Verizon Wireless deal with cable company Cox includes cross-promotion


Verizon on Friday agreed to buy airwaves from Cox Communications for $315 million. (Seth Wenig/AP)
December 16, 2011

Verizon Wireless, widening its advantage over smaller competitors, on Friday agreed to buy cellphone airwaves from cable company Cox Communications for $315 million.

Like a similar deal struck with cable giants Comcast and Time Warner Cable earlier this month, the nation’s largest wireless carrier will also cross-promote services with Cox so that a customer will be able to buy wireless, landline phone, television and Internet services all in one bundle.

“These agreements provide Cox customers with key enablers to mobility, such as access to Verizon Wireless’s 4G LTE network and iconic wireless devices,” said Pat Esser, president of Cox Communications.

That marketing agreement has sparked concern by public interest groups and some antitrust officials, who will review the deal. They fear Verizon will neglect its fiber Internet and television service, known as FiOs, as it promotes the cable companies’ competing products.

The deals also cement Verizon’s lead in the wireless industry, as the cable companies drop their plans to compete.

“Without real competition for cable or mobile phone service, there’s no pressure to lower prices or innovate,” said Matt Wood, policy director for the public interest group Free Press. “For consumers, that means no choice but skyrocketing prices and onerous contract agreements while the cartel rakes in exorbitant profits.”

When asked for comment, Verizon officials referred to the statement from Cox. They did not respond to further requests.

The transaction will test antitrust officials who are scrambling to protect competition when the lines between high-tech and Internet businesses have blurred. Google is no longer just an Internet search engine; it is also a mobile software and device maker. Comcast is a media empire as well as the nation’s biggest cable and broadband Internet provider. Dish Network provides not only satellite TV but also streaming video online with its Blockbuster unit.

Verizon and cable firms have argued that the marketing portion of the deals won’t be reviewed by the Justice Department or the Federal Communications Commission. They say similar marketing deals exist between AT&T and DirecTV.

But given the scope of Verizon’s deals with cable firms, regulators may question the marketing arrangements.

“Generally speaking, marketing agreements have been off-limits to regulators,” said Christopher King, an analyst at Stifel Nicolaus. “But the regulators have wiggle room on that front and may want clarity that where Verizon has FiOs, how they will sell cable products and services.”

According to the deal, Verizon will buy a chunk of airwaves from Cox that covers about 28 million people. Cox had considered expanding its business into wireless, as have most cable companies at one time or another, but said recently it would stop selling its own wireless services to customers in March 2012.

Verizon Wireless, jointly owned by Verizon Communications and London-based Vodafone, has quickly forged its new cable alliances as its chief competitor, AT&T, stumbled in its audacious $39 billion acquisition of T-Mobile.

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