Want a new iPhone? You can only go through AT&T. If you instead want a new Palm Pre, you can only go through Sprint. You can choose the handset you want, but you sacrifice your freedom to choose the wireless carrier. If you want a specific carrier, you then are limited to the handsets they provide.
This past week, the FCC acknowledged that they will investigate exclusivity arrangements between the wireless carriers and the cell phone manufacturers. These was in response to a written request by four senators (John Kerry of Massachusetts, Byron Dorgan of North Dakota, Amy Klobuchar of Minnesota, and Roger Wicker of Mississippi). Consumers have complained that exclusivity decreases competition and only benefits the carriers and manufacturers. When a wireless carrier is the sole vendor of a specific handset, it can set its own prices and services.
This exclusivity increases its customer base and people switch carriers to purchase the newest gadgets. The exclusivity also benefits the manufacturers. It prevents their products from flooding the market and becoming too common, thereby decreasing their value. Both carriers and manufacturers benefit and there is no incentive for them to change.Consumers argue that the exclusivity leaves markets without choices. People are limited to what phone their carrier provides.
In rural areas, the choice of carrier is limited. Some areas have poor service for certain carriers, or there is an increased risk of roaming. Many people are also reluctant to switch because they've enjoyed their service with a specified carrier or do not want to pay early termination fees. Consumers also argue that this exclusivity puts limitations on new technology. For example, the new iPhone allows for multimedia messaging and tethering. Multimedia messaging allows people to send pictures or videos as they would a text message. Tethering allows your computer to connect to the internet using your cell phone, giving you internet access wherever your cell phone gets service. However, at the time of the release of the new iPhone, AT&T did not allow these features to be used by its customers. These features will be enabled but not until the end of summer. With exclusivity, then, a company can set their own prices and service, without giving the attention to the consumer that comes with real competition.The FCC is meeting this week to discuss the issue.