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US Senators Raise Questions Regarding Exclusivity Agreements

June 16, 2009


Questions regarding the fairness of exclusivity agreements between hand held manufactures and Wireless service providers and their effect on consumers has finally started to get some notice in Washington. A letter expressing concern over exclusive agreements and how they are affecting consumers has been sent to Michael Copps, the acting chairman of the US Federal Communications Commission (FCC), and was signed by four US senators. John Kerry - Chairman of the Commerce Subcommittee on Communications, Technology, and the Internet, headed the letter, in which he stressed the urgency of the issue to Copps saying, "act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace. Even though the most notorious exclusivity agreement between Apple and AT&T is not explicitly mentioned in the letter, it's pretty clear who they are taking punches at. When citing how individual carriers may not take advantage of many hardware capabilities there are direct mentions of the inability to tether and send MMS, the very same issues that brought AT&T boos at WWDC. Of course Apple and AT&T are not the only companies entering into these types of contracts, in fact this seems to be the way the entire industry is headed. Verizon and The Storm, as well as Sprint and the Palm Pre are two other examples. The letter was short and to the point mentioning several points that the FCC should look into:
Whether exclusivity agreements are becoming increasingly prevalent between dominant wireless carriers and handset manufacturers; Whether exclusivity agreements are restricting consumer choice with respect to which handsets are available depending on a consumer’s geographic region, particularly for consumers living in rural America; Whether exclusivity agreements place limitations on a consumer’s ability to take full advantage of handset technologies, such as the ability to send multimedia messages or the ability to “tether” a device to a computer for internet use; Whether exclusivity agreements are manipulating the competitive marketplace between commercial wireless carriers. Specifically, whether the ability for a dominant carrier to reach an exclusive agreement with a handset manufacturer is inhibiting the ability of smaller, more regional carriers to compete; and Whether exclusivity agreements play a role in encouraging or discouraging innovation within the handset marketplace.
The letter was not the first time questions have been raised about these types of agreements, in fact on May 20th, 2008, a petition for a decision to be made on exclusivity agreements was filed by the Rural Cellular Association. Following the petition were numerous comments filed by commercial wireless carriers, different consumer groups, regulatory agencies and handset manufacturers. The letter comes just days before a senate meeting, which will discuss the issues raised in the letter. The meeting will be held this Wednesday. The hearing will determine if legislative action is needed regarding the issues presented to wireless consumers. With strong opposition from both sides, Wednesdays hearing will undoubtedly be a heated debate. Could this be the end of the line for AT&T  being the exclusive seller of the beloved iPhone?  For many who want the iPhone but don't want AT&T keep your fingers crossed, but don't throw your hands up in praises yet. Even if a ruling is made that exclusivity agreements are not good for consumers and innovation, it won't happen overnight. After all, the United States legislative process tends to make even the slowest AT&T Edge connection look fast.

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