AT&T, Verizon Communications, Frontier Communications and CenturyLink are facing investigation by the Federal Communications Commission (FCC) over the terms they set for enterprise customers in a $20 billion market to carry business data services.
SoftBank-owned Sprint and Level 3 Communications, two competing companies that need to offer the high-speed lines for their business customers’ traffic, have told the FCC they’re unfairly locked into long-term contracts and face large early termination fees, Bloomberg reports.
“New network builders struggle to attract business customers who are held hostage by AT&T and Verizon in lock-up provisions that can extend up to seven years in length,” said Chip Pickering, chief executive officer of the Comptel trade group with members including Sprint, Level 3, Amazon .com and Cogent Communications Holdings.
The four telecom network operators 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 December 18.
“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,” said Frank Simone, AT&T vice president of federal regulatory. “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,” said Walter McCormick, president of the USTelecom trade group with members including AT&T, Verizon, CenturyLink and Frontier.