Broadband Cable Association of Pennsylvania


March 21, 2012

Lawmakers on Wednesday afternoon will scrutinize a controversial deal between Verizon Wireless and cable companies that critics fear will lead to less competition among Internet service providers and could harm consumers.

The Senate Judiciary subcommittee on antitrust, competition policy and consumer rights will hold its hearing of Verizon Wireless's $3.6 billion bid for unused spectrum owned by cable giants. But that portion of the deal is drawing less opposition than a unique cross-marketing agreement among once-rivals to sell bundles of wireless, regular phone, Internet and video services.

The Justice Department is investigating if that portion of the deal could lead Verizon Communications, which owns half of Verizon Wireless, to neglect its FiOs Internet and television service that competes with cable offerings by deal partners Comcast, Time Warner Cable, Cox and others. That would leave consumers in some markets with few choices, maybe only one choice, for providers of those services to their homes, analysts say.

Ahead of the hearing, labor unions on Tuesday lobbied the offices of lawmakers, protesting the deal that they say will lead to too much consolidation among the top two wireless providers. They fear the power of AT&T and Verizon Wireless in the wireless market will lead to losses in communications industry jobs. Along with public interest groups they said consumers benefited from the competition between FiOs, which covers about 14 million U.S. homes, and cable firms. "The cutthroat competitive environment that pushes innovation forward and forces companies to continually invest in rolling out better products and services is born from companies doing everything they can to steal away their competitors' customers, not by offering to sign up your own customers for rivals' services," Joel Kelsey, policy adviser at public interest group Free Press, said in his written testimony ahead of the hearing.

Verizon Wireless's general counsel will argue on Wednesday that consumers benefit from the marketing agreement because cable firms cover areas they don't serve with their FiOs service. Through the sales partnership, Verizon Wireless subscribers will be able to get bundled packages that aren't available to most Americans, the firm says. "To justify the investment to create innovative converged wireless and wireline products and to offer convenient bundles of services to customers across the United States who want them, Verizon Wireless needed to find wireline partners with footprints that cover the rest of the country," Randal Milch, Verizon Wireless's general counsel, said in a written testimony.

Comcast executive vice president David Cohen will testify that other firms, including AT&T and DirectTV are involved in similar cross-marketing agreements. "The harms that have been alleged are hypothetical and speculative, and opponents of the transactions - several of which are competitors that simply fear increased competition - ignore the benefits the transactions will bring to consumers," Cohen said in written testimony before the hearing.

Analysts say the hearing, the first by Congress on a major telecom merger after the failed $39 billion bid that AT&T made for T-Mobile late last year, will be closely watched for any signs of protest by lawmakers. Sen. Herb Kohl (D-Wis.) opposed AT&T and T-Mobile's deal and telegraphed his concerns early in hearings where he expressed concern about the deal and asked tough questions. Observers say they will watch for questions on how Verizon and cable firms plan to price bundles of services and if they offer better prices compared to those with FiOs. They will also see if lawmakers express concerns that Verizon Wireless could give better quality of service to videos offered by cable firms - an action that could disadvantage FiOs. "I'll be looking for how tough the questions will be and if anything is revealed about an otherwise opaque plan for the marketing portion of the deal," said David Kaut, an analyst at Stifel Nicolaus research. Washington Post

The federal rulemaking process that will determine when or whether Dish Network can use its recently acquired spectrum for a competitive mobile broadband network is expected to kick off Wednesday and could be completed by summer's end, according to Dish executives. The Douglas County (CO)-based company also estimates that building a new network could cost $5 billion and take three years or longer, though a joint project with a wireless carrier could significantly trim both.

Before it can proceed, Dish needs the Federal Communications Commission to drop a condition that handsets using the new spectrum be able to communicate with both satellites and ground-based cellular towers. Dish envisions a ground-based system, like those more commonly available. The FCC requirement would add to the cost and size of the handsets, making Dish's service less competitive with existing options from the likes of Verizon Wireless and AT&T.

While acknowledging that FCC rulemaking can take close to a year, Dish is hoping for an expedited process because of the nation's looming spectrum crunch. "We're optimistic that that can be moved along and be finalized in late summer or early fall," said Tom Cullen, executive vice president at Dish, the nation's second largest satellite-TV provider. An FCC spokesman said Monday that the agency, which decided this month to address the spectrum requirement through rulemaking rather than grant Dish a waiver, is focused on removing regulatory barriers "to unleash more spectrum for mobile broadband."

Dish spent $3 billion acquiring the spectrum in deals for bankrupt satellite technology companies TerreStar Networks and DBSD, which offered services with the satellite requirement. Cullen said Dish is looking at options to "improve the capability of the existing infrastructure with that satellite condition." "In the meantime, we'll continue working with the FCC and entertain discussions on how to best get to market faster," Cullen said. "There clearly could be opportunities to do things jointly with existing providers in terms of network sharing and other opportunities like that."

If it is successful in launching a wireless broadband network, Dish would be the only nationwide pay-TV provider with such an asset . The network could be a game changer as consumers' video-viewing habits shift from the TV set to smartphones and tablets, which often require mobile Internet connections. For years, Dish has been shorthanded in its battle with cable-TV competitors because it doesn't operate a wired broadband network.

Cable-TV providers aren't standing still on wireless. A group of cable companies that includes Comcast announced in December deals to sell wireless spectrum to Verizon and to joint market their services. The spectrum sale requires regulatory approval. Denver Post

QVC Inc., the television and online shopping giant, is expanding into China. QVC, based in West Chester, Pa., said Tuesday it has agreed to form a joint venture with China's government-owned radio, China National Radio, to operate a retailing business in China through CNR Mall TV, a shopping television channel with an associated website. "QVC has long recognized the great potential of having a retail presence in China," Mike George, QVC's president and CEO, said in a statement. The joint venture, known as CNR Home Shopping Co. Ltd., will be based in Beijing. QVC will own a 49 percent stake and China National Radio will own the remaining 51 percent. The financial terms of the deal were not disclosed. Associated Press