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Courts give smaller wireless carriers a gift

Today's federal Court of Appeals decision to uphold the FCC's rule to force Verizon to accept rules for data roaming is victory not only for the FCC, but also for smaller carriers.

Smaller wireless carriers should be dancing in the streets tonight after a federal appeals court rejected Verizon's arguments against the Federal Communication Commission's wireless data roaming rules.

Wireless spectrum's David vs. Goliath saga
James Martin/CNET

Earlier today, the U.S Court of Appeals in Washington, D.C., upheld rules that the FCC had enacted a year ago that will require large wireless operators such as AT&T and Verizon Wireless to strike "commercially reasonable" roaming deals on their 4G LTE networks with any wireless operator interested in using a competitor's network to expand territory.

Verizon took issue with these rules, which are similar to rules the FCC adopted in 2007 that require voice roaming. And the carrier sued arguing the FCC did not have the authority to enact these rules since it doesn't have the authority to regulate the Internet. The court rejected this argument and told Verizon that if it doesn't like these rules, it doesn't have to build a network using the government's licenses.

While the ruling is certainly a victory for the FCC, which had its jurisdiction and authority questioned as part of the lawsuit, it's also a big victory for the hundreds of smaller wireless operators around the nation that are trying to compete against the two dominant wireless carriers in the U.S.

Why? The main reason is that it will finally force major wireless providers to sit down with smaller players and negotiate roaming contracts. Smaller wireless operators often have limited network footprints, and in order for them to offer their subscribers the ability to access their services throughout the country, they need roaming arrangements with other carriers.

This notion of roaming has always been a part of the wireless business. Initially, when the FCC allocated wireless spectrum for cell phone use, there were hundreds of small regional players across the country offering service. These players struck roaming deals to offer access to customers in areas where their own footprints were lacking.

But as the market has consolidated, AT&T and Verizon Wireless have turned into the two largest nationwide carriers. Their networks are far more extensive than those of many of the smaller players that compete with them. As a result, AT&T and Verizon don't need to roam with other players. But for smaller providers to succeed, they need to roam with AT&T and Verizon.

In 2007, the FCC saw this as an issue for voice networks, and it created rules that mandated that wireless operators offer roaming deals at reasonable rates to competitors.

The rules the agency adopted last year do the same thing for wireless data networks. AT&T and Verizon have argued that they will enter into these roaming agreements on their own terms. And they don't believe the FCC needs to make it a rule. But smaller carriers complain that larger players have been unwilling to negotiate deals with them.

Competitive carriers hope this court decision will be just the first step in making sure that interoperability and roaming are a part of wireless communications policy in the future.

"The court's unanimous and unequivocal support for the FCC's action and authority bodes extremely well for the competitive issue of roaming and other competitive issues that CCA will continue to pursue," said Competitive Carrier Association CEO Steven Berry.

Some of the carriers, who have been pushing the FCC to force AT&T to make its 700MHz spectrum interoperable, are hopeful the court ruling will help ease these policy changes. AT&T has created a separate band class for the 700MHz spectrum it bought from the FCC, because of interference concerns. Meanwhile, the band class it has created excludes other spectrum bought by many regional carriers, who had hoped that sharing a band class with AT&T would help them get devices and equipment to build their own 4G LTE networks.

"Now that the court has upheld the FCC's data roaming rules, there is nothing standing in the way of the commission's efforts to unshackle the Lower 700MHz band and restore interoperability, which will help support 4G roaming in the Lower 700MHz band," the Interoperability Alliance said in a statement. "Like data roaming, restoring interoperability will unleash hundreds of millions of dollars of sidelined capital necessary to deploy critical 4G mobile broadband services to the areas of America that need it most, as well as to users like public safety and small businesses who are desperately waiting for it. Further, data roaming requires interoperability -- so without it, the FCC's rules on data roaming will not reach their true potential."

The Interoperability Alliance is a coalition formed by several smaller wireless providers with the sole purpose of getting the FCC to require AT&T to interoperate in the lower 700MHz of wireless spectrum.

Ultimately, what the FCC and lawmakers hope is that forcing the larger carriers to agree to roaming deals at reasonable rates will benefit consumers by seeing to it that competition is preserved.

"These rules ensure that consumers are able to use their mobile devices when they roam outside their own network," Congressman Edward Markey (D-Mass.) said in a statement. "Exorbitant roaming charges should not be permitted to restrict consumers' ability to fully utilize their wireless devices, and I applaud both the FCC's leadership and the court's decision."