Rural mobile-phone operators have asked the Federal Communications Commission to investigate exclusivity deals between the industry’s major carriers and handset vendors, taking aim at an entrenched business practice that they assert is anticompetitive and denies rural residents in many states access to popular wireless devices.
“For many consumers, the end result of these exclusive arrangements is being channeled to purchase wireless service from a carrier that has monopolistic control over the desired handset and having to pay a premium price for the handset because the market is void of any competition for the particular handset,” stated the Rural Cellular Association. “For other consumers – particularly rural ones – these exclusivity arrangements prevent them from purchasing many of today’s most popular handsets because they reside in areas not served by the one carrier offering the desired handset.”
iPhone out of reach
The filing focuses on the relationships among leading handset manufacturers and the Big 5: AT&T Mobility, Verizon Wireless, Sprint Nextel Corp., T-Mobile USA Inc., and Alltel Communications L.L.C.
RCA noted that Vermont citizens still cannot use Apple Inc.’s iPhone without violating terms of service contracts with AT&T Mobility, the largest cellular carrier and currently the exclusive outlet for the device. The trade group said the iPhone is also out of reach to rural residents of Alaska, Arizona, Colorado, Idaho, Kansas, Maine, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Utah and Wyoming.
Not just the iPhone
RCA cited other exclusive marketing arrangements involving Research in Motion Ltd.’s Bold and AT&T Mobility; LG Electronics Co. Ltd.’s Voyager and Verizon Wireless; Samsung Electronics Co. Ltd.’s Ace and soon to launch Instinct and Sprint Nextel; Samsung’s Katalyst and T-Mobile USA; LG’s AX565 and Alltel; RIM’s Thunder and Verizon Wireless (available in 3Q).
The rural cellular group said all are “unique products for which there are no readily available substitutes” [and] “cannot be used by millions of rural Americans, essentially creating another ‘digital divide’ between urban and rural America.”
CTIA claims plenty of choice
The association representing the nation’s top mobile-phone carriers countered that U.S. consumers have a morass of choices when it comes to handsets.
“There are more than 620 unique wireless devices for sale to consumers in the United States. These devices are designed and manufactured by no fewer than 35 companies,” said Joe Farren, a spokesman for CTIA. “Furthermore, American consumers can purchase handsets from a number of sources, including large nationwide electronics stores, independent retail stores, manufacturer stores and Web sites, online auction sites, as well as carrier retail stores and Web sites. This is a vibrantly competitive and healthy market which provides consumers with an abundance of handset choices.”
RCA sites previous action
RCA, which represents more than 80 small and rural wireless carriers, said the FCC in the past has adopted measures to ban exclusivity arrangements deemed not to be in the public interest and, generally, to avoid having a country of technology haves and have-nots.
“The commission has, on multiple occasions, taken action to ensure that citizens of particular states and territories are afforded the same benefits from telecommunications services as residents of other states or territories so as not to leave residents of these unserved areas technologically behind,” stated RCA.
While rural and national mobile-phone carriers have common interests on a number of policy fronts, issues such as roaming, the market size of licenses auctioned by the FCC and, now, carrier-vendor exclusivity deals have tended to divide the cellular industry.
Boldest challenge yet
RCA’s latest filing arguably represents be boldest challenge yet to the wireless establishment, coming at a time of stepped-up CTIA efforts to educate policymakers on the competitive aspects of the cellular industry.
“The exclusivity arrangements between the Big 5 members and manufacturers such as Apple, LG and Samsung do not serve the public interest,” RCA told the FCC. “The time to protect consumers and smaller competitors from these ongoing harms and re-establish a truly competitive U.S. wireless marketplace is now.”
