The Federal Communications Commission agreed with T-Mobile to make its wireless roaming rules more clear, which could make negotiations of such roaming deals with AT&T and Verizon easier for smaller operators.
What's that mean for consumers? It could lead to lower prices and better coverage for 3G and 4G service when using T-Mobile and Sprint. And if these companies can offer better coverage at cheaper rates through roaming deals, it could put pressure on AT&T and Verizon to lower prices on their own service plans.
On Thursday, the FCC's Wireless Bureau ruled on a petition that T-Mobile had filed earlier this year asking the agency to set guidelines for how it defines "reasonable" rates for data roaming.
Network roaming is when a wireless operator uses the network of another operator in areas where it does not have coverage. Roaming arrangements have been around since the wireless industry began in order to give operators more ubiquitous coverage. But as the industry has consolidated and the nation's two largest wireless carriers, AT&T and Verizon, have expanded their footprints, these bigger carriers have resisted striking roaming deals with smaller rivals, particularly when it comes to their 3G and 4G data networks.
In 2011, the FCC passed regulation requiring all carriers to offer roaming deals to competitors at reasonable rates. But carriers, such as T-Mobile, complained to the FCC that since the order was adopted, AT&T and Verizon have been charging smaller carriers exorbitant rates to roam onto their networks. T-Mobile asked the FCC to clarify what it meant by "reasonable."
AT&T defended the original 2011 rules and said no clarification was needed. In a blog post explaining its own filing to the FCC in July, Joan Marsh, vice president of Federal Regulatory Affairs for AT&T, argued that data rates have decreased over time and that asking the FCC to define appropriate rates would encourage companies, such as T-Mobile, to strike roaming deals rather than investing in their own networks.
On Thursday night, the FCC Wireless Bureau issued its decision. The agency agreed with T-Mobile that clarification is necessary. Specifically, the agency clarified two things:
1) Current roaming prices do not establish a presumption that similar future prices are also reasonable.
2) Roaming fees paid in other contexts (i.e., foreign carriers paying to roam in the United States, or what Mobile Virtual Network Operators pay for network access) are relevant evidence in deciding the reasonableness of roaming rates in a formal dispute (such as a potential T-Mobile vs. AT&T dispute) before the FCC.
The decision was praised by T-Mobile, Sprint and other smaller operators. Andy Levin, senior vice president for government affairs at T-Mobile, said, "We commend the FCC for taking this important step to promote competition by facilitating reasonable data roaming rates for all carriers and their customers."
Steven Berry president and CEO of the Competitive Carrier Association, which lobbies on behalf of competitive carriers, said he was pleased with the FCC's decision to provide "much-needed guidance on the 'commercially reasonable' roaming standard."
Berry said that this will allow smaller operators, particularly rural and regional carriers, to focus resources on investing in upgrades their own networks rather than paying high roaming fees.
"The guidance provided today will help incent deploying mobile broadband services in these areas and provide the latest data services to their consumers," he said.
Unsurprisingly, AT&T and Verizon were not happy with the decision. AT&T said in a statement that the company "disagreed strongly with this action and with the irregular process by which it was decided."
Verizon called the FCC Wireless Bureau's actions "deeply troubling." Kathleen Grillo, senior vice president of federal regulatory affairs for Verizon, said in a statement that she believes the move will also discourage investment in wireless networks.
While the two sides of this argument may disagree on whether this FCC action will promote or discourage investment in the wireless network, analyst Paul Gallant of Guggenheim Partners believes the FCC's decision will likely offer smaller operators, such as T-Mobile and Sprint, a better negotiating position when striking roaming arrangements with large national players like AT&T and Verizon.
"The Bureau's ruling should give T-Mobile and Sprint improved negotiating leverage with AT&T and Verizon, and presumably better-than-expected data roaming prices," he said in a research note Friday. But he added that AT&T and Verizon are likely to argue that the clarifications exceed the FCC's authority for overseeing pricing. And it will ask the full Commission to review the decision. If that doesn't get them the result they are looking for, he said the companies will probably go to the courts.