Some iPhone owners crave freedom to unlock from AT&T

The U.S. wireless industry is unregulated, so carriers can do as they wish in terms of prices, devices, service plans, customer policies and more. AT&T, for one, believes an unregulated wireless industry is good for consumers.

The U.S. wireless industry "is a highly competitive market," says Jim Cicconi, head of public policy for AT&T. In most markets, he notes, consumers have their pick of three carriers, at least.

Consumer gripes about AT&T's tough iPhone policies are unfair, he says. The fact that so many people — 2 million in the fourth quarter alone — flocked to AT&T for the iPhone "is ratifying the (exclusive) arrangement" with Apple, he says.

"Consumers have the ultimate option of buying or not buying" an iPhone, he adds. "And the fact is, they're choosing to buy in overwhelming numbers."

Without AT&T's discounts, he says, "The device would be a lot more expensive."

AT&T's position assumes that rivals, given the opportunity, wouldn't charge less for the iPhone, Kelsey notes. Likewise, he says prices on mobile voice and data plans, which start at $70 for iPhone users, might also improve if others were competing.

The Senate Commerce Committee recently held a hearing to explore the impact of exclusive handset deals on consumers. The Federal Communications Commission— whose new chairman, Julius Genachowski, is a confidant of President Obama— is examining the same issue.

The telecom enforcement section at the Justice Department regularly reviews wireless industry practices. But Justice Department spokeswoman Gina Talamona declined to comment on whether a specific investigation is underway.

The Senate Judiciary Committee, in a letter on Monday, asked the Justice Department to examine handset exclusivity agreements, among other issues.

Rural phone companies, meantime, have asked the FCC to ban, or at least limit, handset exclusives. Historically, exclusives lasted no more than a few months. AT&T has had its exclusive deal with iPhone since it was launched in 2007. Verizon's exclusive on LG's "Chocolate" cellphone runs for the lifetime of the device.

Small carriers don't have enough subscribers or financial clout to land exclusives on the latest devices, says John Rooney, CEO of U.S. Cellular, which has 6.2 million customers. As a result, he says, many are losing customers.

Consumers Union, Free Press and other consumer groups are calling on Congress to step in. Their goal: to end practices such as application blocking and long-term device exclusives that they say limit choice and tamp down competition.

"The time has come for regulation," says Ben Scott, public policy director of Free Press.

The Big Four

Size is part of the problem, Scott says. Thanks to years of megamergers, the U.S. wireless industry is dominated by four giants — AT&T, Verizon, Sprint and T-Mobile. They control 85% of the market. The bulk — 65% — is controlled by two: AT&T and Verizon.

AT&T is an amalgamation of four Bells — SBC, Ameritech, Pacific Telesis and BellSouth— plus former wireless giant Cingular and long-distance icon AT&T.

Verizon is a patchwork of two Bells —Bell Atlantic and Nynex— plus GTE and long-distance icon MCI (formerly, WorldCom). It recently acquired Alltel, the No. 5 wireless player.

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