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Verizon Wireless Revamps "Exclusive" Handset Deals

Will offer smaller carriers more high-profile handsets

by Martin H. Bosworth
ConsumerAffairs.com

July 18, 2009

"Effective immediately for small wireless carriers (those with 500,000 customers or less), any new exclusivity arrangement we enter with handset makers will last no longer than six months--for all manufacturers and all devices," said Verizon CEO Lowell McAdam in a letter to Congressman Rick Boucher (D-VA), chairman of the House Subcommittee on Telecommunications and the Internet.

"Exclusivity arrangements promote competition and innovation in device development and design," McAdam said. "We work closely with our vendors to develop new and exciting devices that will attract customers."

The move is largely interpreted as symbolic, given that four major carriers--Verizon Wireless, AT&T, Sprint, and T-Mobile, all with millions of customers--control over 90 percent of the U.S. wireless customer market. Consumer advocates were unimpressed with McAdam's policy announcement.

"Verizon's new terms for exclusive handset deals do not go far enough to create meaningful consumer choice and competition," said Chris Riley, policy counsel for Free Press. "Why is the limit six months, and why is it limited only to the smallest carriers and not any of Verizon's major competitors? This proposal does nothing to address the anti-competitive issues posed by handset exclusivity deals."

Under the typical exclusive wireless contract, a customer pays much less for a phone, but also has to sign up for a year-long or two-year contract. Wireless carriers say the contracts enable the phones to be sold at heavily subsidized prices, enabling them to recoup their investment in selling them.

Critics charge that exclusive contracts hamper innovation by denying customers the right to take their phones and use them with any carrier, and grant the carrier control over what can and cannot be used with the phone.

Concerns about exclusive wireless contracts increased after fans of the popular Apple iPhone vented their discontent with AT&T--the exclusive carrier of the phone--over its pricing plans, service, and support.

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