Comcast, Other Cablecos Couldn’t Justify Wireless Business

For years, Comcast Corp. and other U.S. cable companies in a joint venture investigated ways to potentially use valuable airwaves, but it was ultimately decided that building a wireless network wasn’t feasible, a Comcast executive told lawmakers Wednesday during a hearing on Capitol Hill.

“In the end, SpectrumCo found that the substantial costs associated with construction of a wireless network, the lack of a guarantee of return on the investment, and the risks associated with becoming an additional facilities-based competitor in the highly competitive wireless marketplace did not make business sense and could not be justified,” said David Cohen, Comcast’s executive vice president, in a statement before the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights.

SpectrumCo acquired 137 licenses in 2006, but the joint venture later found that the cost to deploy a wireless network “would be at least $10-11 billion with a very uncertain business outcome,” Cohen said.

Cohen spoke during a hearing that was convened to examine SpectrumCo’s pending $3.6 billion sale of 122 spectrum licenses to Verizon Wireless. Under also review: co-marketing agreements between the cable television operators and the nation’s largest mobile-phone company. The Federal Communications Commission and U.S. Department of Justice are analyzing the transactions to determine whether they are in the public interest and implicate antitrust law.

Verizon Wireless has maintained its needs the licenses in order to continue to meet the explosive demand for wireless services, while some critics have alleged that the mobile-phone giant is merely seeking to “warehouse” spectrum so its rivals can’t have it. Verizon Wireless already controls one-third of the spectrum that is best suited for national mobile broadband services, according to Joel Kelsey, policy advisor with Free Press, the nonprofit organization whose stated mission is to reform the media.

“Verizon and AT&T’s spectrum holdings have nearly four times the value of T-Mobile’s and Sprint’s combined. These two dominant market players hold 80 percent of the most valuable breachfront spectrum for travelling long distance and penetrating buildings and rough terrain,” Kelsey said in a statement during the hearing.

“Purchasing this spectrum is not the only way Verizon can meet increasingly consumer demand for data, but it is the only way it can foreclose its competitors from providing a serious competitive threat by offering low-cost high-speed mobile services,” Kelsey said.

That’s simply not true, according to Verizon Wireless. The company said it needs the spectrum to keep up with demand on its network. Data usage on the network has been more than doubling each of the last three years, and the FCC estimates the demand for mobile data by 2015 will be up to 50 times greater than it was in 2010, Randal Milch, EVP and general counsel of Verizon Communications, said.

“We will need this spectrum in a number of significant markets by 2013, so there is no time to lose in making this spectrum available,” said Milch, apparently addressing criticism that Verizon is attempting to hoard spectrum. “It generally takes years, not months, from the time of purchase before new spectrum can actually be used to provide services.”