Is the fallout from AT&T and T-Mobile's recently broken merger now threatening Verizon? According to recent reports, the U.S. Justice Department is shining a light on the number one U.S. carrier's recent deal to expand its wireless spectrum.
Bloomberg reports that Justice Department spokeswoman Gina Talamona confirmed the antitrust division is examining a deal between Verizon and a joint venture comprised of three major cable companies, Comcast, Time Warner, and Bright House. The deal, inked on December 2, cost Verizon $3.6 billion, and nets the carrier use of wireless spectrum owned by the three communications companies. Further boosting Verizon's spectrum coffers is a recent deal with Cox Communications for $315 million.
"This agreement is diminishing competition in every way," Mark Cooper, director of research at Consumer Federation of America, which opposes the deal, told Bloomberg. "It means the cable companies are no longer trying to do their own thing in wireless, it concentrates ownership of spectrum, and it turns rivals such as Verizon and Comcast into partners."
Though Verizon announced its plans to purchase the wireless spectrum early this month, it only recently filed for approval with the FCC on December 19, according to Bloomberg. The recent filing explains why the Department of Justice would launch inquiries into the deal's details.
Under the proposed agreement, Verizon would pay $2.3 billion to Comcast, $1.1 billion to Time Warner, $315 million to Cox, and $189 million to Bright House to use wireless spectrum owned by each company to fuel the carrier's phone and data networks. In return, the companies each benefit from shared marketing and sales.
Given the regulatory officials' scrutiny to AT&T and T-Mobile over wireless networks, a critical look at Verizon's deal is not surprising. However, it remains to be seen how the government will respond to the number one mobile carrier in the U.S. expanding its leading position, especially in light of dismantling similar plans from competitor AT&T.
In the wake of the failed merger, AT&T has surfaced as a clear loser. As part of the carriers' pre-merger contract, AT&T must enter a 3G roaming agreement and relinquish an important chunk of its Advanced Wireless Solution (AWS) spectrum to T-Mobile. That's in addition to paying $4 billion in cash and assets to the last-place carrier as well. With that assistance, T-Mobile's coverage will expand from 230 million to 280 million consumers.