Is Verizon Facing DOJ Probe Over Cable Deals?

Public interest groups say telecom hinders competition

Now that the Obama administration has successfully shut down the AT&T-T-Mobile merger, it is setting its sights on Verizon Wireless' recent spectrum and joint venture deals with cable companies, a Department of Justice spokeswoman confirmed.

While the AT&T-T-Mobile deal was a straight antitrust case, Verizon's $3.6 billion deal with SpectrumCo's owners Comcast, Time Warner Cable and Bright House Networks, and $315 million deal with Cox Cable are more complex. In both cases, Verizon solidified its leadership position in the wireless business by adding valuable spectrum. But the parties also cut marketing agreements to sell each others' products and form a joint venture to integrate wireline and wireless products and services.

The deal, said Bernstein Research's Craig Moffett, amounted to "a partnership between formerly mortal enemies. . . . All in all, this is a strategic masterstroke for Verizon."

From the moment Verizon announced the game-changing deals, it raised red flags with public interest groups, who view the Verizon deals as a clever way to get around antitrust charges and at the same time shut down a potential competitor.

"It amounts to a cease fire, in which Verizon appears to say it is getting out of the video business and cable companies say they are going to get out of the wireless business," said Andy Schwartzman, the policy director for the Media Access Project. "It will keep in place existing structures rather than allowing new competition. It's a covenant not to compete."

In addition to the DOJ, Verizon must also seek approval from the Federal Communications Commission, which will review the deal for its public interest impact. In its FCC application, filed Monday, Verizon argued that the FCC should only review the deal for its transfer of spectrum licenses.

"Because only spectrum is being transferred, and not an operating entity, the proposed transaction will not result in any diminution in competition," Verizon said in the filing. "Consumers will continue to have all the same choices among wireless providers that they do today."

Verizon was not immediately available for comment.