WASHINGTON - A $3.6 billion deal to sell wireless spectrum and related joint-marketing agreements between cable companies, including Comcast Corp. and Verizon Wireless, faced criticism in a Senate Judiciary antitrust hearing Wednesday that they would hurt consumers and amounted to a truce between the telecom giants.
"It's like you agreed to throw in the towel and stop competing with each other," Sen. Al Franken (D., Minn.), a frequent Comcast critic, said in the hearing.
Steven K. Berry, president and chief executive of the Rural Cellular Association, whose members include Sprint, T-Mobile, and Cricket, said: "This is effectively a non-compete agreement. â ¦ This is the equivalent of eliminating a national competitor from the market."
Top officials at the two companies denied the claims and said the transaction would lead to more choices for consumers and other benefits. "There is nothing in these agreements to prevent us from trying to beat the brains out of FiOS," the Verizon-branded TV and Internet services, David Cohen, executive vice president at Philadelphia-based Comcast, told the Senate panel. "Not one competitor will be removed from the market."
The 2½-hour hearing addressed issues connected with a deal announced in early December in which Comcast and two other cable companies, Time Warner Cable and Bright House Networks, agreed to sell wireless spectrum to Verizon Wireless for $3.6 billion. At the same time, the cable companies and Verizon Wireless signed separate agreements to jointly market bundles of TV, Internet, phone, and wireless services - a marketing program launched on the West Coast in January.
The most controversial part of those marketing agreements is how Verizon Wireless would sell both FiOS TV and Internet and Comcast Xfinity TV and Internet services in the same stores in markets with both FiOS and Xfinity, such as Philadelphia. The companies have not been clear as to how they would do this.
Critics have blasted the transaction and say it could hurt consumers in two ways. Because of closer ties with Comcast and cable companies, Verizon won't expand FiOS TV and Internet services that compete directly with cable companies - leaving the landline, pay-TV, and Internet service market to cable. Meanwhile, cable's sale of spectrum basically eliminates the industry as a potential wireless competitor and further concentrates wireless spectrum in the hands of Verizon, they say. In addition, thousands of Verizon union workers believe that the transactions could lead to fewer jobs if Verizon halts the FiOS build-out.
"This market has a competition problem," said Joel Kelsey, a panelist and critic who is policy adviser for the advocacy group Free Press.
Both the Justice Department and the Federal Communications Commission are studying the transactions for public interest benefits and antitrust issues.
Sen. Herb Kohl (D., Wis.), the chairman of the Senate Judiciary Committee who headed Wednesday's hearing, seemed skeptical in his questioning that the transaction would preserve heated competition between Verizon Wireless and Comcast.
Randal S. Milch, executive vice president and general counsel at Verizon Communications Inc., said the phone company needs the cable companies' spectrum to satisfy booming demand for wireless capacity. The company believes it could face wireless capacity shortage in some markets as early as 2013.
FiOS, which has cost Verizon $23 billion, was never intended to be expanded nationally and Verizon would continue to aggressively market the products because they have only recently turned positive for the company financially, Milch said. He noted that Wall Street had punished the company because the FiOS rollout was so expensive.
Cohen, of Comcast, said the commercial agreements were a "slam-dunk win for consumers" and he said the government has never challenged these types of agreements. "What should not be lost in all the rhetoric is the fact that neither the license agreement or the commercial agreements will reduce or harm competition in any product or geographic market," Cohen said in prepared comments. "The harms that have been alleged are hypothetical and speculative, and opponents of the transaction, several of which are competitors that simply fear increased competition, ignore the benefits the transactions will bring to consumers."
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