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Will FCC pry iPhone loose from AT&T?

Chairman's proposed 'net neutrality' rules raise questions for exclusive smart phone deals

By , Network World
September 25, 2009 01:59 PM ET

Network World - If you're wondering whether FCC Chairman Julius Genachowski finally will pry the iPhone from AT&T's cold dead hands and release it into the wild, you're not alone.

In his "network neutrality" speech this week, Genachowski did not talk explicitly about exclusive deals between handset makers and carriers. But what he did say could lay the foundation for unprecedented and, for a group of market-oriented scholars, unneeded FCC regulation of wireless vendor contracts. (The full text of the speech is online.) 

But as yet, it's not clear how the proposed rules would actually affect current deals such as the one between Apple and AT&T for the iPhone, or future exclusive arrangements.

"Would the proposed net neutrality rules result in a default ban of exclusivity deals?" asks Ryan Radia, information policy analyst with the Competitive Enterprise Institute (CEI), a public interest organization based in Washington, D.C. "That would not be the case, based on my understanding of the proposed rules."

"It at least implicates handset arrangements," says James Gattuso, senior fellow in regulatory policy for the Heritage Foundation, a conservative think tank also in D.C.

Also from Network World: What the U.S. can learn from international net neutrality, broadband policies 

Some network neutrality advocates made a direct connection between Genachowski's speech and exclusive contracts. Andrew Jay Schwartzman, president of Media Access Project, a liberal public interest law group in Washington, was quoted this week in a Bloomberg News report as saying, "The iPhone can't be exclusive under a true net neutrality regime."

But CEI's Radia says exclusivity may still be possible, provided the agreement doesn't carry provisions that would conflict with whatever the final network neutrality rules might be. "[Deals may be legal] so long as the deals do not prevent a consumer from accessing the content of their choice," he says. But, if Apple and AT&T allowed access to only a subset of applications or services, such a practice would likely be illegal.

The FCC in August voted unanimously to look into the general topic of competition in the wireless industry. Previously, in June, it decided to examine the specific issue of exclusive handset deals with carriers, about the time the Palm Pre smart phone was released, only on Sprint's U.S. network

In his speech, the FCC chairman proposed adopting four existing and two new "network neutrality" principles as formal commission rules, to be applied to Internet service providers, including mobile operators.

Four of the principles are currently in a 2005 policy statement, which in effect says consumers are "entitled," with some general exceptions, to access the Internet content, using the devices, applications, and services, of their choice; and to have competition among all these providers. The new ones Genachowski proposed are "non-discrimination" – providers can not discriminate against specific Internet content or applications – and "transparency" – full disclosure by providers about their network management practices.

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