To the surprise of few, Verizon Wireless and a handful of cable operators will need to make changes to their current spectrum deal in order to gain government approval. However, those changes appear to be modest and set the stage for government approval of the nearly $4 billion spectrum deal.
The changes include forcing Verizon Wireless to sell off some of its spectrum holdings and for limitations on the co-marketing agreements between Verizon Wireless and its cable partners. Those partners include Comcast, Time Warner Cable, Bright House Networks and Cox. The Federal Communications Commission earlier this year aligned the comment cycle on the proposed deals.
The spectrum divestitures are connected with the recently announced deal between Verizon Wireless and T-Mobile USA that will see the two operators swap and/or sell a number of licenses. That deal, which was announced in late June, was contingent on the spectrum deal with the cable operators being approved as a number of the licenses involved in the T-Mobile USA deal were caught up in the cable deal.
The FCC attempted to stamp its authority on approving the deal, noting that the original proposal posed significant competitive concerns, but that the modified agreement, which is made up mostly of concessions already announced by Verizon Wireless, lessen the impact. Of course, Verizon Wireless could have also announced that deal with T-Mobile USA fully knowing that the FCC would require divestitures.
“Because of these substantial undertakings and in light of the Consent Decree the companies executed with the Justice Department today, I believe the Commission should now approve this transaction, and I will be circulating a draft order to my colleagues that would do so,” noted FCC Chairman Julius Genachowski, in a statement. “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
marketplace. I look forward to working with my colleagues toward a final Commission vote in the near future.”
Approval of the deal also sets up the potential for Verizon Wireless to begin auctioning off its A- and B-Block licenses in the 700 MHz band. Verizon Wireless had noted that those deals were contingent on the government approving the spectrum deals with the cable operators.
Verizon Wireless was hot for those cable licenses in the 1.7/2.1 GHz band as the carrier is looking to bolster the capacity of its LTE network. That network currently relies on the carriers 22 megahertz of C-Block spectrum in the 700 MHz band that had helped the carrier rapidly expand coverage, which it said this week has surpassed 75% of the U.S. population. In order to expand capacity in densely populated areas, Verizon Wireless is looking to use the 1.7/2.1 GHz spectrum that will allow for closer cell site placement and less interference than if the carrier was to use its A- and B-Block 700 MHz licenses.
Verizon Wireless did pick up some 1.7/2.1 GHz spectrum in the 2006 auction, but those were mostly concentrated in the eastern Unites States. The deal with the cable providers will bolster Verizon Wireless’ 1.7/2.1 GHz spectrum portfolio across most of the Unites States.
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