AT&T, Verizon Said to Face U.S. Probe Over Mobile Technology

(Bloomberg) -- AT&T Inc. and Verizon Communications Inc. are under investigation by U.S. antitrust officials over whether the companies colluded to make it tougher for consumers to switch wireless carriers, according to three people familiar with the matter.

Apple Inc., a pioneer in the eSIM technology that makes switching easier, was joined by other equipment makers in complaining to the government about the carriers’ practices, two other people with knowledge of the matter said. The department issued demands to the companies and the GSMA, a mobile industry standards group, for information on possible collusion, said the people, who asked not to be named because the matter isn’t public.

Regulators have pressured the phone companies to make it easier for consumers to switch carriers. The big four -- Verizon, AT&T, T-Mobile US Inc. and Sprint Corp. -- agreed in 2013 to let consumers use smartphones on other networks after contracts expire. The following year President Barack Obama signed legislation giving consumers the freedom to switch between wireless carriers without having to purchase a new phone.

‘Difference of Opinion’

Verizon spokesman Rich Young said in an emailed statement that the matter is “a difference of opinion with a couple of phone equipment manufacturers regarding the development of e-SIM standards. Nothing more.” GSMA declined to comment. A spokeswoman for the Justice Department didn’t respond to a request seeking comment.

AT&T said it’s aware of the investigation and has provided information to the government in response to its requests. The company said it “will continue to work proactively within GSMA, including with those who might disagree with the proposed standards, to move this issue forward.”

Verizon and AT&T fell on the news. Verizon closed down 1.1 percent to $47.90 after losing as much as 2.5 percent. AT&T, which is fighting the Justice Department’s efforts to block its takeover of Time Warner Inc., dropped 1.9 percent but recovered to close at $34.67, down 0.4 percent.

While the Justice Department is investigating AT&T and Verizon, it sent letters to the four major carriers when it opened the probe in February, two people with knowledge of the matter said. The New York Times reported on the antitrust inquiry earlier Friday.

The technology in eSIM -- short for electronic SIM -- allows users to switch between carriers via a settings menu directly from their phone or tablet. This makes it easy for consumers to swap between wireless carriers without physically popping the SIM card chip out or contacting their wireless carrier.

Standards Groups

“Standards-setting bodies are both extremely valuable, and create an opportunity for collusion,” said John Bergmayer, senior counsel at Public Knowledge, an advocacy group focused on copyright, telecom and the internet. “Incumbent firms have shown themselves willing to use every tool at their disposal to block competition. The DOJ must investigate this alleged collusion swiftly to protect the rights of American consumers.”

Apple rolled out the technology with some of its latest iPad models in 2016, but has thus far not introduced it in smartphones. While the iPad does have the technology, not all carriers use it. On its website, Apple says, “if you buy one of these models at a carrier, the embedded Apple SIM might be locked to that carrier or disabled.”

T-Mobile and Sprint allow iPad users to switch between carriers via a menu on the iPad, while AT&T users can use the eSIM but not to switch to another carrier. Verizon doesn’t support it at all. Alphabet Inc.’s Google added the feature to its latest Pixel phones last year, while other phone makers internationally are known to be working on devices with the eSIM functionality.

The issue appears to center on the ability of the incumbent telephone provider to influence whether a phone being switched to a new provider will be recognized by the new network, said Harold Feld, a senior vice president at Public Knowledge.

The reports about the investigation come as AT&T completed the fifth week of an antitrust trial brought by the U.S. The Justice Department’s antitrust division sued to block AT&T’s $85 billion acquisition of Time Warner because it would give the combined companies too much negotiating leverage and increase TV prices for consumers.

Observers of the trial say AT&T appears to have an advantage after exposing weaknesses in the government’s pricing power claims.

--With assistance from Todd Shields

To contact the reporters on this story: David McLaughlin in Washington at dmclaughlin9@bloomberg.net, Mark Gurman in San Francisco at mgurman1@bloomberg.net, Scott Moritz in New York at smoritz6@bloomberg.net.

To contact the editors responsible for this story: Sara Forden at sforden@bloomberg.net, Rob Golum

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