Verizon Wireless proposal criticized

March 21, 2012

Lawmakers on Wednesday picked apart a controversial deal between Verizon Wireless and the largest cable companies, questioning whether it will impede competition and lead to fewer choices for Internet users.

In a hearing by the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights, lawmakers pressed the firms on a joint marketing plan that critics fear would lead to the demise of FiOS, Verizon Communications’ television and Internet service, which competes with the cable companies.

The marketing plan — in which Verizon Wireless sales representatives have begun to sell subscriptions bundled together with Comcast television and Internet service — could lead to a relationship that is too cozy for antitrust officials, analysts say.

“You argue you won’t end FiOS . . . but how will we know you will keep the same level of price competition . . . against cable companies?” Sen. Herb Kohl (D-Wis.), chairman of the subcommittee, asked a Verizon Wireless executive.

The hearing was the first review of a major deal in the communications industry after AT&T’s failed $39 billion bid for T-Mobile late last year. Some lawmakers cited that attempted merger as confirmation of fears that consumers will face fewer choices for wireless service providers even as they come to depend more than ever on mobile devices as their primary tool to communicate. One-third of all U.S. homes have replaced their plain old telephones with wireless phones. Verizon and AT&T control more than two-thirds of all U.S. cellphone contracts.

The joint marketing proposal by Verizon, Comcast, Time Warner Cable, Cox Communications and Bright House Networks is a reaction by the wireless and cable firms to a dramatic disruption in their businesses. Retailers such as Wal-Mart and Amazon and Web giants Google and Apple are shifting the way Americans watch TV, get their news and shop, creating new competition for traditional providers of those services.

The Justice Department and the Federal Communications Commission are investigating whether a deal for cable firms and Verizon to sell each other’s products in their retail stores violates antitrust laws and harms consumers. They are also reviewing whether Verizon’s agreement to buy surplus airwaves from the cable firms will give Verizon too much of a lead as the nation’s largest provider of cellular service.

“It’s almost as if your companies got in a room with other big companies and agreed to throw in the towel and agreed to stop competing against each other,” said Sen. Al Franken (D-Minn.). “I fear consumers will see their cable rates rise.”

An executive for Verizon Wireless, a joint venture of Verizon Communications and the British firm Vodafone, promised that its parent firm is committed to continuing FiOS. The firm has invested billions of dollars in building it out and cannot afford to abandon the service, said Randal S. Milch, general counsel for Verizon Wireless.

Verizon “spends hundreds of millions of dollars a year to advertise” where FiOS service is available, Milch said, “and we will continue” to do so.

The firms maintain that the deal would bring faster connections to Verizon Wireless customers and enable customers of Comcast and other partner cable firms to buy bundles of wireless, cable, Internet and phone services.

David L. Cohen, Comcast’s executive vice president, said that the cable firms had shopped around their wireless spectrum to “just about everyone in the space,” including T-Mobile, but that only Verizon Wireless was in a position to buy the surplus airwaves.

Cecilia Kang is a staff writer covering the business of media and entertainment.
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