Monday, December 5, 2011

Is Competition in U.S. Telecom Now Over?

Reasonable people will differ about the potential implications of the Verizon spectrum deal with Comcast, Time Warner Cable, Bright House, where AWS spectrum owned by the cable companies is sold to Verizon Wireless, while Verizon and the cable companies agree to work together in some ways.

Some will argue the deal means the end of competition, which has been bolstered in the fixed line business by robust competition between telcos and cable companies.

Others might argue that the agreement by the cable companies to resell Verizon Wireless capacity, rather than Sprint or Clearwire service, likewise means less potential competition in the wireless business.

Others will simply point to nebulous language about “working together” that might lead to less competition. Those views could prove at least partially correct. They might also have far fewer effects on competition than many fear.

For starters, cable companies essentially have relied on three different wireless partners for wireless service, first Sprint, then Clearwire and Sprint, and now Verizon Wireless. One might argue that the resale agreement with Verizon Wireless removes key potential cable contestants from future roles as new facilities-based wireless competitors.

But cable companies in the United States, for whatever reason, have not succeeded at any of those attempts since 1994. They are going to resell under their own brand names, using somebody else’s infrastructure, no matter whose wholesale assets they use.

Nor does the deal alter the nature of fixed network competition between Verizon and the cable companies. Anybody familiar with the typical tensions within single entities over wholesale and retail sales, whether fixed or wireless, knows the actual financial interests of those staffs are not aligned.

Lots of firms buy wholesale service from Verizon Wireless, and none of that prevents the firms from competing as hard as they can in the retail markets.

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