Harbinger's 4G Plan Has Verizon and AT&T Crying Foul

Verizon Wireless 4G network
Verizon Wireless 4G network

It didn't take long for Verizon (VZ) and AT&T (T) to react to Philip Falcone's plans to build a massive 4G wireless network in direct competition with the two telecom giants. Falcone is the hedge fund billionaire who runs Harbinger Capital Partners, and last Friday, Harbinger received Federal Communications Commission approval for Falcone's takeover of SkyTerra, a key component of his wireless plan. Harbinger plans to build out the huge network using the LTE (for Long Term Evolution) wireless over the next several years.

So it's not too surprising that both Verizon and AT&T are already publicly complaining about aspects of the FCC's approval.

Specifically, the country's two largest wireless companies are objecting to FCC rules that require "SkyTerra to seek approval before leasing capacity to 'the largest or second-largest wireless provider,' a condition Harbinger had proposed," Bloomberg notes. The FCC designed these rules to promote new competition in wireless, which is a central tenet of the FCC's new broadband push.

"A Very Disturbing Precedent"?

As GigaOm's Stacey Higginbotham reported, "traffic from the largest and second-largest wireless carriers in the U.S. cannot comprise more than 25 percent of the traffic over the SkyTerra/Harbinger network. This means AT&T and Verizon could not buy up huge chunks of the network or spectrum to keep others off of it."

In essence, Verizon and AT&T are objecting to FCC rules designed to spur a more open market for wireless services.

"The commission is setting a very disturbing precedent when it implies that it may use allocation of spectrum to manipulate the wireless market," Jim Cicconi, AT&T's senior executive vice president for external and legislative affairs, said in an e-mailed statement cited by The Washington Post. "This action is manifestly unwise and potentially unlawful."

David Fish, a Washington, D.C.-based spokesman for Verizon, says the "process and the resulting restrictions are troubling."

Igniting New Competition

In a blog post , the FCC is defending the rules. "These commitments -- building out the network to 260 million Americans by 2015 and allowing the FCC prior review of potential leases of spectrum or capacity to the two largest incumbent carriers -- do not prohibit any specific transactions," FCC official Paul deSa wrote in the post. "But they do provide some reassurance that the approval will ignite new broadband competition while protecting the public from any potential harms."

FCC Chairman Julius Genachowski has made fostering a new wave of competition a vital part of the Obama administration's new national broadband plan. For the biggest current players in the market, the Harbinger guidelines are the first major evidence of that -- and they're not amused.