Sen. Kohl Demands Investigation of Wireless Carriers

By Cecilia Kang
Washington Post Staff Writer
Tuesday, July 7, 2009

A senior senator yesterday demanded a federal probe of alleged anti-competitive practices in the wireless industry, escalating recent congressional concern that too much power is concentrating in the hands of a few carriers.

Sen. Herb Kohl (D-Wis.), chairman of the Senate Judiciary Committee's antitrust subcommittee, sent letters yesterday to the federal agencies overseeing communications and antitrust, calling for an investigation and for action on several regulatory proposals that could give smaller carriers and software firms a better shot at competing.

In the letters to Julius Genachowski, chairman of the Federal Communications Commission, and Christine Varney, head of the Justice Department's antitrust division, Kohl said his recent Senate hearing on increases in text-messaging prices among the biggest carriers represented a "warning sign for the state of competition in the cell phone market."

"I am concerned that the concentrated nature of the cell phone marketplace could lead to future price increases for this and other cell phone services relied upon by millions of Americans," Kohl wrote.

He called for the Justice Department to closely scrutinize future mergers and to investigate whether dominant cellphone carriers are stifling competition in violation of antitrust laws. Over the past three years, the number of national wireless carriers has dropped to four from seven, and the top four carriers serve nine out of 10 cellphone users.

Kohl called for reforms at the FCC that would force the largest carriers to offer partnerships with smaller service providers on data roaming, so that regional-carrier customers can get smartphone service around the country. He also called for the agency to scrutinize the exclusive deals between network carriers and phone makers such as Apple and Research in Motion, which sells the BlackBerry. Smaller carriers say such deals hamper their business as customers look for the latest and fastest phones, which only run on the biggest networks.

Kohl's letter comes as the Obama administration promises to step up enforcement of antitrust violations, which many antitrust experts say will reverberate across high-tech and telecom industries that have seen large market concentrations in certain areas. The Justice Department last week confirmed it was investigating Google's settlement with book authors and publishers, which would give the Internet giant search rights for millions of book titles.

Consumer interest groups and smaller high-tech and telecom firms have met in recent weeks with staffers at the Justice Department, Federal Trade Commission and FCC to press for an investigation of alleged anti-competitive practices among the nation's biggest telecom and wireless companies.

The antitrust division of the Justice Department declined to comment when asked if it has launched such an investigation. The FCC said it would review a petition filed last year by rural wireless carriers calling for reforms that would enhance competition for regional carriers.

The nation's largest carriers said they haven't been contacted by the Department of Justice through the agency's process of civil investigative demands, which calls for documents and interviews to review competitive practices.

"We are not aware of any formal investigation by the Department of Justice, nor have they asked us to provide any information," said Margaret Boles, a spokeswoman for AT&T.

Critics have complained that Verizon and AT&T, which together serve about 60 percent of all wireless customers, use their dominance to push out competition through exclusive contracts with handset makers. They also claim that the carriers have blocked mobile software applications such as the voice service Skype, which competes with their services.

Cellular South in Mississippi and other regional carriers have argued to Congress and the FCC that exclusive contracts steer away customers from their networks because they aren't able to strike similar deals for the iPhone or BlackBerry.

With greater interest by Congress and the FCC in probing the competitive landscape of the wireless and overall telecommunications industry, public interest groups and smaller regional service providers have stepped up their push for regulations that they say would allow for more competition.

"The DOJ is coming to life; for the last eight years they didn't do a lot of this kind of work and now they are jumping on it," said Ben Scott, director of policy for public interest group Free Press. "There is no shortage of regulatory mechanisms to enhance consumer protection in this market."

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