As if a looming regulatory overhaul is not enough to worry the nation's
largest telecommunications companies, the Department of Justice is reportedly
opening an antitrust investigation into the consumer practices of such
powerhouse providers as AT&T and Verizon.
According to the Wall Street Journal, the Department of Justice
has began a preliminary probe that is likely centered on exclusive smartphone
deals between carriers and cell phone manufacturers like AT&T's arrangement
involving Apple's iPhone. The investigation may also cover carriers limiting
the types of services that other companies can offer on the telecoms' networks.
The department declined to comment on either the story or a possible
investigation.
The exclusive handset deals offered by carriers have already gained the
attention of Congress with the Senate
Commerce Committee holding a hearing June 17 questioning the practices of
wireless carriers. Unlike wire-line services, which are required by law to
allow consumers to connect the legal devices of their choice to carriers'
networks, the wireless market is pocked with exclusive deals.
"At the heart of this issue is this question: Is it better or worse for
competition, for innovation and for the American consumer if the carrier
controls the decision over what devices can and cannot operate on their
network?" Sen. John Kerry (D-Mass.) said in his opening remarks at the
hearing. "I think the Commerce Committee should consider how the wireless
industry is functioning and whether current practices are in the best interest
of competition and the consumer."
Paul Roth, president of AT&T's retail sales and services, testified on the
merits of exclusive handset deals.
"Exclusive handset distribution arrangements encourage the necessary
collaboration that optimizes handset performance and accelerates the delivery
of next-generation features," Roth said. "They increase a carrier's
incentives to make purchase commitments and to invest in promotions, network
improvements and special training of sales staff. They lower manufacturer entry
barriers and serve as a key tool to maintain brand value."
Even before the Department of Justice opened its reported antitrust case
against the telecoms and the Senate began nosing around in the matter, the
major carriers were already facing what appears to be a dramatically different
regulatory regime under the Obama administration. Both President Obama and new
FCC Chairman Julius Genachowski have said they support network neutrality and
open networks, something the telecoms have fought hammer and tongs.
Since Obama's election, the telecoms have gently danced around the possible
changes coming in telecom policy. After opposing network neutrality for years,
carriers have, if not embraced, at least accepted the FCC's four network
neutrality principles in hopes of avoiding federal legislation.
"They won the election," Tom Tauke, Verizon's executive vice
president for Public Affairs, Policy and Communications, told reporters in
early June, "and they are going to try to correct whatever problem they
see is there. We don't see that there is a problem, but we're certainly going
to understand what their objective is and try to work with them."
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