Verizon/SpectrumCo: What a Tangled Web It’s Weaved
Verizon/SpectrumCo: What a Tangled Web It’s Weaved
Verizon/SpectrumCo: What a Tangled Web It’s Weaved

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    Today, Public Knowledge and some of our friends filed reply
    to Verizon Wireless and the cable companies’ opposition to
    our petition to deny the proposed spectrum transfer and its accompanying
    agreements.  While we believe the
    transactions will harm competition and consumer choice, what has emerged
    from the debate is how the agency, resale, and joint operating entity (JOE)
    agreements fit into the spectrum transfer. 

    Verizon and the cable companies argue that the agreements
    are distinct and unrelated to the transfer—but in fact, the agreements are inseparably
    connected.  The FCC also realizes that
    the agreements are related to the potential license transfer, and we
    applaud it for using its authority to review the agreements, but we also urge
    that the public interest still requires reviewing the agreements as part of the
    proposed spectrum transfer.

    Verizon and the cable companies want us to believe that the agency,
    resale, and JOE agreements are separate from the proposed spectrum

    But the above graphic fails to represent the actual
    relationship between the agreements and the spectrum transfer.
    David Cohen, Executive
    Vice President of cable company Comcast, admits that “[t]he transaction is an
    integrated transaction.  There was never
    any discussion about selling the spectrum without having the commercial

    Maybe the joke’s on us?

    The truth is that the agreements are intimately entwined
    with, and contingent on, SpectrumCo’s proposed license transfer.

    Because of this tangled web, the FCC needs to include the
    agreements in its review of the proposed license transfer as it considers all
    the harms to the public interest that could arise from the transaction, even if
    it reviews the agreements in a separate proceeding and even if the DOJ
    concurrently reviews the agreements for antitrust violations. 

    There are many concerns that the agency, resale, and JOE
     are anticompetitive [LINK] and contrary to the public interest—and Verizon
    and the cable companies failed to respond to these concerns in their

    One major concern is
    that the JOE is an anticompetitive weapon, and not merely a standard research
    and development agreement. 
    typical R+D agreements, parties cannot agree to restrict the marketing or
    distribution of the technology that arises as a result of the agreements.  Yet parties to the JOE will be able to create
    new technology and then use it as an anticompetitive weapon that keeps
    competitors out of the market.  Even
    though the parties agree that licensing the technology would benefit
    technological innovation and consumers, they have not promised that they will
    license the technology that develops from the JOE. 

    Another big concern
    is that the agreements allow Verizon and the cable companies to form an
    anticompetitive cartel.
      Even under Verizon
    Wireless’s own definition of a cartel, “a combination of producers or sellers
    that join together to control the production or price of the other’s products,”
    Verizon and the cable companies are forming a cartel by being able to control
    the entrance of new competitors, products and services into the marketplace of
    wireline and wireless services.  The fact
    that Verizon Communications, a direct competitor to the cable companies, has
    55% controlling interest in Verizon Wireless only increases anticompetitive
    behavior.  The agreements will
    effectively create industry structures that discourage competition between the parties
    to the agreements.

    The agreements are entwined in a tangled web with the
    potential Verizon/SpectrumCo spectrum license transfer.  Although the FCC is reviewing the agreements
    independently in a separate proceeding, it also has authority to, and must,
    review the agreements as part of the spectrum transfer to ensure that the
    transactions are in the public interest and promote competition.  There’s no better time than the present to
    straighten out the future of the communications landscape.