FCC Chairman Hopes to Bring iPhone, Pre to East Nowheresville
The Federal Communications Commission’s efforts to determine whether exclusive handset deals are promoting or hindering innovation in the wireless market are moving ahead with a focus on rural areas.
That’s the word from agency Chairman Julius Genachowski, who says he’s concerned not just with the competitive ramifications of carrier-exclusivity deals, but with their tendency to limit customer access to top smartphones. “There are markets in the country where if you wanted an iPhone, if you wanted a Pre, you just couldn’t get it–from anyone,” Genachowski told Bloomberg. “So one question is, is that consistent with broad consumer interests?”
Vermont residents and those living in the rural areas of other states who can’t use the iPhone because AT&T (T) offers only roaming coverage there would likely say the answer to that question is no. But AT&T, Verizon (VZ) and other Tier 1 wireless carriers disagree. They claim exclusive handset deals are beneficial.
“The popularity of the iPhone and its innovative features and applications…has provoked an unprecedented competitive reaction,” James Cicconi, AT&T’s senior vice president of external and legislative affairs, wrote in a letter to the Senate Judiciary antitrust subcommittee. “Exclusive handsets have provided U.S. consumers the most advanced devices in the world at distinctly affordable rates. By allowing a carrier and a manufacturer to share the enormous risks and costs of bringing an inventive but unproven new device to market, exclusive arrangements both quicken the pace of technological advancement and incentivize the carrier to offer even greater handset subsidies to its customers.”
Verizon argued that point as well in a recent letter to Congress’s Telecommunications Subcommittee. “Exclusivity arrangements promote competition and innovation in device development and design,” the company said. “We work closely with our vendors to develop new and exciting devices that will attract customers. When we procure exclusive handsets from our vendors we typically buy hundreds of thousands or even millions of each device. Otherwise manufacturers may be reluctant to make the investments of time, money and production capacity to support a particular device.”
In some cases, perhaps. Though I doubt Apple (AAPL) and Research in Motion (RIMM), maker of the BlackBerry, feel that way these days. If there’s reluctance anywhere, it’s reluctance on the part of carriers like AT&T, which can’t bear the thought of losing its exclusive on the iPhone, without which it will face defections and slowing growth.