Verizon-SpectrumCo Approval Means More Competition, Lower Prices

Today, a deal between Verizon and a consortium of cable companies to free more spectrum for mobile broadband gained significant traction with the Department of Justice (DOJ) conditionally signing off on the deal and the Federal Communications Commission (FCC) announcing a vote of approval will come in short order.

The agreement is an innovative move without much precedent. Verizon will purchase a significant chuck of spectrum from SpectrumCo, a group of cable companies including Comcast and Time Warner Cable, that covers 80 percent of Americans and is ideal for 4G mobile broadband. Moving forward, those cable companies can purchase wholesale access to Verizon’s network in order to market new services under the cable companies’ own names. The deal not only brings currently dormant spectrum onto the market, which will help to expand wireless service, but also increases the number of competitors in the wireless market to include cable companies, thus helping to put more downward pressure on consumer prices. These are points free-market groups have long been stressing.

The deal is yet another sign of increasing convergence in the tech world, as telecom, cable, and other companies are increasingly marketing similar services – all run over the Internet. And despite the fact that it would increase – not decrease – the number of competing companies, it still found itself under the eye of aggressive DOJ and FCC anti-trust regulators. These same regulators have already quashed the AT&T/T-Mobile venture and other attempts by companies to purchase more spectrum to meet the demand of consumers who are gobbling up more and more data wirelessly.

But even in approving the deal, the DOJ found ways to hamstring the companies. The final judgment (PDF) prevents Verizon from advertising or selling any cable services in an area where Verizon FiOS exists. It also largely prevents Verizon and the cable companies from working together or even discussing the sale of similar services, except what is already provided for in their agreement. This includes preventing the companies from selling each other’s services or even discussing prices, availability or expansion of cable’s and Verizon’s broadband services.

Today’s tech world is market by extreme dynamism and rapid innovation. As author Larry Downes frequently notes, technology moves quickly, but regulators move slowly. The problem with the DOJ’s final judgment is certainly not that it approved the deal, but that it has essentially locked in the current agreement with Verizon and cable companies. Almost any changes to their innovative new business model will require government approval. So, while the deal’s approval brings an innovative arrangement today, the government has shackled it just enough to potentially prevent future innovations tomorrow.

Nevertheless, after three years of decisions halting more spectrum from coming to market, today’s announcements by the DOJ and FCC to approve the Verizon-SpectrumCo deal are very welcome ones.