Will the Carriers Kill the Mobile Revolution?

Verizon's ugly ploy to squeeze out small carriers

If you live in a big city, you've probably never heard of Blue Grass Cellular. But to millions of people living in rural areas, companies like Blue Grass offer the best -- in some cases, the only -- local service you can buy. You might think that the survival of those companies isn't your problem. But it is.

To stay in business, companies like Blue Grass have to make roaming agreements with the big national carriers. Those agreements allow their subscribers to have service when they travel to other regions. Without those agreements, subscribers who want service when they're away from home would be forced to sign up with Verizon Wireless, T-Mobile, Sprint, or AT&T, further bolstering these already large and powerful companies.

To protect the small carriers and their customers, the FCC earlier this year passed what sounds like a very reasonable rule: Mobile broadband providers must provide data roaming to other carriers "on commercially reasonable terms and conditions." The carriers offering roaming services still have the freedom to negotiate agreements with smaller carriers individually, but they can't arbitrarily turn them down or make charges so high that customers couldn't afford them.

And that's something they've done in the past, says Steven K. Berry, the CEO of the Rural Cellular Association, which represents about 100 carriers.

But Verizon Wireless doesn't want to abide by that rule and is suing in a federal court to have it thrown out. "It is not at all surprising that Verizon Wireless is appealing the data roaming order. Verizon has fought competitive policies for a long time. They have opposed data roaming, they have opposed interoperability, and they have opposed putting an end to exclusive handset deals," says Berry.

Simply put, Verizon Wireless is trying to reduce the market to fewer and fewer players. The bigger Verizon Wireless and its rival AT&T become, the more leverage they have to set prices and terms of services across the country. Already, they together control about three-quarters of the market. Why hasn't AT&T jumped in as well? "In sports parlance, this is the equivalent of what you would call a tag-team match. If AT&T is not there to fight a logical competitive policy decision, then Verizon will step in to complete the tag-team operation for the duopoly," Berry says.

Verizon Wireless argues that it does sign agreements with small carriers. "The reason that we're filing the appeal is we just think that the voluntarily negotiated agreements have been working," a company spokesperson said.

NEXT: Opposition to AT&T's T-Mobile Land Grab

Subscribe to the Best of PCWorld Newsletter