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T-Mobile to FCC: Block Verizon AWS Deal

Wed, 02/22/2012 - 7:32am
Maisie Ramsay

This story has been updated with additional information about the Rural Cellular Association and MetroPCS.

T-Mobile USA has asked the FCC to block Verizon Wireless' $3.9 billion acquisition of a nationwide swath of AWS spectrum held by four cable companies.

The country's fourth-largest wireless operator called the transaction "contrary to the public interest" and argued the transaction would result in an "excessive concentration" of spectrum in the hands of Verizon, according to documents filed Tuesday with the FCC.

"The principal impact of the acquisition would be to foreclose the possibility that this spectrum could be acquired by smaller competitors – such as T-Mobile – who would use it more quickly, more intensively, and more efficiently than Verizon Wireless," T-Mobile said. "If these transactions go forward, the end result will be less LTE capacity available overall and reduced competition in the provision of LTE, which would be contrary to the public interest."

Verizon is paying $3.6 billion to buy 122 AWS licenses from Comcast, Time Warner Cable and Bright House Networks and is shelling out an additional $315 million for Cox Communications AWS holdings. The cable operators originally purchased the spectrum during the FCC's 2006 auction, but never fully realized their wireless ambitions.

The airwaves cover about 287 million people nationwide and will be used to add capacity to Verizon's LTE network, which currently operates on the 700 MHz band.

Yesterday was the last day to file petitions against the deal with the FCC. Rebuttals to the opposition are due March 2, with responses to the second round of comments due March 12.

"We believe the spectrum purchase is in the public interest, and will address the needs of all consumers, putting spectrum to work to meet growing demand," a Verizon spokesman said, adding that the transaction is "in line with goals in the FCC's National Broadband Plan, as well as its views on using secondary market transactions such as this one to ensure that existing spectrum is used by providers who can use it efficiently."

T-Mobile USA wasn't the only one to ask the FCC to block the acquisition. MetroPCS and the Rural Telecommunications Group (RTG) asked the transaction  be prevented from going through, and the Rural Cellular Association (RCA) asked the FCC to impose conditions on the deal. Sprint asked the FCC to closely examine the spectrum sale, but stopped short of opposing it.

MetroPCS argued the deal should be blocked because Verizon withheld too much information from its application. The prepaid operator asked the FCC last month to force Verizon to fully disclose information about separate arrangements with the cable operators tied to the AWS sale.

"Until the applicants place in the record the missing information... the applications must be held in abeyance," MetroPCS said in a petition to the FCC. "Otherwise, the applications should be denied or designated for an evidentiary proceeding."

The RCA said in a statement that the "proposed acquisitions raise serious anti-competitive concerns, including spectrum warehousing by Verizon and further industry spectrum consolidation." 

The trade group wants the FCC to either block the deal altogether or force Verizon to agree to a stringent set of conditions involving spectrum divestments, interoperability requirements for its LTE network and lower prices on data roaming.

"Without conditions, these acquisitions would place competitive carriers at risk in an already extremely consolidated market," said RCA President and CEO Steven Berry.

The RCA advocates for smaller wireless operators on a number of issues such as interoperability in the 700 MHz band and data roaming. Its members include U.S. Cellular and Sprint.

RTG asked the FCC to deny both Verizon's AWS purchases and its recent arrangement to buy airwaves from Leap Wireless International.

"In the absence of any near term FCC spectrum auctions, Verizon Wireless is systematically attempting to corner the market for commercial mobile wireless spectrum while simultaneously stripping existing and potential competitors of all their spectrum holdings," RTG General Counsel Carri Bennet said in a statement. The trade group represents rural wireless carriers with less than 100,000 subscribers.

A number of public interest groups including Public Knowledge, Media Access Project, the New America Foundation Open Technology Initiative and the Benton Foundation also came out against the transaction, saying it would be "aggravating existing anticompetitive problems with spectrum aggregation."

The New Jersey Division of Rate Counsel filed comments opposing the deal last week, saying the "transactions are not  as  competitively benign as  the applicants would have the FCC believe."

As part of the AWS purchase, Verizon and the four cable operators inked a side deal to cross-sell and market each other's products, and formed a joint venture aimed at integrating wireless and wireline services.

Verizon has repeatedly argued that the FCC should not consider the marketing agreement in its review of the spectrum sale and has provided only limited information on the arrangement to groups with an interest in the transaction.

T-Mobile and the other groups opposed to the transaction called on the FCC to investigate the side deal, which the RTG characterized as "anticompetitive."

Interestingly, the Communications Workers of America (CWA) said it did not oppose the spectrum sale but asked the FCC to set specific conditions for the marketing arrangement. CWA represents 35,000 union employees at Verizon Communications.

"The joint marketing agreements will give Verizon and the cable companies – through their ability to offer a quad play of voice, video, data and wireless from the top video, broadband, and wireless providers -- the market power to harm competition, raise cable and broadband rates and reduce incentives for new video entrants to invest in their networks, leading to significant job loss," CWA said in a statement. "The joint marketing arrangements should not be permitted to put other marketers of Verizon Wireless service at a disadvantage."

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