Benchmarks established, other policy aspects clarified in response to T-Mobile petition

The Wireless Telecommunications Bureau has given the wireless industry an early Christmas gift by granting T-Mobile’s Petition for Declaratory Ruling regarding data roaming rates. As we previously reported, back in May, T-MO had asked the FCC to provide the industry with guidance as to what a “commercially reasonable” roaming rate is. The term “commercially reasonable” was imposed on data roaming by the FCC three years ago. (Readers will recall that Verizon challenged the FCC decision in court but lost, leaving the obligation to be commercially reasonable intact.) Since then, though, T-MO and many other smaller carriers have been having trouble negotiating data roaming rates with AT&T and Verizon, as the Big Two carriers have resisted terms that smaller carriers viewed as “commercially reasonable” – a negotiating tactic made possible because the precise metes and bounds of “commercial reasonableness” have never been defined. And therein lies the rub – hence T-MO’s petition.

Numerous carriers, including T-MO, have been trying to negotiate data roaming rates with AT&T and Verizon, only to find that their conception of what is commercially reasonable is a lot different from AT&T and Verizon’s conception. The smaller carriers have complained that the rates offered them by AT&T and Verizon have been anywhere from 8 to 100 times higher than retail rates offered by the big carriers to their own customers. Because “commercially reasonable” is a term new to the communications lexicon, there has been no easy reference point for establishing a benchmark for data roaming. (The more customary standard – applicable to common carrier rates – is that they be “just and reasonable”. That standard predates the 1934 Communications Act itself, with roots in the old rate regulation scheme for railroad traffic.) So despite the court-approved existence of an obligation to offer commercially reasonable rates, data roaming rate negotiations were getting nowhere. This has gotten especially critical in recent months as companies have needed to enter into roaming agreements for LTE traffic, a form of data roaming.

In its petition T-MO asked that the FCC identify “benchmarks” for assessing “commercial reasonableness”:

  • whether a wholesale roaming rate offered to a retail competitor substantially exceeds the relevant retail rate;
  • whether a wholesale roaming rate substantially exceeds roaming rates charged to foreign carriers when their customers roam in the U.S.;
  • whether a wholesale roaming rate substantially exceeds the price for wholesale data service that a seller charges to mobile virtual network operator (“MVNO”) customers; and
  • how the proposed wholesale roaming rate compares to other competitively negotiated wholesale roaming rates

These are similar to benchmarks proposed by other carriers in the complaint and license assignment contexts. T-MO also sought clarification that neither previously agreed-to data roaming rates nor the extent of the requesting carrier’s build-out should not necessarily be determinative of the commercial reasonableness of newly negotiated rates.

The Bureau agreed on all counts.

This does not mean that the battle for reasonable rates is over. Even with the new guidelines, there is still plenty of wiggle room to bargain, and the Big Two can exploit that wiggle room. For one thing, even though the rates offered to MVNOs and other facilities-based carriers can now theoretically inform the rate negotiation process, only the big carriers know what rates they have offered, or are actually charging, other carriers. (All rate negotiations and agreements are cloaked in a shroud of secrecy due to nondisclosure agreements imposed by the majors.) So the utility of that tool is largely blunted unless the industry generally knows what those numbers are. There is pending at the FCC a petition (filed by this blogger on behalf of a client) to require the public disclosure of roaming rates, both voice and data. (You can find a copy of that petition here and links to other related pleadings here.) Favorable action on that petition would give teeth to the benchmarks that rely on comparisons with rates charged to others.

Also, the Bureau emphasized that the benchmarks it has adopted do not function as ceilings or caps for roaming rates. Rather, they are part of the overall matrix of circumstances that bear upon the commercial reasonableness of rates. A hard and fast ceiling would certainly have cut short a lot of the bickering likely to now ensue, but that might also have rendered the FCC vulnerable to the accusation of imposing the dreaded concept of Title II Regulation on a service that at least for now is not subject to such regulation. In the end, it may yet take the filing of actual complaints that consider actual circumstances to put flesh on the bones this decision has generated.

It bears observing that the Declaratory Ruling applies to everyone, including smaller carriers who charge high roaming rates and T-MO itself. To the extent that AT&T and Verizon are net payers of roaming fees – as they have described themselves to the FCC – they are presumably delighted by the ruling. And even T-MO may have to re-examine its own roaming rate structure.

In the end, though, the Declaratory Ruling must be counted as a positive, albeit imprecise and wishy-washy, step in furthering crucial access to nationwide data roaming by all carriers.

Finally, we must observe that the Declaratory Ruling (and another order issued by the Bureau on the same day) aroused the pique, if not the ire, of Republican Commissioners Pai and O’Reilly. Both of them had urged that these items be considered and voted on by the full Commission instead of being handled on “delegated authority” by the Wireless Bureau. In a sense, the Bureau’s Declaratory Ruling in the T-Mobile matter was consistent with the Bureau’s thesis underlying that Ruling, i.e., that the Bureau was simply clarifying a policy adopted by the full Commission in 2011 and therefore full Commission action was not necessary. But the Repubs are being more and more vocal about being run roughshod over both by the Democratic majority and, in this case it seems, by Chairman Wheeler single-handedly. The degree of public contention and dissension on the 8th floor these days is highly unusual in a space where consensus-building has been the norm for decades. Historically, efforts were made to avoid dissenting votes, often through accommodation or compromise with Commissioners who had trouble with some portion of a draft order or policy. No more. Or so it seems from the increasing frequency of dissents by Pai and O’Reilly. No peace on earth or good will toward men in D.C. these days.