Verizon Gets OK on Spectrum Deal — with Limitations (VZ, CMCSA, TWC)

The U.S. Department of Justice today approved Verizon Communications Inc.’s (NYSE: VZ) $3.9 billion acquisition of spectrum from SpectrumCo LLC, a joint venture of Comcast Corp. (NASDAQ: CMCSA), Time Warner Cable Inc. (NYSE: TWC), BrightHouse Networks, and Cox Communications Inc. The catch is that cross-marketing agreements between Verizon and the cable companies will need to be modified before the deal can go ahead.

The Justice Department’s Antitrust Division and the New York State Attorney General also filed suit today to bar the companies from enforcing commercial agreements that are part of the December 2011 agreement:

The proposed settlement prohibits Verizon Wireless from selling cable company products in FiOS territories and removes contractual restrictions on Verizon Wireless’ ability to sell FiOS, ensuring that Verizon’s incentives to compete aggressively with cable companies remain unchanged. In addition, under the proposed settlement, Verizon Wireless’ ability to resell cable company services to customers in territories where Verizon sells DSL Internet service through Verizon Wireless ends in December 2016 (subject to potential renewal at the Department’s sole discretion), thereby preserving Verizon’s incentives to reconsider its decision to discontinue FiOS network expansion and other innovations in its DSL territory.

The antitrust lawsuit will be dropped if the companies agree to a proposed settlement, which the Justice Department also filed with the court.

Verizon and the cable operators have agreed to a service bundling deal that would allow each to offer so-called “quad-play” voice, video, broadband and wireless services in one package. The proposed settlement also “prohibits any form of collusion and restricts the exchange of competitively sensitive information.”

With respect to the spectrum agreement, Verizon will be permitted to acquire SpectrumCo’s spectrum provided the proposed sale of a portion of Verizon’s existing spectrum to T-Mobile USA goes through as planned.

Federal Communications Commission Chairman Julius Genachowski also expressed support for the deal, although he has never been as concerned about possible antitrust violations as the Justice Department.

You could say that the commercial cross-marketing agreements were always the centerpiece of this deal. The spectrum part would probably have been approved months ago if the commercial agreements had not been included.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Cable Companies, Law, Regulation, Telecom & Wireless Tagged: CMCSA, TWC, VZ