Federal agency says collusive agreement could sink otherwise acceptable sale of LTE spectrum

America's largest carrier, Verizon Wireless is on the verge of closing a major $3.9B USD spectrum buy, a purchase which would greatly improve its high-speed LTE network.  However, on the eve of the deal, the U.S. Federal Communications Commission has hit the brakes, alarmed at a "side-deal" in the purchase.

As of this week Verizon representatives expressed confidence in their position, stating, "[W]e have made a persuasive case."

But the FCC is worried about a provision of the deal involving Comcast Corp. (CMCSA), Time Warner Cable, Inc. (TWC), and BrightHouse Networks.  Verizon Communications competes with these companies via its fiber optic (FiOS) network, offering internet, phone, and television packages.  But under the deal, the companies agreed to not publish adversarial adds in regions of mutual service, instead offering up mutual advertising campaigns and dividing up customers.

Many in Congress and at federal regulatory industries feel this is a textbook example of collusion.  Others argue businesses should be free to do whatever they want, regardless of the impact to consumers.

Verizon FiOS
The FCC and DOJ fear that Verizon's promise to jointly advertise with its competitors is textbook collusion. [Image Source: Android Community]

The FCC and U.S. Department of Justice are both looking to block the minor provision of the deal involving the non-compete agreement.

Otherwise, they are relatively pleased with the deal and with Verizon's recent behavior.  While FCC Chairman Julius Genachowski reportedly plans to implement requirements that would force Verizon to offer competitors fair data roaming agreements on its network, he is moving to conditionally approve the deal, ahead of a late August review deadline.

But approval will require Verizon to revise its advertising promises to cable companies, which some fear might be the underlying carrot that convinced the cable providers to offer up their horded spectrum in the first place.  Nullification of the provision could lead cable providers to ask for more money or even move to cancel the deal.

Verizon has worked hard to win approval of the deal, turning rival T-Mobile USA (a Deutsche Telekom AG (ETR:DTE) subsidiary) into a believer, after following an FCC suggestion to sell it part of the spectrum and swap some additional spectrum with the nation's fourth largest carrier.

Source: Wall Street Journal

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