Verizon Wireless Settles with FCC: Consumers Go Forth and Tether

Mobile App and Hotspot consumers gained a breadth of freedom this past summer with Verizon’s settlement with the  Federal Communications Commission (“FCC”) of a claim resulting from an investigation of the cell phone service provider’s practice of charging data customers a $20 fee for tethering[1] their cell phones.[2] The fee was instituted in direct violation of the rules Verizon was mandated to adhere to as the auction winner of the C Block of 700 MHz spectrum in 2008.[3] The rules, primarily introduced to the FCC by Google, asked for the C Block license holder to uphold certain open access principles.[4] Google presented these four “open-access” principles: open applications, open devices, open services and open networks.[5] In the end, the FCC only adopted the open devices and open applications requirement as part of the C Block 700MHz spectrum license.[6]

The auction of this C Block of the spectrum would create massive market strength and control for the license holder, therefore, industry players and interest groups sought to mitigate the competition by calling for more regulation.[7] The 700 MHz spectrum was a hot commodity because the length of radio waves on it enables wider range and more consistent service for cell phone providers. This spectrum became available as a result of analog television converting to digital in 2009.[8] As predicted by industry analysts prior to the spectrum’s auction, the spectrum is used as the foundation of what we now know to be 4G LTE networks.[9]

Verizon defended its tethering fee explaining that customers with unlimited data plans were able to share their data with an unlimited population of wireless devices and such activity was bound to have negative operational effects on its network.[10] Verizon implemented the tethering fee in hopes of supplementing the cost of the additional data the customer would be sharing among multiple devices.[11] This in itself makes sense to most consumers, however, the issue lied in the fact that Verizon was also charging the $20 tethering fee to customers whose data plans were limited, hence, these customers were being charged extra for using only what they had already paid to use![12] Furthermore, Verizon was also limiting access to tethering apps for its customers by requesting Google to make tethering apps invisible from its Android application market on Verizon’s C Block customers’ phones.[13]

The FCC began investigating the matter in 2011 and after preliminary inquiry, Verizon decided to settle without admitting any fault, agreeing to pay $1.25 million to the Department of Treasury in exchange for the termination of the investigation.[14] The FCC touted the settlement as a message that “compliance with FCC regulations is not optional.”[15] The settlement also stipulates that Verizon will not charge any new customer a tethering fee, which is now more than fair since Verizon has done away with its unlimited data plans.[16] Verizon customers grandfathered into the unlimited data plans will have to continue to pay the $20 tethering fee and current customers with limited data plans and enrolled in the tethering allowance program may cancel their membership without penalty.[17]

Considering that Verizon was blatantly requesting the cooperation of Google to violate the C Block rules that were brought into existence by Google, it is not hard to see that Verizon certainly made its bed and Google probably tucked them in real tight.



[1] Tethering allows a cell phone with data transmission to be used as a wireless modem providing other wireless devices with data service.

[2] In the Matter of Cellco P’ship d/b/a Verizon Wireless, 27 F.C.C.R. 8932 (2012).

[3] 47 C.F.R. § 27.16 (Licensees offering service on C Block spectrum “shall not deny, limit, or restrict the ability of their customers to use the devices and applications of their choice on the licensee’s C Block network”).

[4] Anne Broache & Marguerite Reardon, FCC Approves Some Open Wireless Requirements, CNET (July 31, 2007 4:56 PM), http://news.cnet.com/FCC-approves-some-open-wireless-requirements/2100-1039_3-6199990.html.

[5] Id. (Google’s motivation was founded on its interests as a leading third party application aggregator concerned with maintaining access to the major service providers’ customers.  Google wanted to insure that the holders of the new spectrum licenses would not interfere with its ability to reach the app consumers bound to be present in this new spectrum.).

[6] Id.

[7] Brian Patrick Eha, Regulator Smacks Verizon for Blocking Mobile Apps, CNNMoney (July 31, 2012 6:57 PM), http://money.cnn.com/2012/07/31/technology/verizon-tethering-apps/index.htm (Other licenses of the 700 spectrum are not subject to these rules, which is why AT&T and T- Mobile continue with their tethering fees.).

[8] FCC, 700 MHZ, FCC, http://www.fcc.gov/topic/700-mhz.

[9] Marguerite Reardon, Verizon Wins ‘Open Access’ Licenses in FCC Auction, CNET (March 20, 2008, 1:38 PM), http://news.cnet.com/8301-10784_3-9899829-7.html.

[10] Press Release, Fed. Commc’n Comm’n, Verizon Wireless to Pay $1.25 Million to Settle Investigation Into Blocking of Consumers’ Access to Certain Mobile Broadband Applications (July 31, 2012) available at http://www.fcc.gov/document/verizon-wireless-pay-125-million-settle-investigation.

[11] Id.

[12] Id.

[13] Eha, supra note 6.

[14] In the Matter of Cellco P’ship d/b/a Verizon Wireless, 27 F.C.C.R. 8932 (2012).

[15] Press Release, supra note 9.

[16] In the Matter of Cellco P’ship, 27 F.C.C.R. at 8932.

[17] Marguerite Reardon, What Verizon’s FCC Tethering Settlement Means to You (FAQ), CNET (August 2, 2012 10:53 AM), http://news.cnet.com/8301-1035_3-57485518-94/what-verizons-fcc-tethering-settlement-means-to-you-faq/.

Author: Cameryn Hinton

Cameryn Hinton is a Senior Editor with the Journal. She is a New Jersey native and received her Bachelor's of Science degree in Business & Technology at Stevens Institute of Technology. Cameryn aspires to specialize in Intellectual Property law and practice Corporate Law. She has held internships with: Suffolk County District Courts; Missing Link Music, a music publisher and catalog administrator; and Verizon, as a legal intern supporting the Corporate Services Group. Cameryn also served as the Intellectual Property extern for Rutgers' Office of Technology Commercialization in which she assisted Licensing Directors and General Counsel with Rutgers' technology transfers. Cameryn is a member of the Black Women in Entertainment Law organization, as well as Rutgers' Entertainment and Sports Law Society.

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