Verizon wants to make one thing perfectly clear: Its deal to buy spectrum from several cable companies is different from the failed merger between AT&T and T-Mobile.
During a Senate Judiciary Committee hearing today, Verizon general counsel Randal Milch made the case that the proposed spectrum deal would not hinder competition in home broadband markets since Verizon and the cable companies would still be competing with each other for wireline subscribers. Milch also said his company has already made several key investments into expanding its current capacity and will need additional spectrum to keep building out its LTE mobile broadband network.
"From Verizon's own perspective data usage has been doubling for each of the last three years," he said. "In some of our markets the spectrum crunch will begin as soon as 2013. The spectrum purchase will allow us in the short term to meet customers' growing needs... Verizon is a good steward of spectrum. We put it to use and we do it more efficiently than any carrier in the United States."
David Cohen, the executive vice president for Comcast, backed up Milch's perspective and said that Verizon would not enter into collusion with cable providers over wireline service since it had already put so much money into building out its FiOS fiber-optic network to go head-to-head with the cable companies.
"There is no incentive for Verizon to lay down its weapons in the FiOS-cable battle," he said. "Opposition by some of our competitors should be seen in its proper context... Antitrust laws should be to protect competition, not to insulate other companies from competition."
The controversy over Verizon's spectrum holdings started last year when Comcast, Time Warner and Bright House agreed to sell Verizon 122 AWS spectrum licenses that covered 259 million points of presence for $3.6 billion. Verizon subsequently worked out a similar deal with Cox Communications involving $315 million in licenses for 20MHz of AWS spectrum.
In addition to inviting representatives from Verizon and Comcast to the panel today, the Senate Judiciary Committee also invited several critics to discuss their objections. Steven Berry, the CEO of the Rural Cellular Association, argued that Verizon already owns substantial spectrum reserves in many major markets and does not need further spectrum to remain competitive. Berry said if the government approves the deal, it needs to place several requirements on spectrum use to preserve competition among smaller wireless carriers, such as forcing Verizon to divest in certain spectrum holdings and mandating that Verizon offer small carriers affordable roaming and backhaul agreements.
John Kelsey, a policy adviser for public interest group Free Press, argued more strongly against the deal as a whole by pointing out that the wireless industry has already seen tremendous consolidation over the past decade, including mergers between Sprint and Nextel, AT&T and Cingular and Verizon and Alltel. He said that since spectrum is a finite resource, carriers that acquire large chunks of it can effectively shut out competitors by raising barriers to entering the market.
"We truly have a competition crisis," he said. "Acquiring spectrum is the best way to assure that competitors cannot mount a serious challenge."
And Tim Wu, a professor at Columbia Law School who has long been an advocate of network neutrality regulations, argued that a truly competitive market would see wireless broadband services competing with cable companies for home Internet services instead of being offered as part of a bundle package. Wu pointed out that there would be little reason for consumers to buy expensive bundle packages in the future once wireless technologies evolve to the point where they can deliver faster Internet services than today's wireline services.
"4G is a cable replacement, not a complement," said Wu. "It is not clear how selling a replacement can be consistent with selling cable products at the same time... The consumer is served by disruptive innovation, not by bundling. With the advances of Internet services, one service could replace the rest."
Today's Senate hearing came just two weeks after the FCC sent Verizon a letter asking the carrier to deliver a wide range of information on its spectrum holdings and its plans for the spectrum it wants to acquire from the cable companies. Among other things, the letter asked Verizon to detail why spectrum in the prized lower 700MHz band was not suitable for expanding out LTE at a nationwide level; whether the company had considered repurposing spectrum currently used for other services; to provide all analyses about how Verizon would use the companies' spectrum for its LTE services and to detail the cost impacts of adding the spectrum to its LTE portfolio; and to provide a timeline of all talks between Verizon and the cable companies leading up to their proposed spectrum deal.
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