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AT&T Inc. (T) Facing Consumer Heat Over FaceTime Policy

AT&T Inc.AT&T Inc. (NYSE:T) had seemingly been working in lockstep with Verizon Communications Inc. (NYSE:VZ) to ensure that there is no other competition in the wireless market, making sure to come up with very similar plans and concepts so as to maintain loyalty among their customers and try to gain more share by undermining the smaller carriers like Sprint Nextel Corporation (NYSE:S) and T-Mobile USA. But one policy difference is threatening to put AT&T in front of the federal government for an alleged Internet rule violation.

Three consumer advocacy groups announced that they will file a complaint with the Federal Communications Commission against AT&T Inc. (NYSE:T) if the nation’s second-largest wireless carrier does not change its current policy which restricts customers’ use of the popular FaceTime app by Apple Inc. (NASDAQ:AAPL) that is available on current models of the iPhone. The consumer groups – Free Press, Public Knowledge and the Open Technology Institute from the New America Foundation – have written a letter to AT&T threatening action because AT&T Inc. (NYSE:T) limits access to FaceTime to those iPhone customers who are subscribers to the company’s Mobile Share data plans – which are the most expensive plans available to customers. The groups content that federal regulations require carriers to provide access to all of the Internet and related applications to all who buy data plans.

“When you sign up to use the Internet (by buying any data plan), you’re allowed to use the Internet,” said Joel Kelsey of Free Press.

FaceTime is a video-conference app by Apple Inc. (NASDAQ:AAPL) made for iPhone that allows users to talk with people by using their allotment of data each month in lieu of using their voice minutes, which tend to run out more quickly. Verizon Communications Inc. (NYSE:VZ), by contrast, while it has many of the same services and plans in place at similar price points as AT&T, the nation’s biggest carrier has taken the position of allowing FaceTime to all iPhone customers who have any of the company’s tiered data plans. Usage counts against the monthly data allowance rather than monthly minutes.

The FCC may step in and decide whether restricting access to one Web-based application breaks the FCC rule prohibiting restrictions on all Internet access. The potential legal ramifications and expenses – not to mention the potential impact on customer loyalty – may be a point for investors like hedge-fund manager D.E. Shaw to look upon when quarterly reports come out in the coming months.

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