High-Speed Collusion

By Joel Kelsey

The iPad3. The Kindle Fire. The Galaxy Nexus. It seems like every few months an amazing new wireless device is unveiled. Consumers benefit from all this wireless innovation.

However, the foundation for this success — a competitive market for high-speed Internet access — is in serious jeopardy. That’s because of a steady and unmistakable march away from competition and toward higher and higher levels of concentration in the market.

In the past seven years we’ve witnessed rampant consolidation. Sprint bought Nextel. AT&T merged first with Cingular and then with BellSouth. Verizon gobbled up Alltel. Comcast absorbed NBCUniversal. This trend finally paused when the Department of Justice and the Federal Communications Commission (FCC) blocked AT&T’s takeover of T-Mobile.

The consolidation we’re experiencing isn’t a natural result of free-market forces. Rather, it’s the outcome of the FCC’s policy decisions, which discourage competition and place a disproportionate amount of the nation’s most valuable spectrum into the hands of just two companies: AT&T and Verizon.

Now one of these behemoths has asked the government to bless yet another unholy union. Verizon announced late last year that it intends to team up with a coalition of cable companies. In this deal, Verizon has agreed to stop competing with cable in exchange for the opportunity to buy a valuable chunk of “wireless spectrum” — the industry’s term for the public airwaves over which wireless traffic moves.

This latest deal to divvy up the market for high-speed Internet access would hurt consumers. We’d wind up with fewer options for broadband in our communities, higher prices, and increasingly unfair terms and conditions.

Verizon would control even more of the nation’s valuable mobile broadband spectrum, and it would cement AT&T’s and Verizon’s dominance in the wireless market.

Put simply, since Verizon controls more spectrum than any of its competitors, it doesn’t need this deal to meet growing consumer data demand. But it is the best way for Verizon to ensure that another wireless company cannot compete by using that spectrum to offer higher-quality services at lower prices.

The spectrum sale alone should be enough to tilt this transaction against the public interest. But the most stunning part of these deals is a series of cartel-like side agreements between Verizon and the cabal of cable companies — former competitors — to resell each other’s products. If all goes according to plan, you’ll be able to buy Verizon Wireless service from your local cable company, or get cable modem and cable TV service from the Verizon Wireless retailer around the corner.

That proposition would put an end to any hope for nationwide competition between truly high-speed Internet service providers. Competition benefits consumers when companies try to win subscribers from their competitors through better service and lower prices — not when they offer to sign up their own customers for their rivals’ services.

These agreements simply represent a pact between these companies to stay out of each other’s way, forever. They put former rivals on the path toward collusion rather than competition.

Consumers are already feeling the impact of the lack of competition as they get locked in to more expensive long-term contracts and bundles while alternatives are locked out of the marketplace.

There’s no reason this pattern of consolidation and consumer harm has to continue. The FCC and the Justice Department should protect consumers by stopping this deal. If the decision to block the AT&T/T-Mobile merger was the down payment on future competition, preventing Verizon’s deal with the cable cartel should be the next installment.

Joel Kelsey is the policy adviser for Free Press, a national, nonpartisan nonprofit working to reform the media. www.FreePress.net. Distributed via OtherWords.org.

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April 19, 2012  Copyright © 2012 Eastern Group Publications, Inc.

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