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Exclusive cell phone deals called into question

Small rural carriers petition the FCC to examine exclusive deals between cell phone manufacturers and mobile operators.

Rural cell phone carriers want to put an end to exclusive deals between carriers and handset makers.

On Tuesday, the Rural Cellular Association, a group of more than 80 small and rural wireless providers, filed a petition with the Federal Communications Commission to investigate and adopt rules that would prohibit exclusivity arrangements between wireless carriers and cell phone manufacturers. In its petition the group said that these arrangements were unfair and stifled customer choice. The group also believes these deals decrease competition and violate the 1996 Telecommunications Act.


The most prominent example of such a deal is the Apple iPhone. AT&T has the exclusive right to sell the iPhone, which was introduced first in the U.S. market in June. Neither Apple nor AT&T has publicly said how long the exclusivity arrangement will last, but it's been reported to be at least five years. Verizon Wireless also has an exclusive deal to sell the LG Voyager, another popular smartphone.

The RCA says that some people living in rural areas can't subscribe to service from a big carrier like AT&T or Verizon and are therefore locked out of getting these cool phones.

"It is important that all Americans have equal access to the latest technology, including wireless devices, regardless of where they live or which carrier provides the service," David Nace, counsel to RCA, said in a statement. "RCA is standing up for consumers' rights and putting an end to exclusivity arrangements that create another 'digital divide' between urban and rural America."

That said, RCA isn't just looking out for consumers. The truth is that smaller rural carriers are hardly ever offered exclusive handset deals because they have far fewer subscribers than the big four: AT&T, Verizon Wireless, Sprint Nextel, and T-Mobile. And this makes it hard for them to compete.

But getting rid of exclusive deals won't be easy. These deals are an integral part of the U.S. wireless industry that helps both manufacturers and mobile operators make a lot of money. Manufacturers shop hot new handsets around to different operators searching for the carrier that will pay the most for exclusivity. Mobile operators benefit because having access to the hottest, new handset can draw new customers and keep existing customers who might have looked elsewhere.

So unless the FCC or Congress steps in, exclusive deals for hot handsets won't likely go away anytime soon. That said, some operators, such as Verizon Wireless, are moving toward open networks. And as networks become more open, handsets from one carrier could be used on a network of another carrier. If that happens, the days of exclusive deals could really be over.