Verizon/Cable Settlement with DOJ: A Closer Look

[Commentary] The Department of Justice (DOJ) announced that it will allow, with conditions, Verizon, Comcast, and other cable companies to cross-market each other’s products and establish a Joint Operating Entity to develop and control new technology. The DOJ's proposed settlement includes many conditions that attempt to alleviate some of the harms of this deal. Although the conditions still won't be as effective as blocking the deals in their entirety, the DOJ and Federal Communications Commission do deserve credit for trying to fix some of the harms from the deal and for rightfully asserting their authority over the transactions to begin with.

• Joint Marketing Agreements Allowed in Part: The DOJ settlement places significant limitations on proposed joint marketing agreements. Verizon Wireless will not be allowed to market for the cable companies (or permit another company to do so) within the "FiOS Footprint." This includes any area where Verizon has built out FiOS or is legally bound to do so, where Verizon has a non-statewide franchise authorizing Verizon to build out FiOS, or where Verizon has delivered notice of an intention to build out FiOS under a statewide franchise agreement. Starting in December 2016, Verizon Wireless similarly won't be allowed to market for the cable companies within its DSL service territory outside of the FiOS footprint, nor will Verizon Wireless be able to prohibit the cable companies from selling another wireless service.
• The Joint Operating Entity Survives, But Limited: The DOJ conditions specify that the proposed joint operating entity (JOE) can continue to exist but the companies must leave the JOE by December 2016 unless they receive written advance permission from the government. A term limit, while better than an unlimited JOE, still gives the companies the ability and incentive to share information and stifle competition from third parties.
• Ongoing Monitoring: The DOJ settlement also requires the companies to keep records of all of their communications with each other and submit to the DOJ reports detailing how they are complying with the settlement conditions. The reports will specifically include information on sales made through the joint marketing agreements, Verizon Wireless's sales of Verizon wireline services, Verizon's FiOS and DSL buildout, and the JOE's activities. Regarding the JOE, Verizon Wireless must detail the JOE's technology and products, pending patent applications, and intellectual property agreements entered into by the JOE.