Justice puts kibosh—for now—on Verizon-cable spectrum deal

A consortium of cable companies--Comcast (Nasdaq: CMCSA), Time Warner Cable (NYSE: TWC), Bright House Networks (aka SpectrumCo) and Cox Communications--can't sell $3.9 billion worth of unused wireless spectrum to Verizon (NYSE: VZ) Wireless until they alleviate U.S. Justice Department concerns about a complementary cross-marketing agreement between the parties, the Washington Post reported.

According to sources "familiar with the (Justice Department) review," the big worry is that any joint marketing between the cable guys and Verizon Wireless could thwart competition for landline Internet service, the newspaper reported.

That's been a big concern among those charted with approving the deal since it was first announced. The involved companies paint it as a straight spectrum sale--the cablecos bought the air but won't be using it and Verizon Wireless needs it--and a secondary joint marketing/working relationship where the wireless provider pushes cable service in its serving areas and the cablecos push Verizon Wireless. That second part, of course, has everyone a little queasy because it could signal even more erosion on the part of Verizon to push its competitive FiOS broadband service and an even greater consolidation of power within both the wireless and cable spaces.

The FCC supposedly gave its blessing to the spectrum sale after the involved parties agreed to sell off a swatch of air to T-Mobile, those familiar sources told the newspaper. That's the good news. The bad news for the involved parties is that the FCC is actually working with Justice (a rare form of D.C. cooperation) and will back any decision that department makes. At least one person close to the agency's thinking said so, the newspaper reported.

On top of all this, the elected crowd has also gotten into the fray with lawmakers writing to the FCC that the deal would concentrate too much power in the hands of one wireless carrier.

The situation, though, was apparently not bleak enough to dim Verizon spokesman Ed McFadden's optimism.

In an e-mail to the newspaper, McFadden insisted that the companies "have addressed these issues (and) made a persuasive case that bringing used spectrum to the marketplace to serve millions of consumers is strongly in the public interest, and we believe we are on track for approval later this summer."

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