AT&T, Verizon Named in U.S. Probe of $20 Billion Data Market

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By Todd Shields

Oct. 16 — AT&T Inc. and Verizon Communications Inc. are among companies being investigated by U.S. regulators over terms set for business customers in the $20 billion market to carry high-speed data. Four companies, including AT&T Inc. and Verizon Communications Inc., are being investigated by the Federal Communications Commission over the terms they set for business customers in a $20 billion market to carry high-speed data.

Competing companies that need to rent the high-speed lines for their customers' traffic, such as Sprint Corp. and Level 3 Communications Inc., have told the FCC they're unfairly locked into long-term contracts and face large early termination fees.

"New network builders struggle to attract customers who are held hostage by AT&T and Verizon in lock-up provisions that can extend up to seven years in length," Chip Pickering, chief executive officer of the Comptel trade group with members including Sprint, Level 3, Amazon.com Inc. and Cogent Communications Holdings Inc., said in an e-mail.

Business data services are dedicated network connections often used by banks, manufacturers, schools and other organizations that need to transport large amounts of data. They include, for instance, the lines connecting cash-dispensing automated teller machines to banks and credit unions.

The other companies named in the investigation are Frontier Communications Corp. and CenturyLink Inc.

'Complicated Web'

Competitors say the four companies use pricing plans with "a complicated web of all-or-nothing bundling, loyalty and term commitments, complex enforcing penalties" and other provisions, the FCC said in an order . "They assert that the effect is to lock up substantial proportions of carrier and end-user demand, which locks out competition."

The FCC said it had found "potentially unjust and unreasonable practices" that raise "sufficient questions regarding the lawfulness of certain terms and conditions."

The agency asked the four companies to respond by Dec. 18.

'Anti-Competitive Contracts'

The probe will confirm market failure that "has enabled a few powerful firms to leverage their dominance to extract excessive fees as part of anti-competitive contracts," said Jeff Silva, a Sprint spokesman.

The FCC's probe is "perplexing," Frank Simone, AT&T vice president of federal regulatory, said in an e-mailed statement. "The terms the commission is reviewing are commonplace in most commercial contracts."

Ed McFadden, a spokesman for Verizon, said the plans "have been in place for years and reflect reasonable agreements."

Terms and conditions "are fair and lawful," Walter McCormick, president of the USTelecom trade group with members including AT&T, Verizon, CenturyLink and Frontier, said in a statement.

To contact the reporter on this story: Todd Shields in Washington at +1-202-624-1909 or tshields3@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at +1-202-654-7370 or jmorgan97@bloomberg.net; Elizabeth Wasserman