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A quartet of US senators has asked the acting chairman of the US Federal Communications Commission (FCC) to review whether mobile phone manufacturers should be allowed to enter into exclusive contracts with wireless service providers.

In a letter signed by four lawmakers - including Senator John Kerry, chairman of the Senate's Commerce Subcommittee on Communications, Technology, and the Internet - acting chairman Michael Copps is asked to "act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace."

Although such exclusivity agreements are commonplace, the request for an investigation is a direct shot across Apple and AT&T's shared bow.

How direct? Very direct. One of the concerns enumerated in the letter is "Whether exclusivity agreements place limitations on a consumer’s ability to take full advantage of handset technologies, such as the ability to send multimedia messages or the ability to 'tether' a device to a computer for internet use."

Sounds like a direct poke at AT&T's inability to provide those two exact services to owners of Apple's iPhone.

The letter raises other concerns, as well:

  • "Whether exclusivity agreements are becoming increasingly prevalent between dominant wireless carriers and handset manufacturers;
  •  
  • "Whether exclusivity agreements are restricting consumer choice with respect to which handsets are available depending on a consumer’s geographic region, particularly for consumers living in rural America;
  •  
  • "Whether ... the ability for a dominant carrier to reach an exclusive agreement with a handset manufacturer is inhibiting the ability of smaller, more regional carriers to compete; and
  •  
  • "Whether exclusivity agreements play a role in encouraging or discouraging innovation within the handset marketplace."

The letter notes that in May 2008, the Rural Cellular Association, a trade group with 90 smaller wireless-provider members that provide coverage to a claimed 73 per cent of the US, filed a petition requesting rule-making by the FCC on exclusivity.

The process begun by the petition, according to the letter, resulted in a wealth of comments from large and small service providers, consumer groups, regulatory agencies, and handset manufacturers - information that could be used by the FCC to jump-start its investigation.

The debate is sure to be fierce on both sides of the issue. Pro-exclusivity proponents argue that such contracts enable mobile-device manufacturers to cut deals with service providers that result in lower prices to consumers. Such deals can also enable more innovation by juicing manufacturers' R&D budgets.

Anti-exclusivity champions contend that locking competing providers out of contracts with popular device manufacturers engenders a "We don't care, we don't have to" attitude in exclusive providers of popular handsets, as well as squeezing smaller providers out of the picture entirely.

These and undoubtedly many other arguments will be heard at a hearing on "The Consumer Wireless Experience" to be held this Wednesday in Washington, DC by the Committee on Commerce, Science, and Transportation. ®

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