Justice: Tough Case Against Telecom

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Investigation Isn't a Given

AT&T and Verizon Wireless, the largest U.S. mobile service providers, say they have not been contacted by the Justice Dept. and have no knowledge of an inquiry. A Justice representative declined to comment, as did spokespeople for Sprint Nextel (S) and T-Mobile USA, the third- and fourth-biggest wireless carriers, respectively.

An internal inquiry may not result in a formal investigation. "At this stage, it could be something they consider but then quietly drop," says Harold Feld, legal director at consumer advocacy group Public Knowledge. Even if it comes to fruition, an internal review could take more than a year, and a resulting lawsuit several more years, says Marc Schildkraut, an antitrust attorney and partner at law firm Howrey.

However hard it may be to build an antitrust case against telecom carriers, the political will to bring regulation to the largely unfettered wireless industry is growing in Washington. On July 6, Senator Herb Kohl (D-Wis.), chairman of the Senate subcommittee on antitrust, competition policy, and consumer rights, sent a letter to the Justice Dept. and the FCC. "It is vitally important that the FCC and the Justice Dept. take action to enhance competition in this market and to remove barriers to competition preventing the emergence of new competitors," he wrote.

New Era Under Obama

Small carriers, seeking the end of exclusive handset agreements, are openly lobbying Congress. "We intend to pursue every avenue for relief," says Eric Graham, vice-president of government relations at carrier Cellular South.

Under President Barack Obama, Justice has taken a decidedly more aggressive stance on antitrust issues. Assistant Attorney General Christine Varney has vowed to return to "vigorous antitrust enforcement action" by the department.

The department also has recently hired several well-known experts who favor increased government regulation of telecom companies. One, former law professor Philip Weiser, argued in 2005 congressional testimony that "today's regulatory regime… is fundamentally flawed." Another recent hire, Gene Kimmelman, had been vice-president for federal and international affairs at Consumers Union, which has long argued for increased government regulation. He also represented consumers during the breakup of AT&T two decades ago. In April, he became the Justice Dept.'s chief counsel for competition policy and intergovernmental relations.

Still, they and other Justice Dept. officials will have a big job taking on Big Telco.

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

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