You have to hand it to Verizon, but it just “ran off with the last pretty girl in the bar,” according to a note from Craig Moffett, riffing on Verizon’s “transformative” deal to acquire $3.6 billion worth of spectrum from SpectrumCo LLC, which is a consortium of cable companies led by Comcast and includes Clearwire.
Then again, Verizon has been doing this for years.
I recall a conversation a number of years ago, with one of its top federal regulatory people, following the company’s announcement about its major investment in Fiber-to-the-Home (FTTH) technology. Verizon’s announcement came after a series of regulatory moves by the U.S. Federal Communications Commission (FCC), intended to increase investment in broadband by the telcos, so they could better compete with cable operators. Cable companies had no similar regulatory impediments and were clobbering the telcos in broadband deployment.
She and I were discussing comments about the company’s move into fiber, which naysayers were saying would not work, did not make sense, etc. She noted that they thought then-Verizon CEO Ivan Seidenberg was crazy to invest in FTTH on a massive scale, but the same naysayers thought he was crazy to invest so heavily in wireless. The most telling thing about our conversation was her belief in the wisdom of both of these then-risky investments.
Verizon’s announcement does a number of things, which other commenters have duly observed. One result is that spectrum just became more scarce, and more expensive, for other carriers, now at a premium over a large swath that Verizon picked up in 2006, following the FCC’s auction of the spectrum equivalent to “prime beachfront property” for wireless broadband deployment.
Another impact of Verizon’s announcement is that the cable companies, which have long been thought to be natural competitors of the telcos, now have an opportunity to resell wireless capacity from Verizon, so they become, in effect, allies. So it goes in telecom.
A primary theme at “TIA 2011: Inside the Network,” held this past May 2011 in Dallas, was the notion that events in the Information and Computer Technologies industry are moving so fast that companies and industry segments – telcos, cable companies, handset vendors, and search engine companies that morphed into leading handset vendors, seemingly overnight – will be competitors on one issue, and allies on the other.
This point was underscored by AT&T CEO Randall Stephenson, who noted how companies, which had supported open access or net neutrality at the FCC for years, were also on record at the agency in support of the company’s proposed merger with T-Mobile. Now that the merger has been nixed, AT&T’s agreement to spend $8 billion on network investments, had the deal been approved, will be shelved, as well.
It doesn’t take a genius to figure out that the “virtuous cycle of innovation” — which encourages investment in the network, applications, services, and devices — is dependent upon every element within the cycle going full bore. Today’s mobile devices are more powerful than computers from just several years ago, but without a powerful network – or powerfully enticing applications for consumers on the go such as video streaming, for one – the result is stagnation, which doesn’t help anyone, anywhere.
The Verizon announcement illustrates this “try, try again” philosophy in telecom dealmaking at its best. SpectrumCo LLC was created to take advantage of Clearwire’s Wi-Max service, sort of a Wi-Fi on steroids, which, unfortunately, has not worked as planned. The cable companies behind that original venture now have another avenue for reaching consumers with wireless services – reselling a telco’s service – which reflects the positive market impact of wireless resellers.
So if the first venture doesn’t succeed, figure something else out that will, and get a move on.
