Jan 17, 2012

Clarifying Comcast's Spectrum Position

We recently filed our application at the FCC outlining why our proposed transfer of AWS spectrum licenses, currently held by SpectrumCo (of which Comcast is a majority owner), to Verizon Wireless is in the public interest. The reasons why we believe this transfer is in the public interest are fully summarized in that filing, which provides detail about the significant investments made by SpectrumCo and its owners to clear and test the spectrum, and the comprehensive analysis we undertook to determine how to maximize the spectrum's utilization. We always intended to use the spectrum productively, and ultimately, after considering a variety of alternatives, the owners of SpectrumCo concluded that the proposed transfer to Verizon Wireless was the best route to efficiently put that spectrum to use to the benefit of consumers.

Recent questions have been raised about a statement by Comcast CFO, Michael Angelakis, in part of his brief reply to a question at the Citi Media conference earlier this month, that "[w]e never really intended to build that spectrum." We understand the possible issues this raises and want to take this opportunity to put that statement in its proper context and make very clear what the facts are.

First, we bought the AWS spectrum licenses with every intention to use that spectrum to put SpectrumCo in a position to provide our customers with a wireless service, although the scale, type, and business case for that service was undetermined at the time of our purchase in 2006. As SpectrumCo stated in the press announcement at the close of the AWS auction, we "did not approach this investment with the intent of becoming the nation's fifth wireless voice provider" but rather "to obtain greater flexibility in developing options for more advanced wireless services."

Second, Michael's statement was a shorthand reply on a subject with a long and complex history. It was intended to describe the thought process following a lot of evaluation and analysis, and was not intended to describe our intentions at the point SpectrumCo acquired the AWS spectrum. In fact, Michael has spoken many times on this subject, and as far back as 2008 at the Citigroup Eighteenth Annual Entertainment Conference, he talked in more detail about our wireless plans when he said Comcast and its partners "made a major investment in AWS spectrum a while ago. I think what we're really trying to figure out is what is the product and how does that product integrate with our existing product lines...What is the appropriate technology and strategy, and what is the business plan or financial case...that would make some sense?...We are looking at them, we are evaluating...we also don't feel the immediate pressure of needing a wireless product."

Third, our filed public interest statement and related declaration, makes clear the significant amount of work and analysis we have performed over a several-year-period to take the initial steps toward developing a wireless service using the AWS spectrum and answering the question of how best to utilize this spectrum:

  • SpectrumCo invested more than $20 million to clear incumbent microwave links in the AWS spectrum service area. More than 500 incumbents have been cleared.
  • SpectrumCo conducted, between 2007 and 2009, extensive operational testing of different 4G technologies for use with AWS spectrum, including WiMAX, UMB, and LTE.
  • SpectrumCo tested equipment for use with AWS spectrum, independently and with other equipment manufacturers, such as Qualcomm, Nokia, and Samsung.

All the while, a significant amount of resources and time were being expended in analyzing the results of those tests, the changing consumer and wireless technology marketplace, and the various business models (including investments in and joint ventures with other partners in the wireless space, all designed to explore a sustainable business model for providing mobile wireless services to our customers). Moreover, we observed the experience of Cox Communications as it attempted to launch a new, competitive wireless service over its own network. Ultimately, but only after a significant investment and years of substantial study and analysis, we determined that it was not feasible to use the AWS spectrum to launch our own wireless network because: (i) we did not have enough spectrum for anything other than an initial launch;(ii) the costs to solve for that problem were too substantial for us; (iii) the costs of building out a new national network were also too high; and (iv) there were significant marketplace hurdles in launching a new, competitive wireless service, which included access to devices at commercially beneficial terms and the need to obtain national roaming rights on attractive terms.

This has been our consistent message for the last several years as it became clearer that there was not a sustainable business model to support a new, standalone, facilities-based wireless provider. For example, in 2008, Michael set forth the approach we were taking with this spectrum: "I think what we really need to do is look at how do we...add another feature to our existing, really very good products, and how do we add mobility to them in some form or fashion...we're taking a very cautious and careful approach to what is the right product, what is the right technology, and what is the right business plan around that, that we think is attractive for us." And in 2009,as SpectrumCo's analysis evolved further,he explained that "[t]o us it's not necessarily about a quad play in terms of handset and bundles...We have a robust data business...a very good phone business...a terrific video business. How do we take those three products and add mobility to them to enhance the product set?...We have 20 megahertz of spectrum...We don't want to be the seventh competitor in a market that we think is mature...And it's a huge economic investment, which we're uncomfortable there's a real return for." (emphasis added) SpectrumCo also delivered a similar message to the FCC in 2009, explaining that "any new facilities-based entrant in the wireless marketplace, particularly one with national aspirations, and regardless of resources, faces daunting entry barriers. It must obtain suitable spectrum, construct a network, and obtain roaming agreements with entrenched incumbents."

The only fair assessment of our position is to review all of our public statements over the past few years, including our filings at the FCC, and our actions, which show an evolving thought process, based on a detailed analysis of market realities. Focusing on one shorthand sentence in a lengthy Q&A simply does not tell the story. The complete picture is very clear: we acquired spectrum with the intention of using it to help position the company to offer wireless services, we analyzed thoroughly whether we could build a business case to do so, but ultimately concluded, as a business matter, not to become a standalone, facilities-based wireless provider, and having reached that decision, considered other alternatives that would promptly allow for the efficient use of that spectrum to improve wireless consumer experiences.

Tags : SpectrumCo, Verizon Wireless

 
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