T-Mobile US has won a declaratory ruling that could force AT&T and Verizon Wireless to charge lower prices for data roaming.
T-Mobile argued in a petition to the Federal Communications Commission that the biggest carriers charge their smaller competitors artificially high prices. The petition asked the commission to offer specific guidance and enforcement criteria for determining whether any given data roaming agreement is commercially reasonable.
The FCC granted T-Mobile’s request today, rejecting arguments made by AT&T and Verizon. The ruling by itself doesn’t lower the rates that T-Mobile has to pay AT&T and Verizon. However, T-Mobile could now challenge the rates it pays those companies and have a better shot at winning because the commission largely accepted T-Mobile’s proposed guidance. The greater possibility of FCC intervention could also improve T-Mobile's leverage in negotiations.
We asked T-Mobile if it intends to challenge the rates it pays AT&T and Verizon. The company declined to comment on that question, but said that "Consumers deserve affordable access to mobile broadband from their carrier of choice no matter whether they’re at home or on the road. We commend the FCC for taking this important step to promote competition by facilitating reasonable data roaming rates for all carriers and their customers.”
Verizon calls ruling “deeply troubling”
Verizon denounced the ruling in a statement today, saying the roaming market is working well and there is no need for the commission to interfere.
“The US wireless market is the envy of the world and one of the country’s leading sources of economic growth,” said Verizon Senior VP of Federal Regulatory Affairs Kathleen Grillo. “It is deeply troubling that the Wireless Bureau has changed a fundamental wireless rule in ways that discourage investment and unfairly advantage one company over others, and has done so without a Commission vote, as required by law.”
Sprint supported T-Mobile's petition in filings with the FCC.
“Monopoly rents” allegedly harm customers of all major carriers
Consumer advocacy groups that supported T-Mobile’s petition argued that high data roaming rates cause all sorts of problems in the wireless market. By extracting “monopoly rents” from T-Mobile and other carriers, AT&T and Verizon made it harder for competitors to lower prices or offer unlimited data, the groups claimed. Thus impeding their competitors, AT&T and Verizon were able to keep their own consumer prices artificially high and maintain strict data caps with little fear of customers changing carriers, the groups further argued.
“When the FCC adopted its data roaming rules in 2011, it used a new legal standard that left many questions unanswered,” Public Knowledge Senior Staff Attorney John Bergmayer said today in a statement. “By clarifying some of these issues, today's action will help ensure that customers of even smaller or regional carriers can use their smartphones freely as they travel."
Roaming rates can be judged against retail prices
The FCC’s declaratory ruling dismissed the arguments made by AT&T and Verizon one by one.
Verizon and AT&T had argued it wasn't appropriate to compare their data roaming rates to retail prices, rates charged by MVNOs [mobile virtual network operators], or to international roaming rates "because these other rates are based on markedly different factors,” the FCC said. "In our view, the data roaming rule was intended to permit consideration of the totality of the facts and therefore to permit a complaining party to adduce evidence in any individual case as to whether proffered roaming rates are substantially in excess of retail rates, international rates, and MVNO/resale rates, as well as a comparison of proffered roaming rates to domestic roaming rates as charged by other providers."
“Verizon also objects to T-Mobile’s request for guidance on grounds that the current dispute resolution process is working and that T-Mobile and other providers should use these remedies to address concerns with data roaming rates,” the ruling also said. “The guidance we provide today is not an indication that the complaint process is not working. Rather, we grant T-Mobile’s requested relief to address commenters’ concerns over the difficulties that providers are experiencing in negotiating data roaming agreements. This guidance will allow providers to better gauge the commercial reasonableness of data roaming terms, which in turn will facilitate the successful negotiation of future data roaming arrangements.”
The ruling also clarified the presumption that signed agreements are commercially reasonable. The presumption was intended to discourage frivolous claims and applied to challenges lodged against existing contracts. However, this presumption does not apply to new agreements, even if they have the same terms as existing ones.
"The Commission did not intend for the presumption to apply to subsequent negotiation of another agreement (including extension or renewal of an existing agreement) that is not yet signed," the FCC said today.
Republicans dissent, denounce Democrats' version of democracy
The order was issued by the FCC’s Wireless Telecommunications Bureau without a vote by the five-member commission.
The two Republican commissioners, Ajit Pai and Michael O’Rielly, say they wanted a chance to vote on the matter but were refused by Chairman Tom Wheeler.
“Commissioner O’Rielly and I jointly requested that the items be brought before the Commission for a simple up or down vote, consistent with both the law and the long-standing practice of both Republican and Democratic FCC Chairmen,” Pai said in a statement issued today. “The Chairman’s Office refused. I am not aware of a situation in which similar requests from two Commissioners for a Commission-level vote has been rejected (the usual course is to accommodate even one request).”
AT&T promised to appeal the decision. "We disagree strongly with this action and with the irregular process by which it was decided. We will of course appeal this to the full Commission, and further if necessary," said AT&T Senior VP Bob Quinn.
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