• by Mark Walsh  @markfwal, July 7, 2009

Despite the successful rollout of new smartphones like the iPhone 3G S and Palm Pre, with more to come this summer, these must be increasingly unsettling days for the wireless industry. The latest threatening cloud is news that the Department of Justice has begun looking into possible antitrust violations within the telecom industry covering areas from landline voice and broadband service to wireless.

That report from The Wall Street Journal follows growing regulatory inquiry around the major wireless carriers' practice of striking exclusive handset deals with manufacturers, such as AT&T's deal with Apple for the iPhone. The Federal Communications Commission said last month it plans to investigate such agreements.

The FCC announcement followed a request from Sen. John Kerry (D-Mass.) and three other U.S. senators that the agency look into the carrier exclusivity deals. A Senate hearing last month also highlighted smaller carriers' complaints that they're getting locked out of the latest handset technology.

While it's not yet clear what the Justice Department's telecom industry probe will focus on, speculation so far has centered on the exclusive contracts for hot cell phones. The planned FCC investigation of the issue already had the major wireless operators worried.

"The carrier point of view is that this is an insanely competitive market which is already heavily regulated," said Avi Greengart, research director for consumer devices at technology research firm Current Analysis. "Carriers are also frustrated that some regulators and consumer advocates are focusing on subsidies and exclusivity arrangements, which they consider a common business practice across all industries." The subsidies, they maintain, also help to quicken the adoption of new technology.

A former FCC official quoted in the Journal story suggested that the government won't be able to challenge the exclusive handset deals on antitrust grounds unless the manufacturers are being forced into deals, which doesn't appear to be the case. In any event, the heightened scrutiny by the Justice Department, regulatory agencies and Congress could bring enough pressure to bear to bring about changes concerning exclusive phone deals without a formal antitrust case even being brought against any one or all of the major carriers.