Justice Department launches investigation against AT&T and Verizon

According to people familiar with the matter, the Department of Justice has launched an investigation of large U.S. telecommunications companies such as AT&T Inc. and Verizon Communications Inc. in order to show whether they are abusing the market power they have amassed in recent years. The Justice Department's antitrust chief, Christine Varney, has said she wants to reassert the government's role in policing monopolistic and anticompetitive practices by powerful companies. Besides, the review, while in its early stages, is expected to cover all areas from land-line voice and broadband service to wireless.

The telecom review reflects the Obama administration`s philosophy on antitrust thinks Harold Feld, from the consumer advocacy group Public Knowledge. The law that covers such behavior, the Sherman Antitrust Act, has been used in the past against giants ranging from Standard Oil to Microsoft Corp. It lay essentially dormant during the Bush years, with the agency bringing no major case. The telecom industry is among several sectors now coming under scrutiny. Others include health care and agriculture.

The Justice Department is already taking measures against certain agreements. It recently filed an objection to plans by airlines in the global Star Alliance to cooperate more closely on international routes and fares. It has targeted payments large pharmaceutical producers sometimes make to generic-drug makers to delay cheap copies of medicines. In addition, Ms. Varney is investigating Google Inc.'s settlement with authors and publishers over its Book Search product.

Thus, one of the areas that might be explored is whether big wireless carriers are hurting smaller rivals by locking up popular phones through exclusive agreements with handset makers. Lawmakers and regulators have brought up a question about deals such as AT&T's exclusive right to provide service for Apple Inc.'s iPhone in the U.S. Big carriers argue that regulation of specific areas of telecom, including exclusive handset deals, would hurt innovation. Besides, the department may review whether telecom carriers are unduly restricting the types of services other companies can offer on their networks. Public-interest groups have complained when carriers limit access to Internet calling services such as Skype.

Addressing Congress last month Paul Roth, AT&T's president of retail sales and service, said that the billions of dollars the company invests in its network and services would be put at risk if government were to "impose intrusive restrictions on these services or the way that service providers and manufacturers collaborate on next-generation devices." Mr. Roth also added there is plenty of competition and innovation in the wireless industry.

Additionally, Verizon said it has tried to negotiate deals with some small rural carriers, including Cellular South, on certain handsets made by LG Electronics Inc. and Samsung Electronics Co., but the sides haven't been able to agree on final terms. "In the absence of regulation and political interest, we are showing that we're willing to change our business relationship with rural carriers," said a Verizon Wireless spokesman, Jeffrey Nelson.