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Antitrust Senator Raises Concerns Over Verizon Cable Deals

Stops short of recommending regulators block them
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Critics of Verizon Wireless' $3.9 billion spectrum purchase and marketing and joint venture deals with the nation's largest cable companies may have just won a powerful ally in their fight to persuade regulators to either block or condition the deals. Sen. Herb Kohl (D-Wis..), the powerful chairman of the Senate Antitrust Subcommittee, said today that the deals "present serious competition concerns."

Though Congress has no authority over a particular deal's outcome, lawmakers like Kohl (who came out against the AT&T-T-Mobile merger that eventually failed) carry influence and provide regulators with political backup should they want to block or impose restrictions.

However, while Kohl called on regulators to block the AT&T and T-Mobile deal, he stopped short of making that same recommendation in his letter about the Verizon Wireless' cable deals to the Department of Justice and the Federal Communications Commission. Instead, Kohl, who held a hearing in March on the issues raised by the proposed deals, asked regulators to "carefully scrutinize" the transactions for its "potential impact on competition and consumers."

"There is a real concern these agreements transform Verizon and the cable companies from fierce competitors into business partners because they lessen the incentive for Verizon and the cable companies to compete aggressively against each other," Kohl wrote.

For critics, Kohl's eight-page missive to regulators was enough to cheer.

"[Kohl] hit all the right points in the letter," said Gigi Sohn, president and CEO of Public Knowledge, one of the public interest groups opposing the deals. “[He] was right to raise serious issues surrounding AT&T’s proposed takeover of T-Mobile, and he is right again now to raise serious issues surrounding Verizon and the cable companies. The DOJ and FCC would be wise to pay attention."

Verizon Wireless saw nothing to worry about in Kohl's letter, interpreting it as confirmation that the deals will be cleared.

"Because these transactions present unique issues that will deliver major consumer benefits, it is appropriate for Senator Kohl to carefully examine the issues that are also being studied by the appropriate agencies. While Senator Kohl's letter recounts the arguments reviewed at the Senate hearing, it is another indication that this transaction is on the road toward approval this summer," said Tom Tauke, Verizon's executive vp of public affairs, policy and communications, in a statement.

Coming to Verizon's defense and splitting the debate along party lines, the ranking member of the subcommittee, Sen. Mike Lee (R-Utah) drew the opposite conclusion than Kohl, calling the Verizon-cable deals "procompetitive." In a letter sent within hours of Kohl's to the DOJ and FCC, Lee points out that the spectrum Verizon wants to purchase hasn't been in use since 2006 and that the side agreements with the cable companies are "essential to a vibrant economy."

"Government may sometimes have a proper role in ensuring that businesses compete fairly and do not collude. But it is improper for government agencies to pick winners and lowers in the marketplace or to interfere with private enterprise where robust market forces are in operation," Lee wrote.