Verizon’s gesture: Too much or not enough?

Mon, 07/20/2009 - 8:25am
Monica Alleven, Wireless Week

Reaction to Verizon Wireless’ decision to limit exclusivity deals for smaller carriers was, predictably, mixed, with some saying it doesn’t go far enough and others figuring that’s as far as it should go.
Exclusive handset deals have raised the attention of the government, namely the Department of Justice and the Federal Communications Commission, particularly since the hugely popular Apple iPhone has been offered exclusively through AT&T. But it’s a practice shared across industry heavyweights, which use exclusive handset deals to attract customers who can only find certain devices with them.

On Friday, Verizon Wireless said it will limit its handset exclusivity agreements on all handsets to last no longer than six months so that small carriers with 500,000 or fewer customers can get access to the devices. The carrier previously had eliminated long-term exclusive handset agreements with LG and Samsung.

It wasn’t clear today whether Cellular South, one of the most vocal critics of handset exclusivity deals, would be able to take advantage of the deal because it has 800,000 customers.

Verizon Wireless spokesman Jeffrey Nelson said that at this point, it’s a 500,000 customer threshold. “We understand some companies above it may want to take advantage of our offer, and some that are currently under 500,000 will grow to above that,” he said. “They should call us and discuss, company to company.”

U.S. Cellular, which also has been critical of exclusive handset deals, has about 6 million customers.

Cellular South, a privately held regional carrier with headquarters in Jackson, Miss., has argued that exclusive device agreements are anti-competitive, increase consumer prices and decrease innovation. The carrier says American consumers should be allowed to match the device they want with the wireless carrier they choose, as do consumers in other parts of the world.

Will Verizon’s gesture be enough? Not according to Public Knowledge, which issued a statement Friday saying Verizon’s offer is inadequate. “Verizon’s gesture should be seen for what it is – an inadequate attempt to influence legislation and regulation. It should not be up to Verizon to decide the terms and conditions under which consumers can have the benefit of wireless handset competition,” said Harold Feld, legal director for Public Knowledge.

“Obviously, Verizon’s gesture applies only to it, and to no other carriers,” Feld said. “That situation is unacceptable. We urge the Federal Communications Commission, the Department of Justice and Congress to pursue their inquiries into exclusive handset arrangements with the goal of eliminating the practice altogether.”
Telecom analyst Jeff Kagan weighed in, saying companies like Verizon, AT&T, Sprint and others would prefer the government not get involved. “The marketplace has thrived and exploded during the last decade without this kind of government involvement. Sure, there have been a few bumps in the road like this, but if the industry will change and handle this in a fair way, that should be all anyone can ask.
“Customers would prefer no exclusive agreements so they can choose the device and the network; however, the industry has grown up over the last many years with this model, and it seems to work well. There are always some problems from certain perspectives, but even if the government got involved, there would be other problems from other perspectives.”

Cellular South has led efforts in the past to get smaller CDMA carriers together to increase their buying power when it comes to handsets, in part through the Associated Carrier Group (ACG) that was established several years ago.

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•  Verizon's gesture: Too much or not enough?
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