Kohl Calls for Telecom Antitrust Probe

The chairman of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights urges the Department of Justice and the Federal Communications Commission to examine whether dominant wireless carriers such as AT&T and Verizon are stifling competition with practices that include exclusive arrangements between carriers and cell phone makers, possible text messaging price fixing, and questionable roaming arrangements.

Add the chairman of the Senate Subcommittee on Antitrust, Competition and Consumer Rights to those who believe that dominant wireless carriers such as AT&T and Verizon may have acquired too much market power and are limiting competition and innovation in the wireless industry.

In July 6 letters to Federal Communications Commission Chairman Julius Genachowski and Christine Varney, head of the Department of Justice Antitrust Division, Sen. Herbert Kohl (D-Wis.) wrote, "We on the Antitrust Subcommittee have become concerned with emerging barriers to competition in an already highly concentrated market."

Kohl urged the Department of Justice and the FCC to begin investigations into the practices of wireless carriers to ensure that the wireless telephone market remains open to competition and to remove barriers to entry and expansion by new competitors. Kohl raised a host of questions about wireless carriers including price fixing in text messaging, roaming arrangements and prices, spectrum restraints, exclusive handset deals between carriers and cell phone makers, and early termination fees.

Kohl's letters were sent on the same day reports surfaced that the Department of Justice is opening an antitrust investigation into the consumer practices of such powerhouse providers as AT&T and Verizon.

The exclusive handset deals offered by carriers have already gained the attention of Congress, with the Senate Commerce Committee holding a hearing June 17 questioning the practices of wireless carriers. Unlike wire-line services, which are required by law to allow consumers to connect the legal devices of their choice to carriers' networks, the wireless market is pocked with exclusive deals.

"The practice of large cell phone companies gaining exclusive deals to the most in-demand cell phones is a serious barrier to competition," Kohl wrote. "Consumers are unlikely to obtain cell phone service from companies if they cannot obtain desired handsets."

Kohl pointed out that the country's top four wireless carriers control over 90 percent of the cell phone market, with AT&T and Verizon holding a 60 percent market share.

"We urge that the Antitrust Division closely examine the cell phone industry to ensure that the dominant carriers do not take action to stifle competition or engage in conduct contrary [or] injurious to competition in violation of antitrust laws," Kohl wrote.

While accusing companies such as AT&T and Verizon of engaging in anti-competitive behavior has become a popular sport in Washington lately, Harold Feld, the legal counsel of Public Knowledge, thinks it's a tough case to make.

"In a world where even potential competition is supposed to be part of the market analysis, how can a modest 60 percent of the wireless market shared by the two companies, with no evidence of price fixing or coordinated behavior, support any sort of antitrust action?" Feld wrote in a Public Knowledge blog posting. "But for now, I applaud the DOJ apparently making good on Christine Varney's pledge to reinvigorate antitrust and her recognition of how important antitrust enforcement is to the digital economy."