Thou 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.