Are Cellphone Exclusivity Deals Bad For Consumers?

Yesterday, four U.S. Senators sent a letter to FCC acting chairman Michael Copps requesting an investigation into whether exclusivity deals between handset makers and national carriers are ultimately good for consumers, and they plan to hold a hearing on the issue on Wednesday, June 16th. They join a growing number of people and organizations, including the Rural Cellular Association (RCA), who say exclusivity deals benefit no one but the carriers and manufacturers.

The primary concern for members of the RCA, which encompasses over 80 rural cellular carriers, is that by tying up new handset models with specific carriers the national companies are shutting out smaller carriers from competing. For consumers, the charge is that aside from generally limiting choice, exclusivity deals help create a digital divide by preventing customers in certain areas from access to the latest phone technologies.

Earlier this year, other parties also came out against carrier exclusivity deals:

The Consumers Union, the New America Foundation, and the Electronic Frontier Foundation, as well as software provider Mozilla and small wireless carriers MetroPCS (PCS) and Leap Wireless International (LEAP), are lining up in opposition not only to the Apple-AT&T partnership, but to all manner of arrangements whereby mobile phones are tethered exclusively to a single wireless service provider.

But as CNET points out, the problem with breaking up the exclusivity party is that both manufacturers and carriers make a lot of money with the current arrangement, so they have zero incentive to change it.

For consumers, obviously if you could buy an LG Voyager, Palm Pre, or Apple iPhone and use it on any network you like, you’d have far more choice. The only consumers who can do that now are those with the technical savvy and contrarian DIY nature (not to mention the money to afford an unsubsidized phone) to go the jailbreak route, which isn’t an ideal solution.

“Exclusive cell phone deals called into question” [CNET]
“Setting the iPhone Free from AT&T” [Business Week]
“US senators ask FCC to review mobile handset deals” [Reuters via mocoNews]
(Photo: raisin bun)