Concern grows in Washington over exclusive cell-phone deals

Scrutiny of cell phone exclusivity deals, in which hot new phones are available from only one carrier, is intensifying in Washington. Within the past day, the chairman of one Senate subcommittee has weighed in with a list of recommended steps to address such deals, and the Wall Street Journal reports the Department of Justice has opened an investigation into them.

Senator Herb Kohl, who chairs the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights, sent a joint letter to the Federal Communications Commission and the Department of Justice. Calling exclusivity arrangements “a serious barrier to competition,” he urged the FCC to open its own investigation into them and the Justice Department to take “all necessary action to keep the market open to competition.”

The FCC has already announced they’ll open a proceeding to investigate handset exclusivity—another recent development—with the exact question they’ll be investigating expected to be announced within the next few weeks, after which comment will likely be received from interested parties representing consumers, carriers, and manufacturers, among others.

Today’s Wall Street Journal report indicates a parallel, broader investigation at the Department of Justice into whether cell phone carriers are abusing their market power to the detriment of consumers and competitors. Areas of investigation, according to the report, could include exclusivity deals and limitations on the types of competing services that can be offered on carriers’ networks—such as curbs on voice-over-internet calling from smart phones using third-party applications.

Advocates at Consumers Union, the parent company for Consumer Reports, welcome the growing attention in Washington to these issues. Singling out Senator Kohl’s letter, in particular, CU says "exclusive deals with manufacturers and the blocking of applications are common practices among national providers.  There doesn't seem to be any market constraint on this behavior.  We applaud Senator Kohl for taking a strong stand, because consumers need some relief."

In addition, a  bipartisan group of senators, all members of the U.S. Senate Committee on Commerce, Science & Transportation last month asked the FCC to examine exclusivity agreements and act accordingly if the agency finds “they unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace." —Paul Reynolds

Comments

[Neil]

Sam, that is only true for Verizon. I am on a T-Mobile family plan, and the exclusive contract is the only reason I can't use an iPhone. There is no technical barrier for T-Mobile. If I could choose the iPhone with T-Mobile, I would probably do it.

[Clint]

@Sam
You are missing the point of the post entirely by restricting your thoughts to YOUR market. I am a Canadian and we suffer under the same restrictions of handset/carrier 'deals'.

Let me open the thought pattern a bit by saying this. Europe/Asia/rest of world has absolutely NO problem building state of the art phones that support ALL cellular tech. To go one step further, they make it so the phone supports all of it in one device, and don't require multiple models, unlike RIM's BlackBerry or Apple's iPhone might seem to indicate.

Not only does the rest of the civilized world manufacture multi-cell tech phones, they use higher tech (8 & 12mp cameras for example), they support a much larger aftermarket(i.e. double capacity batteries), they sell UNLOCKED phones and they get the phones FIRST. Exceptions being the iPhone and Blackberry.

The only thing the NorthAmerican Carriers can come up with is 'data' that indicates the phones are 'more expensive' to buy across the ocean. What a load. USA carriers have also said that their current 'locked in' manufacturer/carrier contracts help keep costs down!!! A statement so outrageously illogical that I would go so far as to question the intelligence of the manufacturer that thought that.

After all, what phone manufacturer would willingly lock himself into one piece of the pie, where he could have the entire thing if his product is good enough?

America & Canada are using their business models to monopolize, stifle and control, while retaining the highest prices possible. Why compete when you don't have to? Right?

I'm all for the governments to jump in and say its illegal to lock down a product to one service provider. It should be the customers right to pick the product and service provider that best suits them. Everything else is uncompetitive. Period.

[Sam]

I completely disagree with CR on this issue.

As a consumer, and I have no affiliations to any groups here, I think government has no business getting involved here. The government has supported multiple standards when it comes to the cellular infrastructure i.e. GSM, CDMA and even when it comes to frequencies for 3G (a la T-mobile). This is the bigger issue. If the government got involved in setting up a simpler set of standards it would allow for more competition. Right now I could not use an iPhone on Verizon because of incompatible standards and not because of handset exclusivity (plenty of T-mobile customers use an iPhone). To expect manufacturers to build phones for every type of network that the government permits puts the responsibility in the wrong place. The iPhone in particular runs on GSM which is a global standard. I can totally understand them running exclusively on AT&T and other global networks.

T-mobile should be rolling out 3G on the same frequencies as AT&T and other global providers.

The only thing I disagree with is the fact that even after I have completed my contract with AT&T they will not unlock the phone. This says you do not have control over things you purchase.

BTW, I do not applaud Senator Kohl either. I wonder if Verizon or some other organization is behind his awakening.

For the record, I am an AT&T customer and I do not own an iPhone.