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Senators Probing Wireless Device Deals

Wireless devices
A handful of U.S. senators are growing increasingly concerned with the exclusivity agreements that wireless carriers are signing with device makers.

The most notable example, and certainly the one that has drawn the loudest criticism, is AT&T's (NYSE: T) deal with Apple (NASDAQ: AAPL) to be the sole U.S. carrier that supports the iPhone, but those arrangements are common throughout the wireless industry.

Now members of both chambers are mulling legislation that could restrict the practice.

John Kerry, D-Mass., and three of his colleagues on the Commerce Committee on Monday sent a letter to Michael Copps, the acting chairman of the Federal Communications Commission, asking that the agency take a hard look at whether wireless exclusivity agreements hinder competition and consumer choice in the industry.

Kerry's letter follows a complaint from the Rural Cellular Association, a trade group that represents smaller carriers, asking the FCC to initiate a rule-making procedure that would open access for its members to the hottest smartphones on the market. The FCC has since been collecting comments from small and large carriers, device makers, advocacy groups and other stakeholders.

"Based on this record, we ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace," the senators wrote.

On Wednesday, the Commerce Committee is scheduled to hold a hearing on the "consumer wireless experience," which will touch on a host of issues, including tethering, the term for connecting a computer to the Internet through a wireless phone. But Kerry, who chairs the Commerce Committee's Subcommittee on Communications, Technology and the Internet, and his fellow signatories made it clear what the hearing's focus will be.

"The subject of exclusivity agreements between wireless carriers and handset manufacturers will be a focal point of this hearing, and the record will help to determine whether legislative action is also necessary," they wrote.

Cellular South President and CEO Hu Meena, who recently joined the Rural Cellular Association's board, is scheduled to testify at Wednesday's hearing, a source in the Commerce Committee told InternetNews.com. The witness list is still being finalized, but the source said that Mark Goldstein of the Government Accountability Office and Penn State University law professor Rob Frieden are also slated to testify.

In May, a House subcommittee held a hearing on an array of competition issues in the wireless market, including the concern over exclusivity agreements. Verizon Wireless and AT&T, the nation's two largest carriers, were invited to send representatives to testify, but declined.

Rick Boucher, the chairman of the House Subcommittee on Communications, Technology and the Internet, indicated at that hearing that he was exploring legislation that would set rules for the wireless industry.

The senators who added their names to Kerry's letter were Byron Dorgan, D-N.D., Amy Klobuchar, D-Minn., and Roger Wicker, R-Miss.