Members of the Senate Antitrust Subcommittee didn’t seem to have the technical knowledge, the time, or perhaps the will to pin down Verizon and Comcast execs who testified at today’s hearing about the controversial partnership arrangement the companies created in December. Verizon agreed to pay $3.6B for wireless spectrum that several cable giants control, and both camps agreed to cross promote each other’s products in markets where they don’t compete head-to-head. The deal is under review at the Justice Department and FCC. Verizon says that the collaboration won’t affect its efforts to roll out FiOS video and broadband service. It “has always been intended to reach a relatively small” part of the country, the company’s General Counsel Randal Milch said. He added that “Wall Street punished us for the massive investment we made in FiOS…We owe it to our shareholders to give them a return.” Comcast EVP David Cohen echoed the theme that “there’s nothing in these transactions that will stop us from trying to beat the brains out of FiOS.”
Cohen had to dance a little, though, when asked about a seemingly damning comment that Comcast CFO Michael Angelakis made about the deal at an investor conference in January: “We never really intended to build that spectrum,” he said, “so therefore it’s a really good use of that spectrum.” Since it’s illegal to warehouse the airwaves, FCC Commissioner Robert McDowell questioned whether the spectrum was “purchased under false pretenses.” But Cohen says Angelakis misspoke: “The word ‘never’ was unfortunate,” he says. “We seriously studied this alternative (to create a wireless service) and determined there wasn’t a viable business for it.” Comcast and other cable operators decided to ditch the plan to offer their own so-called quad-play package — video, wired phone, broadband, and wireless phone services — after Apple’s iPhone and iPad proved to be so popular. “We concluded that 20 megahertz of spectrum was inadequate,” he said. “We could not figure out a viable business model.”
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Critics of the deal argued that the deals would reduce competition. For example, Verizon’s incentive to market 4G wireless Internet service as an alternative to cable broadband “will be diminished,” Columbia University law Prof. Timothy Wu said. He also challenged Verizon and Comcast’s claim that consumers would benefit from a quad-play offer that includes Verizon’s wireless service. “What the consumer really wants is one play that’s competing with the rest of them,” he said. “The consumer is served by destructive innovation, not bundling.” Free Press Policy Advisor Joel Kelsey also noted that the deal would “put close to a third of wireless broadband spectrum into Verizon’s hands.” Rural Cellular Association CEO Steven Berry added that the arrangements “unless conditioned, would not be in the public interest….This deal is not about price, except perhaps higher prices for consumers.”
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