The Federal Communications Commission passed new rules that mandate mobile broadband companies provide rural carriers “commercially reasonable” smart phone data-roaming agreements in the same fashion the FCC currently enforces voice-roaming agreements.
The FCC passed the rules at its April 7 meeting by a 3-2 vote along party lines, with Democrats in favor and Republicans opposed. FCC Chairman Julius Genachowski and commissioners Michael Copps and Mignon Clyburn argue the new rules will ensure competition among carriers. Republican commissioners Robert McDowell and Meredith Atwell Baker assert the FCC possesses the legal authority to impose common-carrier rules on voice services as it currently does, but not on information data roaming.
Smaller wireless companies called on the FCC to speed up the agency’s process of updating the nation’s wireless roaming rules to ensure their customers can access data networks operated by other providers when outside their own network area at fair rates and terms.
In a March 17, 2011 letter to members of the U.S. House of Representatives Commerce and Energy Committee, FCC Chairman Julius Genachowski said many providers have been unwilling to negotiate data roaming agreements or have “created long delays or taken other steps to impede healthy competition and roaming for consumers.”
The nation’s two largest carriers, Verizon and AT&T, also dispute the FCC’s legal authority to issue such a requirement because roaming is not specifically identified in the Communications Act as a common-carrier service.
Government Intervention Stifles Market
“In a lot of markets, smaller providers are just starting to compete against the larger carriers. There are a lot of pricing pressures from the smaller carriers,” said Scott Testa, an associate professor of business at Cabrini College in Philadelphia, Pennsylvania. “I don’t see the FCC setting pricing, but I do see them trying to appease a lot of parties as a result of the [proposed] merger of AT&T and T-Mobile.”
However, Jean Gottschalk, president of Telecom North America Inc., says the larger companies charge exorbitant fees to provide services to the small, rural carriers.
“The FCC has mandated larger operators to sell roaming to companies like us at reasonable rates, but there is no such mandate for data,” Gottschalk explained.
“The result is that data roaming prices are outrageous,” she said. “We pay about 10 times more than what the same carriers sell the data at to their own end users. This means that we can’t compete, because users with heavy data usage will choose a different carrier who can give them low data rates not only in the local market but [also] nationwide when they travel.”
Gottschalk added, “This why, among other organizations, the Rural Cellular Association, which includes many tiny operators like ourselves, has petitioned the FCC. I think the idea is not to make the FCC set the price—which they haven’t done, either—but to mandate that prices be ‘reasonable.’ This would probably be sufficient to create the market conditions that companies like ours need not to be ‘winners’ but simply to survive.”
‘Serving Rural Areas Expensive’
Rural areas are extremely expensive to serve, Testa notes. The equipment and other infrastructure required to provide data and other broadband capabilities are extremely costly.
“People want broadband and the best wireless service at the lowest possible cost, but you need to be able to charge more in these areas in order to cover your costs, because there are fewer customers and the fixed costs are so high,” Testa said.
“In some of these markets it’s very hard to be profitable,” he said. “But you have to let the free market operate.”
Phil Britt ([email protected])writes from South Holland, Illinois.