AT&T: DOJ Review Will Only Show Competitive Telecom Industry

The U.S. Department of Justice’s reported probe into how telecom companies forge exclusive deals for popular handsets likely won’t reveal anything shocking, experts said. Instead, the review will likely support what long has been an industry standard – that the telecom business is a competitive environment and will remain that way.

 

As TMCnet reported yesterday, the justice department is said to be reviewing how large telecom companies, such as AT&T Inc. and Verizon Communications Inc., develop exclusive agreements for popular handsets. The ongoing trend is prompting concerns that the firms could be abusing their power. Beyond exclusivity, the department’s probe could also touch on whether telecom carriers are restricting certain types of services other companies offer on their networks.

 

For example, Apple (News - Alert) has partnered with AT&T for rights to its iPhone. AT&T (News - Alert) is in its second year of an exclusive, multi-year deal to sell the popular device. In another instance, Sprint (News - Alert) recently forged a deal to exclusively sell the Palm Pre for six months before Verizon Wireless carries the smartphone.

 

Mark Siegel, an AT&T spokesperson, said this in an interview with TMCnet today: “We are not aware of any formal investigation by the justice department. We have not been asked to supply them with any information.”

 

He said that competition and exclusive deals are “commonplace” in the wireless industry.

 

“In terms of exclusives, they have been part of wireless industry since the beginning,” Siegel said. “They allow wireless carriers and manufacturers to collaborate closely on new features and new applications. That means more innovating in terms of the consumers’ hands.”

 

The reported probe, however, would not constitute a formal review and does not call out a specific company.

 

According to Scott Cleland of The Precursor Blog, the justice department’s so-called investigation will reveal a “vibrant, competitive marketplace” in the telecom industry, which he said benefits both consumers and businesses.

 

“The competitive facts in the telecom industry will speak for themselves; the industry is clearly and overtly competitive and trending more competitive,” Cleland wrote.

 

While the inquiry could have far-reaching consequences across the industry, Cleland said the antitrust probe would simply show that healthy competition exists in the telecom world.

 

“The DOJ is highly likely to find a very competitive wireless market with among the lowest prices per minute of use in the world, which in turn has resulted in the most usage of wireless services in the world by far,” Cleland wrote. “Will they find the straw man, perfectly competitive market expected by critics? Of course not, but that is not the antitrust standard.”

 

Since 1994, prices on wireless devices have dropped by 89 percent, Siegel said. And about 600 different kinds of handsets from more than over 30 manufacturers exist in the marketplace, according to The Precursor Blog.

 

“You have dropping prices and increased customer choice of carriers and all technology they produce,” Siegel added. “It’s hard for me to see what can possible be wrong with that.”

 

AT&T and Verizon Wireless are the two leaders in telecommunications space. Combined, the companies account for 90 million landline customers and 60 percent of the 270 million U.S. wireless subscribers, according to the Wall Street Journal.

 

It’s not the first time AT&T has been targeted by a federal probe. In April, officials asked the Federal Communications Commission to look into AT&T and Apple Inc.’s use of Skype, the eBay (News - Alert)-owned Internet calling service. As TMCnet reported, a nonprofit advocacy group asked the FCC to investigate whether the two companies are breaking federal rules by disallowing the widespread use of the service on the Apple iPhone (News - Alert).