The nation’s largest wireless carriers offer lower data pricing to their own retail customers than they do to their smaller carrier wholesale roaming partners, according to two small carrier associations. The Rural Telecommunications Group and the National Telecommunications Cooperative Association made their arguments in a letter sent to the FCC on Friday, which included a report from iGR Research showing the retail rates offered by 60 wireless operators for data services.
The report found that Tier 1 wireless operators AT&T, Sprint, T-Mobile and Verizon Wireless charge customers between one cent and six cents per megabyte of data –and even their overage charges run no more than 10 cents per megabyte. Based on these numbers, the RTG and NTCA argue that:
What this all means is that Tier 1 operators’ operational costs to provide mobile wireless data services are significantly below [10 cents] for a megabyte of customer data usage. A retail rate of [10 cents] still affords those Tier 1 operators a healthy profit margin by any rational measure. Yet small and rural mobile wireless operators (who depend upon those national operators to supplement a small or rural operator’s footprint) are charged wholesale data roaming rates that are often five to ten times what Tier 1 retail customers pay. This is not only unsustainable and commercially unreasonable, but it effectively prices small and rural operators out of the marketplace.
Ultimately this harms rural consumers, the associations said, noting that some rural wireless customers must resort to purchasing an additional phone to use when they travel outside their home market. The associations also stated that one in three rural wireless operators pay more to the national carriers for wholesale data roaming services than they are paid for those services.
The RTG and NTCA said they were sending the letter to the FCC to provide the FCC with information that could be used when reviewing challenges to wireless roaming rates. “Operating under the assumption that a wholesale rate should not exceed a retail rate, the FCC will have a clear and conspicuous way to evaluate whether a wholesale data roaming rate is ‘commercially reasonable,’” the RTG and NTCA said.
Wireless carriers have been required to offer data roaming to other wireless carriers at competitive rates since last year when the FCC adopted a data roaming order despite objections from the nation’s largest wireless network operators. At least one of those operators – Verizon Wireless – has challenged that order.
The assertion that small wireless operators are struggling to make a profit is backed up by recent research from the Telergee Alliance – an alliance of accounting firms with a specialty in small rural network operators. Each year the Telergee Alliance conducts an anonymous survey of the nation’s 700 to 800 small incumbent rural telcos and this year’s survey found that small carrier wireless operating expenses represented 93.7% of their wireless revenues.