Consumer advocates oppose Verizon-Alltel merger
22 Oct 2008
A coalition of public interest groups has stepped up protests to the US Federal Communications Commission over the proposed merger of Verizon Wireless and rural carrier Alltel, saying the deal would be a threat to competition in the cellphone industry.
The Public Interest Spectrum Trust, comprised of six organizations, has balked at an order proposed last week by FCC Chairman Kevin J Martin to approve the merger, which would create the nation's largest cellphone carrier, with 80 million subscribers.(See: Verizon Wireless signs $28.1-billion acquisition agreement for Alltel)
When they meet with the agency's five commissioners this week, members of the trust said they would urge the FCC to put forth clear policies to prevent a combined company from blocking device makers or violating open network guidelines applied to wireline Internet service providers.
The companies announced plans to merge in June, just months after Verizon bought $9 billion in valuable radio spectrum in an FCC auction. If Verizon's merger is approved, the largest carriers could leap further ahead of smaller rivals.
"We're scratching our heads on how this agency can rush to let the nation's second-largest carrier gobble up a strong competitor like Alltel to become the nation's largest carrier," said Chris Murray, senior legal counsel for Consumers Union. "I guess it's Christmas in October for the wireless phone companies."
The five-member commission will vote on 4 November on approval of the merger, along with a separate proposal for the merger of Clearwire and Sprint Nextel. The antitrust division of the Department of Justice is also reviewing Verizon's merger with Alltel. (See: Sprint Nextel announces tower sale to TowerCo for approximately $670 million in cash)
Verizon Wireless has said that the merger could benefit consumers by bringing Verizon's heft and technological advances to rural areas. Verizon has agreed to maintain roaming agreements with smaller rural carriers that use Alltel's networks for the remainder of customers' contracts or for two years, whichever is longer. The public interest groups said the FCC should force the companies to extend roaming agreements even longer, which would help smaller rivals remain competitive with national carriers.
Verizon also reiterated its commitment towards the acquisition, in spite of the prevailing market conditions that have already stymied several similar deals. Verizon Wireless CEO Ivan Seidenberg was quoted as saying the challenge would be to arrange financing that isn't too costly.
In an interview with the Wall Street Journal, Seidenberg said he expects interest rates to come down, but higher-than-anticipated borrowing costs wouldn't derail the Alltel deal. "This is an asset that's going to be valuable to us for 20 or 30 years," Seidenberg told the paper.
