Senators probe carriers on exclusive handset deals

Senators questioned representatives from the nation's top wireless carriers at a hearing yesterday over whether handset exclusivity arrangements hinder competition. Larger carriers argued that the market remains competitive despite the deals while smaller players said such deals limit consumer choice.

The hearing, before the Senate Commerce Committee, pitted Tier 1 operators such as AT&T Mobility and Verizon Wireless against smaller, regional carriers, including Cellular South and U.S. Cellular.

"Competition in the wireless marketplace is white hot," said Paul Roth, AT&T's president of retail sales and services, in testimony before the committee. Roth added that AT&T's exclusive deal for Apple's iPhone has led to "unprecedented competitive frenzy" in the wireless industry. Verizon, for its part, said in comments sent to Congress that it would be "totally unworkable" to regulate the exclusivity deals.

But Hu Meena, president of Cellular South, criticized the deals as stifling competition by locking out smaller carriers. "The largest carriers use their market power to prevent competitors from having access to devices and roaming," Meena said in testimony. "If this trend continues, and I believe it will without intervention from Congress, then there will once again be a duopoly in the wireless industry."

Eric Graham, Cellular South's vice president of government relations, told FierceWireless the 80 or so regional wireless carriers still left in the United States compete very well in terms of network quality and customer service with national carriers--or in "all of those things that are in our control."

"So if you want to stamp out competition you take over things that aren't in [smaller carriers'] control," such as handset exclusivity agreements, he said.

Earlier this week, four senators sent a letter to the FCC urging the commission to look into the issue.

Meanwhile, a spat between Verizon and Cellular South over a related matter took another turn yesterday. Cellular South sent Verizon a letter ordering the company to stop making factual misrepresentations about a deal Verizon offered to the Associated Carrier Group, of which Cellular South is the largest member. The deal was supposed to reduce the duration of Verizon's handset exclusivity deals with LG and Samsung in a bid to help rural carriers get the phones faster by providing the ACG carriers with the phones no more than six months after Verizon launched them.

Cellular South said in the letter that Verizon distorted the intent of the agreement after it was signed by giving the rural carriers access to the devices and specifications only when Verizon released the devices to the general public, and not before, as had been previously agreed to.

"Accordingly, we would ask that your spokespersons cease and desist from misrepresenting the agreement with ACG when in fact Verizon unilaterally altered the terms to extend its period of handset exclusivity and prolong the anti-consumer consequences that such exclusivity entails," Cellular South wrote in the letter.

Verizon spokesman Jeffrey Nelson called Cellular South's letter a distraction from the larger issues at stake in the debate over handset exclusivity.

"This is a sideshow intended to blur the fact that on our own, voluntarily, Verizon Wireless has been dealing with the issue of handset exclusivity, recognizing that it's an issue for some of the smaller carriers that we compete against," he told FierceWireless. "Let's not the lose sight of that fact."

Nelson said that Cellular South and the ACG walked away from the deal after it was agreed to, and that Verizon did not change course or reverse itself on the terms of the deal, counter to the letter Cellular South sent. "The question I'd ask of Cellular South or its lawyers or whoever is speaking for them, is, explain the emails," he said. "If something happened after that, show that, because nothing did."

For more:
- see this Dow Jones Newswires article [1] (sub. req.)
- see this Reuters article [2]
- see this Cellular South letter [3]