Wireless Industry Disputes Pose Problems for Framework Bill
Getting agreement on legislation setting new rules for the wireless industry could be difficult, judging by industry disputes at a House Communications Subcommittee hearing Thursday. There’s bipartisan support on broad goals of setting a national framework for consumer protection rules and doing an audit of unused federal spectrum. But no consensus exists within the industry on whether to change special-access rules, open up the handset industry or extend roaming requirements to data services. Lawmakers also are divided.
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The hearing is just the beginning of the subcommittee’s work on the issue, said Chairman Rick Boucher, D-Va. He thanked former Chairman Ed Markey, D-Mass., for his work last Congress on draft legislation for federal consumer protection standards. Markey criticized the wireless industry for fighting his proposal, which would have given states the power to enforce federal rules. Problems persist in the market with roaming arrangements among carriers, lack of devices and high costs, Markey said. “Many consumers can become trapped after buying expensive devices” with contracts that are expensive and inflexible, he said.
Sprint Nextel and Cellular South said they're under siege from anticompetitive practices by the dominant carriers, AT&T and Verizon, which declined to attend the hearing. Both companies were invited but said they had scheduling conflicts, Boucher said. He invited their written input. A Verizon spokesman said the company is holding its annual meeting. AT&T said its invitation arrived too late for it to provide a witness, a spokesman said.
Sprint pays a hefty cost in special access charges imposed by the dominant carriers, which receive “windfall profits” from them, said Paul Schieber, vice president of Sprint Nextel. The high costs have forced the carrier to defer buildout of mobile broadband. AT&T and Verizon control “overwhelming shares of the special access marketplace,” Schieber said. The FCC has a well-documented record chronicling the problem, and it has the authority to act, he said.
USTelecom disputed the complaints about special access prices in a statement timed to the hearing. “We've heard these arguments before and they don’t stand up to scrutiny,” said President Walter McCormick. Noting the statement, subcommittee ranking member Cliff Stearns of Florida asked Schieber whether it had merit or was “self-serving.” Schieber said it was, “without a question, self-serving.”
Cellular South told the subcommittee that the “duopoly” is snuffing out competitors through its “stranglehold” on devices, said the company’s president, Victor Meena. Exclusivity agreements with device manufacturers prevent other carriers from acquiring popular devices. He cited a recent example with netbooks, which offer Internet access and laptop functionality. Meena said his company has tried to strike deals with some netbook manufacturers, but, “as you may have guessed, the largest carriers are already demanding exclusive models of these wireless devices.”
Roaming agreements are another way the dominant carriers restrict competition, Meena said. “The largest carriers refuse roaming agreements for high-speed data,” he said, and the FCC isn’t certain it has the authority to regulate in that area. “There is no doubt at all that Congress has the power to address high-speed data roaming obligations,” he said, urging action.
Consumers Union said the wireless market is not free or fair, and Congress needs to take action so “innovation can blossom and our Internet economy can help boost our economic recovery,” said the group’s senior counsel, Chris Murray. He cited a list of industry practices that are hurting consumers, from indecipherable cellphone contracts, pricing practices that force consumers into service packages to avoid per-unit pricing and expensive “switching costs” that discourage consumers from moving to a different carrier.
AT&T and Verizon got one vote of confidence from Phoenix Center Chief Economist George Ford. The industry is “workably” competitive, he said, adding that the presence of only a few companies “need not be a cause for concern. … Duopoly is not a dirty word.”
That comment didn’t sit well with Rep. Anna Eshoo, D- Calif. “I can’t get my mind around that. It just doesn’t make sense,” she said. “There are not too many people that will says words to me, like that, that will remain with me forever.”