Verizon's (NYSE: VZ) pending marketing deal with cable companies is under fire from U.S. Sen. Herb Kohl (D-Wis.), who said he believes the pact raises competitive concerns.
The senator, in a letter to the Justice Department and the FCC, said he is concerned that the deal has two potential implications: it will give too much spectrum of one of the largest service providers and that for the telco and cable operators, they will have little motivation to compete with one another for consumer wireline service.
"Critics of these agreements fear that these deals signify a truce between one of the largest phone companies, Verizon, and four of the largest cable companies representing 70 percent of the cable market, and that they represent an implicit promise by Verizon to stand down from its competitive battle, particularly for video customers," Kohl wrote. "There is a real concern these agreements transform Verizon and the Cable Companies from fierce competitors into business partners because they lessen the incentive for Verizon and the Cable Companies to aggressively compete against the other, particularly in the markets where Verizon has deployed FiOS."
The possible end result of these agreements is that consumers won't be able to take advantage of the discounts that arise in a competitive marketplace. He cites an FCC report that in markets where competition exists between cable operators and telcos offering TV, customers gain the benefit of lower prices.
In addition to the telco's pact with cable, Kohl has also questioned Verizon's move to no longer offer standalone DSL service.
"The bundling that Verizon now plans could potentially lessen competition, increase rates and lead to less innovation," Kohl said in his letter. "Consumers benefit when one service is competing with another, not when they must buy a package of services."
Kohl is, of course, not alone. Rep. Mike Doyle (D-Pa.) also sent Verizon a letter asking about its recent decision to stop selling standalone DSL data service.
While Verizon has seen continual subscriber growth in its FiOS data and video service suite where it is currently available, it has made it clear that it has no plans to expand into new markets and will focus on luring more customers to the service where it is available. This means that the almost the remaining 40 percent of its wireline broadband customers are on traditional copper-based DSL. Instead, Verizon has begun to turn its focus toward wireless-based LTE, including its HomeFusion fixed LTE service.
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