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Jul. 21, 2009

As some wireless industry analysts had predicted, the overall reaction to Verizon Wireless’ decision to limit exclusivity deals for smaller mobile carriers was mixed, and certainly not everybody agress with it.

Some are saying Verizon's decision doesn’t even go far enough, while others are still trying to figure out just how far it should go, in light of the facts presented to date.

In the past, exclusive handset deals have raised the attention of the U.S. government, namely the Department of Justice and the FCC, particularly since the hugely popular Apple iPhone has been offered exclusively through AT&T.

However, it’s a practice shared across the mobile phone industry, especially with the biggest companies which use exclusive deals to simply attract customers who can only find certain devices with them. The iPhone is a classic example of just that.

Verizon Wireless said last week it will limit its handset exclusivity agreements on all handsets to last no longer than 6 months so that small carriers with 500,000 or fewer customers can get access to the devices.

The wireless carrier previously had eliminated long-term exclusive handset agreements with LG and Samsung as well.

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

It's still isn't clear whether Cellular South, one of the most vocal critics of handset exclusivity deals, would be able to take advantage of the deal since it has a little over 800,000 customers. Verizon Wireless spokesman Jeff Nelson said 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. “They should call us and discuss, company-to-company,” added Nelson.

Wireless industry analyst Jeff Kagan says companies like Verizon, AT&T, Sprint and others would prefer the government not get involved. “The marketplace has thrived and exploded during the last ten years without this kind of government involvement. There has been a few bumps in the road like this of course, but if the industry will change and handle this in a fair way, that should be all anyone can ask,” said Kagan.

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

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

So in light of all of this, will Verizon’s gesture still be enough? Not according to Public Knowledge, which issued a statement on July 17 saying that, for the most part, Verizon’s offer is still inadequate.

Harold Feld, legal director for Public Knowledge said “Verizon’s gesture should be seen for what it is: an inadequate attempt to influence government legislation and regulation in order to increase its market share. It should not be up to Verizon to decide the terms and conditions under which consumers can have the benefit of wireless handset competition.”

Feld went on to say “obviously, Verizon’s gesture applies only to itself, and to no other wireless carriers, and that's exactly what some are strongly against. Such a situation is totally unacceptable. We urge the FCC, the DoJ and Congress to pursue their inquiries into exclusive handset arrangements with the goal of eliminating the practice altogether.”

“Wireless subscribers would prefer no exclusive agreements so they can select the mobile device and the network of their choice. But the mobile industry has grown up over the last years with this business model and it now seems to work pretty well, especially for Verizon," he said.

"There are always some problems from certain perspectives, but even if the government got involved, there would still be other problems from other perspectives as well,” added Feld.

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Source: GWN.