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Report: DOJ reviewing US telecom deals with handset makers

A recent hearing indicates some senators are concerned about AT&T's long-term deal for the iPhone

By Nancy Gohring, IDG News Service
July 06, 2009 01:48 PM ET

IDG News Service - The U.S. Department of Justice has begun to look into the way that large operators form exclusivity agreements for popular handsets over concerns that the practice is anticompetitive, according to a report in The Wall Street Journal citing unnamed people familiar with the matter.

According to the report, published online on Monday, the DOJ may be looking broadly at ways that large telecom operators including AT&T and Verizon may be acting anticompetitively. Other issues include ways that operators restrict the kinds of services that can be offered on their networks, the Journal reported.

The DOJ does reveal when it is officially investigating a matter. It hasn't yet in this case, which could mean it is now considering whether to launch an official investigation. The agency did not immediately reply to a request for comment.

Some members of Congress have recently expressed their concern over handset exclusivity deals. The Committee on Commerce, Science and Transportation held a hearing last month to discuss the effect that long term exclusivity deals have on the wireless market and particularly on people living in rural areas. Smaller rural operators argue that exclusive handset deals turn rural customers into second-class citizens because in some cases they have no option to buy the latest and most popular phones.

Operators like AT&T, which is in the spotlight because its deal for the popular Apple iPhone is unusually long, say that such arrangements promote innovation. AT&T is in the second year of its exclusive arrangement for the iPhone and while the companies haven't revealed how long the deal will last, many people believe it is expected to go on for five years. Before the deal between AT&T and Apple for the iPhone, exclusive agreements more commonly lasted for a period of months, not years.

At the recent hearing, Senator John Kerry, a Massachusetts Democrat, and other senators struggled to understand AT&T's reasoning for how such deals promote innovation.

AT&T is also among operators at the center of the debate over whether wireless operators should be able to forbid certain applications from running on their networks. The operator is not yet supporting picture messaging on the iPhone or tethering, which would let users connect their iPhones to laptops for Internet access on their computers.

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