Don’t Play Survivor With Verizon
Don’t Play Survivor With Verizon
Don’t Play Survivor With Verizon

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    If corporations were people, here’s a bit of advice:  Don’t enter into a Survivor game if Verizon
    is a contestant.  Verizon shows an
    uncanny ability to get what it wants with a minimum of fuss, even if it means
    cutting out erstwhile partners.

    AT&T, on the other hand, is a different story.

    Pick an analogy for what AT&T finds itself doing these
    days as its futile takeover bid for T-Mobile drags on and on.  “War of attrition” is one description.
    “Trench warfare” might be appropriate. 
    There are a couple of goodies one could drag back from the 1960s; “waste
    deep in big muddy” could be equally applicable here.

    There won’t be a final public accounting of what AT&T
    has spent, but good guesses would put it at breaking the $50 million mark.  AT&T will spend that, and have to pay out a couple of billion dollars or so for a break-up fee with T-Mobile’s German parent, Deutsche Telekom, and end up with nothing.  Meanwhile, AT&T’s cell service ranks at the bottom of customer satisfaction surveys, again.

    By contrast, Verizon has shown that if there were a game of
    Survivor, it, and not AT&T, would walk off with the grand prize.  Not only is Verizon getting what it wants
    with a minimum of fuss, but it is showing how it can inflict distress on a
    former ally using a policy it roped that ally into approving.  A contestant always gets special points for a
    schadenfreude experience.

    Just about everyone but AT&T can see that its T-Mobile
    bid is done.  Its nonsense about needing
    T-Mobile’s spectrum has been exposed, as has the rest of its ill-fated
    scheme.  The company is reduced to
    attacking the Federal Communications Commission (FCC) for trying to protect consumers.  Its top officials admit time and again there
    is no Plan B, as Chief Financial Officer John Stephens told a UBS conference in
    New York Dec. 7.  As late as Dec. 9,
    lawyers for AT&T had the audacity to go into federal court and press for
    continuation of a long, expensive trial on the basis that “nothing has changed”
    in recent weeks.  The withdrawal of their
    FCC application for the takeover didn’t count. 
    The Justice Department didn’t buy it, and it appears as if the judge was
    very skeptical as well.

    Meanwhile, Verizon’s recent moves show a much different view
    of the world.  For a mere $3.6 billion, Verizon
    purchased some spectrum from a consortium of cable companies (Comcast, Time
    Warner and Brighthouse) while agreeing to a new, closer working relationship
    with Comcast.

    In one fell swoop, Verizon did what AT&T wants to
    accomplish.  It will take a potential
    competitor off of the market while getting itself some spectrum in places it
    can really use it (unlike AT&T). 
    There had been some speculation that when the AT&T takeover of
    T-Mobile finally ends, that Comcast or other cable operators would be there to
    pick up some of the pieces.  Now, unless
    Comcast and/or others in the cable spectrum consortium try to buy T-Mobile
    outright with the $1 billion profit they made from sitting on the spectrum and
    then selling, cable will remove itself as a potential wireless competitor.

    The big difference, of course, is that compared to the
    AT&T fiasco, there will be relatively little fussing over the Verizon deal
    from the FCC despite the clear anti-competitive implications of the
    arrangements.  That’s because there is
    nothing as blindingly obvious as AT&T trying to take out a current

    This merger is more akin to Comcast taking over
    NBC-Universal.  There are all sorts of
    opportunities for anti-competitive activities, but antitrust law doesn’t give
    the government much of a hook on challenging the deal, so they need to fall
    back on “conditions” that aren’t really much of an obstacle because they are so
    hard to enforce. Bloomberg has been fighting for six months just to get a
    channel slot on Comcast systems for its business programming that competes with
    an NBC channel.  Bloomberg wants to be
    with the other business channels, rather than be exiled to a far-away neighborhood
    of unrelated programming.  On some
    systems, Bloomberg is up in the 100s, while CNBC is at channel 60 or lower.

    Yes, this is the type of deal that could lend itself to
    “conditions” even as the two companies involved swear they will still compete
    with each other while unofficially dividing up the market between them.  Cable has video programming.  Verizon has wireless.  Sure, they will compete where there is
    Verizon’s fiber-optic service, FIOS.  But
    there are lots of places where Verizon isn’t offering it.  Verizon has already cut off a technical trial
    it was doing with DirecTV, its erstwhile video partner, to concentrate on its
    new cable BFFs.

    The cable consortium originally bid for spectrum with the
    expectation that cable operators would offer wireless services to go along with
    video, phone and data, in order to compete with the phone companies.  But why compete when you can simply divide up
    the market and laugh behind the regulators’ backs?

    So score the cable spectrum deal for Verizon.  The other move they made is even more
    insidious and, yet, delicious, and that’s the dust-up over Verizon’s
    non-blocking of Google’s Wallet application on Android phones.

    Verizon says it’s only trying to work through security
    concerns about the payment app, and that if approved, Verizon customers will
    have access to the app at some point.

    Google says they aren’t any security concerns.  They say Verizon is stalling until Verizon’s
    similar payment app, Isis, is ready some time next year.

    Thanks to Google’s  Executive Chairman, Eric Schmidt, Google is totally out of
    luck on this.  It was the summer of 2010,
    remember, that Google cut that deal with Verizon that screwed Net Neutrality
    for wireless applications.  Schmidt and
    Verizon Chmn. Ivan Seidenberg became best buds, writing op-eds together in the
    Wall Street Journal and Washington Post while setting out the grand bargain
    eventually adopted by an FCC too meek to realize wireless is the future.

    Google is one of those companies that ordinarily would have
    the will and the means to contest what should be a violation of the principle
    that customers should have access to any legal application on any device over
    any network, part of the proposal that Google and Verizon put forward.

    But this is what Schmidt agreed to in that proposal:  “Wireless
    Broadband: Because of the unique technical and operational characteristics of wireless
    networks, and the competitive and still-developing nature of wireless broadband
    services, only the transparency principle would apply to wireless broadband at
    this time.”

    Here is what the FCC said in its Dec. 23, 2010
    order:  “We conclude it is appropriate to take measured
    steps at this time to protect the openness of the Internet when accessed
    through mobile broadband. We apply certain of the open Internet rules, requiring
    compliance with the transparency rule and a basic no-blocking rule.”

    Yes, Google, you did a number on yourself this time.  Congrats. 
    Verizon wins again.

    The only shadow on the horizon for Verizon is this notion of
    becoming an online video provider
    According to latest reports, it will partner with Redbox, which rents
    all those movies that show up in their rental machines.  The question is how the streaming will work
    in areas not served by Verizon’s fast fiber optic service (FIOS).  Are they going to stream over the slower
    DSL?  Or try to sell it as an independent
    service like Netflix?  Or go
    wireless?  The offering should set up an
    interesting dynamic with their new cable partners.  And, don’t forget, those pesky Open Internet rules apply on the wired services.  Those are the rules Verizon is challenging in court, and may just succeed in nullifying.