Exclusive cell phone deals called into question

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.

(Credit: Apple)

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.

[Pete Bardo]

These exclusivity deals not only make it difficult for smaller providers to compete or even exist, they allow the big four to compete based on who has the best phones instead of who has the best service or price. They affect the consumers maybe more than the competition.

But, then again, it's not illegal, just a pain for all of us.

[MCOjerry]

LOL..I completely agree with both of your comments. Even if they are the same :-)

[Pete Bardo]

These exclusivity deals not only make it difficult for smaller providers to compete or even exist, they allow the big four to compete based on who has the best phones instead of who has the best service or price. They affect the consumers maybe more than the competition.

But, then again, it's not illegal, just a pain for all of us.

[jrappy87]

why is there even a need for smaller providers? and if there is a need, its not verizons fault they are so successful...if the iphone or voyager was offered to a small company, lg and apple would make no profit. All i can say is people who dont have service from the big four, especially verizon, really must live in the middle of no where. verizon is the best and the only reason AT&T is winning in customers is because they have been around longer but verizon is and will catch up.

[jrappy87]

why is there even a need for smaller providers? and if there is a need, its not verizons fault they are so successful...if the iphone or voyager was offered to a small company, lg and apple would make no profit. All i can say is people who dont have service from the big four, especially verizon, really must live in the middle of no where. verizon is the best and the only reason AT&T is winning in customers is because they have been around longer but verizon is and will catch up.

[RandomnessPrevails]

Ok, for our next act we should have Microsoft offer the XBox Live as an *exclusive* deal with perhaps, Verizon? Somehow I think not...LOL

[FireyIce01]

to jrappy:

Why do they need smaller carriers? How about because ATT, Verizon, etc dont care about rural communities? There are huge swaths of america that have no coverage from the big 4, just because it wouldn't be profitable for them to put up and maintain a tower in that area. Not enough people using their service. Then, of course, there's that competition thing.

So, you suggest these rural customers sign up for verizon, or att, or whoever, even if there's no coverage in the area that they live/operate in? That sounds like a stupid idea. Maybe I'll buy a car without an engine too! All 4 of the big companies suck. They're restrictive of their internet plans, and overprice all their plans.

The exclusivity contracts are anti-competitive, and if they were illegal, and the iphone and voyager were available to smaller carriers, they would be making MORE sales, because people that otherwise couldn't use the phones would be able to.

Also, note the number of unlocked iPhones that have flooded the market.

Really, the corporations have had unfair advantages over ma and pa companies for way too long, and the US needs to start re-aligning their laws to benefit the people instead of the powerhouses.

[Shutterstuff]

How would the public take it if Earthlink users could only use Gateway computers on their service? Or Comcast would only allow Macs? I find it ludicrous that the cell phone industry is so fragmented and stuck in the dark ages. I remember when you had 4 choices of landline phones, desk or wall mounted, black or beige. They had dials too! Pushbutton? You had to pay extra per month to use them. I refuse to play the game of switching carriers just to get the handset I like. As a result, I have a PDA with WiFi and a basic cell phone (does not even have Bluetooth). I use the phone to make calls and check voicemail. The PDA does everything else. There is a PDA phone I like, but my carrier does not enable all the features so I have not bothered. I have used a cell phone for over 20 years and I am still amazed how stupid the US carriers are? especially when I compare to what my over seas friends have.

[JimmyLSeattle]

Well, I do believe that the Voyager sold by Verizon is actually a smart-dumbphone and not really a PDA. The Glyde is much better and cheaper

[erika_mt]

Thank you, FireyIce01. To jrappy87, I don't see why you think that because the four major carriers aren't in some areas, that those areas are considered the "middle of nowhere". Like FireyIce mentioned, there are rural areas allover the US. The day the iPhone came out, there was an article in our newspaper, titled something along the lines of "iPhone too techy for Montana". Really? That's embarrassing, especially for the technology companies, like mine, working successfully out of picturesque Montana. It's not too techy, it's just that Verizon takes the majority of the customers in our area because there is a lack of options, so AT&T doesn't bother coming into a market that has already "chosen" Verizon. The unfortunate part is, because these rural areas are having to provide their own local providers, they aren't able to get some of the other technology that comes along with it, because many companies who provide services that integrate with carriers, can't afford to subscribe to all the major carriers and the 80 small carriers. Are these people "not techy" because they choose to be? No; it's because they don't have the option to be. Would they like to be able to text message and send mobile pix/flix and get on the internet on their phone. Yes! It's not an abundance of Hillbillies like Hollywood portrays. (Someone from San Diego asked me just a few short years ago if we still rode horses around town on a daily basis? Yep! and we also don't have indoor plumbing, we just use outhouses!)
Point being - I fully support the petition. Say the iPhone becomes available to the 80 rural providers. That's quite a large boost in sales if you ask me. A sale is a sale.

[jrappy87]

this is way off topic but...verizon stil has the best coverage over at&t and has better phones, faster internet...verizon gets mobile tv, at&t gets mobile TV...verizon has gps, AT&t gets gps...verizon is the best carier does everyone agree? except for you people who live in rural areas and use rural cell phone companies. i doubt a phone will boost customers...the iphone didnt boost any costomers for at&t, their turnover rate is greater than verizons. the only reason at&t has more costomers is because theyve been aorund longer, but dont worry verizon will catch up. the voyager is better than the sidekick, the lg vu, and apples iphone....i mean what expensive phone doesnt have bluetooth? apple just wipped up a cell phone, lg has been making cell phones for years and came out with the first camera phone. does anyone agree? finally, ok i guess i agree the rural phone companies should be able to get any phone they want.

[benjaminstraight]

Is this a monopoly?