FCC Said to Be Close to Circulating Order To Approve Verizon Wireless Spectrum Deals

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By Paul Barbagallo  

The chairman of the Federal Communications Commission is preparing to send his fellow commissioners a draft order that would approve Verizon Wireless's proposed $3.9 billion spectrum purchase from a consortium of the nation's largest cable operators, including Comcast Corp. and Time Warner Cable, sources confirmed Aug. 14.

The FCC's 180-day “shot clock” deadline for completing its review is Aug. 21, and FCC Chairman Julius Genachowski's office is still looking to circulate the order by then, sources said.

One government source told BNA that Verizon has accepted several concessions to win the agency's acceptance. At least one will pertain to the timeline with which Verizon uses the spectrum, while another will restrict Verizon's separate joint-marketing arrangements with the cable companies, the source said.

The spectrum licenses that Verizon seeks to acquire from Comcast, Time Warner, Bright House Networks, and Cox Communications were originally purchased at auction in 2006 for $2.4 billion through a joint venture of the cable operators and Sprint Nextel Corp. known as SpectrumCo. The venture bought the spectrum with plans to start a wireless business, but never did. Sprint Nextel abandoned SpectrumCo in 2007. Last November, Cox, citing a “lack of wireless scale necessary to compete in the marketplace” did the same. (Sprint's spectrum is not included in the sale. Verizon has one agreement in place with Comcast, Time Warner, and Bright House; and a separate one with Cox.)

In defending its bid for more spectrum, Verizon has argued that the additional Advanced Wireless Services, or AWS, spectrum nationwide will help the company avoid what has been termed “spectrum exhaust,” especially in suburban and urban areas. Since Apple made the iPhone available on Verizon's network, Verizon has experienced increasing network congestion similar to that endured by AT&T Inc., the first wireless carrier to offer the iPhone.

Perhaps most important for Verizon, the cable operators' spectrum will allow the company to greatly expand its 4G network in both the AWS band and the 700 megahertz band, in which the company currently occupies a contiguous, nationwide footprint. Even without Comcast's, Time Warner's, Bright House's, and Cox's spectrum, Verizon already has 13 AWS licenses in the Northeast, Southeast, Great Lakes, Mississippi Valley, and Louisiana. In all, Verizon would acquire a total of 122 nationwide AWS spectrum licenses from the cable operators.

Also, as part of the deals, Comcast, Time Warner, Cox, and Bright House cable services would all be sold through Verizon Wireless stores in those companies' service territories, while the cable providers will cross-promote Verizon Wireless services through their call centers and websites. After four years, the cable carriers will have the option of selling Verizon Wireless service under their own corporate names, creating a true “quadruple play” of wireless, cable TV, landline phone, and home internet services. This would, in effect, allow the cable operators to maintain a stake in the wireless business.

These arrangements have come under scrutiny from critics who fear Verizon's FiOS TV service would never be a serious competitor for cable.

One of the conditions the FCC could impose on Verizon and the cable operators is not carrying their joint-marketing agreements in areas where Verizon markets its FiOS TV, internet, and landline phone services, sources told BNA.

The Department of Justice also is reviewing Verizon's deals, and is said to be most concerned about the proposed cross-marketing arrangements.

Representatives for both agencies declined to comment Aug. 14.