FCC Will Examine Wireless Competition

Move Could Be a First Step Toward Regulations Designed to Aid Consumers

The Federal Communications Commission is taking a closer look at the practices of the wireless industry, potentially the first step toward more regulations intended to push down prices and increase choices for consumers.

At its first meeting with all five commissioners seated since the inauguration of President Obama, the FCC voted unanimously Thursday to open an inquiry into the state of competition in the wireless industry. The FCC also wants to explore factors that encourage innovation and investment in wireless.

The FCC inquiries are information-gathering exercises and it is too soon to know where they will lead. But the agency faces mounting pressure from public interest groups and Congress to investigate common business practices in a market dominated by four national carriers, including AT&T and Verizon Wireless.

These examinations are likely to look at issues such as spectrum auction rules, roaming obligations and handset exclusivity deals, such as AT&T's contract with Apple to serve as the sole U.S. carrier for the iPhone. The FCC is also looking into expanding "truth in billing" rules, which require phone companies to clearly describe charges on consumer bills.

"It is essential that the commission develop policies that encourage a new generation of innovators, working with new tools, on new platforms, and having an extraordinary impact on our economy and society," said Julius Genachowski, who took over as FCC chairman at the end of June.

The Senate and House have been probing the wireless business as well, holding hearings on such topics as handset exclusivity and text messaging rates.

In July, Sen. Herb Kohl (D-Wis.), chairman of the Senate Judiciary subcommittee on antitrust, competition policy and consumer rights, sent letters to Genachowski and Christine A. Varney, the new head of the antitrust division at the Justice Department, urging them to take action to promote competition in the wireless industry.

The FCC has already sent a strong signal that it intends to step in when it sees potential problems in the industry. Last month, the agency sent letters to Apple, AT&T and Google asking why the Google Voice messaging service has not been approved for use on the iPhone.

Joel Kelsey, a policy analyst at Consumers Union, said regulators will have to consider two main issues: The high switching costs that lock consumers into lengthy contracts, and the practices that make it difficult for smaller rivals to unseat the industry heavyweights. Kelsey would like to see the FCC ban exclusive handset deals.

Genachowski has already said he wants to examine whether such deals are unfair to rural customers who live in places not served by the big wireless companies. With the issue in the spotlight, the industry has started to change its behavior. Verizon Wireless told several top lawmakers last month that it would limit future handset exclusivity deals to six months, letting carriers with up to 500,000 subscribers sell its handsets after that period.

Christopher Guttman-McCabe, vice president of regulatory affairs for the wireless association CTIA, said the industry welcomes the FCC inquiries as a chance to educate policymakers on how competitive the wireless industry is. After all, he said, while much of the attention has focused on the four largest carriers, there are many smaller companies, such as Leap Wireless International and MetroPCS Communications.