11:48 AM

Senator Urges DOJ, FCC To Probe Wireless Deals

Chairman of Senate Judiciary Committee's antitrust subcommittee seeks opportunities for smaller carriers and software firms to compete in the wireless market.

Federal government scrutiny of exclusive handset offerings by wireless carriers is broadening as Sen. Herb Kohl, D-Wis., urged officials at the Justice Department and the FCC to examine the exclusive deals.

The FCC began looking into the exclusive arrangements last month and in letters Monday, Kohl also brought the DOJ into the picture.

"I am concerned that the concentrated nature of the cell phone marketplace could lead to future price increases," Kohl wrote in letters to Christine Varney, chief of the DOJ's Antitrust Division, and to Julius Genachowski, the FCC's chairman. Kohl is chairman of the Senate Judiciary Committee's antitrust subcommittee. Kohl and Sen. John Kerry, D-Mass., have spearheaded the drive in the Senate to examine the exclusive handset deals. Kerry is a member of the Senate's committee on commerce, science, and transportation.

Much of the focus has centered on AT&T's exclusive deal to market Apple's iPhone. Many other phones, including RIM BlackBerrys and Palm Pres, are offered exclusively by carriers for a short period. There have been persistent reports that Verizon will offer a version of the iPhone and, if true, that could influence any investigation.

AT&T and Verizon Wireless dominate the U.S. mobile phone market. Their hold was buttressed last year when they bought up more than $16 billion of the $19.6 billion prime 700-MHz spectrum auctioned off by the FCC. The 700-MHz spectrum -- the so-called oceanfront bands -- had been promoted as a way to increase competition in the wireless marketplace.

In his letters to the FCC and DOJ, Kohl said he wanted to see more opportunities for smaller carriers and software firms to compete in the wireless market. The DOJ has declined to comment on any possible investigation of wireless carriers.

In June, FCC Commissioner Michael Copps, then interim FCC chairman, initiated a FCC proceeding to examine the exclusive handset deals. At the time, he said: "The commission, as the expert agency, should determine whether some of these arrangements adversely restrict consumer choice or harm the development of innovative devices, and it should take appropriate action if it finds them."

During hearings on his nomination as FCC chairman, Genachowski said he also favored examining the exclusive carrier-handset arrangements.

Wireless carriers have argued that the exclusive handset deals promote competition in the long run, because they lead to investments in research and innovation.

Consumer and public interest groups have long argued that the cell phone business has consolidated at the detriment to consumers. "This [DOJ] examination is long overdue," said Gigi Sohn, president and co-founder of Public Knowledge. "Consumers have suffered over the past 10 years as the industry has consolidated and strengthened its hold over which services can be offered and which equipment can be used. Competition is almost non-existent in crucial services for home and business use."

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