Cable Troika Aligns With Verizon Wireless For Spectrum, Sales

In a stunning announcement, Clearwire investors Comcast, Time Warner Cable and Bright House Networks said they will sell 122 Advanced Wireless Service (AWS) spectrum licenses covering 529 million POPs for $3.6 billion to Verizon Wireless.

The news comes just one day after Clearwire seemed to have resuscitated itself; it reached a new accord with Sprint, and it made interest payments on its debt. (For more, click here). This sale also follows the recent move by AT&T and T-Mobile to withdraw their merger application with the Federal Communications Commission (FCC); AT&T had every intention of using T-Mobile’s AWS spectrum for its own LTE plans. (For more, see AT&T/T-Mobile: The Other Shoe Drops).

Commented Dan Mead, president and CEO at Verizon Wireless, “Spectrum is the raw material on which wireless networks are built, and buying the AWS spectrum now solidifies our network leadership into the future, and will enable us to bring even better 4G LTE products and services to our customers.”?

The trio of cablecos formed a joint venture called SpectrumCo LLC to participate in the 2006 AWS auction. Comcast owns 63.6 percent of the venture, and it will receive approximately $2.3 billion once the deal has been completed. Time Warner Cable owns 31.2 percent of SpectrumCo, and it will receive approximately $1.1 billion. Bright House Networks owns the remaining 5.3 percent, and it will receive approximately $189 million.

The agreement comes at a time when consumer demand for wireless services and bandwidth is increasing rapidly, and the government is looking for ways to acquire more spectrum, including acquiring spectrum from broadcasters. In Washington this week, it was all partisan politics, with House Republicans introducing the "Jumpstarting Opportunity with Broadband Spectrum (JOBS) Act," and the opposition unveiling its "The Democrats Wireless Innovation and Public Safety Act." (For more, see Walden’s Broadband Spectrum Act: It’s All About JOBS).

SpectrumCo’s sale and transfer of its advanced wireless spectrum to Verizon Wireless is subject to FCC approval and review under the Hart-Scott Rodino Act and other customary conditions.

Some are already pointing out that Verizon’s purchase of spectrum may stifle competition.

Mark Cooper, director of research/Consumer Federation of America, said, "Today, Verizon announced a deal to pay $3.6 billion to buy spectrum from the largest cable companies, who had purchased it intending to enter the wireless business.  Instead, they will launch a venture to jointly develop and market products with the cable companies, effectively ending any prospect for serious head-to-head competition in the cable-telco space. The deal signals bad news for consumers, who can expect higher prices for video, fewer choices and higher prices for wireless."

In terms of marketing products, the three cable operators also inked several sales-and-services agreements with Verizon Wireless. As a result, the cable companies, on the one hand, and Verizon Wireless, on the other, will become agents to sell one another’s products and, over time, the cable companies will have the option of selling Verizon Wireless’ service on a wholesale basis. Additionally, all four carriers formed an “innovation technology” joint venture for the development of technology to better integrate wireline and wireless products and services.

Neil Smit, president at Comcast Cable, noted, “These agreements, together with our Wi-Fi plans, enable us to execute a comprehensive, long-term wireless strategy and expand our focus on providing mobility to our Xfinity services. We’re excited about this partnership with Verizon Wireless and the future innovations we will bring to consumers.”

Added Time Warner Cable President and COO Rob Marcus, “We’re excited to be able to offer the nation’s best wireless services to our customers and to have Verizon Wireless as a sales channel for our superb wireline services. We’re also pleased to have obtained an attractive price for the spectrum we’re selling.”

-Linda Hardesty