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DoJ Sniffs Around VZ Wireless-Cable Deals

Jeff Baumgartner
12/20/2011

The U.S. Department of Justice is reportedly investigating Verizon Wireless 's recent string of deals with four cable operators to see if they violate antitrust laws.

Verizon Wireless is looking to obtain a swath of Advanced Wireless Services (AWS) spectrum from Comcast Corp. (Nasdaq: CMCSA, CMCSK), Bright House Networks , Time Warner Cable Inc. (NYSE: TWC) and, most recently, Cox Communications Inc. , for about $3.9 billion. Tied in, the MSOs and Verizon Wireless will cross-sell and cross-market each other's services, with the cable operators having an option to offer Verizon Wireless services under their own brands in about four years.

The DoJ was not immediately available for comment, but did confirm to Bloomberg that it is checking into the transactions without elaborating further.

BTIG Research analyst Walter Piecyk tells Light Reading Cable that the DoJ is likely interested in having the companies shed more light on the terms of the deals and views this more as standard procedure than a move by the DoJ to try to squash them.

"There was not much disclosure about the nature of the exclusivity of the marketing agreements between the companies, which likely requires some review by DoJ, given the power that these companies have in the markets where they compete," he said via email.

He suspects the DoJ will also examine the impact an exclusive deal could have on weaker competitors, such as Sprint Corp. (NYSE: S) and Clearwire LLC (Nasdaq: CLWR), which are seeing their relationships with cable end as a result of the new agreements between Verizon Wireless and the MSOs. (See Comcast, TW Cable to Halt Clearwire Sales.)

Why this matters
Word of a DoJ dissection is not a huge surprise, because sensitivity around mobile and spectrum deals is at an all-time high after AT&T Inc. (NYSE: T) was forced to abandon its acquisition of T-Mobile US Inc. over mounting concerns that the deal would harm mobile competition. (See AT&T Drops Bid to Acquire T-Mobile and DoJ Blocks AT&T/T-Mobile Merger.)

And the rhetoric around the cable-Verizon Wireless deal is already heating up. Verizon, along with Comcast, Bright House and TW Cable, defended the deal in its request that the FCC transfer the spectrum to the mobile operator, claiming the deal will enable Verizon Wireless to add capacity and help it and its cable partners meet consumer demand for wireless broadband without decreasing consumer choice.

Free Press is asking for more transparency and an investigation that will shed more light on the nature of the deals. "Verizon and its newfound cable allies should stop hiding the ball," Policy Director Matt Wood said, in a statement that aired concerns that "there may be provisions" that would incent them to work together and resell other's products rather than rolling out their own services and battling for customers.

For more
Catch up on the cable-Verizon Wireless love-in.





— Jeff Baumgartner, Site Editor, Light Reading Cable

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