FCC OKs Verizon Wireless purchase of Rural Cellular

The Federal Communications Commissions gave the green light to Verizon Wireless’ $2.67 billion purchase of Rural Cellular Corp., with the transaction and a separate pending deal involving the No. 2 mobile-phone operator bringing to the forefront a number a key policy issues.
The FCC, like the Department of Justice previously, conditioned approval of the Verizon Wireless-RCC acquisition on the divestiture of six licenses in Vermont, New York and Washington.
It is not yet clear where the divested spectrum will go.
While not a blockbuster deal by today’s standards, the transaction became highly controversial and government review was lengthy because of competitive, roaming, consumer and other issues prominently raised by Sen. Bernie Sanders (I-Vt.) and state agencies.
The two Democrats on the five-member, GOP-led FCC made specific reference to those issues in separate statements associated with their lukewarm backing of the Verizon Wireless-RCC tie-up.
“While I am always troubled by additional concentration in the wireless marketplace, these divestitures will improve competition in the affected areas (as compared to an unconditioned merger) and I am glad we require them,” said Commissioner Michael Copps. “I think it is particularly important that Verizon will divest all of RCC’s spectrum, facilities and customers in Vermont to the nation’s largest GSM carrier – it will ensure that native Vermonters and visitors to the state who happen to have GSM phones will continue to be able use their handsets.”
Copps comments seem to indicate that AT&T Mobility will be the new home for the GSM network that RCC operated in the Northeast, but there is still some question as to how much spectrum will be included in the spin off.
Copps dissented to the FCC ruling’s inclusion of 700 MHz spectrum to calculate the spectrum screen, an antitrust analytical tool that can trigger closer scrutiny of potential anticompetitive consequences in markets where combined wireless assets reach 95 megahertz or more.
“The licenses won in our auction earlier this year will not even be available for use until February 2009 and it may be several years before it is ever used commercially by a majority of licensees,” Copps stated. “As I have explained in earlier statements, we have already been cavalier in applying this altered spectrum screen to prior transactions and we ought not put the cart before the horse yet again in an effort to encourage still more consolidation in the wireless industry.”
Commissioner Jonathan Adelstein shared concerns flagged by Copps and Sanders.
“I continue to have concerns, however, regarding the inclusion of the 80 [megahertz] of the 698-806 MHz spectrum band in the total amount of spectrum suitable for mobile telephony nationwide,” stated Adelstein. “As I have cautioned before, the premature inclusion of this spectrum as part of our evaluation of the input market for spectrum and the potential competitive harms raises concerns regarding increased likelihood of competitive harm in certain overlapping markets. And with even more mergers on the horizon, we must be vigilant so as to protect consumers and ensure that the wireless market continues to be competitive.”
The FCC and Justice Department are currently evaluating Verizon Wireless’ proposed $28 billion acquisition of Alltel Communications L.L.C., a deal expected to further elevate competitive, roaming and spectrum policy issues and that could result in AT&T Mobility being dethroned as the No. 1 cellular operator in the United States.
The FCC’s approval is the final regulatory hurdle facing the Verizon Wireless-RCC transaction.