FCC to Examine Exclusive Cell Phone Deals

According to a report by the Associated Press, the Federal Communications Commission will investigate whether exclusive cell phone deals, such as the one that locks the iPhone to AT&T, are good for consumers.

The acting chairman of the Federal Communications Commission, Michael Copps, has instructed the commission's staff to review exclusivity arrangements.
"In the fast-changing wireless handset market ... we must ensure that consumers are able to reap the benefits that a robust and innovative competitive marketplace can bestow," Copps said Thursday at an industry conference in Washington.

Earlier this week, Sen. John Kerry, a Massachusetts Democrat, and several of his Commerce Committee colleagues penned a letter to Copps asking him to investigate exclusive cell phone deals like the one between AT&T and Apple for the iPhone.

Carriers generally negotiate exclusive deals that last six months to a year, after which other carriers can also sell the phone model to their customers. By launching with only one carrier, the manufacturer gets a higher price or extra promotional spending on the phone.
Apple Inc.'s iPhone is a much-noted exception. Dallas-based AT&T Inc. has been the sole U.S. carrier since Cupertino, Calif.-based Apple launched the first model two years ago, frustrating consumers who want to use it on another carrier.

Handset exclusivity was one of the subjects of a Senate Committee on Commerce, Science and Transportation hearing this week.

Consumer rights group such as Washington-based Free Press, applauded the scrutiny, telling Reuters that “the path to innovation is paved by openness, and unlocking devices is a good start.”
Verizon Wireless offered a few months ago to shorten its exclusive periods for new cell phones from LG and Samsung to six months, from as long as a year, to give small rural carriers a better chance to sell up-to-date phones. But the rural carriers rejected the offer as insufficient, AP reproted.

(June 19, 2009)

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