The idea that the nation's largest wireless operator--Verizon Wireless (NYSE: VZ)--and the nation's largest cable operator--Comcast (Nasdaq: CMCSA)--can work together and still compete has federal regulators scratching their heads, multiple reports suggest.
According to a Reuters posting, the Justice Department is looking closely at a proposed marketing collaboration and "joint operating entity" between Comcast, Time Warner Cable (NYSE: TWC), Cox Communications and Bright House Networks and Verizon Wireless because it could mean Verizon Communications, which co-owns the wireless operator with Vodafone Group, will back off its competitive FiOS service.
While Verizon says that's not the case, "the Justice Department has big concerns about what mischief could be done in undefined agreements that would lock out competitors," a source who was not authorized to speak publicly told Reuters in private.
Meanwhile, Multichannel News reported that 32 House of Representatives Democrats sent a letter to the FCC stating that the deal "appears to renege" on Verizon's promise to abide by the 1996 Telecom Act and compete, not collaborate, with cable. Stopping short of opposing the deal, the letter signers did express "serious concerns" that they said the FCC should address.
The FCC will be fielding other comments from other interested parties until end of day July 10 as it gathers evidence to give the deal thumbs up or down. On the surface, at least, it appears that the collaboration between Verizon Wireless and a cable consortium known as SpectrumCo--with Cox joining later--portion of the deal where the cable operators sell owned but unused wireless spectrum to Verizon Wireless for about $3.9 billion is likely to be approved.
It's the other part--or parts, depending on how you break it down--that have Justice in a tizzy because, the source told Reuters, "they're a problem."
The Reuters story outlined three steps Justice could take: stop the side arrangements altogether, change them somehow so they can't collude or monitor what's already happening with joint marketing agreements the two sides have set up and then decide.
"Obviously discussions remain ongoing, we're addressing concerns as they arise, but all indications are that we will be closing on this as expected sometime later this summer," Verizon spokesman Ed McFadden told Reuters.
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