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Cable vs.Telco: Verizon-Cable Industry Stop Competing, Forced to Collude

Cable vs.Telco: Verizon Cable Industry Stop Competing, Forced to Collude

Cable vs.Telco: Verizon Cable Industry Stop Competing, Forced to ColludeThou shall not covet your competitor’s assets; there should be a universal commandment which industries should abide by, and it seems as if former staunch competitors, Verizon and the Cable Industry so covet each other’s assets they are willing to partner to get them. Verizon needs Cable’s robust spectrum holdings and broadband network, the largest and highest penetrated in the nation, and Cable needs Verizon’s mobile network, the largest in the U.S. Cable dangled its impressive spectrum holdings to seal the deal. The result compels competition to stop and collusion to begin.

Legislators Created this Monster

Legislation formulated through intensive lobbying efforts from large corporations enabled deregulation in telecommunication markets, creating enormously successful companies which blanket the U.S. in coverage. Uniquely, these one-time competitors carved out their niche for various products. To continue competing against such large behemoths on their own turf, corporations must build enormous infrastructures outside their niche products which prove to be so costly, like Verizon’s FIOS broadband and Cable Industry’s lack of mobile infrastructure. Partnerships become so attractive that former staunch competitors willingly embrace collusion for economic reasons. This forces a coupling of surprisingly unlikely bed-fellows. See (Verizon Defends Cable Spectrum Deal as Rivals Push for Delay)

“When President Clinton used an electronic pen to sign the Telecommunications Act of 1996, the country assumed that he was unleashing tremendous telecom competition that would help consumers across America.” See (The House GOP Plan to Gut the FCC)

Spectrum Transfer, Market Agreements, Back-Haul Sharing: Foul Shout Smaller Competitors

Some would argue a spectrum sale is just part of the free market system, no matter the selling or receiving parties. But add on marketing arrangements which sell both competitor services, where no competition exists, the deal morphs into unprecedented collaboration. Being a competitor of these market dominate companies permeates fear and a resolved recognition of impending doom at being left out of significant tools to compete going forward. Building out additional competitive infrastructure becomes so capital intensive and economically unfeasible, companies balk at the challenge. It’s not surprising that both Sprint and T-Mobile strongly object to a Verizon-Cable Industry deal which leaves them without an alternative business plan.  See (T-Mobile: FCC should Block Verizon’s $3.9 Billion Spectrum Deal)

Short-Cut to Resolve Market Ills

What kind of signal are U.S. Legislators sending to telecommunication markets? With reverence to broadband proliferation the FCC mandated increased coverage for U.S. consumers, rural, urban and any market in between. That message somehow did not register with dominate market players, that each competitor must build out their infrastructures in accommodating demand, or compete with each other to stabilize and reduce consumer pricing. Therefore we have seen AT&T propose to eliminate a competitor to increase broadband proliferation while Verizon and the Cable Industry partner to do the same, that is, grow in market domination. They too, cannot see a business model in building out more infrastructures. See (Video: Opposition Building Over Verizon-Cable Deal)

Restoring-Repairing Competition much harder now

Some will inevitably make the assumption that we do not need robust competition anymore; that the few examples of our competitive environment in telecommunications infrastructure are sufficient to serve consumers with the most innovative and price sensitive products. As my favorite example, Apple, Inc. did not gobble up competitors are collude with rivals; it built innovative products the hard way by infinite research and development along with hefty capital investments. It produced the best product fueling enormous demand.

The way both large cable and telecom companies propose to reduce competitive forces in keeping up with that demand, as carriers and re-sellers, is tremendously disappointing. Now legislators are being lobbied again, this time from consumer groups and smaller competitors to right a market wrong.  When markets are artificially manipulated by an original legislative miss-step, allowing uncontrolled mergers and acquisitions, therefore creating competitive imbalances in a free market system; government seems the only viable and alternative solution to right that imbalance.

photo credit: socialwoodlands via photo pin cc

Cable vs.Telco: Verizon Cable Industry Stop Competing, Forced to Collude
Cable vs.Telco: Verizon Cable Industry Stop Competing, Forced to Collude Leonard Grace (270 Posts)

Founder of Broadband Convergent, a Broadband-Mobile-Cable-Wireless-Telecom market website focused on highlighting industry news and strategic issues within technology arenas. Highly researched and experienced insights and trends both inform and enlighten readers on current industry convergence of Broadband-Cable-Mobile-Wireless and Telecom Sectors.

Cable vs.Telco: Verizon Cable Industry Stop Competing, Forced to ColludeCable vs.Telco: Verizon Cable Industry Stop Competing, Forced to ColludeCable vs.Telco: Verizon Cable Industry Stop Competing, Forced to ColludeCable vs.Telco: Verizon Cable Industry Stop Competing, Forced to ColludeCable vs.Telco: Verizon Cable Industry Stop Competing, Forced to ColludeCable vs.Telco: Verizon Cable Industry Stop Competing, Forced to Collude

  • jophan_c

    Competition as a source of lower prices was doomed from the beginning. The people who most wanted it were those on being rooked by the subsidies the regulators built into the industy: business to residence, urban to rural, rich to poor.  And regulators still require them whenever they get the leverage, as witness the subsdized broadband Comcast provides as a condition of the NBCU merger.

    Even before the Telecom Act was passed, it was forecast that wireless would replace wireline for voice.  Improvements in wireless capacity have extended that likelihood to broadband.  Sure, fiber to the home for everyone would be nice, but no one is willing to pay for it.  The market will not tolerate the massive investment required to provide facilities-based service by more than one provider except in the lowest cost and highest income areas, and even by a monopoly provider in the rest. That’s a consequence of deregulaton, too: no provider may be forced to enter an unprofitable market.

    So if you don’t have broadband already available from cable or telco, wireless will be your only choice.

  • Leonard Grace

    Thanks for the informative comment. This link touches on deregulation aspects allowed to take hold during the Bush Administration. Laws enacted as a result of the great depression were amended to favor deregulation of market segments, allowing mega mergers and acquisitions. This made Wall Street rich and led to financial misconduct.

  • tmc8080

    I disagree with the premise that specific laws were passed to “DEREGULATE” telecom. What DID happen is the Department of Justice under George W. Bush was sufficiently gutted of resources and experienced personnel to be a consumer watchdog and ensure that competition was not severely damaged in any one specific market. What we have today other than lip service to the notion that the consumer *MUST* be protected is a toothless Obama rubber stamp to the problems of big telecom colusion with the cable industry. What was a menace in the making has now become a full-blown epidemic of anti-consumerism. The big telcos and cablecos are now saying you’ll buy it and like at at any price & terms of service we care to charge! Otherwise, go to hell, and don’t even THINK about building your own network. We won’t allow that either! Espeically where we allow network infrastructure to fall apart and offer poor service! What ever happened to the teeth of State public utility commissions?!? They delegate too much authority to the federal government which is all but useless in protecting the consumer these days. In recent days, Verizon is now showing the other face to consumers by killing off dry loop DSL, which was a condition agreed to when getting access to the high ROI markets with FIOS FTTP (with the rhetoric that these markets would eventually be upgraded to fiber anyway, which we now know to be a FASLE premise in 35% of Verizon’s footprint left post merger to create “V-E-R-I-Z-O-N” and post fairpoint/frontier debacles.