The dirty secret inside Verizon’s cable spectrum buy

[Commentary] The debate over Verizon’s purchase of unused spectrum from cable companies is a fight that should involve everyone from consumers to the Internet companies whose businesses rest on access to the wireline and wireless pipes affected by this deal.

This deal reduces the amount of both wireless and wireline competition: the loss of the cable companies’ spectrum marks the loss of the last real likelihood for another entrant into the wireless market dominated by AT&T and Verizon. It will also prevent smaller, spectrum-hungry operators from buying the airwaves (which is T-Mobile’s biggest argument against the deal). Additionally, the exclusivity agreements on the wireline side could preclude the cable companies from signing up to use wireless from a smaller, hungrier player offering a new channel and maybe some cash that T-Mobile, Clearwire or another provider could have sorely used. On the wireline side, it signals that the speeds of FiOS aren’t going to increase further, and takes out Verizon as a potential competitor with an over-the-top video service that changes the way ISPs have to sell their triple play. Now everything fast, and even pay-TV related, will continue to rest in the hands of cable companies. And there’s another big issue we’re not talking about yet. But we should.

The marketing agreements create a shadow joint-operating entity (JOE) between Verizon and the cable companies. This JOE is worrisome to those of us who realize that getting Verizon in a room once a month with the executives at the nation’s largest cable companies could lead to agreements about technology, deployment strategies and R&D that will be controlled by the large ISPs. The fear is that this organization will be able to slowly stifle new innovations for Internet services or even devices attached to wireline networks by creating technologies and standards that are only available to the JOE participants. Perhaps others might be able to license those technologies, but there’s no guarantee of that, or that the JOE would do so for a fair and reasonable amount.