Verizon to AT&T: Want more spectrum? Here’s how you get it.
Posted on December 02, 2011 at 13:49 PM EST
Verizon has offered three cable companies a total of $3.6 billion for spectrum that Comcast, Time Warner Cable and Bright House Networks were planning to use for their own mobile play, and it’s unlikely that the Federal Communications Commission will do anything to stop it.
Once again all eyes will be on FCC Chairman Julius Genachowski
Updated: Verizon has offered three cable companies a total of $3.6 billion for spectrum that Comcast, Time Warner Cable and Bright House Networks were planning to use for their own mobile play, and it’s unlikely that the Federal Communications Commission will do anything to stop it. Unlike AT&T, which is attempting to acquire T-Mobile for $39 billion and hitting roadblocks at the FCC and the Department of Justice, Verizon is likely to work a deal that gives it up to 20 MHz more of unused spectrum to deploy for LTE in all major U.S. markets.
This is no small feat, as one of the suspected lures of T-Mobile’s AWS spectrum for AT&T was that it allowed AT&T to deploy an LTE network without having to worry about phasing out customers using its existing spectrum for 2G and 3G devices. Now Verizon stands to get pristine spectrum in the AWS band that it can combine with its 700 MHz airwaves it won at auction for LTE. The key for FCC approval lies in the fact that this spectrum is unused, according to sources in Washington D.C.
Because there are no customers on it right now, it’s an asset, and Verizon’s acquisition of it doesn’t affect actual customers or an existing market. Thus, a competitive market analysis like what the DoJ and the FCC evaluated in the AT&T and T-Mobile deal doesn’t make sense. Plus, coming immediately after the FCC all but quashed the AT&T attempt to purchase T-Mobile, while also releasing a report that essentially accused Ma Bell of lying, it’s unlikely to react so boldly a second time, especially as we head into an election year. When I asked the FCC for comment, a spokesman replied, “When the applications come before us, the FCC will undertake a thorough, fair and fact-based review of the proposed transaction.”
The FCC, however, can evaluate the deal against its spectrum screen as opposed to looking at how the deal would affect individual markets. The FCC has the ability to evaluate transactions that allow one player to hold a large amount of megahertz in a given market, and Public Knowledge, a consumer lobbying group has called on the FCC to do exactly that. But the agency also can choose to let companies add capacity over those spectrum screens (it used to have hard caps on the spectrum companies were allowed to hold in a given market, but it dropped that).
Given how both LTE and the coming LTE-Advanced spectrum standards require larger blocks of spectrum in order to deliver faster speeds, there’s a technical argument for ignoring those screens in given markets. Update: A source informs me that of the 122 markets, fewer than 20 would be close to the FCC’s current spectrum screens. Another factor going for the transaction is that Verizon take unused spectrum and deliver more mobile broadband, which helps address concerns that the U.S. is letting companies “hoard” valuable spectrum. One area where the FCC could stop this is the side agreements that Verizon has signed with the cable companies. If they are blatantly anticompetitive, the agency could step up to block the transaction, but I can’t imagine a lobbying company as savvy as Verizon or even Comcast showing up with something that won’t pass muster.
On its face, this deal is almost a slap in the face for AT&T which has faced a huge beating in public, may lose some of its spectrum and a $3 billion breakup fee, and watches a big competitor walk away owning as much as 60 MHz in certain major markets.
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