Monday news

It looks as if the FCC is planning for the Verizon/Comcast deal of late last year to be approved. We don’t have many details, but Verizon is said to be swapping spectrum with T-Mobile (with more spectrum going to T-Mobile than Verizon) in exchange for both implicit and explicit promises. The explicit promise is a relatively small payment (perhaps a few hundred million dollars) from T-Mobile to Verizon; the implicit promise is that scrappy T-Mobile will drop its opposition to the larger transaction.

It also appears that the particular spectrum to be swapped will allow T-Mobile to firm up its position in geographic regions where it was weak:: Philadelphia; Washington, D.C.; Detroit; Minneapolis; Seattle;: Cleveland; Columbus, OH; Milwaukee; Charlotte, NC; Raleigh-Durham, NC; Greensboro, NC; Memphis, TN; and Rochester, NY. That’s great for T-Mobile.

This Verizon/T-Mobile transaction is conditioned on the approval of the Verizon-cableco deal – the $3.6 billion payment from Verizon to SpectrumCo (mostly Comcast and Time Warner) for spectrum, plus $300 million to Cox, and the agreement to jointly market each other’s services. Getting T-Mobile out of the way is probably essential to regulatory approval of the deal; the company was mounting the fiercest opposition of anyone (it was great to see them get their voice back) and making the most cogent points out there about the risks to competition posed by the transaction.

The FCC is likely continuing its review of the spectrum aspects of the deal, but it appears that this T-Mobile transaction will go a long way to satisfy its spectrum concerns. There may be other conditions that come up, but the betting is that the deal will go through.

It’s certain that FCC and DOJ are closely cooperating. But what DOJ will do is not known. DOJ wouldn’t be as focused on spectrum anyway. After all, the antitrust division is looking into the entire cable distribution marketplace and its effect on a wide range of actors. Given Verizon’s status as the only competitor pressuring DOCSIS 3.0 installations by the cablecos, its willingness to collaborate with cable in the areas where it is supposedly energetically working on FiOS must be causing some heartache at DOJ.

Here’s the thing: If FiOS was actually pressuring cable, actually competing, that would force the cable distributors to do something about their upstream capacity. Right now, in order to approach the FiOS upstream offering, cable would have to change out almost every piece of electronic equipment in its network, including even the passive components. Everything except the coaxial or fiber cables themselves. Cable’s upstream path is “rail-thin,” according to Jeff Baumgartner. Cable doesn’t want to have to spend the money to compete with fiber. From their perspective, it’s better to cooperate. Better for dividends and buy-backs.

So we end up with a second-best wired connection, a set of powerful entities who have every incentive to cooperate (“you take wireless, we’ll take wired”) rather than compete, and no path towards the national upgrade that we need. Upstream? No, we’re just passive.

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