by Bill Snyder

How AT&T, Verizon Make Smaller Carriers Keep Prices High

Jul 15, 20143 mins
CarriersConsumer ElectronicsMobile

Sky-high data roaming charges from AT&T and Verizon help the carriers line their pockets and keep competitors from offering truly unlimited data plans, according to a new collection of consumer advocacy groups.

You may not be an AT&T or Verizon wireless customer, but part of your monthly cell phone bill likely winds up in their coffers. That’s because the two mobile giants charge sky-high roaming rates when competitors’ customers access the AT&T and Verizon networks as they travel out of range of their smaller networks.

You aren’t billed directly when you roam within the United States, but your carrier is. Roaming charges are a huge expense, and they make it much harder for smaller players like T-Mobile to cut prices or offer truly unlimited data plans, according to a coalition of consumer groups that recently asked the FCC to crack down on the practice. (Nearly all “unlimited” data plans are throttled when a customer hits a certain threshold, so saying a data plan is unlimited is somewhat misleading.)

Smaller carriers’ customers aren’t the only ones who lose because of high roaming charges. “By making it financially impossible for competitors to offer uncapped and unthrottled broadband, AT&T and Verizon get to keep their own broadband capped and overpriced,” according to Harold Feld, a senior vice president of Public Knowledge, a group that fights for an open Internet.

Transmitting data to wireless customers requires spectrum, essentially space in the airwaves, and a network of cell phone towers and other equipment. AT&T and Verizon control the lion’s share of these resources, so competitors like T-Mobile are forced to rent some of it.

This comes into play when a customer “roams” to a part of the country where T-Mobile, for example, doesn’t have adequate network coverage. Assuming the customer agrees to roam (the phone prompts the user), he or she starts using spectrum owned by AT&T or Verizon, and T-Mobile pays the owner of that network for the privilege. (Voice service is regulated differently and is a separate issue, as is data international roaming, which is paid for by the user and can be quite expensive.)

I don’t dispute that network owners have a right to charge other companies to use it. The public owns the airwaves (in theory, at least), and the FCC, which regulates them, says charges should be reasonable.

They’re not. These high charges amount to “monopoly rents,” according to the four advocacy groups – Public Knowledge, the Open Technology Institute at the New America Foundation, the Benton Foundation, and Common Cause – as argued in a lengthy filing with the FCC.

AT&T’s Joan Marsh counters in a blog post that her company’s wholesale rates have actually gone down. That’s true, according to a T-Mobile FCC filing, but the data use is so much higher than in the past that T-Mobile is paying much more to AT&T. In any case, the roaming charges are wildly inflated.

“The average domestic wholesale data roaming rate that T-Mobile paid in 2013 is 3.6 times the maximum retail rate that Verizon charges a user of 1,700 MB per month, six times the rate AT&T charges, over seven times the rate that T-Mobile charges, and over 10 times Sprint’s maximum rate,” T-Mobile wrote in its filing.

“It seems reasonable to assume that requiring AT&T and Verizon to negotiate commercially reasonable data roaming agreements will result in T-Mobile offering lower prices and uncapped and unthrottled plans — forcing AT&T and Verizon to lower their own data rates,” according to the advocacy groups.

It’s also likely that other carriers would do the same. In other words, if the proposed changes are made, everybody wins – except, of course, the price gougers.