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Verizon Spectrum Sale Stirs Debate

Verizon claims sale is no ploy for approval of cable deals
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Verizon's decision to sell some of its spectrum has nothing to do with regulators currently reviewing its pending deals for spectrum and marketing with major cable companies, the company said Thursday.

"We didn't just wake up yesterday and decide to sell spectrum because we're running into roadblocks at the [Federal Communications Commission]," said Fran Shammo, Verizon's CFO, during Verizon's first-quarter earnings call with investors. The spectrum for sale "does not fit as nicely into our spectrum holdings as it may for others."

Verizon announced Wednesday it planned to sell portions of its spectrum in a number of major markets, contingent on winning approval for its purchase of spectrum from four cable companies, expected this summer. The wireless company purchased the spectrum at the FCC's spectrum auction in 2008.   

The announcement immediately churned up the debate in Washington over Verizon's deals for spectrum, which included joint marketing agreements with SpectrumCo (an entity owned by Comcast, Time Warner Cable and Bright House Networks), Cox and Leap Wireless. Those deals are currently under review by the FCC and the Department of Justice and was the subject of a recent hearing before the Senate Antitrust Subcommittee. 

A number of public interest groups, seeing AT&T and T-Mobile all over again, have opposed the deal arguing it would squelch competition in the wireless industry by effectively taking out potential cable rivals.

"There is less than meets the eye to Verizon's spectrum sale," said Harold Feld, director of Public Knowledge. "Verizon is trying to use the mere offer of a spectrum sale to tempt the FCC and Justice Department into approving the deal with the cable companies, and the agencies should resist the temptation."

Broadcasters being urged by the administration to voluntarily give up some of their spectrum for auction took the announced sale as evidence that Verizon has been sitting on unused spectrum, calling into question whether there really is a spectrum crisis, as the administration has claimed as the basis for policies promoting the transfer of spectrum to wireless companies.

"The fact that [Verizon] has warehoused this ‘beachfront property’ raises the fundamental question of whether a spectrum shortage actually exists,"  said Dennis Wharton, the National Association of Broadcasters' evp of communications. "Rather than simply take at face value the specious claims of wireless broadband providers, policymakers should heed the words of Martin Cooper, the inventor of the cellphone, who disputes the notion of a spectrum crisis."

The industry that stands to benefit from more spectrum shot back at the broadcasters. "By denying there is a need for additional spectrum for wireless broadband service, NAB remains firmly committed to its membership in the Flat Earth Society," said Jot Carpenter, vp of government affairs for CTIA-The Wireless Association.