How many times have you heard it’s better to be proactive instead of reactive? Well, Verizon is being a little of both. The U.S. government has been laying the groundwork for an antitrust suit against the big four wireless companies because of their exclusive contracts with handset makers. Critics claim that this exclusivity shuts out smaller wireless carriers, and harms consumers by choking off competition and limiting choices. The wireless carriers disagree, but that won’t stop the suit from being pursued if the government feels it’s warranted. Verizon, the country’s largest wireless carrier, apparently isn’t going to wait around and see what the government thinks. In an unprecedented move, they will now limit their exclusive handset deals to six months.
Verizon’s CEO Lowell McAdam made the announcement on July 17 via a letter addressing several key members of Congress, presumably those who have been the most vocal in their displeasure about exclusive contracts between wireless carriers and handset makers, and who took part in a hearing about the issue. The most notable of these agreements is Apple’s agreement with AT&T for the iPhone. It’s interesting to note that AT&T was the only wireless company to appear at that Senate hearing, yet Verizon is the first to make an attempt to avoid litigation and legislation. Meanwhile, AT&T is desperately trying to get Apple to extend their iPhone contract, which is set to expire in 2010, for at least one more year.
In his letter, McAdam stated that although the company will continue to pursue exclusive agreements with handset makers, “Any new exclusivity arrangement we enter with handset makers will last no longer than six months—for all manufacturers and all devices.” After that time, Verizon would allow wireless carriers with fewer than 500,000 customers to begin offering those devices. He went on to say, “Exclusivity arrangements promote competition and innovation in device development and design. This new approach is fair to all sides.”
Well, I’m pretty sure the FCC and the Justice Department will be the judges of that. It’s obvious that Verizon isn’t concerned about smaller carriers, consumer choice, or general fairness. If they were, they would have made this move a long time ago. Doing it now is nothing more than an attempt to get the government to back off and let the antitrust talk die down. But at the same time, it’s a good move for consumers in two main ways. First, wireless customers who have not been able to get their hands on the latest devices because they live in rural areas only served by smaller carriers would now have the opportunity to join in the fun. Second, Verizon would save millions of dollars it would have to pay for legal representation in an antitrust suit, and in fees if they lost, all costs that would, in one way or another, be passed on to their customers.
So maybe this really is a win-win all the way around. But two questions remain—will the government consider Verizon’s proposal an acceptable solution to the monopolistic hold the carrier currently has on certain devices; and will the other three big carriers follow suit?