• by Wendy Davis , Staff Writer @wendyndavis, August 24, 2009

AT&T and Apple have given critics some ammunition certain to be used against them Thursday at an FCC hearing about wireless competition.

The two companies have confirmed to the FCC that they agreed to limit apps that make VoIP calls on the iPhone. "There is a provision in Apple's agreement with AT&T that obligates Apple not to include functionality in any Apple phone that enables a customer to use AT&T's cellular network service to originate or terminate a VoIP session without obtaining AT&T's permission," Apple told the FCC Friday.

AT&T also said that its contract with Apple provides that Apple won't "take affirmative steps to enable an iPhone to use AT&T's wireless service (including 2G, 3G and Wi-Fi) to make VoIP calls without first obtaining AT&T's consent."

The companies were responding to an FCC inquiry about why Apple didn't approve a Google voice app for the iPhone that would have enabled free SMS messages and cheap international phone calls. (Apple says it's continuing to review the application.)

The statements confirmed suspicions of advocacy group Free Press, which earlier this year asked the FCC to specify that neutrality principles apply to wireless networks. At the time, Apple had just rejected a Skype iPhone app that would have worked on the 3G Network. Instead, Apple gave the OK to an app that works only on the spottier Wi-Fi network.

"The FCC's inquiry into Google Voice has ripped back the curtain on the wireless market and revealed AT&T's secret veto power over applications on the iPhone that offer consumers voice services over the Internet," Ben Scott, policy director of Free Press, said in a statement.

AT&T's ability to limit the apps that are available for iPhone users could potentially violate net neutrality principles -- though it's not known whether the FCC and/or courts will agree. In 2005, the FCC said in its Internet policy statement that Web users are entitled to run applications and services of their choice on networks, but it's not clear that statement applies to wireless networks.

It's also not clear whether Apple -- which, after all, is not an Internet service provider -- can violate those principles by refusing to sell an app.

Still, given that there's already concern that the deal between Apple and AT&T hurts consumers, news that the companies agreed to limit VoIP apps isn't likely to help either company's reputation with consumer advocates.

There was another interesting nugget in Apple's response to the FCC. Among other reasons for withholding approval, Apple raised a privacy issue. The company alleged that the app would have imported users' contacts to Google's servers and that it hadn't received assurances from Google that "this data will only be used in appropriate ways," the company said.

Frankly, this doesn't seem like it should be Apple's decision. If users want to transfer the names, phone numbers or email addresses in their contact lists, that's up to them. People can already transfer that information manually. Why shouldn't they be able to do so automatically?