In a $3.6 billion deal, three top cable companies have agreed to sell spectrum to Verizon Wireless and to sell each other's products. The agreement will have a big impact on the wireless industry as it shifts into the next generation of high-speed data access,
The deal for 122 advanced wireless system licenses is widely viewed as capitulation by companies who have tried unsuccessfully to gain a foothold in a market dominated by Verizon, AT&T, T-Mobile and Sprint.
"It's really hard for a cable company to expect to compete in a highly competitive wireless market," Time Warner Cable spokesman Alex Dudley told the Associated Press. "We got a good price for the spectrum. An arrangement like this makes a lot of sense."
Reaching 259 Million
The other cable companies in the deal are Comcast Corp. and Bright House Networks. The trio formed SpectrumCo, LLC as a joint venture to try to break into the exploding wireless industry. Smartphone use has grown from 46 percent in the third quarter of 2010 to 59 percent during the same quarter this year, according to figures from NPD Group.
The deal, which Verizon noted is subject to approval by the Federal Communications Commission and review under the Hart-Scott-Rodino Act, includes spectrum that reaches 259 million Americans and allows the cable companies to sell Verizon services and products. It also puts Verizon at an even bigger advantage over top rival AT&T as it struggles to salvage its $39 billion merger deal with T-Mobile. The Justice Department has filed suit to block the deal, saying it will hurt fair competition.
Acquisition of T-Mobile's wireless spectrum was a prime motivation for the proposed merger, as the No. 2 carrier launches a long-term evolution (LTE) high-speed data network for 4G phones, to compete with Verizon's year-old LTE network.
In addition to beefing up Verizon's capacity, the deal also takes spectrum off the shelf that could be used by competitors.
Not For Amateurs
"Wireless is confusing," said technology consultant and analyst Jeff Kagan. "It is growing so rapidly and it looks like it is such an easy business, but only if you understand the rules of the game.
"The cable television industry has tried to get into wireless in recent years and they have failed. This is the end of the big speculations that the cable television industry would become a powerhouse in wireless."
The approximate breakdown gives Comcast, which owns 63.6 percent of SpectrumCo, $2.3 billion from the deal, while Time Warner, which owns 31.2 percent, would get $1.1 billion, and Bright House, which owns 5.3 percent will get $189 million.
"Spectrum is the raw material on which wireless networks are built, and buying the AWS spectrum now solidifies our network leadership into the future, and will enable us to bring even better 4G LTE products and services to our customers," said Dan Mead, president and CEO of Verizon Wireless.