Verizon Wireless is proposing to change its roaming policy to appease smaller carriers who piggyback on its networks, but the smaller carriers are not satisfied. They want the Federal Communications Commission, Congress, or U.S. Department of Justice to force more concessions.
Currently, wireless companies are not required by law or FCC regulation to provide roaming services to competitors that own spectrum in a given market but have yet to build out a network there. Smaller wireless carriers say this hurts their business because customers who can’t roam in those regions will be more likely to cancel their contracts.
In an apparent effort to forestall government action, Verizon said in a July letter to Congress it would support a requirement to provide roaming services in such circumstances so long as the agreements last no longer than two years with a negotiated option for a third.
Smaller Carriers Balk
Smaller, mostly rural carriers contend Verizon’s proposal doesn’t go far enough, and they want the federal government to mandate more “competitive practices.”
“Since the inception of the cellular industry, the federal government has generally managed competition with a pro-market perspective and, in most cases, has done a commendable job,” said Todd Lantor, regulatory and legislative counsel to the Rural Cellular Association (RCA). “However, a heavier regulatory or legislative hand is sometimes needed, as is the case presently.
“We have a situation in which the nation’s two largest carriers—Verizon Wireless and AT&T—have been allowed to grow to the point that competition [among the large carriers] and the hundreds of other regional and small wireless carriers is not all that vibrant,” Lantor said.
Vince Vasquez, senior policy analyst with the National University System Institute for Policy Research in La Jolla, California, says he’s “disappointed to hear the news about the spat between large and small carriers.” Government intervention, he says, will not solve their problems.
“Telecom industry regulators have spent the last decade trying to amend the numerous legacy ‘competition’ rules that have impeded capital investments and consumer service improvements,” Vasquez said. “Numerous studies have shown that the federal policy of ‘forced access’ failed to create the competitive landline telephony marketplace that Congress wanted in the 1990s. And it’s highly unlikely that new roaming service mandates on wireless companies will do the same in the future.
“Small carriers should reject the lure of ‘rent-seeking behavior’ and seek to innovate their way to larger markets,” Vasquez added.
‘Bow Before Government’
Gregory Lund, spokesman for San Diego-based Leap Communications, said Verizon’s previous roaming arrangements allowed companies to build networks where their customers are, which is the exception and not the rule.
Leap, considered a small carrier in the market, competes on its own terms. Lund said that is a better business plan than asking the government for ever-more intervention.
“The nature of the wireless industry these days seems to be that private companies have to bow before government operatives to continue doing business as they see fit,” Lund said. “Smaller wireless companies can compete without government help, but the government needs to make sure the playing field is lawfully level and competition is not stifled. And they can do that using existing antitrust laws.
“Consumers can be hurt with poor government management or no management at all,” Lund said.
Ready to Regulate
Lantor said it was clear Verizon is trying to head off government regulation it would not like by offering better roaming deals to smaller carriers.
“There have been clear indications from congressional and FCC leadership that they are prepared to address the roaming-related concerns raised by smaller carriers,” Lantor said. “Verizon likely wanted to influence the process and decided that their roaming announcement was a good way to do that.”
The “Big Four” wireless carriers in the United States—Verizon, AT&T, Sprint Nextel, and T-Mobile—are not as unified on this question as one might expect. Sprint Nextel, for instance, supports the smaller carriers’ call for more government action.
“There are a couple areas with respect to roaming the government can and should address—elimination of the in-home-market exception and ensuring roaming isn’t disrupted with the sales of Verizon assets to AT&T,” said Crystal Davis, public affairs/corporate communications officer for Sprint Nextel.
“More generally,” Davis continued, “while government’s role can be limited in competitive retail markets, it should step into carrier-to-carrier matters when one carrier has market power and abuses that power to the detriment of its competitors by squeezing competition and raising consumer pricing.”
Cautions Against Intervention
Randy Skoglund, executive director of Americans for Technology Leadership in Washington, DC, advised against government putting its thumb on the scale of competition—even for small wireless companies.
“Any time a business model requires one firm to give another firm special treatment in their contracts, it is clear that the free market has been set aside for political preference,” Skoglund said. “The historical complaint that small, rural providers could not compete because of scale is not born out by experience.
“Time and again, smaller providers are able to aggregate their customer base to develop bargaining power with large network providers and thereby win extremely favorable contract provisions,” Skoglund added.
Tabassum Rahmani ([email protected]) writes from Dublin, California.