wireless, Comcast, and the other cable companies. And, we are pleased that the consent decree that we have negotiated with the Department of Justice preserves the most important goals of the agreements, including Comcast's ability to market Verizon Wireless services throughout our footprint in order to offer our customers a wireless option, Verizon Wireless' ability to market our products in virtually all of our footprint, our ability to opt into an MVNO relationship with Verizon Wireless, and the essential structure of the innovation R&D technology joint venture. We are also pleased that the FCC is circulating an order proposing approval of the spectrum sale and we are hopeful that a final order will be issued shortly."

Berin Szoka of the Tech Freedom stated in a release that "This deal is great news for consumers".

Gigi Sohn, head of the Public Knowledge (PK), stated in a release that "By allowing Verizon and the cable companies to sell each other's services, the DoJ and the FCC are acknowledging what has been clear for some time -- that broadband competition policy in the United States has failed. For years, policymakers have hoped that "facilities-based" competition between wired broadband providers would protect consumers, drive down prices, and encourage new deployment. It is clear that this promise has not been fulfilled."

"Instead", said Sohn, "Verizon has stopped deploying fiber, and will be marketing cable broadband instead of its own services in non-fiber markets. Nationwide, cable has opened up an unsurpassable lead over DSL. Meanwhile, the wireless broadband market has become a near-duopoly, as AT&T and Verizon acquire more and more spectrum, leaving all other competitors behind."

Joel Kelsey of the Free Press stated in a release that "Limiting the joint-marketing agreements between Verizon and the cable companies to four years is a start. But this concession doesn't deal with the deep structural problems in the market for at-home broadband service. There is still no meaningful competition".

This case is USA and State of New York v. Verizon Communications, Inc., et al., U.S. District Court for the District of Columbia, D.C. No. Case 1:12-cv-01354.