Unlike AT&T, Verizon Will Avoid Major Regulatory Hurdles Obtaining New Spectrum
Verizon (NYSE:VZ) announced a $3.6 billion deal Friday that would help it buy a significant chunk of wireless spectrum from SpectrumCo, a joint venture formed by Comcast (NASDAQ:CMCSA), Time Warner (NYSE:TWC) and Bright House Networks. [1] The deal will give Verizon control of 122 advanced wireless services (AWS) spectrum licenses helping it reach around 259 million potential customers, or 83% of the U.S. population in other words. [2] Verizon said that it will use the spectrum to build out its rapidly growing LTE network where it already has a significant head start over its smaller national carriers AT&T (NYSE:T) and Sprint (NYSE:S).
The deal is, however, subject to approval from the FCC and anti-trust clearance from the Justice Department. Considering the stern opposition that the AT&T-T-Mobile merger has faced from these regulatory bodies, it does seem that Verizon will not be afforded a grand welcome to go ahead with a deal that creates similar anti-competitive concerns. The AWS spectrum purchase will make the largest national wireless carrier even larger and make it even tougher for smaller wireless providers to compete effectively.
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Verizon will not face AT&T-like opposition
But an important thing to note is the scale of this spectrum purchase. Verizon’s is a mere $3.6 billion deal as opposed to a whooping $39.6 billion that AT&T proposed to pay to buy out the fourth largest wireless carrier in the U.S. Verizon’s deal only gives it access to additional spectrum it needs for its LTE rollout, unlike AT&T, which gets control of not only T-Mobile’s spectrum but also its customers. Also, T-Mobile’s AWS spectrum alone is much larger than SpectrumCo’s. [3] In addition, T-Mobile also has PCS spectrum resources that AT&T would have gained access to.
Not to forget, SpectrumCo was sitting on a huge swath of wireless spectrum without using it at a time when the wireless industry is facing a spectrum crunch. Earlier this year, FCC Chairman Julius Genachowski had drawn up a plan to get TV broadcasters to give up some of their unused spectrum for auction. However, broadcasters questioned this move as cable companies were also guilty of having a large chunk of unused spectrum they had no plans of deploying anytime soon. Approving this deal will therefore resolve this embarrassing problem for FCC by freeing up airwaves for the wireless industry. [4]
Sure, the FCC may have to ask Verizon to divest some of its spectrum assets in a few markets to assuage antitrust concerns but that will not be on the same scale as AT&T’s proposed 40% sale of T-Mobile’s assets. Looking at the opposition that AT&T has met with in its aggressive quest to acquire T-Mobile, Verizon has done the smart thing by moving quickly to buy unused spectrum from cable companies to bolster its network, thereby making it easier for the FCC to approve these deals.
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Notes:- Comcast, Time Warner Cable, and Bright House Networks Sell Advanced Wireless Spectrum to Verizon Wireless for $3.6 Billion, Company Press Release, December 2nd, 2011 [↩]
- U.S. Population Statistics, U.S. Census Bureau [↩]
- A Visual Guide to AWS, PhoneScoop [↩]
- Verizon’s Spectrum Deal Could Help FCC Save Face, NationalJournal, December 5th, 2011 [↩]