Verizon’s Side Deals Draw Congressional Scrutiny

Groups charge company hurt wireless competition

The side marketing agreements that Verizon cut with the nation's largest cable companies as part of its deal for unused wireless spectrum is attracting congressional scrutiny.

Sen. Herb Kohl (D-Wis.), the powerful chairman of the Subcommittee of the Senate Antitrust, Competition Policy and Consumer Rights Subcommittee, said Wednesday that plans were underway for hearings to examine the deals' impact on consumers. He did not give a date for the hearings.

Kohl has been a tough taskmaster on mergers of late. Last year, he came out swinging against the AT&T purchase of T-Mobile following hearings held by his subcommittee, sending a clear message to regulators.

Verizon announced two deals last December that have raised alarm bells with public interest groups and other companies that fought tooth and nail against the AT&T/T-Mobile merger. One was a $3.6 billion deal with SpectrumCo (owned by Comcast, Time Warner Cable and Bright House Networks), the other a $315 million deal with Cox Cable.

While both deals solidified Verizon Wireless' leadership in the wireless business, what really turned heads were the cross-marketing agreements and joint venture deal cut with Verizon's former competitors, the cable companies, effectively taking those potential wireless competitors out of the market.

Public interest groups and companies, alarmed at the effect on competition in the wireless industry, have been pushing the FCC and DOJ to consider Verizon's side marketing deals as part of the regulatory review.

"Even without the agreements [among] Verizon, Comcast and the other cable operators to resell each other's services, this transaction would raise serious concerns about spectrum aggregation and the future wireless competition," Harold Feld, the legal director for Public Knowledge, said in a statement praising Kohl's decision. "But when, in addition, competitors become resellers of each others' services, those charged with protecting consumers and promoting competition have a duty to take a very careful look."

Public Knowledge was one of eight organizations and companies, including Sprint, T-Mobile and DirecTV, that wrote to the FCC last week requesting that Verizon and Comcast provide more details to the agency about its proposed business arrangements.

Verizon was not immediately available for comment. In its filing to the FCC, the company argued that its commercial agreements should not be part of the FCC's review because they don't fall under the FCC's authority. "The commission—rightly—has never asserted authority to review such agreements or required parties to file such agreements, and there is no basis to do so here," Verizon said in an FCC filing. "The commercial agreements have no relevance to this proceeding. "


Publish date: February 1, 2012 © 2020 Adweek, LLC. - All Rights Reserved and NOT FOR REPRINT