The Justice Department’s agreement to let Verizon Wireless purchase Rural Cellular Corp. so long as the No. 2 mobile-phone carrier sells off a handful of licenses in Vermont, New York and Washington, was perhaps the easy part.
Getting the $2.67 billion transaction through the Federal Communications Commission – which considers antitrust and public-interest factors such as those raised by Sen. Bernie Sanders (I-Vt.), consumer advocates and public-interest groups – has been a heavier lift.
Sanders said the DoJ “settlement represents just the first step in the federal approval process of this buy-out of Unicel by Verizon Wireless. As the process now moves to the Federal Communications Commission for its review, my office will continue to press for an accelerated expansion of reliable cellphone service across Vermont. It is wrong that many Vermonters and many Vermont businesses, particularly those in rural parts of our state, do not have the type of state-of-the-art service that so many other Americans take for granted.”
The DoJ filed a civil lawsuit in U.S. District Court for the District of Columbia to block the proposed transaction, but concurrently filed a proposed consent decree which, if approved by the court, would resolve competitive concerns and the lawsuit.
RCC, headquartered in Alexandria, Minn., and marketed as Unicel, provides service to 716,000 customers in 15 states in the Midwest, Northeast, Northwest and the southern regions of the United States. The carrier utilizes CDMA and GSM technologies. When it announced the acquisition last July, Verizon Wireless, a CDMA carrier, said it planned to deploy CDMA technology in RCC’s existing markets and convert GSM subscribers to CDMA service. At the same time, Verizon Wireless said it intended to maintain RCC’s GSM networks to avoid disenfranchising roaming customers of other GSM carriers.
Condition trail
It wasn’t long after Verizon Wireless and RCC filed their application with the FCC last September that controversy began to foment.
In an Oct. 29 letter to FCC Chairman Kevin Martin, Sanders recommended a number of conditions as a prerequisite for regulatory approval of a deal he said raised antitrust and service availability problems in Vermont.
In addition to having to provide 100% geographic coverage of Vermont within 30 months, Sanders wanted a commitment from Verizon Wireless to maintain, upgrade and expand Unicel’s GSM network indefinitely. Sanders said Verizon Wireless originally agreed only to support Unicel’s GSM operations in the state for 18 months.
In another option outlined by Sanders, Verizon Wireless would have to sell the GSM network and spectrum assets to another service provider. Sanders called for a free exchange of Unicel’s customers’ phones for comparable Verizon Wireless handsets. The lawmaker also wants an enforceable commitment from Verizon Wireless to provide automatic roaming services at reasonable rates for voice and data – including wireless broadband – to other GSM or CDMA carriers.
Overtime
The FCC tries to rule on mergers and acquisitions within 180 days. The Verizon Wireless-RCC tie-up has been pending at the FCC for 244 days. Last November, the Vermont Public Interest Research Group asked the FCC to extend the public comment period to better ascertain the consumer impact of Verizon Wireless’ plan to buy RCC’s GSM assets in the state. Verizon Wireless and RCC opposed the 90-day extension request, arguing it would delay public benefits of the transaction. The FCC granted VPIRG’s request, pushing out the last comment deadline to Feb. 28.
Consumer groups echoed Sanders’ concerns. “The acquisition, as proposed, would have anti-competitive and anti-consumer effects in several, particularly rural, areas,” stated Consumer Federation of America, Consumers Union, Free Press, U.S. Public Interest Research Group and VPIRG earlier this year.
Some lawmakers grew irritated about the length of time it was taking the FCC to rule on Verizon Wireless-RCC deal.
“We are concerned that any further postponement of the FCC approval process would slow new investment and wireless broadband deployment in rural areas,” stated Sens. Tim Johnson (D-S.D.) and John Thune (R-S.D.) and Rep. Stephanie Herseth Sandlin (D-S.D.) in a letter to FCC Chairman Kevin Martin several months ago. Lawmakers from Alabama, Kansas, Florida and Michigan sent similar letters to Martin.
“We’re still evaluating the application and we hope to make a decision soon,” said an FCC spokesman.
Tangled spectrum web
In another wrinkle, Verizon Wireless and AT&T Mobility in April asked FCC permission to swap wireless assets in Arizona, Kentucky, Nevada, New York, Ohio, Pennsylvania, Vermont and Washington to meet divestiture obligations related to AT&T Mobility’s $2.8 billion purchase of Dobson Communications Corp. The licenses and spectrum leasing arrangements that Verizon Wireless would provide to AT&T Mobility in the exchange are held by subsidiaries of RCC.
More recently, with Verizon Wireless-RCC transaction pending at the FCC, Verizon Wireless announced plans to acquire the No. 5 mobile-phone carrier, Little Rock, Ark.-based Alltel Communications L.L.C., for $28.1 billion. Alltel was forced to sell off some of its spectrum holdings in Minnesota to Rural Cellular last year following Alltel’s acquisition of Midwest Wireless.
If approved by federal officials, Verizon Wireless would return as the nation’s largest cellular operator. With Verizon Wireless and AT&T Mobility’s domination of the 700 MHz auction, some Democratic lawmakers have begun to raise questions of increased concentration in the wireless industry even though it is still more competitive than other telecom sectors.
