When Verizon Wireless announced a $3.6 billion purchase of wireless spectrum from a group of cable companies, numerous antitrust concerns were raised. T-Mobile tried to block the deal out of fear that Verizon would unfairly dominate the race to LTE. But it turned out the biggest concerns had to do with whether Verizon and the cable companies were wheeling and dealing in a way that eliminates competition for home Internet users between Verizon FiOS and cable.

Verizon Wireless’s purchase of airwaves comes from SpectrumCo, a consortium dominated by Comcast, Time Warner Cable, and Bright House Networks. But there was also a side deal between Verizon, those three cable companies, and Cox Communications, consisting of “a series of commercial agreements that require the companies to sell each other’s products and create an exclusive technology research joint venture,” in the Justice Department’s words. The fear was that the deal was basically an agreement not to compete for Internet users in each other's territory.

Today, US officials allowed the Verizon Wireless spectrum purchase and joint selling agreements to go forward—but it is imposing key limitations on the commercial agreements aimed at preserving Verizon FiOS as a real alternative to the cable companies’ video and broadband products. The concessions mainly target areas in which FiOS has already been built out. In areas where Verizon hasn’t yet built FiOS, it can simply re-sell its competitors’ cable products.

An antitrust lawsuit was filed today by US officials against Verizon and the cable companies. But the lawsuit isn’t likely to turn into a protracted battle. The DOJ proposed a settlement alleviating all of the concerns raised in the suit, and a consent decree was entered into by Verizon, the cable companies, and the DOJ, with the goal of wrapping up the whole process soon.

Good for Comcast and Verizon, but not good for competition

Both Verizon and Comcast have issued statements in support of the consent decree and proposed settlement, and for good reason. Comcast said even with limitations on the deal, Comcast will get to resell Verizon Wireless services and Verizon Wireless will have the "ability to market our products in virtually all of our footprint."

If left unchecked, the DOJ says the Verizon/cable joint marketing agreements would have been very much like an agreement not to compete, resulting in higher prices and lower quality services.

“Verizon and the cable companies are direct competitors in many local markets throughout the United States where Verizon offers video, voice, and broadband service,” the DOJ said today while announcing approval of the spectrum buy. “The series of commercial agreements between Verizon and the cable companies would have threatened this competition. Most notably, the agreements, as originally structured, would have required Verizon Wireless to sell the cable companies’ services on an ‘equivalent basis’ with FiOS where FiOS is available, thereby reducing Verizon’s ability and incentive to sell its own services aggressively.”

Even with the newly imposed limitations, there is reason to be concerned that joint marketing agreements will help Verizon and cable companies maintain a status quo in which many communities have little or no competition for home Internet service.

FiOS is a desirable service to many consumers because of its speed, but Verizon has only built it out in a few parts of the country. The concessions demanded by the Department of Justice probably won’t force Verizon to dramatically increase availability of FiOS service. It seems to be aimed primarily at preventing competition from becoming any less robust than it already is today, because of provisions that affect only the limited areas in which FiOS is already sold. The settlement announcement does not say the competition landscape will be improved. Instead it will remain unchanged.

Verizon can't resell cable services in FiOS areas

The DOJ said the settlement it proposes “forbids Verizon Wireless from selling cable company products in FiOS areas and removes contractual restrictions on Verizon Wireless’s ability to sell FiOS, ensuring that Verizon’s incentives to compete aggressively against the cable companies remain unchanged. In addition, under the proposed settlement, Verizon Wireless’s ability to resell the cable companies’ services to customers in areas where Verizon sells DSL Internet service ends in December of 2016 (subject to potential renewal at the department’s sole discretion), thereby preserving Verizon’s incentives to reconsider its decision to stop building out its FiOS network and otherwise innovate in its DSL territory.”

While the DOJ raised the right sorts of concerns about the deal’s impact on FiOS/cable competition, at least one public interest group says it didn’t go far enough in forcing Verizon to compete against cable in areas where FiOS has not yet been deployed.

“The proposed conditions on this transaction attempt to alleviate some of the harms that will arise from a lack of competition, and policymakers deserve credit for trying to make the best of a bad deal. However, it is not enough for the anti-competitive cross-selling agreement to be limited in time or scope—it should not happen at all,” Gigi Sohn, CEO of advocacy group Public Knowledge said in a statement.

Research Director Mark Cooper of the Consumer Federation of America goes further, saying approval of the joint venture between Verizon and cable “demonstrates that the primary pillar on which the Telecommunications Act of 1996 stood—intramodal and intermodal competition between broadband platforms—has collapsed in a short 16 years.”

FiOS is available to only about 13.7 million potential customers nationwide, a number expected to grow to 18 million as Verizon builds out services in existing FiOS areas. Verizon has not committed to new rollouts.

“Verizon has stopped deploying fiber, and will be marketing cable broadband instead of its own services in non-fiber markets,” Sohn said. “Nationwide, cable has opened up an unsurpassable lead over DSL. Meanwhile, the wireless broadband market has become a near-duopoly, as AT&T and Verizon acquire more and more spectrum, leaving all other competitors behind.”

DOJ, FCC wrap up final details

What happens next? As mentioned, the DOJ’s antitrust division and the New York State attorney general’s office filed a civil antitrust lawsuit in US District Court to prevent Verizon and the cable companies from moving forward with their commercial agreements. But the lawsuit was filed along with the aforementioned proposed settlement resolving the concerns alleged in the lawsuit. Additionally, the consent decree seems to indicate that the deal is in its final steps.

In a statement sent to Ars, Verizon Wireless said, “As evidenced by the consent decree, we believe we have addressed the Department of Justice’s concerns. We now believe the consumer benefits of the transaction will be promptly realized, and look forward to the conclusion of the FCC review so that we can move forward with meeting the unprecedented consumer demand for innovative 4G LTE mobile and data driven products and services.”

Comcast, meanwhile, said, “we are pleased that the consent decree that we have negotiated with the Department of Justice preserves the most important goals of the agreements, including Comcast's ability to market Verizon Wireless services throughout our footprint in order to offer our customers a wireless option, Verizon Wireless' ability to market our products in virtually all of our footprint, our ability to opt into an MVNO relationship with Verizon Wireless, and the essential structure of the innovation R&D technology joint venture. We are also pleased that the FCC is circulating an order proposing approval of the spectrum sale and we are hopeful that a final order will be issued shortly.”

FCC Chairman Julius Genachowski announced that he will be circulating that draft order in the hopes of finalizing FCC approval. The FCC concerns were alleviated in part by Verizon’s agreement to sell some spectrum to T-Mobile.

“Verizon Wireless has undertaken an unprecedented divestiture of spectrum to one of its competitors, T-Mobile, and has committed to accelerate the build-out of its new spectrum and enhance its roaming obligations,” Genachowski said. “In addition, the companies’ commercial agreements will be modified to, among other things, preserve Verizon's incentives to build out FiOS, increase wireless competition, and ensure that the proposed IP venture is pro-consumer and that its products cannot be used in anti-competitive ways.”

Genachowski’s remarks will come as small consolation to the vast majority of Americans whose only option to buy FiOS today is to move to a different state.