DoJ Chokes Wireless Broadband to ‘Save? Wireline

It’s come to this. After more than a decade of policies aimed at reducing the telephone companies’ share of the landline broadband market, the feds now want to thwart a key wireless deal on the remote chance it might result in a major phone company exiting the wireline market completely.

The Department of Justice is holding up the $3.9 billion deal that would transfer a block of unused wireless spectrum from a consortium of four cable companies to Verizon Wireless, an arm of Verizon, the country’s largest phone company.

The rationale, reports The Washington Post’s Cecilia Kang, is that DoJ is concerned the deal, which also would involve a wireless co-marketing agreement with Comcast, Cox, Time Warner and Bright House Networks, the companies that jointly own the spectrum in question, would lead Verizon to neglect of its FiOS fiber-to-the-home service.

There’s no evidence that this might happen, but the fact that DoJ put it on the table demonstrates the problems inherent in government attempts to regulate competition.

For years, broadband competition has been an obsession at a number of agencies, starting with the FCC but also addressed by DoJ, the Federal Trade Commission, Congress and the White House. Federal policies such as UNE-P, network neutrality, spectrum set-asides and universal service funding have all sought to artificially tilt the competitive advantage toward non-incumbent providers, regardless of their overall financial viability (think Solyndra). State and local officials took the cue, and state public utilities commissions developed their own UNE-P-type set-ups and endorsed fiscally suicidal municipal broadband projects, all aimed at providing competitive alternatives to “monopolistic” telephone company broadband service.

So there’s some regulatory whiplash when a major government agency says that a competitively weak Verizon would be bad for consumers.

Nonetheless, this is pure supposition. Verizon shows every sign of remaining a significant competitor. The company is upgrading its FiOS service, offering speeds of up to 300 Mb/s. The Newark Star-Ledger, citing data from the New Jersey Board of Public Utilities, in June reported that cable companies are losing subscribers to FiOS, in the Garden State and the nation. “Verizon FiOS ate up market share in Jersey and the nation, growing nearly 20 percent through 2011 in Jersey, even better than the national gain for paid TV by telecommunications companies, up 15 percent,” the Ledger states.

Balanced against DoJ’s academic speculation is the fact that the cable spectrum is sitting unused amid a dire spectrum crunch. Wireless demand is booming, yet the government’s penchant for precautionary regulation is getting in the way of market-based solutions to real-world problems.

Moreover, as Scott Cleland points out on his blog, the Verizon-cable deal will create more competition as it will allow the four cable companies to bundle wireless service with cable. “The Verizon-Cable spectrum transaction, as currently configured,” Cleland writes, “is now a series of integrated secondary market transactions that result in multiple competitors gaining access to spectrum that they need, which will enable them to offer faster and more competitive broadband offerings, greatly benefiting American consumers.”

Even President Obama’s notoriously activist FCC cleared the spectrum sale, stipulating only that Verizon swap some of the acquired spectrum with T-Mobile (perhaps to abate some of the consequences of the FCC’s competition-obsessed decision to kill T-Mobile’s merger with AT&T, a rant for another day). But that condition itself implied an understanding that getting additional spectrum in play is a paramount goal.