iPhones’ Success Draws Exclusivity Limits

Leslie Cauley reported for USA Today that the success of the Apple iPhone has gathered millions of customers for exclusive US carrier AT&T and this, according to Senate penal, has an important impact on wireless prices, innovation and competition. Paul Roth, the head of retail sales for AT&T noticed that exclusive arrangements have the benefit to give impulses to the competition, underlining the fact that now there are more than 30 smartphones to compete with iPhone. These effects help keep prices under a close check, enabling the customers to have several choices.

A contrary opinion comes from John Rooney, the CEO of US Cellular, saying that the exclusive deals can damage the market, limit choices, restrict innovation and options of the subscribers, especially the ones in rural areas, thus a wireless ‘digital divide’ will start to prevail. To make his point, Rooney holds a list of the top 14 devices, iPhone included, locked down in exclusives with AT&T, Verizon, Sprint and T-Mobile, this lowering their ability to serve the customers.

Cauley added that normally a device exclusive typically ends after 12 months, but AT&T deal, enclosed around 2006, is still on, Roth claiming that it was due to a ‘multiyear’ arrangement with Apple, according to their contractual terms. Going deeper into the matter, the limited duration of exclusive deals between carriers and handset producers do not restrict the developing and selling of the revolutionary products, such as iPhone, and to spread such innovations to more people. The question is: what can happen a year before the law conditions that deal must end? Do the subventions stop? For example, the iPhone 3GS that start at $699 will have the same price for everyone when it comes in the last year of legal exclusivity? This is a thing to be considered by lawmakers and Federal Communications Commission.

This issue can become more complex with any legislation bound to appear, along with unexpected consequences. If we let this matter up to the market’s decision, then we already have the solution: the exclusive AT&T and iPhone deal is a resounding success. An end to this exclusiveness would raise other issues: the carriers’ stimulant to improve their services would be impacted?, how could competing handset makers even compete so long as there won’t be a network to offer iPhone? US government can force Apple to create device compatible with other wireless standards so it can work on other networks? Would there be a law to legally bound Apple in producing a certain number of different devices? Would Apple have to sypply iPhones to carriers with bad service, not taking into account the fact that in this way Apple’s brand is damaged? In this case would the government compensate Apple for the damages it was submitted to? The limit for exclusiveness would apply for all the devices or only for the successful ones? Any
way, on government’s behalf this would be done at no cost to require multiple versions of unsuccessful devices for all the qualifying carriers.

But what represents a qualifying carrier; how would the law characterize a device to be successful enough so that it calls for exclusivity limits? Till we have the answers we may carry on purchasing iPhones with the competition constantly on stand by positions, while iPhones’ success draws exclusivity limits on the market.