Will Washington Politics Push Better, Cheaper Handsets and Apps?

Congressional leaders have been taking wireless companies to the verbal woodshed over exclusive arrangements for handsets, and it’s clear at least one carrier has heard it now.

 

On Friday, July 17, Verizon (News - Alert) Wireless published a letter on its policy blog that it sent to key lawmakers on Capital Hill announcing that effectively immediately for small wireless carriers that Verizon’s new exclusivity arrangements with handset manufactures will last no longer than six months for all manufacturers and all devices.

 

Verizon defines smaller wireless carriers as those with 500,000 customers or less, so you shouldn’t expect your favorite new Verizon phone to show up on AT&T (News - Alert), Sprint, or T-Mobile’s network anytime soon, but the political chess game may ultimately have a broader impact upon all service providers and device manufacturers and the games they play in limiting what handsets and services can and can’t do.

 

A couple of senators launched the first round for more openness in handset choices in mid-June, holding hearings on potentially anticompetitive practices in the wireless industry, examining competition and consumer choice including the lock-up of Apple’s (News - Alert) iPhone to AT&T’s network.

 

Larger service providers were – as you might expect – very comfortable with the status quo with AT&T going out of its way to defend exclusivity deals as the only way to get new technology deployed into U.S. market. The Big Four carriers – AT&T, Sprint, Verizon Wireless, and T-Mobile (News - Alert) USA – provide service to about 90 percent of the nation’s 270 millions cell phone users, so they can offer phone manufacturers access to the large markets they want.

 

Lawmakers weren’t happy with what carriers said in response, so regulatory agencies took the hint and now the Federal Communications Commission is now looking into the impact of handset exclusivity deals. A broader antitrust review of the telecommunications industry by the Department of Justice may also be in the works.

 

Verizon has taken a pre-emptive move to try to keep the pot of revived and invigorated government oversight from boiling over onto their current business. To be fair, Verizon may be the company with the least to lose when it comes to exclusives. It doesn’t have an iPhone or a Palm Pre, but it would certainly like to have one or both of those phones to sell to its customers. And since Verizon has taken the first step with limiting its own exclusivity arrangements with smaller carriers, Congressmen and regulatory agencies might be emboldened to “encourage” the other members of the Big Four to liberalize their policies.

 

More importantly, if Verizon did have access to the iPhone or Palm Pre as a “second source” vendor, it might be offering phone-as-modem “tethering” services a lot quicker than either AT&T or Sprint (News - Alert) have. AT&T is currently blocking tethering on the iPhone until it can get its network upgraded while Palm shut down discussion of how to write a tethering application for the Pre on its developer’s website as something it didn’t want to get into to upset its primary customer.

 

IT managers should stay tuned – the last thing carriers want is having the government telling them they must do something. They would prefer to figure out a solution that lets them continue on with minimal changes to how they do business and at the same time mollifies Congressional critics. Current moves may not produce a second U.S. source for the iPhone or Pre overnight, but by the end of the year, who knows?

 

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