Comcast and Verizon Merge Without Merging
The Comcast/Verizon/Time Warner Cable/BrightHouse agreement is long and confusing and will need regulatory sign-off before it goes into effect.
But here’s the upshot: The cable guys, who had been noodling with the idea of getting into the wireless business, are going to let Verizon handle it instead. And Verizon, which has already committed a ton of money to get into the cable TV and broadband business, won’t spend any more.
Call it a virtual merger, or detente, or whatever you like — it’s both sides agreeing to work together by staying out of each other’s way. [UPDATE: Comcast doesn’t love with my characterization of the deal. See below]
None of the players involved wants to come out and say that, perhaps with antitrust regulators in mind. And the agreements won’t explicitly prevent any of the companies from competing with each other.
Verizon’s FiOS, for instance, is already available to about 15 percent of Comcast’s TV/broadband subscribers, and Verizon won’t stop selling it there. But Verizon stopped expanding its FiOS footprint last year, after spending $23 billion. And while Verizon hasn’t said it won’t start up again, this tie-up makes it very unlikely.
Comcast, meanwhile, is sort of in the wireless business now. But only a handful of its subscribers — perhaps 30,000 to 40,000 — use its Xfinity Internet2go service. So it’s easy to stop marketing that immediately, and transition that group to Verizon’s services in the near-term.
Meanwhile the companies all agree to co-market each other’s services. And the cable guys have essentially given themselves an option to get back into the wireless business four years from now, where they could rent out Verizon’s spectrum and become “mobile virtual network operators.” But that seems more like an escape hatch/leverage, not a road map.
The deal seems like it has obvious upsides for both companies, but we’re very likely to hear consumer watchdogs tell us that the tie-up stifles competition for crucial communication services. Which is why Comcast is making sure to argue that the deal will “provide more choice, great new innovative products, and better experiences to consumers and small and medium-sized businesses.” It will be interesting to see what Washington thinks of this, especially in light of its AT&T/T-Mobile stance.
UPDATE: Comcast wants to get some of its points across. Fair enough. The following comes from PR rep Jen Khoury:
·SpectrumCo is selling, and Verizon Wireless is buying, 122 spectrum licenses. This helps Verizon Wireless by putting them ahead of the curve on meeting their future spectrum needs as they roll out 4G LTE
·The sales agreements are customary in the wireless industry – similar to DirecTV and AT&T’s agreement to market and sell each other’s services, and they don’t require regulatory approval.
·We’ll be like each other’s Best Buy – each selling the other’s products and services, essentially for a commission.
·Neither Comcast nor Verizon Wireless is acquiring an ownership interest in the other company, and the operations of the two companies will remain independent, and no customers are being transferred.