TAB 1 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ALEX NGUYEN 1050 Kiely Blvd. #2608 Santa Clara, CA 95055 Proceeding No. 16-242 408-499-4239 File No. EB-16-MD-003 [email protected] Complainant, v. CELLCO PARTNERSHIP & AFFILIATED ENTITIES d/b/a VERIZON WIRELESS Defendant. REPLY AND LEGAL ANALYSIS October 31, 2016 TABLE OF CONTENTS I. PARTIES................................................................................................................................1 II. BACKGROUND....................................................................................................................1 A. The C Block Rules and the 2012 Order and Consent Decree......................................1 B. The 2010 and 2015 Open Internet Orders..................................................................11 C. Device Providers Support LTE Band 13 for Compatibility with the Verizon Wireless Network......................................................................................................................11 D. Verizon Dominates Device Sales for Over 141 Million Subscriber Connections......12 E. Verizon Claims Its “Certification” Process Only Tests Network Connectivity..........13 F. Verizon Claims Its “Certification” Process Generally Takes Between Four and Six Weeks..........................................................................................................................17 III. VERIZON INTERFERES WITH CUSTOMERS' ABILITY TO USE THE DEVICES OF THEIR CHOICE..................................................................................................................18 A. Verizon Blocked Asus Nexus 7 Tablets for 22 Weeks................................................24 B. Verizon Blocked Third-Party Apple iPhone 6 and iPhone 6 Plus Devices for 47 Weeks..........................................................................................................................27 C. Verizon Blocked Third-Party Motorola Nexus 6 Smartphones for 29 Weeks............28 D. Verizon Continues to Block Other Compatible Third-Party Devices.........................31 IV. VERIZON IMPOSES DISCRIMINATORY PRICING ON BRINGING YOUR OWN DEVICE...............................................................................................................................33 V. VERIZON INTERFERES WITH EDGE PROVIDERS' ABILITY TO MAKE THE DEVICES OF THEIR CHOICE AVAILABLE TO CUSTOMERS.....................................38 A. Verizon Disables (or Compels Edge Providers to Disable) FM Radio Capabilities...38 B. Verizon Disables (or Compels Apple to Disable) Embedded Apple SIMs.................40 VI. VERIZON INTERFERES WITH CUSTOMERS' ABILITY TO USE THE APPLICATIONS OF THEIR CHOICE AND EDGE PROVIDERS' ABILITY TO MAKE THE APPLICATIONS OF THEIR CHOICE AVAILABLE TO CUSTOMERS.................41 A. Verizon Disables Built-in Tethering Features and Charges an Additional $20.00/Month to Re-Enable Them.............................................................................41 B. Verizon Compelled Customers to Use FamilyBase and Blocked Samsung from Enabling Blocking Mode............................................................................................42 C. Verizon Compelled Samsung to Preload Isis Wallet and Blocked Pay with PayPal..43 D. Verizon Compelled Samsung to Preload Verizon Cloud and Blocked Samsung from Preloading Microsoft OneDrive.................................................................................45 E. Verizon Compelled Samsung to Preload Android Pay and Blocked Samsung Pay...47 F. Verizon Blocked Samsung Internet 4.0......................................................................56 G. Verizon Compelled Samsung to Preload Caller Name ID and Blocked Samsung from Integrating Whitepages...............................................................................................58 VII. VERIZON MISLEADS AND DECEIVES CUSTOMERS BY STATING THIRD-PARTY DEVICES THAT ARE COMPATIBLE WITH ITS NETWORK ARE NOT......................59 VIII. VERIZON OFFERS VAGUE AND SPECIOUS ALLEGATIONS (INSTEAD OF SPECIFIC EXPLANATIONS) FOR DENYING NETWORK ACCESS............................60 IX. COUNT ONE: VIOLATIONS OF 47 USC § 202(a) AND 47 CFR §§ 8.5, 8.11, AND 27.16 FOR INTERFERING WITH CUSTOMERS' ABILITY TO USE THE DEVICES OF THEIR CHOICE..................................................................................................................61 A. Verizon Denies, Limits, and Restricts the Ability of Its Customers to Use the Devices of Their Choice...........................................................................................................62 B. Verizon Blocked Non-Harmful Devices.....................................................................64 C. Blocking Third-Party Devices Limits Consumer Choice...........................................65 D. Blocking Third-Party Devices Has Anti-Competitive Effects....................................66 E. Blocking Third-Party Devices (that are the Same Models Sold by Verizon) isn't Reasonable Network Management.............................................................................67 F. Verizon Unreasonably Discriminates against Third-Party Devices............................68 G. Verizon's Claim that It Blocked Customers from Activating SIMs for Third-Party Devices to Protect Its Network Lacks Merit...............................................................68 X. COUNT TWO: VIOLATIONS OF 47 USC § 202(a) AND 47 CFR §§ 8.5, 8.11, AND 27.16 FOR IMPOSING DISCRIMINATORY PRICING ON BRINGING YOUR OWN DEVICE...............................................................................................................................71 A. Verizon Disadvantages the Ability of Customers to Use the Devices of Their Choice ....................................................................................................................................72 B. The “No Blocking” Rule Prohibits Discriminatory Pricing.......................................72 C. Imposing Discriminatory Pricing on Bringing Your Own Device Has Anti- Competitive Effects....................................................................................................73 D. Verizon Unreasonably Discriminated against Bringing Your Own Device................73 E. According to Its Own Public Disclosures, Verizon Should've Applied Line Access Discounts for Customers who Brought Their Own Devices......................................73 F. Verizon's Semantic Gymnastics Don't Make Imposing Discriminatory Pricing on Bringing Your Own Device a “Permitted Incentive”..................................................74 XI. COUNT THREE: VIOLATIONS OF 47 USC § 201(b) AND 47 CFR §§ 8.5, 8.11, AND 27.16 FOR INTERFERING WITH EDGE PROVIDERS' ABILITY TO MAKE THE DEVICES OF THEIR CHOICE AVAILABLE TO CUSTOMERS.....................................75 XII. COUNT FOUR: VIOLATIONS OF 47 USC § 202(a); 47 CFR §§ 8.5, 8.11, AND 27.16; AND THE 2012 ORDER AND CONSENT DECREE FOR INTERFERING WITH CUSTOMERS' ABILITY TO USE THE APPLICATIONS OF THEIR CHOICE AND EDGE PROVIDERS' ABILITY TO MAKE THE APPLICATIONS OF THEIR CHOICE AVAILABLE TO CUSTOMERS.........................................................................................76 A. Verizon Limits Customers' Ability to Use the Devices and Applications of their Choice and Edge Providers' Ability to Develop the Devices and Applications of Their Choice...............................................................................................................77 B. Verizon Requested that Applications be Made Unavailable to Customers.................78 C. Verizon Outright Blocked Applications......................................................................79 D. Blocking Applications that Compete against Verizon-Backed Applications Limits Consumer Choice........................................................................................................79 E. Blocking Applications that Compete against Verizon-Backed Applications Has Anti- Competitive Effects....................................................................................................79 F. Verizon Stifles Adoption of Innovative Applications.................................................80 G. Verizon's Practices Are Primarily Motivated by Business Reasons...........................80 H. Tethering is a Device Feature, not a “Service” Provided by Verizon.........................80 I. Verizon Unreasonably Discriminates against Applications that Compete against Verizon-Backed Applications.....................................................................................84 J. Blocking Device Providers from Preloading Applications is Blocking.....................85 K. Even if Edge Providers Try to Offer Devices Directly to Customers, Verizon Can Still Block Them.........................................................................................................85 XIII. COUNT FIVE: VIOLATIONS OF 47 CFR § 8.3 FOR STATING DEVICES THAT ARE COMPATIBLE WITH ITS NETWORK ARE NOT............................................................86 XIV. COUNT SIX: VIOLATIONS OF 47 CFR §§ 8.3 AND 27.16 FOR OFFERING VAGUE AND SPECIOUS ALLEGATIONS (INSTEAD OF SPECIFIC EXPLANATIONS) FOR DENYING NETWORK ACCESS.......................................................................................86 XV. PRAYER FOR RELIEF.......................................................................................................87 A. Declare that Verizon Willfully and