U.S. Said to Investigate AT&T and Verizon Over Wireless Collusion Claim
U.S. Said to Investigate AT&T and Verizon Over
Wireless Collusion Claim
By CECILIA KANG APRIL 20, 2018
WASHINGTON — The Justice Department has opened an
antitrust investigation into potential coordination by AT&T, Verizon and a
telecommunications standards organization to hinder consumers from easily
switching wireless carriers, according to six people with knowledge of the
inquiry.
In February, the Justice Department issued demands to
AT&T, Verizon and the G.S.M.A., a mobile industry standards-setting group,
for information on potential collusion to thwart a technology known as eSIM,
said two of the people, who spoke on the condition of anonymity because the
details are confidential.
The technology lets people remotely switch wireless
providers without having to insert a new SIM card into a device. AT&T and
Verizon face accusations that they colluded with the G.S.M.A. to try to
establish standards that would allow them to lock a device to their network
even if it had eSIM technology.
The investigation was opened about five months ago after
at least one device maker and one wireless carrier filed formal complaints with
the Justice Department, two of the people said.
Representatives for the Justice Department, AT&T,
Verizon and the G.S.M.A. declined to comment.
At the heart of the investigation is whether the nation’s
biggest wireless carriers, working with the G.S.M.A., secretly tried to
influence mobile technology to unfairly maintain their dominance, in a way that
hurt competition and consumers and hindered innovation in the wider mobile
industry.
AT&T and Verizon together control about 70 percent of
all wireless subscriptions in the United States. A technology that made it easy
to switch carriers could lead to more turnover and fewer subscribers for them.
The investigation highlights a push by the Justice
Department’s antitrust chief, Makan Delrahim, to crack down on the opaque world
of intellectual property, or I.P., standards. He has said the Justice
Department will scrutinize potential coordination in standards-setting
organizations that can hurt competition.
“In the context of antitrust and I.P., we will be
inclined to investigate and enforce when we see evidence of collusive conduct
undertaken for the purpose of fixing prices, or excluding particular competitors
or products,” Mr. Delrahim said in a speech this month at a conference in
Washington. He previously warned of the potential for “cartel-like behavior” by
competitors that got together with standards-setting organizations.
At the same time, the Justice Department is suing
AT&T to block its $85.4 billion merger with Time Warner. Mr. Delrahim has
said the deal will hurt competition and lead to higher prices for cable
customers. AT&T and Time Warner have strongly disputed the claims in a federal
trial that is expected to end this month.
Currently, most mobile phones use SIM cards, which
contain unique identifying information about a user and are inserted into the
devices so the phones can function. People typically have to buy a new SIM card
when changing carriers.
The eSIM technology, which was introduced in early 2016,
is embedded in mobile phones and other devices so that people do not need SIM
cards anymore.
The eSIM technology is supported by gadget makers
including Apple, Google and Microsoft, as well as several wireless carriers
globally and in the United States. The Apple Watch 3, Google Pixel 2 smartphone
and Microsoft Surface all have eSIM abilities, for example. The technology
would make it easier for people to use local carriers when traveling
internationally and would free up storage space in devices to use for other
technologies like bigger processors and batteries.
The push by the major carriers to restrict the
flexibility of eSIM runs counter to a movement in which consumers were gaining
more flexibility to move from carrier to carrier. In late 2013, under pressure
by the Federal Communications Commission, the wireless industry agreed to let
people take devices off any particular network without penalty once the devices
were fully paid for.
After the formal complaints against AT&T and Verizon
were filed, several device makers and other wireless companies voiced similar
concerns to the agency about the carriers’ actions around eSIM, four people
familiar with the investigation said. The investigation may also include other
major American carriers, another person said.
“The actions would limit choice for consumers and harm
competition,” said Ferras Vinh, a policy expert at the Center for Democracy and
Technology.
In a private meeting of a task force called G.S.M.A.
North America this year, AT&T and Verizon pushed for the ability to lock
phones to their networks, bypassing the purpose of eSIM technology, said Harold
Feld, a senior vice president of Public Knowledge, a nonprofit consumer group,
who was briefed on the meeting. Verizon has said it needed to be able to lock down
phones to prevent theft and fraud.
“There is a constant problem with industry
standards-setting organizations that on the one hand allow the industry to come
together for the purpose of efficiency but can be very anticompetitive and
operate in secrecy,” Mr. Feld said.
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