Congressional Hearing Pits Small Fries Against Comm Giants on Spectrum Buy

Executives from Verizon and Comcast went before a U.S. Senate judiciary subcommittee Wednesday to defend Verizon’s plan to purchase US$3.6 billion worth of spectrum from cable industry joint venture SpectrumCo. They were met with opposition from other wireless providers and consumer advocacy groups.

Verizon announced a plan last December to acquire 122 Advanced Wireless Services spectrum licenses from SpectrumCo. SpectrumCo is a collaborative venture between Comcast, Time Warner Cable and Bright House Networks.

Comcast owns about 64 percent of SpectrumCo and could stand to benefit most from the deal.

Verizon made a similar deal with Cox Communications later in December, but before either deal can go through, they must meet regulator approval.

On Capitol Hill on Wednesday, representatives from Verizon and Comcast argued in front of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights that buying the spectrum would ensure greater customer service, especially on 4G LTE networks.

Opponents countered that the additional spectrum would give Verizon, already the nation’s largest wireless provider, too much power. Sen. Herb Kohl (D-Wis.), who presided over the hearing, also worried that the agreement between Verizon and Comcast would serve to hamper competition.

In Opposition

Senator Kohl’s wasn’t the only voice of concern regarding the deal. Smaller providers represented by the Rural Cellular Association and consumer advocacy groups like Free Press have also said they’re worried the deal would actually be worse for wireless users.

“We already have a wireless market that’s trending towards a duopoly,” Joel Kelsey, policy advisor at Free Press, told the E-Commerce Times. “We don’t have a model for protecting consumers in that environment. Right now we rely on competition to discipline prices, and if this trend towards a duopoly continues, consumers are left without that protection.”

The concerns are similar to those raised last year during AT&T’s attempt to buy T-Mobile. In that case, AT&T and its supporters maintained that the company needed the additional spectrum that T-Mobile had to offer to ensure it could continue reaching customers across the nation. Ultimately, the deal was abandoned under opposition from multiple federal agencies.

“The wireless market is not like every other market,” he said. “The government is in charge of managing spectrum, which is the No. 1 resource a carrier needs to develop and scale the market.”

If the government allowed the deal, then, it would be allowing Verizon to have 60 percent of the marketshare and more than 80 percent of industry profits, said Kelsey.

“When you allow one or two companies to have the control, you’re tipping us closer to the world where consumers don’t have the choices they need. It’s not up to the FCC to pick winners and losers, and it’s not up to them to anoint kings,” he said.

While the deal’s opponents are smaller in stature than corporations like Verizon and Comcast, their voices are taken into consideration during these types of hearings, according to Michael Carrier, law professor at Rutgers School of Law.While tinier and less powerful that Verizon and Comcast, one legal expert said the opposing voices are taken into consideration during the hearing.

“Smaller competitors and consumers often bring cases to the attention of the federal agencies,” he told the E-Commerce Times. “The agencies consider them while considering these actors’ interests in challenging the conduct.”

Spectrum Crunch

While consumer freedoms come into play during the hearing, the question of limited spectrum is also a true concern, especially as smartphone, tablet and wireless use is on the rise.

“They’ll argue that there’s plenty of bandwidth for all out there — enough for everyone,” Dan Olds, principal analyst at Gabriel Consulting Group, told the E-Commerce Times. “But that’s not necessarily true. There’s no such thing as an unlimited resource.”

Rather than allow one or two companies to become powerful, then, the FCC or the wireless providers should come up with other means to make sure customer needs are met, Kelsey suggested — for example, cell splitting, spreading the traffic over more towers, exploring spectrum swaps in congested areas or looking at WiFi hotspotting.

“It’s a balancing act, and there always needs to be new ways to remain competitive,” said Kelsey.

Verizon didn’t respond to our request for comment on the story.