A controversial deal between Verizon and four cable companies won federal approval Thursday despite warnings that the collaboration would undermine consumer choice and drive up prices for Internet, phone and television services.
The approval by the Justice Department amounted to an acknowledgment that the federal government had little power to curb steeply rising telecommunications bills for data-hungry Americans, said consumer groups and analysts.
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Federal officials imposed several conditions on the $3.6 billion deal in hopes of preserving competition in communities — including much of the Washington area — where Verizon’s FiOS service already battles cable services such as Comcast’s Xfinity for customers.
But the robust digital competition once envisioned by policymakers has failed to develop in most of the nation, leaving a series of dominant regional players offering expensive bundles of services for broadband Internet, phone and television from a single company.
Traditional cable operators dominate that market and, analysts say, are likely to tighten their hold in the years ahead. While competition over delivering television programming is mounting, running broadband lines into homes is so costly that new players struggle to catch up with the existing infrastructure of the cable companies.
“You have an effective monopoly of broadband [Internet] within the country,” said Mark Cooper, research director for the Consumer Federation of America. “The question is, what do you do?”
December’s deal was unusual because it brought together rivals who had been fiercely competing over bringing high-speed service to homes. It allowed Verizon to buy a coveted but unused swath of cellphone bandwidth controlled by the cable companies, which include Comcast, Time Warner, Cox Communications and Bright House Networks. They also inked an agreement in which they agreed to work with Verizon to market each other’s products and share in some research efforts.
Some analysts criticized the deal as amounting to a white flag in Verizon’s development of FiOS, which, since its inception in 2005, was seen as the main challenger to high-speed data services offered by the cable companies. Consumer groups, unions and member of Congress expressed alarm and urged careful scrutiny by the Justice Department and the Federal Communications Commission.
Federal officials concluded that the deal, as initially reached among the companies, would harm consumers by hindering their incentive to compete over price and the quality of their services. But officials balked at calls to block the deal outright because the two sides largely are in different businesses, competing directly to provide a limited set of services in a limited number of markets.
About 19 million American households, mostly on the East Coast, are slated eventually to have access to FiOS. As the Justice Department noted in court documents submitted with the approval Thursday, Verizon announced last year it would sharply curb the rollout of the service because of the high cost of running new wires into homes and businesses, meaning that area of competition was unlikely to expand beyond that.
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