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Now, some lawmakers are questioning whether that arrangement is legitimate. This week, Sen. John Kerry (D-Mass.) along with three others -- Roger Wicker (R-Miss.), Byron Dorgan (D-N.D.) and Amy Klobuchar (D-Minn.) -- asked the Federal Communications Commission to investigate whether "exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace."
The Senate Commerce Committee will also examine that issue at a hearing this week.
Kerry also authored a blog post -- "Who Really Owns Your iPhone?" -- arguing that exclusivity contracts limit consumers' ability to use the newest phones. "Today, we've got a wireless marketplace where four companies account for more than 85 percent of all subscribers. These large carriers strike deals with the companies creating the newest and most innovative phones, leaving smaller regional wireless carriers without access to the latest technologies to attract consumers," he wrote. The post is available at the net neutrality site SaveTheInternet.com.
In May 2008, the Rural Cellular Association asked the FCC to investigate exclusivity arrangements and potentially issue rules banning them in some circumstances. The group argued that deals that tether devices to wireless carriers end up giving carriers monopolistic control over handsets and result in higher prices. The organization also said that such deals prevent some consumers from purchasing particular devices at all.
"For carriers able to command these exclusive arrangements, the end result is a significant and unfair advantage over competitors," the group said in its petition.
A&T filed comments in February asking the FCC to reject the petition. The telecom argues that exclusivity deals promote carrier and manufacturer investment. "When an exclusive handset gamble pays off for one carrier, that provokes competitive responses and further innovation from other carriers and manufacturers, benefiting all consumers," AT&T said in its comments.
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I noted that the complaint was files exclusively by Democrats. Perhaps there is an anti-business motivation rather than a pro-consumer motivation.
Exclusivity agreements would be truly monopolistic if there was no alternative choice. If you categorize the market segment as "iPhone," perhaps it would be considered a monopoly.
However, the true market segment is "smart phones." Consumers can chose the iPhone, Blackberry, or a host of other handsets with a variety of comparable features, all tied to a variety of carriers. This hardly serves as a limitation of choice or restriction of competition.
The biggest impact of an exclusivity agreement in the marketplace is the restriction of the sales of a particular handset because buyers do not want or cannot access the services of the exclusive carrier. This hardly counts as a "corner on the market."
Monopolistic behavior such as this is anti-competitive ONLY when it prevents a consumer access to similar or equivalent alternatives. Otherwise, it merely serves as an incentive to innovate (much as I hate to agree with AT&T). ;)~