The largest wireless service provider, Verizon, and the
largest cable companies (Cox, and SpectrumCo, which is made up of Comcast, Time
Warner Cable, and Bright House) have proposed a series of transactions that
will harm consumers, inhibit competition, and stifle technological innovation. The
transactions would move spectrum away from the cable
companies and to Verizon, already the largest wireless provider. But that’s not
the worst of it —the companies are also proposing to divide the market and not
to compete with each other by exclusively marketing each other’s products and
jointly developing new technologies. Essentially, Verizon and AT&T get
wireless; cable gets wireline; and consumers get nothing.
These
sorts of cease-fire agreements—cartels, essentially—will leave customers
unprotected from the whims of a few large companies by denying them the
benefits of a fully competitive and fair marketplace.
That’s why Public Knowledge joined forces with Media
Access Project, New America Foundation Open Technology Initiative, Benton
Foundation, Access Humboldt, Center for Rural Strategies, Future of Music
Coalition, National Consumer Law Center, on behalf of its low-income clients,
and Writers Guild of America, West to protect the public interest in a healthy
communications marketplace by asking the Federal Communications Commission
(FCC) to block the
transactions.
Here
are the nuts and bolts of what’s going on and why you should be concerned:
Why transfer
spectrum?
The cable companies bought this spectrum a few years ago
but haven’t been able to put it to good use.
So they’ve decided to give up trying to compete with Verizon and sell it
the spectrum instead.
Why is the
spectrum transfer bad?
The spectrum transfer is contrary to the public interest
because it will not effectively promote wireless competition. The largest wireless service provider in the
country will get even more spectrum, and Cox, Comcast, Time Warner Cable, and
Bright House will have surrendered their ability to enter the market as competitors.
Competition, on the other hand, benefits the public by
lowering prices and offering more options, technological innovations, and
better services.
What are the other
agreements?
In addition to SpectrumCo’s potential license transfer to
Verizon, the companies want to enter into various agreements if the FCC permits
the license transfer.
First, there are agency agreements where Verizon and
SpectrumCo will be the exclusive resellers of each other’s products.
Second, there are joint operating entity agreements where
Verizon and SpectrumCo will exclusively control any new technologies that stem
from their joint venture.
Why are these
agreements bad?
The agency agreements are bad for competition because Verizon
and SpectrumCo are agreeing not to compete with each other and essentially
dividing the wireless and cable markets between each other. A customer in a Verizon store to buy a cell
phone plan could also walk out with a new Comcast cable subscription. This will make it difficult for other market
participants to compete with Verizon and SpectrumCo companies and could
increase prices for consumers.
The joint operating entity agreements are bad because
Verizon and SpectrumCo will likely not license their new technologies to
competing service providers. Without the
ability to build on existing technology, service providers will have a hard
time competing and consumers will have fewer options when choosing technological
devices in the future.
Why must the FCC
review the proposed spectrum transfer and accompanying agreements?
As explained above, the spectrum transfer, agency
agreements, and joint operating entity agreements are all bad for independent
reasons, but together, they are that much worse. It is essential that the FCC defends the
public interest as companies want to consolidate and integrate their
services. Companies cannot transfer
spectrum licenses without the FCC’s consent and the FCC also has the authority
to look at agreements that coincide with the proposed transfer.
Although the FCC can fix the most egregious harms posed
by a spectrum transfer or contractual agreement, remedies will not work
here. We don’t even have access to most
of the contents of the agreements, and anyway, the greatest threats may come
down the road when the companies modify their agreements.
The bottom line?
If the FCC allows these transactions to go forward, the
companies will find collusion easier than ever, and consumers will pay the
price.