Verizon Asks FCC to Hurry Up
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Verizon (NYSE: VZ) has been long awaiting for the decision of FCC on its $3.6 billion deal with the cable companies joint venture SpectrumCo and Cox Communication for acquiring AWS spectrum. The company has been taking steps to re-farm its PCS spectrum.
PCS re-farming not enough
The country’s largest wireless provider is re-farming its 1900 MHz PCS spectrum, presently set aside for its 3G CDMA network, to serve the rising traffic on its LTE network. However, this is in no way a substitute for the 20 MHz AWS spectrum that the company desires to purchase under the deal.
The carrier said that it requires at least a 5X5 block of the PCS spectrum and reiterates that this shall not be enough to meet the robust data demand, thereby emphasizing the need of the AWS spectrum as a supplement. The mobile data traffic is growing at a shocking pace, and the current spectrum is unable to manage the dramatic growth which is coming from the iPhone and the bandwidth hogging smartphone usage.
Capacity constraints concerns the carrier
The wireless provider is worried that it could witness a capacity constraint as early as next year, and the shortage could intensify by 2015 in case it is unable to get its hand on additional spectrum. The company has told the FCC about its current need saying it needs considerably more spectrum than its PCS S-band for the LTE deployment and customer demand. The company projects the LTE traffic to be five times its highest EVDO traffic by end 2015.
Urging regulators for quick redressal
Verizon proposed to buy AWS spectrum from SpectrumCo in December last year. The FCC was to take 180 days to review the deal and give a final decision. But recently, the regulator postponed the announcement of the decision to end of July, citing the complications of the co-marketing agreement in the deal as the reason for delay.
The company has been criticizing the agency for taking such a long time to pass the decision. The FCC should relax a bit and allow ‘the commercial markets work a little freer’. A top Verizon executive urged the FCC to move out of the way and ease the process of buying and selling airwaves in the secondary market.
What’s taking time?
The FCC and the Department of Justice are reviewing the transaction which has two components. The first is the transfer of spectrum license and the second is to do with the co-marketing deal between the two parties. This is drawing concern and criticism from fellow carriers, T-Mobile and MetroPCS (NYSE: TMUS), who believe that the deal will crush competition and so want the commission to block the transaction. While other operators want the FCC to impose conditions of spectrum divesture before Verizon, in case the agency approves the deal.
Verizon Chief Technology Officer, Tony Melon, has asked the FCC not to worry about the marketing deal. It is a separate pact between the carrier and the cable companies and has nothing to do with the AWS spectrum transfer. He says that the agency should only concentrate on the spectrum part of the deal. The FCC is not quiet convinced. Reason being, David Cohen, Comcast’s (NASDAQ: CMCSA) Head of Regulatory Affairs, confirmed before the Congress that both the airwaves transfer and the joint marketing agreement are integral part of the same deal.
Amidst all this, FCC, which was to pass its final decision in 180 days, has asked for some more time to consider the deal’s fate. Verizon needs to be a little patient and keep its cool knowing FCC’s record of finalizing decisions on spectrum transfer. One of the instances of spectrum transfer is that of AT&T (NYSE: T) and Qualcomm (NASDAQ: QCOM), where the former was to purchase 12 MHz of spectrum from the latter. FCC took nearly a year to complete its review. Verizon’s cable company deal is much larger, involving the spectrum license transfer of 20 MHz. The FCC will take time to review the deal keeping in mind its possible consequence in the industry.
The bottom-line
Both the FCC and the Department of Justice are to decide the deal’s destiny. Majority of the experts are of the opinion that Verizon will get a green signal from the regulators. But the consent won’t come that easy. The carrier might have to face some conditions on the transaction such as the spectrum divesture in strong markets. Also, chances are high that the agency might add some flavor in the marketing deal too. After all, blessings aren’t earned that easily.
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