FCC to Scrutinize Exclusive Wireless Contracts

By Cecilia Kang
Washington Post Staff Writer
Friday, June 19, 2009

The Federal Communications Commission will launch a review of exclusive partnerships between cellphone makers and wireless service carriers, such as the one between Apple and AT&T for the iPhone, to see if the deals harm consumers and hamper competition, interim Chairman Michael J. Copps said yesterday.

Speaking at a conference in Washington on broadband Internet yesterday, Copps said the FCC would open a proceeding that would review the industry's practice. He said he has instructed the agency's bureau on competition to investigate.

"The commission as the expert agency should determine whether some of these arrangements adversely restrict consumer choice or harm the development of innovative devices, and it should take appropriate action if it finds harm," Copps said.

Julius Genachowski, President Obama's pick to chair the FCC, weighed in on the subject as part of his confirmation hearing this week. In written response to questions, Genachowski said that if confirmed he would review complaints that exclusive deals between handset makers and the larger telecommunications companies hurt smaller regional competitors.

Genachowski's nomination was approved yesterday by the Senate Commerce Committee along with that of Republican Robert M. McDowell to serve another term as a commissioner of the agency. Their nominations will move to the full Senate for a vote at a date yet to be determined.

The FCC's review of exclusive phone deals comes after a Senate hearing this week on the practice and after four senators sent a letter to Copps urging the FCC to act on a petition filed by rural carriers one year ago. The petition raised concerns that deals such as Apple's with AT&T, Google's Android phone on T-Mobile's network and Palm's new handset deal with Sprint Nextel unfairly hurt smaller carriers that are unable to strike deals to provide the most desired smartphones on their networks.

The industry has consolidated to four major carriers from seven in the past three years, with the four biggest carriers -- AT&T, Verizon Wireless, Sprint Nextel and T-Mobile -- serving 90 percent of all cellphone users.

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