Grassroots and consumer groups continued their pressure against
exclusive deals between wireless carriers and cell phone manufacturers
June 17 with a major assist from U.S. Sen. John Kerry (D-Mass.). While
Free Press launched a FreeMyPhone campaign calling on lawmakers to open
up wireless networks and promote consumer choice, Kerry held a hearing
questioning wireless-carrier practices.
Unlike wireline 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 such as Apple's iPhone
arrangement with AT&T.
"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?” Kerry 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."
Kerry said it wasn't easy to round up witnesses for the hearing, noting
every major handset manufacturer was invited to testify and each of
them declined the offer. Paul Roth, president of AT&T's retail
sales and services, though, was willing to testify 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."
Sen. Kay Bailey Hutchinson (R-Tex.), the ranking member of the Senate
Commerce Committee, also weighed in with the Republican free market
approach favored by the GOP when it controlled Congress for almost a
decade.
"I understand the concerns expressed by some of my colleagues; however,
it is important to note that these arrangements are largely responsible
for many of the exciting products in the marketplace today, Hutchinson
said. "The marketplace is competitive, and the introduction of a
breakthrough new technology by one company, spurred by a competitive
desire to offer consumers something new and exciting, in turn drives
other providers to invest heavily in research and development of
similar devices."
Hu Meena, president and CEO of Cellular South, found fault with Hutchinson's free market reasoning.
"Our country’s banking and finance policy mistakenly believed that free
reign in the marketplace with little oversight was the best course of
action and that certain institutions were simply too big to fail,"
Meena said. "This reasoning will lead to the same market failures in
the wireless industry. Congress must take action now to ensure that the
wireless industry remains the competitive and innovative marketplace
that Congress intended for consumers to have."
While Kerry spoke of possible Congressional action to force wireless
carriers to open their networks to all legal devices and services, the
more likely forum for reform will be the Federal Communications
Commission, where President Obama's nomination for FCC chairman,
Julius Genachowski, is expected to be confirmed by the July 4 holiday.
In a June 15 letter to Acting FCC Chairman Michael Copps, Kerry asked
the FCC to investigative whether exclusive deals between cell phone
makers and wireless carriers are unfairly impacting competition and
restricting consumer choice in the commercial wireless marketplace.
"Based on this record, we ask that you examine this issue carefully and
act expeditiously should you find that exclusivity agreements unfairly
restrict consumer choice or adversely impact competition in the
commercial wireless marketplace," Kerry, along with Roger Wicker
(R-Miss.), Byron Dorgan (D-N.D.) and Amy Klobuchar (D-Minn.), wrote to
Copps.
Timothy Karr, campaign director of Free Press, said the FreeMyPhone
campaign offers consumers a chance to get involved and demand better
policies.
"Wireless companies promise the Internet in your pocket, but deliver
the walled wireless Web. Through exclusive deals for phones like the
iPhone and BlackBerry Storm, wireless companies have stifled
innovation, crippled applications and stuck users with the bill," Karr
said in a statement.
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