Court deals blow to Verizon, upholds FCC's data roaming rules

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A federal appeals court upheld the FCC's rules requiring data roaming, dealing a blow to Verizon Wireless (NYSE:VZ), which had sued to block the rules under the argument that the FCC overstepped its authority in passing them.

The U.S. Court of Appeals for the D.C. Circuit disagreed with Verizon, and in a unanimous opinion a three-judge panel said the FCC was well within its rights to set up a rule "requiring mobile-data providers to offer roaming agreements to other such providers on 'commercially reasonable' terms."

The FCC passed the rules in April 2011 on a party-line 3-2 vote. However, there are important limitations on the rules. Carriers offering roaming can negotiate terms on an individual basis, and can ensure that those seeking roaming agreements offer comparable network services. Companies can resolve disputes by filing complaints or seeking declaratory FCC rulings.

Verizon sued to block the rules in May 2011. The company argued that there was no need to codify data roaming deals, which Verizon said it strikes with companies regularly. "Today's ruling upheld rules that require carriers to offer data roaming on commercially reasonable terms," Verizon said in a statement. "As we made clear throughout the case, Verizon Wireless regularly enters into such data roaming agreements on commercially reasonable terms to meet the needs of consumers, and will continue to do so."

The ruling is a significant victory for the FCC, giving the agency enhanced power to regulate wireless service at a time when more broadband traffic is traveling over mobile networks.

Though the FCC won a victory on data roaming, the same may not be true on net neutrality. Verizon and MetroPCS (NYSE:PCS) have filed suit against the FCC's net neutrality rules, also arguing that the FCC overstepped its authority in enacting those regulations. 

"We would urge extreme caution, however, in any attempt to extract solid predictive value from the D.C. Circuit's data roaming ruling with respect to the net neutrality appeal still before the court," Jeffrey Silva, an analyst at Medley Global Advisors, wrote in a research note. "These are two separate cases, involving varying legal theories, legal precedents, statutory underpinnings and regulatory constructions.

Others said the ruling would give weight to the FCC's role in regulating mobile data services. "This does bode well for the FCC's ability to assert its authority in regulating wireless services," Andrew Jay Schwartzman, senior vice president and policy director at public interest group Media Access Project, told the New York Times. "This is the first time these issues have come up in the context of data, which obviously is our future."

The ruling is also a win for smaller carriers, which stand to benefit from the rules. Steve Berry, president of the Competitive Carriers Association, said in a statement that the decision "bodes extremely well for the competitive issue of roaming and other competitive issues that CCA will continue to pursue."  

However, it is unclear how the decision will affect data roaming deals practically in the market. Verizon Wireless said in a May filing with the FCC that it offered MetroPCS an LTE roaming agreement in February, but that MetroPCS did not respond to the offer. Verizon said MetroPCS was stalling on the issue in hopes that the FCC would step in and mandate better roaming terms.

For more:
- see this CNET article
- see this GigaOM article
- see this NYT article
- see this Politico article
- see this Bloomberg article

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