Aug. 21 (Bloomberg) -- The Federal Communications Commission is examining whether AT&T Inc. and Verizon Wireless stymie wireless competitors by denying them connections and making it hard for subscribers to switch providers.

FCC Chairman Julius Genachowski has asked fellow commissioners to vote approval for a broad inquiry into wireless industry practices at the agency’s Aug. 27 meeting.

The agenda for the meeting lists proposed inquiries into the “status of competition,” how to “encourage innovation and investment” and ways to “empower American consumers” with information about services.

The agency probably will look for evidence that AT&T and Verizon, which have a combined 60 percent of the U.S. market, engage in anti-competitive behavior, said Andrew Jay Schwartzman, a Washington communications attorney who has followed the FCC for more than 30 years. The probe may signal President Barack Obama’s intention to step up scrutiny of antitrust matters generally, he said.

“The willingness to investigate these questions foretells an administration willing to take on large operators,” said Schwartzman, who is president of Media Access Project, a nonprofit law firm.

Among practices the FCC may question are terms for connecting rival companies’ calls, fees for access to lines that move high-volume traffic, the length of contracts tying subscribers to carriers, and fees charged customers when they want to leave a contract early, according to an FCC official who declined to be identified discussing the plans.

Apple, Palm

“The commission is taking a proactive approach to better understand practices in the wireless market,” Jen Howard, a spokeswoman, said in an e-mailed statement.

Genachowski, a Democrat appointed by Obama, took office June 29. The chairman wasn’t available to comment, Howard said.

The agency said June 18 it was investigating whether consumers are shortchanged by carriers’ exclusive contracts for wireless handsets, such as deals linking Apple Inc.’s iPhone to AT&T, Palm Inc.’s Pre to Sprint Nextel Corp. and Research In Motion Ltd.’s BlackBerry Storm to Verizon.

Separately, the FCC is reviewing a complaint by EBay Inc.’s Skype unit that wireless carriers block consumers from using Skype’s Internet-based calling services.

The FCC also has sent letters to Apple, AT&T and Google Inc. asking about Apple’s rejection of Google Voice for the App Store, a Web site where consumers can download applications for the iPhone. Google Voice offers lower-cost calling and text service. Responses to the letters are due today.

FCC’s Reach

“We are being reviewed, and I think it’s fair to say we have some work to do to educate policy makers,” said Christopher Guttman-McCabe, vice president for regulatory affairs for CTIA-The Wireless Association.

Steve Largent, chief executive officer of the Washington- based trade group, said he expected the FCC to hold hearings.

“There’s not even any hesitation in welcoming the FCC or anybody else to investigate exactly how competitive this industry is,” Largent said.

The FCC’s regulatory reach in the wireless industry includes approval of mergers and administering rules that aim to bolster competition, such as letting customers keep phone numbers when they switch carriers.

Basking Ridge, New Jersey-based Verizon Wireless is “very much looking forward to beginning the dialogue” about its services, spokesman Jeffrey Nelson said.

“We like the fact that this new FCC and the new chairman seem to be very data-driven,” said Michael Balmoris, a Washington-based spokesman for AT&T, in an e-mailed statement. “When you look at the facts in the wireless industry, you see a lot of choice and variety.”

‘Two Gorillas’

U.S. consumers pay less and have more choice of service providers than those in other countries, Guttman-McCabe of CTIA said. The association represents 275 companies including the four largest U.S. wireless carriers: Dallas-based AT&T; Deutsche Telekom AG’s T-Mobile unit; Overland Park, Kansas-based Sprint Nextel; and Verizon Wireless, owned by Verizon Communications Inc. and Vodafone Group PLC.

The four carriers serve about 90 percent of U.S. wireless subscribers, and AT&T and Verizon account for about 60 percent, said Joel Kelsey, Washington-based policy analyst for Consumers Union, the non-profit publisher of Consumer Reports magazine. Verizon Wireless reported having 87.7 million customers in a July 30 filing, and AT&T said in an Aug. 5 filing that it had 79.6 million wireless subscribers.

“You’ve got two 10,000-pound gorillas and everybody else is struggling for air,” said Gigi Sohn, president of Public Knowledge, a Washington-based public interest group. She said the big carriers’ dominance leaves consumers with high prices for handsets, expensive text messaging, slow data service and spotty signal coverage.

Smaller Carriers

“Competition leads to lower prices and better service,” Sohn said.

Smaller wireless carriers are also pressing the FCC for action.

“There are very encouraging signs that they’re going to take a harder look,” said Michael Rosenthal, director of legal and external affairs for Atlanta-based SouthernLinc Wireless, a unit of the Southern Co.. SouthernLinc has about 275,000 customers, according to its Web site.

The FCC should require large operators to offer data connections at reasonable rates so small-company customers’ Web devices work outside their home areas, said Rosenthal, who is also head of the government and regulatory committee for the Rural Cellular Association, a McLean, Virginia-based trade group.

Congress, Justice

The industry faces pressure from the Democratic-controlled Congress as well. In June, four U.S. senators requested the FCC’s inquiry into exclusive handset deals. Last month, Senator Herb Kohl, the Wisconsin Democrat who heads his chamber’s antitrust panel, asked the FCC and Justice Department to “take action to enhance competition” for wireless services.

Andrew Lipman, a Washington-based partner in the media, telecommunications and technology practice at Bingham McCutchen LLP, said Justice Department antitrust officials have begun “a sector inquiry” that falls short of a formal investigation.

“Consumer protection issues have a similarly receptive audience these days both at Justice and the FCC,” Lipman said.

Justice Department spokeswoman Gina Talamona declined to comment.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

Last Updated: August 21, 2009 00:00 EDT