(ADN) — The Federal Communications Commission has approved plans by GCI and Alaska Communications to combine their wireless holdings in a joint venture, while continuing to compete in retail sales, to better compete against two giants in the industry, AT&T and Verizon.
The companies intend to cut capital expenditures by $15 million and operating expenses by an equal amount, according to the FCC review of their application. They would reduce the total number of cell sites from 450 to about 300 and scale back plans for new tower sites.
The new venture, Alaska Wireless Network, would be able to deploy “a robust 4G LTE network more quickly than either ACS or GCI could achieve individually,” the companies said.
“The applicants argue that the instant transaction would allow them to compete more effectively in Alaska against larger and better financed nationwide wireless competitors,” the FCC said of the two companies.
In a decision released July 16, the agency said that while Verizon is only offering data services at this point, it intends to offer phone service next year and “plans to obtain significant market share.”
GCI and ACS have had “Alaska-only” plans that are about $15 to $20 a month cheaper than nationwide plans. AT&T and Verizon do not have “Alaska-only” plans, the FCC said.
The Alaska plans are held by a “much smaller segment” of the customer base for both GCI and ACS, but the agency said the combination of the two carriers “may create incentives for GCI and ACS Wireless to raise prices.”
“We recognize that this transaction may lower the incentive of GCI and ACS Wireless to compete on the Alaska-only plans. The parties’ agreements require GCI and ACS Wireless to maintain legacy price plans, including Alaska-only plans, for their existing 2G and 3G subscribers for a two-year period, and this provision may mitigate some of the immediate harm. To further mitigate this potential harm, we condition our approval of this transaction on the parties’ agreement to make their existing Alaska-only plans available to new customers for a one-year period following the closing date of the transaction,” a spokesperson said.
The FCC said that with the combination GCI and ACS would have similar services.
“GCI and ACS Wireless would both purchase services from AWN on an equal and non-discriminatory basis. There would be no differentiation in terms of coverage and quality since they will be using the same network. Therefore, post-transaction the mobile telephony/broadband market in Alaska may be characterized as more homogeneous, and given the market structure in Alaska, intended to sustain an agreed-upon market outcome,” an FCC spokesperson said.
The FCC said that while GCI is “financially stable, executives believed that the company lacked the spectrum required to deploy LTE. In addition, while we believe the Applicants’ asserted technological benefits relating to accelerated LTE deployment may be somewhat overstated, we recognize that AWS spectrum perhaps provides for a more certain and timely LTE path, which ultimately will benefit consumers in Alaska.”