multichannel connect
careers
all access

Policy

SpectrumCo Sale Is Almost-Done Deal

7/16/2012 12:01 AM Eastern

WASHINGTON — The Federal Communications Commission
is close to approving Verizon Wireless’ $3.9 billion
purchase of advanced wireless spectrum from four
big cable operators.

But that OK will
come with with one
caveat, according to
sources inside and
outside the FCC, confirming
an initial report
by the Reuters
news agency.

The Justice Department is still eyeing associated marketing
agreements, and final approval likely won’t come
unless the cable operators and Verizon agree to modify or
drop those deals. A source familiar with Justice’s negotiations
with stakeholders suggested some compromise on
those agreements would not be a deal-breaker. Comcast
— the largest of the three members of the SpectrumCo
consortium, at 63.6 % of the joint venture — had no comment
on any negotiations with Justice.

If there is an agreement on the marketing covenants,
FCC and Justice Department approval would
likely come sometime in August, but not sooner. The
FCC must still vet the comments it solicited after
Verizon also said it would be trading some of the spectrum
it acquired from SpectrumCo members Comcast,
Time Warner Cable and Bright House Networks — as
well as Cox Communications, a former SpectrumCo
member — with wireless rival T-Mobile.

That trade would make the SpectrumCo deal even
more FCC-friendly by reducing the number of markets
where Verizon’s spectrum concentration is above an informal
agency cap to just a handful.

The deal is already FCC-friendly in the sense that it
will free up fallow spectrum for wireless broadband —
something the regulator and the Obama administration
have made a national priority.
And it can be put to use almost
immediately, compared to the
years it will take to reclaim and
auction spectrum from broadcasters
and the government.
That point was not lost on cable
operators.

In their joint filing with Verizon
last week, the MSOs said:
“While it is critical for the government
to continue its ongoing
efforts to make additional spectrum
available for commercial
use, the Commission correctly
has recognized that secondary-
market transactions such
as these are equally important
to allow wireless providers to
put existing spectrum to work to help address skyrocketing
consumer demand for mobile broadband services.”

Deal opponents, including Democratic lawmakers
and public-interest group Free Press, were offering
their views in force last week. But if the cable operators
and Verizon are willing to compromise on the
marketing agreements — they declined to comment
on that prospect — the deal will likely be done by mid-
August, beating the FCC’s informal 180-day shot clock.

In one positive sign for cable operators that the deal
could be decided soon, the FCC two weeks ago refused
to give deal critics more time to weigh in on the impact of
the T-Mobile swap, saying the commission “has an obligation
to review the transactions proposed in the Verizon
Wireless/SpectrumCo/Cox Applications as expeditiously
as possible, consistent with the public interest.”

A decision is unlikely to come until August, since
the commission did extend the comment period on the
SpectrumCo deal until July 10, and won’t be collecting
the last comments on the T-Mobile deal until July 24.

But as Republican staffers pointed out in a memo
in advance of an FCC oversight hearing in the House
Communications Subcommittee last week, if the agency
does not stop the clock on its merger review again
— it was restarted July 10 after the T-Mobile-related
comments were filed — its informal 180-day deadline
would be up Aug. 21.

Last week, Free Press also petitioned the FCC to deny
the Verizon/T-Mobile swap. It said that, in isolation, the
deal would probably be OK, but not as essentially a deal
sweetener for the SpectrumCo deal it opposes. Public
Knowledge echoed that sentiment, saying the deal “does
nothing to solve the serious competitive harms threatened
by the commercial agreements between Verizon,
Comcast and the other cable companies.”

SpectrumCo and Verizon were making no bones
about their belief that the swap does alleviate the spectrum-
aggregation concerns of their deal, though they
still said those concerns were unwarranted.

TAKEAWAY

If the marketing-agreement
issue can be resolved with the
Justice Department, the FCC
appears OK with cable’s sale of
spectrum to Verizon Wireless.

TICK … TICK … TICK

Republican House Communications Subcommitt ee staffers last week signaled that they’re
counting the days until the FCC’s informal shot clock runs out on vett ing Verizon Wireless’ purchase
of wireless spectrum from SpectrumCo:

Jan. 19: Clock started


May 1:
Clock stopped for 21 days
to collect additional documents

June 26: Clock stopped 14 days
for comment on Verizon’s
spectrum swap with T-Mobile

July 10: Clock restarted

Aug. 21: Clock runs out (barring another stoppage)

September