From the New York Times (7/21/09)
By the Editorial Board of the New York Times
It is gratifying to see that the leviathans of mobile telecommunications in the United States are finally drawing the attention of regulators and Congress.
Exclusivity contracts, with which the Big Four cellphone companies lock in the hottest new phones, are a good place to start looking. But the Federal Communications Commission and the Department of Justice also should look broadly at whether competition is being stifled among mobile providers.
Because of exclusivity, unless you are willing to be a hacker, you can use the iPhone only on AT&T’s network, the BlackBerry Storm on Verizon’s and the Palm Pre on Sprint’s. Cellphones from Samsung and LG are also tied up. If you live in a rural community that the large companies aren’t interested in serving, exclusivity generally means you get an outdated handset.
With the pattern of exclusive deals extending to new netbooks, smaller companies warn that mobile Web access could be tied up entirely. In the past 10 years, the big cellphone companies have gobbled up smaller ones while regulators looked on. The Big Four — Verizon, AT&T, Sprint and T-Mobile — account for 90 percent of cellphone subscribers. Verizon and AT&T alone have 60 percent. Dozens of areas have but one wireless provider.
And they haven’t been shy about using that power. The F.C.C. mandates carriers, for example, to sign roaming contracts for voice services. But data, the fastest-growing and most innovative segment of telecommunications, isn’t covered. Small carriers complain that the big ones won’t enter into data roaming contracts.
Verizon and AT&T also control so much of the country’s land-line market that it could hamper the development of new services like mobile Web access, which requires use of wire-line networks. Consumer advocates and the Government Accountability Office, the investigative arm of Congress, have warned about scant competition, high prices and onerous contracts in this area.
Phone companies point out that exclusivity agreements are commonplace in other industries. For example, they say, it is not often that one finds a restaurant serving Coke and Pepsi. They argue that the iPhone and its imitators are testament to a competitive and innovative market.
But many of their practices hinder consumer choice. Consider the decision to block the Skype application on the iPhone from working on AT&T’s 3G network or cellphone contracts that get extended every time you buy a new phone or change your plan.
In 2007, the average American cellphone subscriber paid $506 for the year, according to the Organization of Economic Cooperation and Development. This compares with $374 in Britain and $293 in Spain. The average of all countries in the O.E.C.D. was $439.
Regulators’ attention may already be prompting some changes in behavior. Verizon announced it would shorten the exclusivity contracts for some handsets to six months so that rural providers can have them. More is needed, however. The F.C.C. is directed to foster a competitive wireless marketplace, which is an important gateway to the Internet. It warrants close examination.