Industry Demands Scrutiny of Verizon-Cable Agreements

Last week Comcast and Verizon Wireless announced that they will launch a new marketing program in Seattle and Portland, Ore., selling their respective services to the other’s customers.

This is the first marketing promotion under the new landmark partnership which was announced last month, whereby Verizon Wireless agreed to pay $3.6 billion to a consortium of cable providers for 122 advanced wireless services (AWS) spectrum licenses covering approximately 259 million people, or more than 85% of the U.S. population. Additionally, the cable companies and Verizon Wireless entered into a joint re-sale, marketing and technology development agreement. Separately, just a few days later, Verizon Wireless entered into an similar agreement with Cox Communications to purchase 20 MHz of AWS spectrum licenses covering 28 million POPs for $315 million.

Under the trial promotion launched in the Northwest, customers who sign up for a two-year contract with Verizon Wireless and Comcast will be eligible to receive a prepaid Visa card, varying in value from $100 to $300 depending on which Comcast bundle is selected and the length of service contract. The prepaid Visa card is intended to be used toward the purchase of a smartphone or tablet.

To qualify, customers must purchase the Comcast and Verizon services within 14 days of each other, and must activate a new smartphone or tablet device. The initial joint offer is scheduled to end May 8, 2012.

In addition to this online offering, Comcast will promote Verizon Wireless services through its call centers and in its retail stores. For its part, 8 Verizon Wireless stores in the Seattle area will be staffed with Comcast reps for the initial retail launch.

The AWS spectrum sale and related agreements have not yet been approved by the FCC or the Department of Justice, the later of which announced back in December that it is investigating the proposed transactions.Verizon Wireless maintains that the marketing agreements are not subject to regulatory approval. For its part, the DOJ’s antitrust division maintains that it has the flexibility to look into all related aspects of a proposed transaction to determine if they will result in anticompetitive market dynamics.

Last week, at the request of FCC officials, Verizon Wireless and the cable companies — Comcast Corp., Time Warner Cable, Inc., and Bright House Networks LLC as part of SpectrumCo, and separately Cox Communications, Inc., — voluntarily submitted new information about the marketing agreements in order to avoid undue delay in the commission’s review of the spectrum transaction. However, the companies made it clear that they still believe the deals are not relevant to the spectrum transactions as they are not contingent upon one another. They also said that the FCC doesn’t have the authority to review them.

In a letter submitted last week to the commission, nine companies and public interest groups asked the FCC to require Verizon Wireless and the cable companies to publicly provide all of the documents related to joint marketing agreements so the market impact of the agreements can be reviewed. Entities signing onto the letter included C Spire Wireless, Directv LLC, Ntelos Holdings Corp., Sprint Nextel, T-Mobile, New America Foundation, Public Knowledge, Consumer Federation of America and Media Access Project.

Although they did not sign onto the joint letter, Fairpoint Communications and Frontier Communications are clearly impacted by Verizon Wireless’ partnership agreements. The two landline companies each acquired wireline network assets and customers from Verizon. Now they face competition from Verizon as it returns to these markets with LTE service offered through its new cable partner companies.

Petitions to deny the spectrum transactions must be filed with the FCC by Feb. 21, oppositions to the petitions are due March 2 and replies are due March 12 in WT docket 12-4.

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