Senators Sniff Around Exclusive Handset Deals

from the lurking-with-intent dept

A group of senators has announced they’ll hold a hearing in Washington on Wednesday to examine exclusive deals between mobile handset vendors and operators, and has asked the FCC to look into the practice. The senators want to know if the deals (such as those that make the iPhone exclusive to AT&T and the Palm Pre to Sprint) “unfairly restrict consumer choice or adversely impact competition”. Exclusive deals are becoming a big part of the operators’ strategies as they look to grab users from their rivals. As prices, coverage and other competitive factors reach a degree of parity, exclusivity on certain devices is a major way the operators seek to differentiate themselves. Smaller and rural carriers argue this puts them at a disadvantage, because of their small size, which makes it impossible to compete for hot devices if a bigger operator wants an exclusive deal. The senators seem to be capitalizing on the recent outcry from some iPhone owners regarding AT&T’s upgrade policy, as well as its lack of support for new features in the latest version of the iPhone software. It’s unclear just how far the senators want to take this. For instance, if exclusives are banned, would manufacturers be forced to build variants of a handset for any operator’s network? Say the exclusive deal for the iPhone was abolished. Would Apple be forced to build a CDMA version for Verizon and Sprint? Would it have to make a model that supported the frequencies used by T-Mobile’s 3G network? Hopefully the attempt to gain some publicity by seizing on a hot topic won’t lead to rushed legislation that brings unintended consequences.

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Comments on “Senators Sniff Around Exclusive Handset Deals”

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Zubin Madon (profile) says:

“For instance, if exclusives are banned, would manufacturers be forced to build variants of a handset for any operator’s network?”

This is an extreme assumption. There is an obvious middle ground where exclusives are banned, and handset makers simply must choose which networks to build for without shopping their handsets around in search of exclusives.

Lawrence D'Oliveiro says:

Stifling Competition

Here’s an example of an exclusive deal stifling competition: Palm has put a stop to discussions about how to tethering on the Pre, on the grounds that it might upset the exclusive deal it has with Sprint.

Why should buyers of a Pre be prevented from doing what they like with their own property? If you buy something, do you not own it?

Sarah Black says:

Re: Stifling Competition

the same could be said about the content you purchase. While Apple like having a dominant hand on Personal Media Players (The iPod), they are also now saying that they dont want to give access to the music purchased from iTunes Store to any competing hardware – which includes Palm’s Pre

Apple Says – “Apple designs the hardware and software to provide seamless integration of the iPhone and iPod with iTunes, the iTunes Store, and tens of thousands of apps on the App Store. Apple is aware that some third-parties claim that their digital media players are able to sync with Apple software. However, Apple does not provide support for, or test for compatibility with, non-Apple digital media players and, because software changes over time, newer versions of Apple’s iTunes software may no longer provide syncing functionality with non-Apple digital media players.”

Apple took to their support pages, informing Palm that they could disable the Pre’s compatibility with iTunes—without actually saying as much.

/end side conversation.
back on topic.

Anonymous Coward says:

Re: Re: What's the problem?

2 different types of networks isn’t a hodge-podge. That’s it, Sprint/Verizon and most of the rest are GSM.

I really wish they would get rid of phone subsidies, lower the cost of service and let me buy the phone I want.
And when the carriers put their own software on the phones, they are a piece of crap.

Josh says:

Re: Re: What's the problem?

That’s true…But…

In my opinion the phone should be built to the highest standard available at the time of it’s production, with backwards-compatibility built in. Since 3G is on it’s way out phones should be built to the new standard and while any telco can use the phones (due to built in backwards-compatibility) only the network that was built to support that highest level (3G currently) would do well with the phone. That is how a free market is supposed to work. Phone makers should not have their hands tied on how a phone is NOT allowed to work on a given network, they should just be allowed to build the phone and then pass it on the the reseller who fits their network to the phone.

Look at phones in Asia. OTA TV capabilities, they all have WiFi, touch screens are the norm, and the built in memory is as good as the iPhone. The only reason those phones are not here in the US is that the networks refuse to allow them in. All the manufacturers need to do is refuse to sell crippled phones. The end users would be happier and so would the telco that adapted.

Anonymous Coward says:

Re: What's the problem?

Yeah? None of the carriers in Australia even offer the same feature set as AT&T. No visual voice mail here. It was “coming soon” with the release of the 2nd gen phone.

Only one carrier offers a no-contract service: Optus. I brought my unlocked (yellowsnow – thanks guys!) phone from the US. Bring your own unlocked phone to Telstra or Vodaphone and *still* have to sign a contract. Eff that.

In all cases, I pay about 3x as much for a lesser service for my iphone in Australia as I did in the US (contract or not).

And I though the US telecom sucked… Telecom in Australia is like being in the US circa 1980. Don’t get me started on ISPs, here.

Mr RC (profile) says:

Re: Re: What's the problem?

Errr what? Vodaphone does have a no-contract service, I was using it when I went home for 6 weeks to visit my family and friends.. much cheaper than getting hammered with roaming fees ..

I agree 100% about the ISP’s though… but then I think America is just as backwards.. I pay €39 a month for unlimited internet (optical 20/20), IP phone and 200+ channels (5 of which are 24/7 porn that I DON’T pay extra for)

Anonymous Coward says:

If they had half a brain (and they don’t) they would be more worried about “free handset, expensive contract” deals. I like places like Hong Kong, where you buy your phone, and then buy your service. Yes, you can buy direct from Apple unlocked Iphones. $580 US about for a 3g / 8 gig. No plan, activate it with any simcard.

The phone companies would hate it, the cellular companies would hate it, but consumers would love it. Done like this, your cell phone bill would likely be about $700-$800 lower over 2 or 3 years (cost of the unit plus profit), and you would likely never have to lock in to a plan.

Jack Sombra says:

“For instance, if exclusives are banned, would manufacturers be forced to build variants of a handset for any operator’s network?”
Only if they let the networks force them. In most of the rest of the world you can get most phones (only real exception is iphone and even that is not always the case) on any network and there is no difference between the phone’s…only in the features the network provides

Anonymous Coward says:

If you don’t like the crappy deal the phone manufacturer and wireless provider are offering you because of an exclusivity agreement, it seems like there’s an obvious choice here. Don’t buy the danged phone or the contract.

Plenty of smart phones out there that will work just as well as the iphone or the pre. Heck, buy an ipod touch and skip the wireless companies altogether.

If enough people didn’t wait for days to buy into a crappy contract for the latest and greatest, exclusivity contracts wouldn’t be an issue. However, it seems to be standard SOP that we need to be protected from ourselves because we lack any kind of impulse control. Therefore we must have govn’t intervention to save us from the evil $699 upgrade option.

David says:

The funny thing is

There is actually legislation (lobbied for by the carriers, many years ago), which makes it illegal to modify the circuitry on a phone to get it to work on a different carrier. This was from before the GSM and CDMA age… I think that any phone should be able to drop in a chip that will allow use on any network….

My phone, my property. Who are they to tell me how I can use it, as long as it does not hurt anyone else…

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