RTG and RCA Skeptical about Verizon’s Spectrum Crisis Cries

If the spectrum crunch/crisis/apocalypse is really so severe, why is Verizon offering to sell some of its highly-prized lower 700 MHz spectrum assets? Two possible answers come up for critics of the Verizon-SpectrumCo/Cox deal: Verizon clearly has plenty of spectrum, and Verizon is trying to sweeten the appeal of the deal to regulators and the industry.

On April 18, 2012, Verizon announced it will sell all of its regional and metro 700 MHz A and B Block licenses, which are not used for its LTE network, if the FCC approves Verizon's proposed $3.9b acquisition of SpectrumCo, Cox and Leap Wireless’ AWS spectrum. Wireless Week reported that the 700 MHz licenses cover urban and rural areas including New York, San Francisco, Atlanta, Los Angeles, Chicago, and Miami—in other words, highly valuable, top-tier markets. A Verizon representative stated, “Provided our acquisition of AWS spectrum is approved, our open sale process will ensure these A and B spectrum licenses are quickly and fairly made available for the benefit of other carriers and their customers.”

Regardless of Verizon’s real intentions, critics are already voicing skepticism and disproval of Verizon’s potential spectrum sale.  Rural Telecommunications Group (RTG) general counsel Carri Bennet quickly issued the following statement: “This offering is a lure and what Verizon Wireless really wants is the government’s blessing of its cable-wireless cartel.” Bennet added, “The mere fact that Verizon Wireless is offering spectrum for sale suggests that its capacity and congestion concerns are unfounded…Clearly, Verizon Wireless never was and currently is not starved for spectrum.” Bennet further argued,“This spectrum sale is a well-crafted and well-thought-out distraction by Verizon Wireless designed for it to acquire what it wants most: the approval of federal regulators so that it may form an Axis of Broadband Power with the cable companies and in the process limit consumer choice which will result in higher prices.”

The Rural Cellular Association (RCA) also appears to see through Verizon’s alleged façade. RCA president and ceo Steven Berry responded with the following statement: “This announcement confirms what RCA has said: Verizon has developed a spectrum warehouse exceeding its needs.” Berry also stated that selling this spectrum “is not sufficient to resolve competitive concerns in the industry." Consumer groups did not pull punches, either. The Hill’s Hillicon Valley reported that both Free Press and Public Knowledge criticized Verizon’s announcement as an attempt to “entice regulators into approving the deal.”  

Is there any upside to Verizon’s proposed spectrum sale? Like, for example, smaller carriers acquiring some of this 700 MHz spectrum, and expanding LTE networks in rural areas? NTCA ceo Shirley Bloomfield sad on her blog that she "would love to see the rural carriers at least take a close look at these potentially pending sales and not miss an opportunity as spectrum becomes a scarce resource." However, GigaOm was quick to assume that AT&T will “be first in line to pick up whatever Verizon doesn’t want,” and even though the licenses at stake here “don’t gel with Verizon’s 4G plans, they fit perfectly with AT&T’s own LTE network schemes.” It doesn’t really sit well that Verizon would be willing to basically transfer its own spectrum into the hands of its biggest competitor—especially if you believe the hype about the spectrum crisis—but maybe Verizon is just that desperate to convince the FCC to approve its AWS purchase?

RCR Wireless discussed the appeal of new spectrum coming to market: “Potential suitors for the 700 MHz licenses are expected to be extensive as just about every carrier is in need of spectrum in order to support the build out of next-generation networks. The most desperate would seem to include T-Mobile…MetroPCS…and Leap Wireless.” RCR Wireless mentions that AT&T is definitely a “potential suitor,” but an attempted AT&T grab of Verizon spectrum is sure to raise eyebrows.

With this spectrum sale on the table, Verizon is going to have a difficult time playing the “spectrum crisis” card to regulators and the industry, but maybe it was willing to make that sacrifice in the name of consolidation and market power. One thing is certain: the Verizon-SpectrumCo/Cox ordeal just got a lot more interesting.