Carriers' exclusivity deals create digital divide, senators told

By
Leslie Cauley, USA TODAY
June 17, 2009, 11:36 PM ET
2 min read

— -- The success of the Appleaapl iPhone has translated into millions of new customers for exclusive U.S. carrier AT&T. t But a Senate panel on Wednesday explored what impact such exclusive agreements have on wireless prices, innovation and competition.

Paul Roth, head of retail sales for AT&T — the only big carrier that testified — made the case that exclusive arrangements help spur innovation, noting that there are now more than 30 smartphones competing with the iPhone. Those sorts of competitive responses help keep prices in check and also give consumers plenty of choices, he argued.

In short, these arrangements "are really good for consumers," Roth told the Senate Commerce Committee.

John Rooney, CEO of U.S. Cellular USM, had a different view. He said exclusives are "damaging" to consumers, arguing that they limit choice, tamp down innovation and tie the hands of subscribers. U.S. Cellular is the fifth-largest wireless carrier in the country, with about 6 million customers.

People in rural areas are particularly hard hit, Rooney told the committee.

Owing to exclusive deals, he says, a wireless "digital divide" — between people who have access to top devices and those who don't — is starting to take hold.

To help make his point, Rooney held up a list of the top 14 devices, including the iPhone, that are locked down in exclusives with the Big Four — AT&T, Verizonvz, Sprint s and T-Mobile.

"That puts a big dent in our ability" to serve customers, he told the committee.

The duration of AT&T's iPhone exclusive was also a point of discussion. Device exclusives typically end after 12 months. AT&T's deal, penned around 2006, is still going on.

Citing contract confidentiality, Roth would only say that AT&T has a "multiyear" arrangement with Apple. That has been AT&T's standard response since the iPhone made its U.S. debut in June 2007.

Sen. Roger Wicker, R-Miss., who raised the question, suggested he might want to revisit that question with AT&T later.

Wicker and other lawmakers on Monday asked the Federal Communications Commission to take a look at exclusive arrangements between handset makers and carriers. That task will likely fall to incoming FCC chief Julius Genachowski. His confirmation hearing was held Tuesday, and he is expected to be officially confirmed shortly.