Senators call for antitrust probe of exclusive handset deals

Kerry and other members of Congress's Commerce Committee have written to the Federal Communications Commission (FCC) asking it to investigate deals such as that which means that only AT&T users can buy Apple's iPhone in the US.

"We write to express our concern regarding the use of exclusivity arrangements between commercial wireless carriers and handset manufacturers with respect to wireless handsets that are made available to consumers," said the letter.

It said that there were "benefits served by these agreements to those entities in position to take advantage of them," as well as challenges "in terms of maximizing consumer choice and competition within the marketplace".

A small, rural mobile network had complained to the Commerce Committee, and comments had been received by consumer groups, regulators, phone manufacturers and mobile networks.

The Committee wants the FCC to look into whether such deals are becoming increasingly common and whether they restrict some consumers' ability to take advantage of the latest phone technology.

The most high profile tie-up is between Apple and AT&T, which has exclusive rights to sell the iPhone. Other handsets are network-tied in the US too, though. Spring is the only network to sell Palm's Pre, while Verizon is the only network which can sell Blackberry's first touch screen phone. In the UK O2 has the exclusive right to sell the iPhone.

The letter said that the Commerce Committee would itself be looking into the consumer choice and competition implications of tie-ins, and that it may recommend changes in the law. "The subject of exclusivity agreements between wireless carriers and handset manufacturers will be a focal point of this hearing, and the record will help to determine whether legislative action is also necessary," it said.

Issues identified by the Committee are whether tie-ins restrict consumer handset choice based on where they live and excludes rural dwellers; whether the tie-ins restrict innovation in the phone market; and whether they make it too hard for smaller companies to compete with those that can afford exclusive deals.

The Rural Cellular Association (RCA) wrote to the Committee asking it to put a stop to tie-ins. "Carolina West is in the same position as most small carriers in that in order to win or retain a customer, it must overcome a customer’s or potential customer’s desire to purchase a specific exclusive handset that it is prohibited from selling to customers," said one of its members, Carolina West, in that submission.

"Consumers who are, in fact, able to access these exclusive arrangements are then forced to switch providers, pay a premium for their desired handset, and enter into multi-year service agreements with the exclusive provider," it said. "Carolina West believes that wireless carriers must have access to the same handsets as the largest carriers in order to compete with them on a level playing field. Otherwise, the ability of these carriers to compete effectively with nation’s largest carriers is significantly harmed."

Apple has exclusive deals with many operators across the world, deals which are said to depend on a cut of phone network revenue earned from iPhone users.

French law, though, forbids tying a phone to a network. It says that consumers must be able to move from network to network and keep their phones. Orange is Apple's chosen network in France but it was forced to make an 'unlocked' iPhone available when it launched there.