AT&T;, Verizon Forced to Let Rivals Use Networks For Data

The AT&T; Inc. logo is seen at the Mobile World Congress in Barcelona. Photographer: Denis Doyle/Bloomberg

AT&T Inc. (T) and Verizon Wireless must let smaller competitors use their networks for mobile Internet service under rules approved today by a divided Federal Communications Commission.

The agency voted 3-2 with Democrats approving and Republicans dissenting to require large wireless carriers to strike commercial agreements with smaller carriers. Such agreements are voluntary now.

The rule extends to data traffic the network-sharing arrangements that already are mandatory for voice calls. The measure was opposed by Verizon, the largest U.S. wireless provider, and Dallas-based AT&T, which would vault to No. 1 if it completes its proposed $39 billion purchase of Deutsche Telekom AG (DTE)’s T-Mobile USA Inc.

“Roaming deals are simply not being widely offered” and the requirement will spur investment and promote competition, said Julius Genachowski, the agency’s chairman.

“The commission simply does not have the legal authority” to adopt today’s rules, said Robert McDowell, a Republican commissioner who voted against the measure.

Data-roaming agreements let wireless customers use their devices to connect with Internet sites and e-mail outside their home areas, just as voice roaming lets them connect calls as they travel. Data services are growing in importance as customers increasingly turn to Web-enabled smartphones and tablet devices, such as Apple Inc. (AAPL)’s iPad.

Commercially Reasonable Terms

The FCC order approved today requires carriers to strike agreements on commercially reasonable terms. Carriers unable to reach agreements may appeal to the FCC.

AT&T and Basking Ridge, New Jersey-based Verizon Wireless opposed the measure. Carriers have scores of roaming agreements so there’s no need for regulation, and the agency lacks authority over data services, the companies said in FCC filings.

The FCC’s action “is a defeat for both consumers and the innovation fostered by true competition” and “a new level of unwarranted government intervention in the wireless marketplace,” Tom Tauke, Verizon executive vice president of public affairs, policy and communications, said in an e-mail.

“A data-roaming mandate is unwarranted and will discourage investment,” Robert Quinn, AT&T chief privacy officer and senior vice president of federal regulatory, said in an e-mail today. “Proponents of a roaming mandate were seeking government intervention, not to obtain agreements -- which are plentiful -- but rather to regulate rates downward.”

‘Historically Significant’

The agency’s action “certainly will be viewed as historically significant,” Steven Berry, president of the Rural Cellular Association, said in an e-mail. The Washington-based group represents almost 100 companies, according to its website, and members include U.S. Cellular Corp. and Atlantic Tele- Network Inc.

“Consumers will benefit from a more competitive marketplace, and carriers will be encouraged to invest in advanced networks,” Berry said.

The FCC’s data-roaming rule is negative for AT&T and Verizon Wireless and positive for independent carriers, including Sprint Nextel Corp. (S), seeking to expand their mobile broadband offerings, Rebecca Arbogast and David Kaut, Washington-based analysts for Stifel Nicolaus & Co., said in a note today.

Companies potentially benefitting also include MetroPCS Communications Inc. (PCS) and Leap Wireless International Inc. (LEAP), they said.

The agency also voted 5-0 to lower rates that telephone companies pay to attach lines to utility poles. The step is part of a set of policies for extending the reach of broadband, or high-speed Internet service.

Verizon dropped 9 cents to $37.76 at 4:01 p.m. in New York Stock Exchange trading. AT&T gained 7 cents to $30.54 at 4 p.m.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net