Senators ask FCC to look at iPhone-type exclusive deals

According to report by Bloomberg, four U.S. senators asked the Federal Communications Commission to review exclusive deals between wireless-phone companies and handset makers to see whether the arrangements unfairly restrict consumer choice.
On Monday, four members of the Commerce Subcommittee on Communications, Technology and the Internet sent a letter to the FCC expressing their concern around agreements, like the one between Apple and AT&T, that allow an operator to exclusively sell a phone for a period of time.
"We ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace," they wrote.
Based on a request that a group of rural operators sent asking the FCC to examine the practice, the senators say they wonder if the exclusive agreements restrict customer choice of handsets depending on the user's geographic location, limit a consumer's ability to use certain technologies like multimedia messaging services and tethering, inhibit the ability of smaller operators to compete and discourage innovation in the handset market. Senators John Kerry, a Democrat from Massachusetts; Roger Wicker, a Republican from Mississippi; Byron Dorgan, a Democrat from North Dakota; and Amy Klobuchar, a Democrat from Minnesota, signed the letter.
It's a hot issue in the mobile market particularly since the emergence of the popular iPhone. AT&T has clearly benefited from its two-year exclusive deal for the iPhone. In the first quarter, AT&T signed up 1.6 million iPhone customers, presumably some of whom migrated from other operators.
Other new hot phones have also been tied to a particular operator. Verizon exclusively sells the first touch-screen BlackBerry, the Storm, and Sprint got the newest Palm, the Pre.

Small operators, which often offer services in rural areas where the large operators don't have coverage, say that such deals put them and their customers at a disadvantage. "Exclusive handset contracts divide wireless customers into 'have's' and 'have not's' with many customers in rural areas having no option to subscribe to the services of the large, national carriers, thus denying these customers access to the most desirable and advanced handsets that are only available through exclusive arrangements with the national carriers," wrote U.S. Cellular, in support of the request for rule-making filed by Rural Cellular Association. "Turning rural consumers into second class customers by blocking their access to smartphones and other innovative handsets is not consistent with the purposes and policies of the Act," the operator wrote, referring to the Telecommunications Act.
But the nationwide operators argue that the FCC doesn't have the right to regulate such deals, and some say that the exclusive agreements benefit end-users. "In the absence of exclusivity agreements, wireless carriers would have less incentive to develop and promote innovative handsets, because other providers would have immediate access to the handsets without having made any investment in research and design," Verizon wrote in its comments to the RCA request, PC World reported.
According to Reuters, the senators said they would hold a hearing on Wednesday to probe competition issues and decide if legislative action is needed.