Verizon’s Deal To Buy Spectrum From Cable Companies Could Mean Fewer Cable Options For Consumers

It seems like it’s been oh, about eight months since Verizon Wireless announced its proposal to buy billions of dollars worth of wireless spectrum from cable companies who aren’t using it anyway. At first glance, it seems like a not-horrible idea, as Verizon Wireless doesn’t compete directly with the likes of Comcast and Time Warner Cable. But with regulators nearing a decision on the deal, several high-profile folks have come forward to voice their concerns about how Verizon might be sacrificing the growth of its FiOS business in favor of its wireless network.

The city of Boston has a pretty bad track record with the cable industry. Not only did it need to fight tooth-and-nail to get back its right to regulate cable pricing after a decade of Comcast market dominance, it also got the shaft in 2010 when Verizon decided to scale back on its efforts to build out the pricey FiOS network in the area.

So this morning, Boston Mayor Thomas Menino wrote to U.S. Attorney General Eric Holder to express his concerns about the spectrum sale. Of particular worry are the marketing agreements the deal puts in place between Verizon Wireless and the cable companies, effectively making them business partners — and thus making it in no one’s best interest to make FiOS a viable option.

From Menino’s letter to AG Holder:

“We believe that the new joint Verizon/Cable marketing agreement… will negatively impact and future FiOS investment by Verizon and any further fiber network expansion by Verizon Wireless’ new partner, Comcast. On the one hand, Verizon will have committed its capital expenditure to its wireless division, not FiOS. And, on the other hand, Comcast will essentially partner with its competitor, thereby removing any threat to its existing infrastructure.
“Put simply, the City is concerned that these transactions are designed to ensure that Verizon and Comcast collaborate and never compete in Boston.”

Menino’s letter comes only two days after Minnesota Senator Al Franken wrote to both Holder and FCC Chairman Julius Genachowski about the deal, which he has been following as a member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights.

“I remain very concerned that this Verizon/cable partnership presents serious competition concerns and is likely not in the public interest,” writes Franken.

Like Menino, Franken is most worried about the marketing agreements this deal forms between VZW and the cable operators:

“These are very complicated transactions, and at present, only a very limited amount of information about these agreements has been made public… However, based on the limited available information, I remain very concerned that these agreements would carve up the marketplace for cable, broadband, and wireless phone service to the detriment of consumers and would have a substantial impact on competition.”

In a statement to Consumerist, Parul P. Desai, Policy Counsel for Consumers Union, writes, “We strongly believe this transaction does not serve the public interest. If approved without safeguards, it could lead to the loss of competition and choice for consumers in the video, broadband, and wireless markets. Consumers would likely be saddled with an increase in prices and fewer competitive alternatives.”

In addition to the concerns about lack of competition in the cable industry, people are also worried that adding to Verizon’s already dominant position in the wireless market could ultimately lead to even less competition and fewer wireless options for consumers.

“With fewer choices for consumers to choose in a duopoly or monopoly market, Verizon and the cable companies would not have incentives to price their products competitively,” explains Desai. “In tough economic times, it’s in the public’s interest for prices to be as competitive and choices to be as robust as possible.”

These are just the latest voices to join the concerned chorus. Last week, Maryland Senators Barbara Mikulski and Benjamin Cardin, who co-authored a letter to Holder and Genachowski [PDF] last week, saying they worried that their state could be “left on the wrong side of the ‘digital divide'” by the deal.

And in early July, a total of 32 members of Congress signed a letter [PDF] to the regulators expressing concern that “the commercial agreements would eliminate or reduce cross-platform competition and diminish incentives to expand FiOS deployment.”