FCC: The Mobile Crackdown Cometh

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Here's why: Regulators may be hard-pressed to prove that other areas of concern by smaller wireless carriers, such as the exclusive iPhone deal between Apple and AT&T, impede competition. "I don't see how they can do it," says Harold Furchtgott-Roth, an economic consultant and former FCC commissioner. There are three to four carriers servicing any given market in the U.S., and small service providers such as MetroPCS (PCS) and Leap (LEAP) have grown quickly.

Apps and data services, meanwhile, represent a ripe area for new rules from Washington. The burgeoning mobile data market is largely unregulated, and small carriers such as Cellular South and consumer advocacy groups, including Public Knowledge, say the large carriers aren't allowing users to send e-mail and access the Web from phones using their services when traveling outside their home states. "Consumers are not getting the services they deserve," says Eric Graham, a vice-president at Cellular South. The FCC also provides little guidance on how wireless carriers need to break out data charges on consumer bills. Whether carriers have the right to block certain text messages is another issue of contention.

The Gatekeeper Debate

Use of data services is skyrocketing, which could serve as an impetus for reform as well. Back in 2005, wireless data services contributed only 7.5% of the carriers' total revenues, and much of that came from basic text-messaging. By the end of 2008, data services accounted for 22% of total revenues and reached $32.3 billion, according to the industry association CTIA.

As data services have gained momentum, they shifted some power away from carriers. Nowadays, Apple's App Store drives many people to use AT&T's network. The store offers more than 65,000 apps from thousands of independent developers.

Google has suggested that Apple now acts as a gatekeeper, deciding who gets access to wireless subscribers. While the FCC may not have the authority to regulate Apple, it may be able to tell carriers whether they can restrict or reject an application.

AT&T and other carriers argue that their networks' capacity is finite and that certain applications, such as Web-calling and video, may clog up those networks. Certain apps could also eat into their revenues, such as those that let users skirt international calling charges. The arguments are similar to those posed earlier in the so-called net neutrality debate, which centered on whether cable service providers had the right to hinder use of applications such as peer-to-peer video sharing on their networks.

Similar changes may be coming to the wireless market as well.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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