On Call: Is carrier exclusivity really a problem?

The federal government wants to investigate carrier exclusivity of cell phones. On Call argues that there are bigger problems with the cell phone industry.

Try as I might, I can't get that worked up about carrier exclusivity. If a cell phone carrier and a manufacturer want to pair up and offer a handset for a certain period, I'm not going to oppose it purely on principle. Granted, such deals may not be fair to absolutely everyone, but I'd argue that there are much bigger problems with how the U.S. wireless industry operates.

Yet, a few U.S. Senators don't appear to agree. On July 7, a few weeks after a Senate committee grilled national carrier reps on device exclusivity, Sen. Herb Kohl (D-Wis.) wrote letters to both the federal Communications Commission and the Justice Department's antitrust division asking the agencies to investigate the issue and suggest possible regulatory proposals.

The original iPhone made carrier exclusivity an issue. Corinne Schulze/CNET

"The practice of large cell phone companies gaining exclusive deals to the most in-demand cell phones is a serious barrier to competition," Kohl wrote. "Consumers are unlikely to obtain cell phone service from companies if they cannot obtain desired handsets."

I'm no carrier lackey, but I find it fascinating that Congress is just now noticing that carrier exclusivity exists. The practice, which is hardly unique to the United States, has been around for a long time. So from where is the sudden interest coming?

Party politics is a factor--Congressional interest in the wireless industry has stepped up following the Democratic takeover of Congress in 2006--but AT&T's monopoly on the iPhone is a bigger motivator. It was only after the iPhone went on sale that politicians and many consumers began raising the issue.

I can't think of another cell phone that has highlighted carrier exclusivity so harshly. Though it may seem like ancient history now, the Motorola Razr received a huge amount of hype when it went on sale in 2004. It wasn't quite at iPhone levels, but more than a few people switched to then-Cingular just to get it. And at the time, I heard few complaints.

The iPhone was different for a few reasons. Though the Razr spawned the thin-phone craze, it really was just another Moto phone in a new package. The iPhone, however, was unique. And as Apple's first cell phone, it carried with it the invertible star power that Apple is so successful at spinning.

What's more, while we knew that Cingular's hold on the Razr would last just a few months, we still have no official word on when AT&T's iPhone monopoly will end. But even when that happens, there's no guarantee that Verizon, which turned down the iPhone before , will pick it up. For that to happen, Apple would have to make a CDMA version.

If Congress or the executive branch is going to tackle this carrier issue, I hope that it treads carefully. Banning such agreements isn't going to make any cell phone automatically available to everyone. It's long been a characteristic of the U.S. market that cell phone carriers collaborate financially and technologically on the development of phones. Changing that dynamic, rather than government regulation, will do more to lessen carrier exclusivity.

I'd rather the federal government concentrate on issues that are more detrimental to consumers and that can really affect change. Why not make it easier to unlock handsets when your contract is up? How about some progress on the effort to put a moratorium on new federal taxes on cell phone service? Limiting local taxes and ending the ridiculous charge to receive text messages would also be welcome, but I recognize that federal power has its limits.

We could make cell phone contracts more consumer-friendly. Contracts are the price we pay for subsidized phones, but Congress could make it easier for consumers to get out of them without paying an early termination fee (ETF). For example, while carriers can end a contract for a variety of reasons, most of time you can end your contract only if your carrier makes a "material adverse" change to your service; what that means is entirely up to them.

I'd also welcome a few of the ideas in a current Senate bill . They include requiring carriers to prorate ETFs (as many carriers already do), set a cap on ETFs, produce coverage maps that are detailed enough to identify whether a person could get service in their home and make public specific details on coverage gaps and dropped calls.

Over-regulation of any industry practice is hardly the answer, but we should focus on decreasing taxes and fees, limiting unfair contract penalties, and providing accurate service information to consumers. Indeed, there are some things the federal government can do to make life easier for cell phone users, but banning carrier exclusivity isn't one of them.

 

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