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Senators probe carriers on exclusive handset deals
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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 (sub. req.)
- see this Reuters article
- see this Cellular South letter
Related Articles:
Verizon challenges handset exclusivity claims
Senators urge FCC to probe handset exclusivity deals
For rural carriers, Verizon offers to reduce exclusivity time for LG, Samsung phones
Lawmakers debate iPhone-like exclusivity deals, wireless contract disputes
Report: Apple talking to Verizon about iPhone
Comments
Posted by WilliamC | June 18, 2009 - 11:06am
Every one listens to these guys from AT&T. Whatever they say is law. Give me a break. That is why they are the big behemoth that they are today. They were broken apart years ago to be put back together with the blessings of the FCC and their co-horts!!! Its time to break up this preferential treatment between AT&T and Verizon. There are other telecommunications companies that can offer services and products comparable to these two and do a good job too. They cry wolf all the time. We have had enough of the soup they feed us year after year. The consumer has to understand that the bigger these two get - their networks get taxed by the increase in suscriber usage. Prices stay high and get higher. You will never get a reasonable bill from them. It is a loss for them. Is it worth giving a customer a cheap monthly bill after adding 4 million Iphone suscribers??? Of course not...It's called losing money. It doesn't make sense from a business stand point....Plus it is lucrative for them...Somebody has to pay to keep those networks and bandwith going smoothly....
Posted by Rick | June 18, 2009 - 12:12pm
"it would be 'totally unworkable' to regulate the exclusivity deals"
Who wants to regulate them? Users want to ban them, to eliminate all phone locking whatsoever. That would be pretty easy.
Posted by James brehm | June 18, 2009 - 12:39pm
Its all about econimies of scale and profitability. You cannot fault AT&T and Verizon for executing better. Cellular South had the same opportunity to grow into a "behemoth" that AT&T and VZ did, but must not have executed as well.
Instead of crying wolf over handset exclusivity, why isn't Cellular South working with emerging vendors to provide them with similar functionality.
I'll bet if Cellular South were to call someone like ZTE and collaborate on a premium device, the device would make it into production.
There's hundreds of able bodied OEMs and ODMs looking for the next contract, the next device to build. Put ideas to good use and stay away from regulation. Don't you remember the telecom marketplace circa 1980?
I'm sure there's at least one consulting company out there that is willing to assist Cellular South find areas for Growth.
Posted by Anonymous | June 18, 2009 - 1:16pm
Get real James. CellSouth has built a quality network that far outshines ATT and Verizon in it's area. They have chosen quality over quantity and is not driven negatively by trying to keep shareholders happy, only customers. Customers have and always will be #1 to CellSouth. ATT and Verizon will never serve rural America they way they deserve. They BIG 2 have threatened manufacturers into not creating devices of the same quality for the smaller carriers.
Posted by Fred Stein | June 18, 2009 - 4:49pm
Well said.
In the case of the iPhone, ATT is getting a free ride from Apple and all the App Store ISVs. And they are NOT upgrading their network to give adequate coverage to customers who are under contract for dataplans for 2 years. In any other situation, it would be breach of contract on their part. Their size, and exclusivity give them effective monopoly power, which they abuse.
Posted by Anonymous | June 25, 2009 - 6:14pm
The big problem that cellular south has is that they do not have any money to contract the idea of making a phone that is unique so they are relying on VZW and ATT to go through the whole process of having the device designed tested and put through the FCC and then marketed. After that they want the devices to be able to go to them so all they have to do is put it through the FCC to have them approve it and then only pay for the marketing. They only want to feed off someone else's hard work and well spent money so that they can keep their business barely afloat. Where is that fair? Any other time it would be considered Patent infringement. These small companies can not compete with the bigger 4 companies(VZW, ATT, Sprint, and TMobile) due the fact that they don't want to charge their customers the real cost of what it cost them to do business so therefore they can't spend the money in developing something original for their own company, and we want to punish the 4 mains because they know how to run a business well enough to make money and come up with their own ideas to continue the growth of their company?
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