FCC Approves Verizon/SpectrumCo Deal

Vote is 5-0, with Republicans raising concerns about data roaming, FCC authority

Two days after it was unanimously adopted -- reportedly as
commissioners, some far-flung, finished their statements -- the FCC on Thursday
the order
approving Verizon Wireless' purchase of spectrum from cable
operators Comcast, Time Warner Cable, Cox and Bright House.

The telco is paying $3.9 billion for advanced wireless
spectrum the cable ops decided not to use to build out a competing wireless
network. It is also spinning off some of that spectrum to competitors T-Mobile
and Leap (Cricket).

The deal includes associated marketing agreements that allow
Verizon and the cable ops to sell each other's services, but they have been
modified so that Verizon can't sell cable service in competition to Verizon FiOS
service in areas where that has been built out. It also limits the agreements
to four years, with the FCC reviewing the agreements after that time and the
companies able to petition for an extension.

"We are pleased
that the Federal Communications Commission has now voted unanimously to approve
the spectrum sale and transfer by Comcast and other cable companies to Verizon
Wireless," said David Cohen, executive VP of Comcast, in a blog posting
Thursday, also saying he expected the deal to "close shortly."

He went on to
outline what Comcast would now be able to do in terms of cross-marketing
Verizon produces and services:

"Comcast will
be able to market Verizon Wireless products and services across our entire
footprint under a renewable agent agreement (for the first five years, we will
be exclusive to Verizon Wireless, but Verizon Wireless will not be able to
enforce the exclusivity provisions after five years).

"Comcast and
Verizon Wireless will be able to work together for at least five years in an
R&D partnership to develop innovative technologies that integrate wireless
and wireline products and services; after five years, we can continue that
partnership with the agreement of the DOJ.

"Comcast has
the right to opt into an MVNO (or reseller) agreement with Verizon Wireless at
any time after six months' notice.

Wireless will be able to market Comcast products and services throughout the
vast majority of the Comcast footprint (everywhere outside the FiOS footprint)
under a renewable agent agreement; after five years, Verizon Wireless can renew
the agreement other than in the DSL footprint where DOJ approval is required."

"This purchase
represents a milestone in the industry and we appreciate the FCC's diligent
work to review and approve the transaction," said Verizon Wireless President
Dan Mead in a statement Thursday. "We will work aggressively to ensure that we
put this previously unused spectrum to use quickly to benefit customers."

As first reported in B&C/Multichannel News, the vote was 5-0, but
with the Republicans concurring in part.

"Approval of the
substantially modified transaction will benefit consumers in several ways,"
said FCC Chairman Julius Genachowski, whose said the deal as modified was in
the public interest, but as originally proposed would not have been. "By
advancing U.S. leadership in 4G LTE deployment, the transaction marks another
step in our effort to promote the U.S. innovation economy and make state-of-the-art
broadband available to more people in more places.  The transaction will
preserve incentives for deployment and spur innovation while guarding against
anti-competitive conduct.  And vitally, it will put more than 20 megahertz
of prime spectrum - spectrum that has gone unused for too long - quickly to
work across the country, benefiting consumers and the marketplace. "

Commissioner Mignon Clyburn made it clear that the time
limits and other conditions on the cross-marketing agreements, as well as the
spectrum spinoff to Leap Wireless, were key to her vote. "As initially
proposed, no FCC could have found the transaction to be in the public
interest," she said in a statement. But with those conditions, she said,
the deal was "ripe for approval."

She also praised what she called the FCC's most robust data
roaming transaction condition to date.

Commissioner Jessica Rosenworcel agreed that the deal, as
initially proposed, raised serious concerns, and that it had been improved
through the conditions. But she said nobody had a crystal ball and that the
order was a series of predictive judgments and that the FCC and DOJ would need
to circle back in four years, when the cross-marketing agreements terminate, to
carefully review any petitions for extension and answer the following questions:
"Have these arrangements spurred the deployment of infrastructure? 
Do joint activities mean innovation? Or do they harm the incentives to
compete?  Have they led to more job creation?  What are the
consequences for consumers?  Have they benefited from new services with
higher quality at lower rates?  Have they meant more competitive
opportunities for broadband access for everyone, in rural communities, urban
centers, and everything in between?  The honest answers to these questions
are important," Rosenworcel said.

Senior Republican commissioner Robert McDowell called the
deal a procompetitive one that will benefit the consumer. But McDowell
concurred, rather than approved, two elements of the decision. He said he
disagreed with the data roaming obligation, since he says the record does not
demonstrate that Verizon has failed to offer roaming, and took issue with the
FCC's authority over the marketing agreements. He said that should have been
solely the province of Justice.

As expected, commissioner Ajit Pai also took issue with the
FCC's assertion of authority over the cross-marketing agreements -- a point on
which he also concurred rather than approved. He said the FCC's authority under
its merger review charter is "broad" but not "boundless."

"Congress limited the scope of our review to the
proposed transfer of spectrum licenses, not to other business agreements that
may involve the same parties," he said, adding that, in any case,
"the assertion is unnecessary. If DOJ 'conducted its own independent and
comprehensive investigation of these agreements,' and if the Consent Decree it
negotiated 'address[es] the key potential harms to consumers and competition,'
then any pronouncement about our authority is just dicta."

But the FCC asserts the authority anyway -- the commission worked
on the marketing agreement conditions in concert with DOJ.

Pai was also not supportive of the roaming condition, which
also drew a concurrence rather than approval. "First, such a condition is
not voluntary in any meaningful sense of the word, insofar as the parties would
not agree to it independently but know that its acceptance is a predicate for
regulatory approval of these transactions. Moreover, the Commission's authority
to impose such a condition generally is doubtful," he said.

Still, on balance, Pai said the order would "will
increase consumer welfare, will mitigate any potential harms to competition,
and will signal the speedier resolution of secondary market transactions."