Unsatisfied by the testimony they heard from experts and executives in the wireless industry at a series of hearings last month, a pair of senators are now looking to government regulators to launch a probe into potentially anticompetitive practices among mobile carriers.
In a letter sent Monday to the chairman of the Federal Communications Commission and the antitrust chief at the Department of Justice, Herb Kohl (D-Wisc.) called for a regulatory review of competition in the wireless industry, highlighting the issue of identical increases in the rates the four largest carriers charge for text messages, the subject of a hearing he chaired in June.
"The cell phone companies testified that they did not coordinate their price increases in any way, and we received no evidence to contradict this testimony," wrote Kohl, who chairs the Judiciary Committee's antitrust subcommittee. "Nonetheless, these identical price increases are hardly consistent with the vigorous price competition we hope to see in a competitive marketplace. Indeed, these price increases may represent a warning sign for the state of competition in the cell phone market."
Separately, John Kerry (D-Mass.) is speaking out in praise of Julius Genachowski, the newly minted chairman of the FCC, for pledging to review a petition arguing that the exclusivity deals between wireless carriers and device makers harm consumers and undermine competition.
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"This is the kind of healthy oversight we want to see," Kerry said in a statement.
Last month, one day before Kohl's hearing on text-messaging rates, Kerry chaired the second half of a two-part hearing that broadly probed competition and consumer choice in the wireless sector, and also took a hard look at the sort of arrangements that keep Apple's iPhone (NASDAQ: APPL) tied to AT&T's (NYSE: T) network in the U.S.
"During our committee's examination of exclusive deals between cell phone manufactures and wireless providers, it was clear that we need to know more about how these contracts affect competition in the marketplace and its impact on consumers," Kerry said. "As the future of communication continues to move out of the ground and into the airwaves, it is important that we ensure the wireless market remains competitive and consumers are protected."
The latest calls for regulatory oversight follow an unconfirmed report in the Wall Street Journal outlining a broad antitrust review of the telecom industry underway at the Justice Department. A spokeswoman for the department declined to comment on the report, which described the review as being in its early stages and not yet formal.
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Microsoft Sites Up Big in Time Spent OnlineWhile Kohl and Kerry have each latched onto a specific issue they see harming consumers, their appeals for a more active regulatory framework over the largely unregulated wireless market seem to have an air of political momentum as the Obama administration takes shape. The Department of Justice has already opened probes into the hiring practices of IT firms and Google's (NASDAQ: GOOG) deal with authors and publishers for its Book Search project, suggesting to many observers that Christine Varney, the assistant attorney general for the department's antitrust division, is going to bring more stringent oversight of the tech sector.
Meanwhile, over at the FCC, others are looking for Genachowski to revisit some of the deregulatory policies that critics argue have brought excessive consolidation to the wireless sector and ceded too much market power to the likes of AT&T and Verizon (NYSE: VZ).
Last month, for instance, a new coalition formed to press the FCC to reregulate the prices the largest carriers charge their smaller competitors for access to the so-called middle mile of their data networks, also known as special access fees.
The special access fight pits carriers like Sprint (NYSE: S), T-Mobile and a bevy of smaller providers against AT&T and Verizon, who maintain that the FCC continues to regulate special access fees in noncompetitive markets, and accuse their critics of distorting the issue by cherry-picking data to bolster their argument.
Nevertheless, the movement to reform special access has an avowed supporter in Kohl, who in his letter to Genachowski wrote, "It is essential that the FCC take action to ensure with respect to reform of special access regulations."
Kohl also touched on a host of other issues he sees inhibiting competition in the wireless industry, including the handset exclusivity agreements that Kerry is challenging.
"The practice of the large cell phone companies gaining exclusive deals to the most in-demand cell phones is a serious barrier to competition," Kohl said. "Consumers are unlikely to obtain cell phone service from companies if they cannot obtain desired handsets."
The handset exclusivity issue has the wireless industry divided, as the big four carriers, among whom the practice is common, defend the arrangements as promoting innovation. At last month's hearing, AT&T's Paul Roth argued that without subsidies from carriers, many innovative new devices like the iPhone would never be brought to market.
Smaller carriers counter that with 90 percent of the wireless market in the hands of four providers, they don't have the clout to secure exclusive deals for the hot new phones, which puts them at an unfair competitive disadvantage.
Last year, the Rural Carriers Association (RCA) filed a petition asking the FCC to look into the exclusive arrangements. The agency collected public comments on the issue, but has not acted on the petition.
Immediately following his confirmation hearing, Genachowski responded to written questionnaires submitted by members of the Commerce Committee. In his responses to Kerry, Genachowski said he would "ensure that the full record on the RCA petition is reviewed, and act accordingly to promote competition and consumer choice."







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