Verizon-Cable: Opponents Need FCC to Overreach its Authority

The March 21st Senate Judiciary Subcommittee hearing reviewing the Verizon-cable agreements provides Congress with an opportunity to learn:

  • How the metamorphosis of communications competition is increasing competition;
  • How the Government has created artificial and temporary spectrum scarcity in failing to free up more spectrum for broadband use in a timely fashion; and
  • How unfair, arbitrary and capricious the FCC review process has become in reviewing market transactions.

Given that the DOJ has such weak grounds and facts under antitrust law to challenge the Verizon-cable commercial agreements, and given that the spectrum transfer is in the public interest in multiple dimensions, opponents appear to be pushing the FCC to do whatever necessary to try and block Verizon-cable under the FCC's make-it-up-as-they-go-along public interest standard.

Unfortunately opponents have been encouraged to do so by the FCC's proven propensity to ignore the law, precedent and procedure in order to pick market winners and losers.

  • For example, last November the FCC broke with precedent and procedure and released an unapproved, fact-challenged, and obviously-unfair staff report to politically derail the AT&T-T-Mobile merger.
  • Last spring, the FCC price regulated wireless data roaming fully aware it likely did not have the statutory authority to do so under the Comcast vs. FCC D.C. Appeals Court Decision.
  • Last winter, the FCC passed (3-2) highly-controversial net neutrality price regulations in its Open Internet order that very likely defies the Comcast vs. FCC precedent that the FCC does not have the statutory authority to regulate an unregulated information service.
  • This recent and consistent ends-justify-the-means track record has emboldened competitors and interest groups to try and get the FCC to derail this transaction and/or force as much of cable's AWS spectrum to be redistributed to competitors as possible at subsidized below-market prices.

The first acts the FCC has taken in reviewing the Verizon-cable spectrum transfer, do not inspire confidence that the FCC will respect the law, precedent or procedure here.

  • First, the FCC has misapplied the 180 merger-review clock to a simple transfer of fallow spectrum that should be able to be approved in weeks not six months. If the FCC really cared about getting long-fallow, badly-needed spectrum to market fastest and to its optimal use for the most users, it would be fast-tracking this simple spectrum transfer decision, not encouraging opponents to slow roll and game the process.
  • Second, in requesting Verizon-cable make public commercially-sensitive information in the commercial agreements that are independent of the spectrum transfers, the FCC is implicitly flouting Supreme Court precedent (Regents of the University System of Georgia vs. Carroll) which ruled that nothing in the FCC's authority allowed the FCC to force a breaking of separate contracts as a condition for a license transfer.
  • Simply, the FCC ignores the law when it conflicts with its parochial desires to pick market winners and losers, which is eerily similar to the FCC's ignoring court precedent in the Data Roaming and Open Internet orders because the FCC wanted to price regulate despite having no authority to do so.

Suggested Verizon-cable hearing questions:

Can "potential" facilities-based wireless competition by cable actually be considered "potential," if it is not economic competition, given that competition must by definition be economic to be sustainable? In other words, isn't antitrust and competition driven by facts and not unproven and outdated government market assumptions?

Why shouldn't new real actual competition enabled by this agreement (in the form of wireless being added to the cable bundle, and cable being offered in a Verizon Wireless bundle) outweigh speculative harms of uneconomic potential competition?

Why are these new competitive initiatives not strong evidence that Verizon/Verizon Wireless and cable will continue to compete vigorously against each other post spectrum transfer:

  • Verizon Wireless' new "Cantenna" fixed wireless broadband service that will compete most everywhere with most everyone, including cable?
  • Verizon's joint venture with Coinstar's Redbox that will compete against cable and other broadband and video competitors?
  • Comcast's new Xfinity Streampix service that will compete against Verizon Wireless' and other competitor's streaming offerings?

Is it fair and not arbitrary and capricious for the FCC to exceed its legal authority to create a de facto redundant, double-jeopardy-ish, antitrust review at the FCC, by re-interpreting FCC competition policy and the FCC public interest standard to remake the FCC as a de facto Deputy Division of the DOJ for antitrust, when the FCC has no statutory antitrust authority and the FCC is supposed to be an independent agency?

Is the FCC operating in an arbitrary and capricious manner here in slow-rolling the transfer of much-needed fallow spectrum, and forcing inappropriate public transparency of commercially sensitive information, when the FCC exceptionally fast-tracked and non-transparently decided to give Lightsquared an extraordinary staff waiver to use much more spectrum in a different competitive manner?

Are the FCC's initial actions in dealing with Verizon-cable respecting Congress' policy and legal direction in recently-passed new spectrum law; meaning are market forces driving the allocation of spectrum and are spectrum concentration issues being addressed in an industry-wide rulemaking subject to due process?

Do opponents of Verizon-cable view opposition as payback for, or leverage against, Verizon for exercising its constitutional rights to challenge the FCC's Data Roaming and Open Internet orders as exceeding the FCC's statutory authority?

In sum, this hearing can be an important public indicator of whether or not the review of the Verizon-cable spectrum transfers and agreements will be reviewed by the Government in a fair manner driven by the facts, antitrust law, precedent, and procedure -- not by an arbitrary and capricious FCC public interest standard abused to pick market winners and losers.