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CU: Verizon-Cable deal puts competition at risk

March 20, 2012

Consumers Union: Verizon-Cable Deal Puts Consumer Pocketbooks, Competition at Risk
WASHINGTON, DC – The proposed spectrum deal between Verizon Wireless and several cable companies would jeopardize competition and put consumers at risk of paying higher prices, says Consumers Union. As the Senate Judiciary Subcommittee on Antitrust prepares for a hearing Wednesday on the pending spectrum sale and joint-marketing agreements, Consumers Union, the policy and advocacy division of Consumer Reports, sent a letter to committee members urging them to scrutinize this proposed transaction and the effect it will ultimately have on consumer pocketbooks.

Parul P. Desai, policy counsel for Consumers Union, said, “Once again, consumers are faced with the possibility of less market competition, fewer choices, and companies with little incentive to lower prices across multiple markets. Verizon Wireless already holds the greatest amount of spectrum compared to its wireless competitors. This deal would only add to its control. These joint-marketing arrangements are effectively agreements to not compete. They would essentially divide up the current broadband, video, and wireless markets.”

The proposal would allow Verizon Wireless to purchase spectrum licenses from a group of several cable companies, including Comcast, Time Warner, Bright House, and Cox. In addition to the spectrum sale, the companies have established joint marketing agreements tied to the deal that would allow the cable companies and Verizon Wireless to sell one another’s products.

In the letter, Consumers Union pointed to concerns about Verizon’s spectrum domination, with the proposed sale helping to solidify a wireless duopoly controlled by Verizon Wireless and AT&T. Moreover, the sale would threaten current wireless competitors, who will become even more dependent on Verizon Wireless for roaming agreements. This dependency would give Verizon Wireless the incentive to raise the costs of roaming agreements and essentially squeeze competitors out of the market.

Additionally, the consumer group points out, Verizon will have no incentives to build out its FiOS network, a direct competitor to cable companies. As DSL becomes less attractive for consumers because of slower speeds, consumers will be faced with only one option for high-speed broadband – the local cable provider.

Desai said, “This deal could lead down a dangerous path for consumers. This may be a sweet deal for Verizon, but it is definitely not in the best interest of consumers, and we urge lawmakers to address these issues in Wednesday’s hearing.”

The hearing is scheduled for Wednesday, March 21 at 2 pm. For more information, visit www.judiciary.senate.gov.

For a copy of the full letter, please contact David Butler or Kara Kelber at Consumers Union (202) 462-6262.