DOJ Conditionally Approves Verizon Wireless Deal With Big Cable

Company and its partners can offer quad play for 5 years

Verizon Wireless and four of the nation's largest cable companies can co-market a "quad play" of wireless, wired, TV and cell phone services, according to the Department of Justice—but only for five years. This limitation on the controversial cross-marketing and joint venture deals is included in a DOJ consent decree filed this morning in the U.S. District Court in Washington.

The marketing agreements are part of Verizon Wireless' $3.9 billion bid to purchase valuable wireless spectrum from SpectrumCo companies Comcast, Time Warner Cable, Bright House Networks and Cox.

While the DOJ approved the spectrum deals (and Verizon's contingent deal to sell some spectrum to T-Mobile), the DOJ's antitrust division found that allowing the marketing deals to go through as originally proposed would have turned competitors into collaborators.

"We achieved a result that is terrific for consumers," said Joseph Wayland, acting assistant attorney general for the DOJ's antitrust division, which worked with the companies to come up with what Wayland called a "jointly-negotiated agreement."

In addition to capping the duration of both the proposed technology venture to integrate wireless and wired products and the cross-marketing agreements, the DOJ also forbade cross-marketing pacts in markets where Verizon offers its FiOS service.

"These changes will ensure head-to-head competition," Wayland said.

Over the next five years, Wayland said the DOJ would be carefully monitoring the how the side marketing deals play out "to make sure benefits accrue to consumers."

In a statement, Verizon Wireless said it accepted the terms of the consent decree.  "We now believe the consumer benefits of the transaction will be promptly realized, and look forward to the conclusion of the FCC review so that we can move forward with meeting the unprecedented consumer demand for innovative 4G LTE mobile and data driven products and services," said William Petersen, vp and general counsel and secretary for Verizon Wireless.

Comcast, the largest SpectrumCo owner, said in its statement that the consent decree kept the most important aspects of the original deal intact. "We are pleased that the consent decree that we have negotiated with the Department of Justice preserves the most important goals of the agreements, including Comcast's ability to market Verizon Wireless services throughout our footprint in order to offer our customers a wireless option, Verizon Wireless' ability to market our products in virtually all of our footprint, our ability to opt into an MVNO relationship with Verizon Wireless, and the essential structure of the innovation R&D technology joint venture," said David Cohen, Comcast's executive vp, in a prepared statement.

Consumer groups—which, along with the Communications Workers of America, lobbied hard for regulators to place conditions on the deals—didn't think the DOJ went far enough.

"By allowing Verizon and the cable companies to sell each other's services, the DOJ and the FCC are acknowledging what has been clear for some time—that broadband competition policy in the United States has failed," said Gigi Sohn, president and CEO of Public Knowledge.

The Federal Communications Commission also has to sign off on the deal for its impact on the public interest and the sale of spectrum.

FCC chairman Julius Genachowski is recommending that the other four commissioners approve the FCC's order. "Verizon Wireless has undertaken an unprecedented divestiture of spectrum to one of its competitors, T-Mobile, and has committed to accelerate the build-out of its new spectrum and enhance its roaming obligations. In addition, the companies' commercial agreements will be modified to, among other things, preserve Verizon's incentives to build out FiOS, increase wireless competition, and ensure that the proposed IP venture is pro-consumer and that its products cannot be used in anti-competitive ways," said Genachowski in a statement.

FCC officials confirmed in a press conference today that it is circulating a final order for a vote among the the five commissioners, so that decision could come soon.