Cell-phone exclusivity: Not good for consumers, say critics

Is it fair that if a consumer wants a particular model cell phone—an Apple iPhone 3G S or a Palm Pre, say—they must use the wireless service provider chosen exclusively by that phone's manufacturer? A U.S. Senate committee has asked the FCC to investigate the matter of cellphone handset exclusivity.
[ stock photo courtesy of: Ben Shafer ]

With the iPhone 3G S launching Friday, available exclusively from AT&T, and the Palm Pre having just launched, available exclusively from Sprint, it's a good week to ask: Is having particular mobile phone handsets available from only one carrier a good thing for consumers?

Maybe not, according to four senators who sent a letter yesterday to Federal Communications Commission (FCC) Commissioner Michael Copps to review the exclusive arrangements between wireless carriers and cell phone manufacturers. Advocates, including Consumers Union, publisher of Consumer Reports, are also weighing in against such deals.

The bipartisan group—comprising Senator John Kerry (D-Mass.), Chairman of the Commerce Subcommittee on Communications, Technology, and the Internet, along with Senators Roger Wicker (R-Miss.), Byron Dorgan (D-N.D.), and Amy Klobuchar (D-Minn.), all members of the U.S. Senate Committee on Commerce, Science & Transportation—today asked the FCC to "examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace."

Also, in remarks prepared for delivery later today to another congressional committee—the Senate Judiciary Committee—Joel Kelsey, a policy analyst with Consumers Union, says that handset exclusivity agreements "artificially limit consumer choice, restrict device innovation, and lead to higher prices." In addition, countering industry arguments that such exclusivity arrangements are an essential feature of the cell-phone marketplace, Kelsey points out that "handset manufacturers in Asia and Europe are able to sell 70-80 percent of...phones independent of exclusive deals."

More later on Kelsey's remarks to the committee on another hot-button consumer issue with cell phones: The uniformly—some say suspiciously so—high price of sending text messages.

Meantime, the Commerce Committee holds a hearing later this week on cell-phone exclusivity. —Paul Reynolds

Comments

[anti-Corp]

I strongly disagree with xtra-T and the assertion that Consumer Reports is off-base. CR is the rare voice that dares to speak up on behalf of consumers instead of the being an industry mouth-piece spewing out the corporate spiel.

The telecom industry giants not unlike their counterparts in the pharmaceutical industry manipulate the U.S. market and continuous to charge U.S. consumers higher prices than in other markets. I can see a case for short period of "exclusivity", say 90 days, when a truly new and innovative item is first introduced but after that, let the marketplace decide. Why is it that all the people who talk about the benefits of the free market always defend monopolistic actions by the giant oligarchies.

[Bjorn]

I think the bigger problem here is that not one of the manufacturers or carriers is pushing for phones that actual function well as phones. These aren't "phones" anymore, they are becoming toys. I was just researching phones and noticed that not one phone scored "very good" or "excellent" for voice quality in the Consumer Report ratings. That's disturbing!

Can someone make a decent phone, please!

[smartsusie]

concerning cell phone exclusivity. i think the manufacturer, in signing an exclusive contract with a cell phone service provider, hurts themselves more than the public. the blackberry smart phone line, has passed the i-phone in popularity and sales because of it's availability. i believe all major carriers have the blackberry. i know i enjoy mine!

[Joel]

While I would prefer phones to be independent of their carriers, I certainly don't think that its breaking any laws or particularly in bad taste of carriers to sell exclusive phones. The quality of phones available is just one more item to consider when shopping for a carrier, and if you're willing to sacrifice in quality of service for a specific handset, go for it.

I think modernizing our wireless infrastructure is much more important, and if selling exclusive phones is what it takes wireless companies to have the profits to do that--I'm all for it.

[xtra-T]

Your "experts" should stick to reviewing products. Did you consider that no one in their right mind pays $.20 a text - there are packages for $5.00 a month. And no carrier out there won't waive high charges and help a customer get onto a package. The government is not here to ensure the public pays the lowest price on every item for sale. Maybe the government should look into this group's non-profit status or your fees. What a show.

You are equally off base on the exclusivity deals. We would not have an iPhone if it were not for the carrier to Apple relationship -- or at least one that is priced below $600. You have no clue as to the enomous development costs for these devices. Do you really think these things are just crafted from thin air? I am so disappointed by your slap shot anaylsis of these issues.