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Approved Verizon Spectrum Acquisition A Mixed Bag For Consumers

The recently approved acquisition by Verizon of spectrum from other cable companies has both positive and negative consequences for the public.  While the purchase is a good indication for a positive growth in wireless industry in the country, it can also affect negatively the position of home broadband in the U.S.

The Good

The good news is that by releasing more spectrum to Verizon, the country can effectively maximize the said spectrum which are being used inefficiently by cable companies. In other words, it’s better to have someone using them instead of letting them unused for years. It is in this sense that Verizon’s acquisition creates a positive development in the usage of precious wireless resource sitting idly.

President Obama’s administration demonstrated that companies cannot just get spectrum by buying companies and rivals. The failed merger of AT&T was a good example. Verizon, in its quest to expand its capability, does not want to show the government that it’s following the lead of AT&T. It offered to let go of some of its previously owned spectrum to its rivals, Cricket and T-Mobile, as a show of good faith. It is known that T-Mobile employs an aggressive tactic of offering lower prices to keep customers, and has even brought back the unlimited data plan back. The move is indeed good for competition.

To further appease the government, Verizon also offered to build a network covering a third of the country in three years time. It has also agreed to offer reasonable data roaming price to its competitors for five years. This is an important offer since the spectrum involved Advanced Wireless Services, which is being shared by T-Mobile, AT&T, Verizon, Cricket, and MetroPCS. Such additional networking infrastructure can benefit Cricket, T-Mobile, and MetroPCS as this ensures the availability of LTE AWS phones through roaming.

In a bigger picture, the acquisition is not only beneficial for Verizon but also for smaller competitors excluding Sprint, which does not use AWS.

The Bad

The government may have upheld the competition laws it’s trying to protect, but consumers are still at the losing end here. Internet broadband in the country remains comparatively expensive if we look at the price of other home broadband in other developed countries. Wireless broadband cannot also compete very well due to data caps and limited capacity. Even T-Mobile’s popular unlimited data offer does not allow tethering to PC’s.

Home broadband in most U.S. cities lack competition, and DSL/cable businesses are still reigns supreme in these areas. The main reason the duopoly enjoys supremacy in their business is because of a prohibitive cost in building a wired network. That said, cable and DSL companies can raise prices at will without worrying for competition.

Cable companies will not relinquish their advantage with anyone unless forced to do so. DSL is becoming obsolete as time goes by as it’s being slowly overtaken by cable, fiber, and even wireless speeds.

So while Verizon’s move to expand its wireless capability is seen as good for the wireless industry, the acquisition is still open ended, with a possible negative effect for consumers. By releasing idle spectrum and sharing it with other carriers, data and wireless services means better speeds and coverage, but at the same time, it also degrades the home broadband services for most homes in the U.S.

source: pcmag