Friday, August 24, 2012

FCC approves Verizon + Comcast -- The gentleman's agreement between cable and wireless companies

Verizon Wireless on Thursday won unanimous Federal Communications Commission approval to move forward with its $3.9 billion purchase of 4G LTE spectrum from the country’s largest cable providers. The partnership also enables the cable companies to market Verizon services and in some cases sell their own services inside Verizon stores.

Here is how the industry sees the deal:

Dan Mead, president and chief executive of Verizon Wireless: “This purchase represents a milestone in the industry, and we appreciate the F.C.C.’s diligent work to review and approve the transaction.”

David L. Cohen, executive vice president of Comcast: “a smart and efficient way for Comcast to deliver a broader array of wireless services, and is an efficient deployment of this spectrum.”

And here is the opinion of Gigi B. Sohn, president and co-founder of Public Knowledge, a nonprofit organization based in Washington that promotes an open Internet:

“By allowing Verizon and the cable companies to sell each other’s services, the D.O.J. and the F.C.C. are acknowledging what has been clear for some time — that broadband competition policy in the United States has failed."

I have to agree with Gigi Sohn. The US congress tried to foster competition with the 1996 Telecommunication Act. The idea was that the incumbent telephone companies would allow competitors to use their facilites at wholesale rates to compete as retail level service providers. The telephone companies drug their feet and fought at the state and local level to keep that from happening, and they succeeded.

This is what William Kennard, who, as chairman of the F. C. C. from 1997-2001, was charged with implementing the Telecommunications Act, had to say near the end of his term:

“All too often companies work to change the regulations, instead of working to change the market.”

“[regulation is] too often used as a shield, to protect the status quo from new competition - often in the form of smaller, hungrier competitors -- and too infrequently as a sword -- to cut a pathway for new competitors to compete by creating new networks and services.”

“companies invest in lawyers, lobbyists and politicians, instead of plant, people and customer service.”

Some have argued that wireless connectivity would eventually bring competition to the Internet service industry, but it seems we have instead a gentleman's agreement in which the cable companies will provide land-line connectivity and the cell phone companies will provide wireless connectivity. Furthermore, sometimes they can sell each other's service.

My experience illustrates the gentleman's agreement. I was a Verizon DSL customer for years. I was about to leave them when I started seeing ads and billboards saying I would soon be able to get their fiber service, FIOS. After a couple years wait, they announced they would not be bringing FIOS to my neighborhood after all. Then they cut my DSL speed from 5 to 1.5 mbps! I switched to Comcast cable -- my one alternative.

My current slim hope for getting connectivity that close to what is available in Riga Latvia is Google's pilot in Kansas City.

Update 10/5/2014

The FCC okayed Comcast's deal with Verizon, but maybe they are getting tougher now. They've put the Time Warner Cable merger on hold:
In a public letter to Comcast and Time Warner Cable executives, the FCC announced that it is hitting the pause button on its review of the proposed $45 billion merger. Citing inadequate responses by both cable companies to earlier FCC requests for additional information, the agency is stopping the clock on its 180 day review period until late October.