The Justice Department is "holding up" Verizon Wireless's deal to buy spectrum from cable companies over concerns that the deal and related swaps will leave many US residents with only one option for broadband Internet service, the Wall Street Journal reported last night.

Verizon last December announced an agreement to buy $3.6 billion worth of wireless spectrum covering 259 million Americans from a consortium called SpectrumCo, which includes Comcast, Time Warner Cable and Bright House Networks. Verizon eventually promised an open sale of many of its pre-existing airwaves (contingent on the approval of the SpectrumCo buy), and then a deal with T-Mobile to trade spectrum and cash in exchange for T-Mobile dropping its opposition to the SpectrumCo purchase. Verizon is also buying spectrum licenses from Cox, and Leap Wireless.

According to the Wall Street Journal's sources, Justice Department antitrust officials "remain concerned that a side deal between Verizon and the cable companies is, in effect, an agreement not to compete for Internet users in each other's territory, and could leave many Americans with a single option for broadband service." Unless the airwave swaps are changed to allay concerns, the DOJ isn't likely to give its seal of approval, the article continued.

The Journal notes that Verizon (Verizon Wireless's parent company) offers FiOS service that competes against cable companies for home Internet customers. But in a cross-marketing deal, Verizon Wireless stores are offering services from rival Comcast and Time Warner Cable. "So far, the cross-marketing deal has been put into effect only in areas where Verizon doesn't offer FiOS, though the companies say the plan is to extend it into Verizon territory," the Journal wrote. "Consumer advocates and some congressmen worry that Verizon and the cable companies have declared a 'truce' and agreed to divide up the market."

The Federal Communications Commission has also raised doubts about the various wheelings and dealings. Verizon bought spectrum in the Lower 700MHz band in an FCC auction in 2008, and is proposing to sell off many of those airwaves if its SpectrumCo deal is approved. The FCC asked in May why Verizon Wireless hasn't yet deployed services on that spectrum. But according to the Journal report, the FCC is now prepared to sign off on the deal, leaving Justice Department concerns as the major roadblock.