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Customers purchase the iPhone 4 shortly after the phone went on sale with the Verizon Wireless network in Boca Raton, Florida February 10, 2011.
Credit: Reuters/Joe Skipper
By Sinead Carew and Jasmin Melvin
NEW YORK/WASHINGTON |
Thu Aug 16, 2012 4:28pm EDT
NEW YORK/WASHINGTON (Reuters) - Regulators cleared the way for Verizon Wireless to proceed with its $3.9 billion purchase of airwaves from big cable providers but placed constraints on the companies' controversial marketing agreements.
The U.S. Department of Justice said on Thursday it would approve the spectrum sale and the head of the Federal Communications Commission said the commission should also give the go-ahead to the deal.
The deal will give Verizon Wireless additional capacity to help it cope with rising demand for data services such as Web surfing and video on mobile devices.
Wells Fargo analyst Jennifer Fritzsche said that the positive regulatory review of the deal with "minor conditions" would be good for the industry and prompt more spectrum deals.
"We expect the approval of this deal to stimulate more spectrum moves (purchases, sales and/or swaps) with other industry players," Fritzsche said.
Reuters had reported on August 2 that regulators were expected to approve the deal with conditions.
Verizon's proposed deal with cable providers such as Comcast Corp and Time Warner Cable Inc had attracted opposition from some rivals and public interest groups who complained that it would hurt competition.
Verizon Wireless anticipated some regulatory concerns by agreeing in the last few months to sell some spectrum, including a deal it forged with Deutsche Telekom AG unit T-Mobile USA, which was originally the most outspoken opponent to Verizon's deal with the cable companies.
The Justice Department said on Thursday it would approve the T-Mobile USA deal but that it also wanted changes to Verizon Wireless' commercial agreements with the cable companies under which they planned to market each other's services and form a technology joint venture.
For example, the Justice Department said Verizon Wireless should not be allowed to market cable company products in areas where its parent company, Verizon Communications Inc, sells FiOS television and Internet services that compete with cable providers.
The department also said that it would limit the duration of the proposed technology venture so that it would not "dampen the companies' incentives to compete against one another."
It also said that the companies should tweak their service resale agreement so that cable companies would be allowed to sell services from Verizon Wireless rivals after five years.
Shortly after the Justice Department announced its conditions on Thursday, FCC Chairman Julius Genachowski urged the commission to approve the deal since Verizon Wireless has made certain promises, including its plan to sell certain spectrum assets.
Genachowski also said that the company committed to accelerate the build-out out of its network to use the new spectrum and to "enhance its roaming obligations."
A majority of the five-member panel must still vote in favor of the transaction before it can proceed. The conditions the Justice Department placed on the commercial agreements are also subject to a 60-day comment period and require court approval.
Verizon General Counsel William Petersen said in a statement that the company believed it has addressed the Justice Department's concerns and that the "consumer benefits of the transaction will be promptly realized."
However, consumer groups said that while regulators had mitigated some "consumer harms this deal would have caused" it has not done enough to prevent Verizon Wireless and its cable partners from becoming too dominant.
"Whatever has been done to address the worst parts of this agreement, it's clear now that Congress and the FCC still need to confront the monopoly environment most consumers now face when choosing broadband service," said Free Press policy adviser Joel Kelsey.
In a move that analysts described as procedural, the Justice Department said on Thursday that it had filed a lawsuit barring the companies from going through with their original commercial agreements; it also filed a proposed settlement that would resolve its concerns if the plan gains court approval.
Verizon Wireless is a venture of Verizon Communications and Vodafone Group Plc.
(Additional reporting Yinka Adegoke in New York and David Ingram in Washington; Editing by Gerald E. McCormick, Lisa Von Ahn and Phil Berlowitz)
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