Consumer Groups Warn Of Higher Internet Prices As Verizon, Cable Deal Clears Hurdle

Teni Sow | August 18, 2012

Consumer groups on Friday warned that a proposed deal made by Verizon and four cable companies would force consumers to pay higher prices for Internet service, a day after the agreement cleared a major regulatory hurdle.

In December, Comcast, Cox, Time Warner and Bright House Networks agreed to sell Verizon a $3.6 billion portion of the wireless spectrum. The cable companies and Verizon, the nation’s top wireless carrier, also agreed to market and sell one others’ products and services.

The Justice Department approved the deal Thursday after the companies decided on concessions aimed at protecting competition. Verizon pledged to not sell cable companies’ service to residents who already have access to Verizon’s own high-speed broadband service, known as FiOS, and agreed to sell wireless spectrum to another wireless provider, T-Mobile.

But consumer advocates said the concessions did not ease their concerns that the deal would hurt competition by giving consumers fewer choices for Internet service. By allowing Verizon and cable companies to sell one anothers’ service instead of competing, they could charge consumers higher prices, said Derek Turner, research director at Free Press.

“We have a serious competition problem in our broadband and wireless markets, and this deal only serves to exacerbate this problem,” Turner said.

Michael Calabrese, a director of the Wireless Future Project at the New America Foundation, said the deal would also reduce those companies’ incentives to upgrade their networks to faster speeds.

“Five years from now, people who don’t live in the premium markets will have the same broadband they have today and no better because there’s no competitive pressures to upgrade quality,” he said.

Verizon spokesman Ed McFadden disputed those claims, saying the deal would give consumers more choices for Internet service, not less, because cable companies would be selling Verizon’s wireless service to compete against AT&T. He said Verizon would be “competing extremely hard” against cable companies in areas where Verizon offers FiOS.

But FiOS, which has been considered the only service fast enough to compete with cable broadband, is only available in a small percentage of cable markets. And Verizon has said it does not plan to expand the service beyond 18 million homes, leaving cities like Baltimore and Buffalo without another option for high-speed wired broadband, Turner said.

The deal still must be approved by the Federal Communications Commission.

In a statement on Thursday, FCC Chairman Julius Genachowski said the deal between Verizon and the cable companies “would make state-of-the-art broadband available to more people in more places.”

 

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