Verizon Communications Inc. (NYSE:VZ) won an approval from U.S. government regulators that allow them to buy a $3.9 billion spectrum that gives them access to four major cable providers including Comcast Corporation (NASDAQ:CMCSA), Time Warner Inc. (NYSE:TWX), Bright House Networks, and Cox Communications. The approval doesn’t come without a few conditions, though.
The Federal Trade Commission is forcing Verizon to divest some of their wireless spectrum. The Department of Justice recently worked out a deal with Verizon Communications Inc. (NYSE:VZ) and other cable companies in which they agreed to limit their scope of co-marketing and re-sale agreements.
Joseph Wayland, assistant attorney general for DOJ’s Antitrust Division, made the following statement, “By limiting the scope and duration of the commercial agreements among Verizon and the cable companies while at the same time allowing Verizon and T-Mobile to proceed with their spectrum acquisitions, the department has provided the right remedy for competition and consumers. The Antitrust Division’s enforcement action ensures that robust competition between Verizon and the cable companies continues now and in the future, as technological change alters the telecommunications landscape.”
Verizon wanted to buy the spectrum in order to expand their 4G network. This move also allows cable companies to purchase access to Verizon’s 4G service, which they can bundle with their packaging services. Essentially, this deal just allows both companies to cross-promote each other. This could have been a bad move for cable companies since Verizon has their own paid television service called FiOS, and broadband internet service. The Department of Justice filed an antitrust lawsuit against all companies and everyone decided to agree on a settlement as long as they followed certain conditions.
The agreement won’t allow Verizon Communications Inc. (NYSE:VZ) to sell cable service in areas where FiOS is available. The agreement is reported to last through December 2016. Another additional requirement included prohibiting Verizon from bundling DSL services with satellite television services.