FCC to Probe Exclusive Mobile Handset Deals

IDG News Service — The U.S. Federal Communications Commission will launch an investigation into exclusive handset deals between mobile carriers and handset makers, acting FCC Chairman Michael Copps said.

Copps has instructed FCC staff to open an inquiry into exclusive handset deals, he said during a speech at the Pike and Fischer Broadband Summit Thursday.

"In the fast-changing wireless handset market ... we must ensure that consumers are able to reap the benefits that a robust and innovative competitive marketplace can bestow," Copps said. "The commission, as the expert agency, should determine whether some of these arrangements adversely restrict consumer choice or harm the development of innovative devices, and it should take appropriate action if it finds harm."

Copps announcement came as several U.S. senators and consumer rights groups have begun to question exclusive handset deals, particularly the arrangement for AT&T to be the only carrier to offer service for Apple's popular iPhone in the U.S. The Senate Commerce, Science and Transportation Commission conducted a hearing on exclusive handset deals on Thursday.

Senators raised concerns that exclusive deals limit innovation and consumer choice.

"If we had done this in the past with the computer area, it would be like Microsoft and IBM having exclusive deals and you would actually never have had a Google because who would have wanted to make deals with some of these startup companies that might not have had much promise," Senator Amy Klobuchar, a Minnesota Democrat, said Thursday. "So I have a big concern about innovation and the long-term effect this might have on pricing."

Copps seemed to agree in his speech. "We should always be concerned about potential gatekeeper control," he said. "That is why, from the very beginning, I have supported an open Internet, Internet freedom, network neutrality, or whatever you want to call what it is that we need to keep the Internet dynamic and transformative for consumers, innovation and competition."

Supporters of open Internet and net neutrality rules believe consumers should be able to access the Web content and attach devices of their choosing to broadband networks without restrictions from broadband providers, including wireless broadband carriers.

An AT&T spokesman referred to the Senate testimony of Paul Roth, the carrier's president of retail sales and service, when asked about the Copps' inquiry.

The U.S. mobile market is "intensely" competitive, and AT&T has invested $38 billion in its wireless and wireline networks in the past two years, Roth told the Commerce Committee.

"Calls for the government to dictate the terms of contracts for handset distribution between device manufacturers and carriers should be rejected," Roth said in written testimony. "The reasons for this are simple and compelling: The current business and regulatory framework -- which allows service providers and device manufactures to partner and share risks to develop the most compelling devices -- ensures innovation, lower prices, and choice."

Regulations limiting these partnerships "would serve only to harm consumers, as devices would devolve into the lowest common technological denominator and the key pillars of wireless competition would evaporate," Roth added.