Verizon: Collusion with AT&T Is 'Make-Believe Issue'

The U.S Department of Justice is putting the heat on AT&T and Verizon for allegedly colluding.

The federal government is probing the two companies and GSMA, an organization overseeing mobile operators, Reuters reported last week. The DoJ reportedly is seeking information on if the two telecommunications companies worked together to “thwart” eSIM technology. The purpose of eSIM is to replace a mobile phone’s physical SIM card and allow customers to more easily switch to a new wireless carrier.

Sources suggested to Reuters that other carriers might be receiving information requests from the government.

AT&T and Verizon say they are cooperating and providing information. Verizon has adamantly denied the claims of collusion, saying it is a “make-believe issue” that other wireless companies are foisting onto their two largest competitors, according to the Washington Post.

“The government looked at this issue once before,” Verizon said in a statement provided to the Post. “Their findings were quite clear then, and we’re confident the outcome will be the same this time … the reality is that there’s nothing to substantiate it. It’s time to move on.”

The Post writes that certain wireless carriers made a proposal at the GSMA forum to restrict the use of eSIM technology in North America.

“Under the limitations, consumers would not be able to use the remote-switching feature of eSIMs without first obtaining permission from their existing carrier,” Brian Fung and Tony Romm wrote.

The Justice Department investigated that proposal in 2016 and caused the vote to be put on hold.

AT&T said in a statement that it will continue to work with GSMA and regulators and “those who might disagree with the proposed standards.”

“We are aware of the investigation into GSMA’s process for developing eSIM standards that provide a better experience for consumers,” the company said.

J.P. Morgan analyst Philip Cusick wrote that the probe could subject carriers to further scrutiny down the road. Bloomberg writes that the federal government is cracking down on anticompetitive practices, citing the Justice Department’s lawsuit against AT&T’s acquisition of Time Warner. Regulators and AT&T’s unions have spoken out against the deal.

But Philip points to Sprint as a company that might suffer the consequences of this investigation.

“While the DoJ and IRS have brought other probes against fixed and wireless providers in the past, we have never seen a substantial impact from those and would be surprised to see a painful outcome for carriers in this one,” Cusick said. “However, it is worth noting that, while we see the wireless industry as highly competitive, a DoJ view that carriers are colluding could mean that a potential Sprint + T-Mobile merger would face higher scrutiny, making us somewhat less optimistic about that deal.”