The Justice Department on Tuesday confirmed it is investigating Verizon’s agreement with cable companies for any anti-competitive effects the deal might have on the telecommunications industry.
Verizon’s $3.6 billion purchase of wireless airwaves from Comcast, Time Warner, Bright House Networks would give the leading wireless carrier an edge over other firms racing to beef up their networks to handle more Internet traffic from smartphones and tablets.
The agreement also includes a marketing deal under which Verizon and cable companies would cross-promote each other’s products.
Gina Talamona, a spokeswoman for Justice, confirmed antitrust officials are reviewing the transaction. Verizon on Monday also submitted an application to the FCC to approve its spectrum purchase from the cable companies.
Verizon Communications spokesman Ed McFadden declined to comment, saying it had not received information about the investigation. Comcast has argued that competition won't decrease because no wireless companies are being removed from the market.
Analysts downplayed the significance of the inquiry, saying the reviews by Justice and the FCC are route and expected in this case given the size of the transaction.
But, as reported when the deal was announced, Justice officials are particularly concerned about the cross-marketing agreement that was announced in conjunction with the spectrum purchase.
Under the plan, Verizon would give up its television and Internet landline business known as FiOS, which has been a cable alternative for 14 million U.S. homes.
“There is a concern that this creates too cushy a relationship between companies that had been competing,” said a personal familiar with the review who spoke on the condition of anonymity because the investigation is ongoing.
“We know Verizon isn’t building FiOS out everywhere, but once you have it in the ground the question is what it does next?”
As the communications industry transforms, antitrust officials want to ensure Verizon, for example, would offer new services like online streaming television to compete with cable providers, the person said.