As T-Mobile US (NYSE:TMUS) and AT&T Mobility (NYSE: T) continue to duel over potential changes to the FCC's data roaming rules, a filing by an economics professor in support of T-Mobile's position reveals that in 2013, T-Mobile paid an average 30 cents per MB for data roaming data in the U.S.
The economist, Joseph Farrell, argues that the figure is 3.6 times the retail data rate Verizon Wireless (NYSE: VZ), charges its own customers, 6 times the retail rate for AT&T and more than 10 times the rate at Sprint (NYSE: S). However, in 2012, T-Mobile paid almost 86 cents per MB in data roaming charges and in 2011 in paid almost $1.20 per MB. Those figures have likely fallen as T-Mobile has built outs its network coverage, especially for LTE.
Farrell, who served as the FCC's chief economist from 1996-1997 and is now a professor at the University of California-Berkeley, argued in his filing to the FCC on T-Mobile's behalf that when deciding whether a proposed data roaming rate or agreement is commercially reasonable, the FCC "should be especially concerned about high rates charged to a significant retail competitor that lacks adequate alternative roaming providers," as is the case with T-Mobile and AT&T.
T-Mobile last spring launched a campaign to get the FCC to issue new guidance and enforcement criteria on data roaming agreements. The campaign is an attempt to get the agency to revisit its 2011 data roaming order that required wireless carriers to provide data roaming on "commercially reasonable" terms. Specifically, T-Mobile is asking the FCC to issue "benchmarks" on the cost of roaming rates. The carrier is also asking the commission to clarify that current roaming rates aren't necessarily indicative of "commercially reasonable" roaming rates, and to clarify rules related to locations where carriers do not yet operate networks but are requesting roaming.
T-Mobile has argued that, despite the FCC's 2011 data roaming order, it cannot obtain commercially reasonable roaming rates from AT&T. AT&T has fired back that T-Mobile's proposal would eviscerate the current rules and that T-Mobile hopes to rely on roaming to provide coverage instead of spending money to build out its network.
Although Farrell writes in the filing that none of the benchmarks he outlines "is or can be ideal," he argues the FCC should consider things like whether a roaming rate offered to a competitor greatly exceeds "a suitable measure of retail price," meaning, a figure designed not to underestimate effective retail prices of data services. The FCC should also consider whether a wholesale roaming rate "substantially exceeds" roaming rates charged to foreign carriers when their customers roam in the United States, he wrote.
Additionally, he said the FCC should consider the price for wholesale data service that a seller charges to MVNO customers. Finally, he added, the FCC should also consider the general level of prevailing domestic wholesale roaming agreements, which he acknowledged would be complicated based on changes in technology, costs, consumption patterns and market competition.
Interestingly, the study found that the average domestic wholesale roaming rate that T-Mobile paid in 2013, of 30 cents per MB, is more than 10 times the average rate that T-Mobile charged its own MVNOs during that year.
For more:
- see this Prepaid Phone News article
- see this FCC filing (PDF)
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