U.S. Justice Department Mulls Telecom Antitrust Probe

The U.S. Department of Justice is reportedly looking into how large national telecom companies, including AT&T Inc. and Verizon Communications Inc., form exclusive agreements for popular handsets – a trend that's raising concerns that the companies could be abusing their power.

 

According to Amol Sharma of the Wall Street Journal, the justice department’s antitrust probe could explore whether such wireless carriers are impacting smaller rivals by forging exclusive distribution deals. For example, Apple has partnered with AT&T (News - Alert) for rights to its iPhone. AT&T is in its second year of an exclusive deal to sell the popular device.

 

 

A probe into the practices – which have emerged as standard as handset-makers introduce new devices to the market – could have far-reaching consequences.

 

As TMCnet reported recently, Sprint (News - Alert) forged a deal to exclusively sell the Palm Pre for six months before Verizon Wireless carries the device.

 

The justice department could also review whether telecom carriers are restricting the types of services other companies can offer on their networks, the newspaper reported. For instance, the Apple (News - Alert) iPhone’s 50,000 applications hold a key advantage over competitors, which have a minuscule offering in comparison.

 

The action, however, is not a formal review and does not call out a specific company, according to the Journal.

 

AT&T and Verizon have become the two leaders in telecommunications space. Combined, the companies control 90 million landline customers and 60 percent of the 270 million U.S. wireless subscribers, the Journal reported. In addition, the companies operate large portions of the Internet backbone, managing data across the country and overseas, it said.

 

The probe into the telecom industry shows a far more aggressive stance from the Obama administration compared to the Bush administration, the Journal said. The Justice Department's antitrust chief, Christine Varney, said she wants to reassert the government's role in policing “monopolistic and anti-competitive practices” by powerful companies, the report said.

 

Perhaps the new administration will shed some light on the issues that have been plaguing the telecom industry for some time, officials said.

 

“Antitrust problems with telecom consolidation have been evident for a while – it’s not just wireless,” Gary Reback, an antitrust attorney at Carr & Ferrell in Palo Alto (News - Alert), Calif., told CNNMoney. “There has been a lot of public opposition to the consolidation, but the Bush Administration just shrugged it off.”

 

While Apple isn’t a direct target of the inquiry, the company could still become tangled in the

And rightly so. It isn’t the first time Apple has come up concerning a federal antitrust probe.

 

In April, officials asked the Federal Communications Commission to look into AT&T and Apple Inc.’s use of Skype (News - Alert), the eBay-owned Internet calling service. As TMCnet reported, a nonprofit advocacy group asked the FCC to investigate whether the two companies are breaking federal rules by disallowing the widespread use of the service on the Apple iPhone (News - Alert).