Notes from today's hearing
I’m pretty sure no one actually reads my live blogs on various events but guess what? They’re incredibly useful for me in terms of note taking for my articles. Ergo, I’m gonna do it regardless of whether anyone cares or not 🙂
This hearing should be good to go at around 2:00 p.m. ET so we’ll start in a couple of minutes.
Opening statements:
Herb Kohl: After this deal, Verizon and AT&T will have the lion’s share of the most valuable spectrum. Both Verizon and Comcast believe they are acting in their own best interests but we need to ensure that consumers’ best interests are being served in the long run. The fundamental question we must answer is whether these deals will bring benefits to consumers.
Mike Lee: Most important question is whether joint agreement interferes with Verizon’s incentives to deploy FiOS. We should remember htat the purpose of our antitrust laws should be to strengthen consumer benefit. It’s improper for government agencies to pick winners and losers.
Witnesses:
First: Randal S. Milch, Executive Vice President & General Counsel for Verizon. I wish to make three points — first it’s critical that this previously unused spectrum be put to use. Mobile broadband is a continuing bright spot in our national economy. It’s no secret that we’re currently in a critical situation. customer demand is quickly outgrowing available spectrum. Total smartphone traffic in 2015 will be 20x more than it is today. From Verizon’s own perspective data useage has been doubling for each of the last three years. In some of our markets the spectrum crunch will begin as soon as 2013. The spectrum purchase will allow us in short term to meet customers’ growing needs. Verizon is a good steward of spectrum. We put it to use and we do it more efficiently than any carrier in the United States.
We have spent $22.3 billion over the last three years on our network. But we do not believe we can engineer our way out of the spectrum crunch.
Second: David L. Cohen, Executive Vice President for Comcast. Verizon is hardly going to walk away from its $23 billion investment in FiOS which generates 61% of its consumer wireline revenue today. There is no incenvtive for Verizon to lay down its weapons in the FiOS-cable battle. The cable companies have made a concerted decision not to build a new wireless network. Opposition by some of our competitors should be seen in its proper context. Antitrust laws should be to protect competition not to insulate other companies from competition.
Steven K. Berry, President & CEO Rural Cellular Association: Verizon owns some substantial spectrum reserves, as many as 44MHz in some top markets. If this deal is approved they could hold as much as 72MHz of spectrum in reserve. Spectrum is a finite and taxpayer funded resource. spectrum is the lifeblood of the wireless industry and if you cut off the lifeblod the heart stops beating. We did not file a petition to deny, we filed a petition to condition this transaction. Must be conditioned by significant spectrum divestitures, roaming requirements, affordable backhaul. Denying carriers the ability to have these inputs would be denying their ability to survive.
John Kelsey, policy advisor for Free Press. We have a truly large competition crisis. Verizon and AT&T capture nearly 80% in the wireless industry’s profits. The market for at-home broadband services has long been a duopoly. JD Power reports that the average wireless bill in 2011 was $86, a $20 increase from two years ago. This deal will result in AT&T and Verizon in controlling a 60% value share in spectrum. Not al spectrum is created equal — the more quality spectrum a carrier has the harder it is to compete. Acquiring spectrum is the best way to assure that competitors cannot mount a serious challenge. The spectrum sale is enough to tilt this deal against the public interest in the wireless market. The joint marketing agreements put former rivals on the path to collaboration rather than competition. Consodliation we’ve been experiencing is no accident, it’s not the hand of the free market. There is no reason this pattern of poorly protecting the public interest has to continue.
Timothy Wu: Verizon holds more valuable spectrum that anyone else and if this deal goes through it will hold more valuable spectrum than the AT&T and T-Mobile deal would have yielded. The FCC must examine this transaction just as closely as it did the AT&T-T-Mobile merger. 4G is a cable replacement, not a compliment. It is not clear how selling a replacement can be consistent with selling cable products at the same time.
Charles Rule: If you look at the commercial agreements it’s hard to tel a story where they impact the competitive incentives of the companies. You’re still going to get wireless service directly from the wireless company.
Wu: It’s not always clear that the consumer is served well with the quadruple-play strategy. The consumer is served by destructive innovation, not by bundling. With the advances of Internet services, one service could replace the rest.
Kelsey: What’s interesting with these deals is the cable companies have shown they want to be involved in the wireless market, which is good but they can do that in ways that aren’t harmful to the competitive market.
Sen. Franken: The FCC found that over a 14-year period cable prices have increased by 114%. That’s more than three times the rate of inflation.
Cohen: In the same report the FCC also included that the price per channel had declined 7%. I think that market is robustly competitive.
