Recap -- The Verizon/Cable Deals: Harmless Collaboration or a Threat to Competition and Consumers?

The Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on Verizon’s proposed acquisition of spectrum from cable companies and related commercial agreements. Three questions kept coming up: Will Verizon's purchase essentially eliminate a major competitor from the industry? Are Verizon and the cable companies colluding to drive up broadband prices? And does Verizon really need the spectrum it’s buying from cable operators, or is it just placing it out of competitors’ grasp?

Verizon wanted to impress on the lawmakers that the deal is different from the failed merger between AT&T and T-Mobile. Verizon's Randal Milch made the case that the proposed spectrum deal would not hinder competition in home broadband markets since Verizon and the cable companies would still be competing with each other for wireline subscribers. Milch also said his company has already made several key investments into expanding its current capacity and will need additional spectrum to keep building out its LTE mobile broadband network. David Cohen, the executive vice president for Comcast, backed up Milch's perspective and said that Verizon would not enter into collusion with cable providers over wireline service since it had already put so much money into building out its FiOS fiber-optic network to go head-to-head with the cable companies. Subcommittee Chairman Herb Kohl grilled Comcast executive vice president David Cohen over recent comments from a Comcast executive that the company "never" planned on using its spectrum. The FCC bars companies from warehousing or stockpiling spectrum without planning to use it. Cohen said his company intended to launch its own wireless network when it bought the spectrum but realized in recent years that plan was not economically viable. He said the use of the word "never" was "unfortunate."

Steven Berry, the CEO of the Rural Cellular Association, argued that Verizon already owns substantial spectrum reserves in many major markets and does not need further spectrum to remain competitive. Berry said if the government approves the deal, it needs to place several requirements on spectrum use to preserve competition among smaller wireless carriers, such as forcing Verizon to divest in certain spectrum holdings and mandating that Verizon offer small carriers affordable roaming and backhaul agreements.

Joel Kelsey, a policy adviser for Free Press, pointed out that the wireless industry has already seen tremendous consolidation over the past decade, including mergers between Sprint and Nextel, AT&T and Cingular and Verizon and Alltel. He said that since spectrum is a finite resource, carriers that acquire large chunks of it can effectively shut out competitors by raising barriers to entering the market. Tim Wu, a professor at Columbia Law School, argued that a truly competitive market would see wireless broadband services competing with cable companies for home Internet services instead of being offered as part of a bundle package. He pointed out that there would be little reason for consumers to buy expensive bundle packages in the future once wireless technologies evolve to the point where they can deliver faster Internet services than today's wireline services.

Sen. Herb Kohl (D-WI), chairman of the subcommittee, told reporters after the hearing that he had "strong concerns" that the transactions would hurt consumers, but he said would continue to review the data before recommending whether regulators should block them. Sen Al Franken (D-MN) said he is "skeptical" about the deals.