Are you kidding; Verizon (NYS: VZ) and Cable Operators sign deal to corner the market on wireless spectrum? Yes, it’s true; and the driving force behind the historical spectrum deal and marketing agreements by former competitive giants would be to further the FCC’s agenda, rolling out more spectrum to serve the growing demand for mobile services. Spectrum is scarce and this deal ties up a big portion left available with cable companies.
T-Mobile-MetroPCS Say No
The proposed deal (up-ends) a planned FCC spectrum auction, the goal to have a fair and equitable dissemination of a scarce commodity to the highest bidder, by possibly side-stepping regulators. T-Mobile Deutsche Telekom AG (OTCQX: DTEGY) and MetroPCS (NYSE: PCS) were so affronted by the announcement that both filed a complaint with the DOJ, since the AT&T/T-Mobile deal was struck down under government anti-trust concerns. See (T-Mobile urges U.S. to Block Verizon’s Spectrum Purchase)
Now that the spectrum crisis has heated up to unprecedented proportions companies are looking to get around the tough scrutiny which rained down on AT&T and T-Mobile. Does this deal meet the stamp of approval status which Verizon and Cable Companies are searching for; not a chance? The deal gives each provider a leg up on competition that may prove to be anti-competitive if certain criteria are not implemented, like IP discrimination for roaming, and patent agreements that could stifle competitors.
Additional Scrutiny Planned
Senator Herb Kohl (Dem: Wis.), chairman of the Senate Judiciary Sub-Committee on Anti-Trust, Competition Policy, and Consumer Rights scheduled hearings on the matter. Nine consumer groups filed complaints saying the deal changes the fundamental the way telecommunications work. This comes as network providers are looking for more spectrum as consumer demand continues to increase exponentially which threatens to slow down network speeds, and increase dropped calls. The deal forms an alliance that could possibly leave Verizon and Cable Operators as defacto go to services, especially in some of the most concentrated markets in the U.S. See (Before the Federal Communications Commission)
All about Market Penetration
The partners are planning strategically about market penetration. That is, like Apple, Inc. chose AT&T Mobile as the provider for the IPhone rollout, since the largest mobile operator was the most logical vehicle to get the best market penetration, so is a Verizon-Cable strategy looking to ensure a likely outcome in marketing combined services over a giant network. It makes for good business tactics while betting on a marketing agreement not being as offensive as a merger. See (Why the FCC Won’t Block Verizon’s Pending Deal with Cable Operators)
The best laid plans rarely come together without obstacles and setbacks, and this deal will have its detractors, skeptics, and those wishing to squash the deal out right. Since the deal is a private sale and marketing agreement, not a merger, each company is betting it does not come under the same legislative scrutiny as AT&T-T-Mobile. But both Cable Operators and Verizon must look at the larger picture, does the deal harm existing and future competition while concentrating market power with a few companies? That particular question is yet to be determined.