In closing the Obama-era investigation, the government said that while mobile carriers had pushed for new industry policies that raised competitive concerns, their initiative proposed little more than a “technical capability” for cellphones without clearly demonstrating how or if companies such as AT&T and Verizon might use it to gain an unfair advantage.
The investigation could be reopened if the proposed policies raised further concerns after implementation, the Justice Department indicated in the letter, whose authenticity was confirmed by multiple people familiar with the matter. While some of the policies have been approved for inclusion in the final standard governing cellphones, the overall policy remains in the drafting phase and has not yet been implemented.
The Justice Department declined to comment. AT&T didn't immediately respond to a request for comment. Verizon, in a statement Saturday, accused other companies in the wireless industry of creating a “make-believe issue” for regulators.
“The Government looked at this issue once before,” said Verizon. “Their findings were quite clear then, and we're confident the outcome will be the same this time … the reality is that there's nothing to substantiate it. It's time to move on.”
Verizon ended 2017 with over 116 million wireless customers. AT&T ended the year with over 156 million wireless customers in Mexico and the United States.
The “technical capability” highlighted by the Justice Department concerns the development of eSIMs — a relatively new technology that could someday allow consumers to switch wireless providers with little more than a few taps on their smartphone screen. Unlike the small, physical SIM cards that must be plugged into devices to register them on cellular networks today, eSIMs are integrated directly into electronic devices and rely on software that makes it a trivial matter to change from AT&T's network to T-Mobile's, for example.
“An eSIM, or embedded SIM, stores the data on the device itself,” said Ferras Vinh, a policy lawyer at the Center for Democracy and Technology. “It serves the purpose of a physical SIM card and lets consumers choose their carrier [remotely].”
The technology is already available in smartphones like Google’s Pixel 2.
The proposal by some wireless carriers at the GSM Alliance, an international forum for the wireless industry, would have imposed restrictions on eSIMs in North America. Under the limitations, consumers would not be able to use the remote-switching feature of eSIMs without first obtaining permission from their existing carrier.
Key elements of the proposal had already been approved by GSMA when the Justice Department intervened with its investigation in the summer and fall of 2016. The government’s inquiry ended up delaying the proposal’s advance, though it ultimately moved forward again after Justice suspended its investigation.
The government’s latest investigation resembles the 2016 probe in most respects, with officials requesting information on the standards-setting process, according to two people familiar with the matter. Then, as now, all four national wireless carriers received requests from the government for information.
But since 2016, wireless carriers have pushed to include an additional rule in the proposed cellular standard, one that would prevent consumers from circumventing the proposed carrier restrictions on eSIMs by performing a factory reset of their device. GSMA members were set to vote on that proposal in March — but it was postponed in light of the Justice Department’s ongoing inquiry. It is unclear whether the new rule is a focus of the probe.
News of the investigation comes as the Justice Department's trial to block AT&T's $85 billion Time Warner merger draws to a close. Among the government's arguments in that case is that AT&T could collude with companies such as Comcast to restrict competition in the market for subscription television.