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FCC to investigate iPhone-like deals

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Interim Federal Communications Commission chair Michael Copps is calling for an examination of exclusive handset deals to establish if they are restricting innovation.

In an informal presentation on broadband policy at the Pike & Fischer Broadband Policy Summit(pdf) Mr. Copps brought up the subject of exclusive deals and how they could "restrict consumer choice or harm the development of innovative devices".

Earlier in the week Senator Kerry wrote to the FCC suggesting that such deals risk giving too much power to dominant networks, with particular reference to the iPhone and AT&T and using much the same language as Mr. Copps.

Mr. Copps said: "we should open a proceeding to closely examine wireless handset exclusivity arrangements that have reportedly become more prevalent in recent years, and I have instructed the Bureau to begin crafting such an item."

Network operators love exclusive handset deals, even if they only last a month or two: not only can they associate their brand with the new handset, but the network also gains from the advertising spending of the handset manufacturer. Device manufacturers know this, and will demand a much higher handset subsidy in exchange for an exclusive, which, after all, limits their market.

In markets with healthy competition between equally-sized networks that all works fine, but where a dominant player can snap up the exclusives - perhaps by refusing to list a handset at all rather than offering a substantial subsidy - then smaller networks can easily be sidelined - which is what the FCC will be seeking to establish.

While it might be hard to imagine Apple being forced to sell handsets operating on networks other than AT&T, it's worth remembering that they are already required to do so in several counties that already restrict such deals. ®

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