U.S. Senators Are Seeking Investigation into Carrier Handset Exclusivity Agreements

[iLeoMarc]

THE WALL STREET JOURNAL

The senators said they would hold a hearing on Wednesday to examine competition issues and determine if legislative action is necessary.

Just incase you wanted to know here are the list of testimonies to be given:

Mr. Mark Goldstein
Director, Physical Infrastructure Issues
U.S. Government Accountability Office

Mr. Robert M. Frieden
Pioneers Chair and Professor of Telecommunications and Law
Pennsylvania State University

Mr. Jack Rooney
President and Chief Executive Officer
U.S. Cellular

Ms. Barbara S. Esbin
Senior Fellow and Director
The Progress and Freedom Foundation

Mr. Paul Roth
President, Retail Sales and Services
AT&T Services, Inc.

Mr. Hu Meena
President and CEO
Cellular South, Inc.

I think to fully answer:
"Whether exclusivity agreements play a role in encouraging or discouraging innovation within the handset marketplace"
Congress needs to have a representative of a handset maker available. I think they can shed some light on their reasons behind making a handset exclusive.

 

[samab]

I'd imagine there's a belief that if the iPhone was unlocked and usable on every network then AT&T would already have enabled MMS and tethering and maybe even offered it for free so users wouldn't go elsewhere. They might even drop the data fee and lower the monthly voice charges.

Yet if they even bother to look at the rest of the world --- like Australia where there are 3 or 4 different carriers selling the iphone. Tethering is still going to cost you extra. Data plans are multiple times more expensive than the AT&T's iphone plan.

If the market is competitive, then it's competitive. Hong Kong has the cheapest iphone in the world --- because there are 6 carriers. Hutchison 3 HK is the exclusive iphone distributor in Hong Kong --- yet they have the cheapest iphone in the world. There are no government regulations forcing them to sell a unlocked iphone, yet 3 HK sells a completely unlocked iphone.

 

[jav6454]

Agreed with iLeoMarc. All I see is carrier testimonies and no testimonies by the makers of handsets like Motorola, RIM, Apple, Sony, etc. They are the ones many times pushing the handset exclusivity.

 

[iLeoMarc]

Update

With all the excitement of 3.0, I just wanted to fill you in on the senate hearing on headset exclusivity.

There seemed to be statements directed to Apple & AT&T's exclusivity agreement. The representative for AT&T stated that the iPhone's exclusivity has fostered innovation, where wireless service providers has continued to come out with "iPhone killers" due to not having the iPhone available. Do you think that this statement is true? Can you imagine a world which the iPhone was released to all networks (minus the CDMA vs. GSM compatibility issue), will other networks not be so inclined to promote another product which competes' with the iPhone?

As a side note: AT&T's representative was also asked about the iPhone's exclusivity agreement being limited in time. The answer was, "Yes" but that they have not disclosed the length of their agreement.

 

[ptsube]

Let's say Apple is required to make a GSM and a CDMA phone. Their costs will go up on hardware as well as software. Apple will pass that cost on to the carrier and then the carrier will pass it on to the consumer.

Now, every carrier will want the iPhone because it is the cool phone. Now that every carrier has the iPhone, why bother carrying the HTC Touch or the Nokia 5800, or the LG Dare, or the Palm Pre, or the Samsung Instinct? Not only does this create a monopoly with the iPhone, it also takes away important competition that Apple needs to inspire them to make a better product.

Now that all the carriers have the phones they want, it comes down to price and who has the better service.

Obviously there is no more innovation. Who needs anything other than an iPhone?

Now the carrier with the best service has more costs because they have more towers to repair and operate. So even though they have better service, they have to charge the same price in order to get customers. Why pay more for the same phone and similar service?

Small carriers go out of business because they can't absorb the cost of the phones plus offer good prices with great service.

Less competition to the big carriers means higher prices.

Then you want another regulation saying that a carrier can only charge so much for service and a phone. Now some carriers can't afford to offer the iPhone because they can't absorb that cost. They go out of business.

Now you have maybe two carriers with the exact same service with the exact same prices, and the exact same phones.

Why even have more than one carrier if they are all the same?

Now you have one giant, nationalized carrier, without choice, without innovation, and without competition.

Are you happy the FCC made Apple sell the iPhone to Verizon, Sprint, Alltel, T-mobile, Qwest, US Cellular, Virgin Mobile, Tracfone, Boost Mobile, and Cricket?

Not everything is perfect, and when it is, that is when you should worry.

 

[Mr. Giver '94]

The stupid senate can't get anything done anyway. Complainers, don't expect any results from this.


Exclusivity exists to draw consumers to one carrier or another. Making manufacturers allow all carriers to sell their phones aka socializing the cell phone industry won't help anything.

 

[loleries]

Pstube, im not quite sure you understand the basics of capitalism here.

Now, every carrier will want the iPhone because it is the cool phone. Now that every carrier has the iPhone, why bother carrying the HTC Touch or the Nokia 5800, or the LG Dare, or the Palm Pre, or the Samsung Instinct?

No. The handset companies will want to always make the iphone killer. In fact, innovation will not only go up, but at a faster rate.

Not only does this create a monopoly with the iPhone, it also takes away important competition that Apple needs to inspire them to make a better product.
Obviously there is no more innovation. Who needs anything other than an iPhone?

Again, basic capitalism here. Say the iPhone takes the monopoly. As soon as Apple begins slacking on features and innovation, interest will decrease and the market will shift towards another phone.

As for the rest of your post on price fixing by the FCC, I fully agree.

 

[coolwater]

Let's say Apple is required to make a GSM and a CDMA phone. Their costs will go up on hardware as well as software. Apple will pass that cost on to the carrier and then the carrier will pass it on to the consumer.

Now, every carrier will want the iPhone because it is the cool phone. Now that every carrier has the iPhone, why bother carrying the HTC Touch or the Nokia 5800, or the LG Dare, or the Palm Pre, or the Samsung Instinct? Not only does this create a monopoly with the iPhone, it also takes away important competition that Apple needs to inspire them to make a better product.

Now that all the carriers have the phones they want, it comes down to price and who has the better service.

Obviously there is no more innovation. Who needs anything other than an iPhone?

Now the carrier with the best service has more costs because they have more towers to repair and operate. So even though they have better service, they have to charge the same price in order to get customers. Why pay more for the same phone and similar service?

Small carriers go out of business because they can't absorb the cost of the phones plus offer good prices with great service.

Less competition to the big carriers means higher prices.

Then you want another regulation saying that a carrier can only charge so much for service and a phone. Now some carriers can't afford to offer the iPhone because they can't absorb that cost. They go out of business.

Now you have maybe two carriers with the exact same service with the exact same prices, and the exact same phones.

Why even have more than one carrier if they are all the same?

Now you have one giant, nationalized carrier, without choice, without innovation, and without competition.

Are you happy the FCC made Apple sell the iPhone to Verizon, Sprint, Alltel, T-mobile, Qwest, US Cellular, Virgin Mobile, Tracfone, Boost Mobile, and Cricket?

Not everything is perfect, and when it is, that is when you should worry.

I don't buy it. I cannot agree with the notion that more competition will lead to less innovation and higher price. I understand how some people think as if iPhone is their only choice to own, but there are far more non-iPhone users in US and it will stay like that maybe forever. Blackberry sold more than 7milllion units in North America in the 1st quarter alone--thanks to President Obama.

AT&T already has phones other than iPhone and we are not seeing all AT&T customers choosing iPhone. I even wonder if iPhone users make up 50% of AT&T wireless customers. I am guessing NO.

Also, never underestimate other phone companies like RIM, Nokia, Samsung, LG, etc. They will survive alright. If iPhone is offered in all 4 major networks, we will see less price and better service for sure. And, I wouldn't worry about phone carriers making less profit. They are making way too much now and the industry needs more competition. More profit does not always lead to better R&D, but more competition usually does.

Costing APPLE more to produce both GSM & CDMA versions? If so, the cost will be offset because as more iPhones are sold, higher economies of scale will kick in. If Apple can double or triple iPhone sales in US, raising the price will be the last thing they will do.

AT&T is the best fit for iPhone at the moment, but if Verizon and other carriers get iPhone, they will eventually make themselves at least on par with AT&T if not better.