Among the tier 1 operators exclusive handset deals with OEMS have become a critical part of doing business. AT&T with its exclusive U.S. distribution of the iPhone has reaped the benefits of its arrangement. The operator reports that more than 40 percent of its customers with iPhones are new to its network.
But smaller operators don't have that same luxury. They have fewer subscribers and therefore don't have the necessary clout to strike exclusive deals with OEMs. In fact, just getting stylish and state-of-the-art handsets in their portfolio can be a huge struggle. For customers of these small carriers, this lack of buying power equates to a smaller handset selection. Often, tier 3 carrier customers have to wait months or even years to get the devices that they see in advertisements from the larger operators. This phenomenon creates a huge disadvantage for rural operators which are already struggling to keep abreast of the latest wireless trends.
Small operators have tried to overcome their disadvantage by banding together to create more buying power. A few years ago several small operators formed the Associated Carrier Group to work aggressively with handset makers to negotiate better handset deals and get state-of-the-art devices. The group consisted of CDMA operators, which at that time seemed to have a bigger disadvantage. However, that no longer is the case, as AT&T and T-Mobile are both big beneficiaries of exclusive deals.
But now the issue is getting even more clout. Yesterday the Rural Cellular Association petitioned the FCC asking the agency to investigate these exclusive arrangements and perhaps adopt rules to prohibit exclusivity. The petition lists more than 50 handsets that are offered exclusively by the top 5 carriers and are therefore off-limits to smaller operators.
I applaud the rural operators for drawing attention to this situation but I think they have an uphill battle. Tier 1 operators are clearly seeing the benefits of these exclusive deals and handset manufacturers, hungry for the Tier 1 relationships, are more than willing to appease their demands. --Sue
P.S. I'd like to welcome Mark Lowenstein as a regular contributor to FierceWireless. Mark is the managing director of the consulting firm Mobile Ecosystem and a highly regarded wireless expert. Be sure to check out his first column in today's issue.