Sprint CEO: Exclusivity Periods Should Be Questioned

Dan Hesse says exclusive handset deals foster innovation in the industry, but concedes time limits may be in order.

Marin Perez, Contributor

September 18, 2009

2 Min Read

Sprint Nextel CEO Dan Hesse said Thursday that exclusive handset deals between manufacturers and wireless carriers are important for the industry, but that it is fair for the government to ask about the length of these agreements.

"The legitimate question is how long the exclusivity periods need to be," said Hesse during the Goldman Sachs Communacopia conference in New York. "It's a fair question."

Exclusive deals have long been a part of the wireless industry, but they generally expire within a year because the handset maker seeks to be on as many carriers as possible to address the widest possible audience. For example, Sprint is the exclusive U.S. provider of the Palm Pre smartphone, but the touch-screen handset is expected to be picked up by Verizon Wireless in early 2010.

The issue of exclusivity has gained prominence and is being examined by the federal government primarily because of Apple's iPhone, which has only been available on AT&T since its launch in 2007. The iPhone has been a major driver of new subscriber growth for AT&T, and the wireless operator is reportedly looking to extend its exclusive arrangement.

Hesse argued that exclusive deals can promote innovation in the industry. In response to AT&T's iPhone, Verizon, T-Mobile, and Sprint have all nabbed their own exclusive flagship handsets with the BlackBerry Storm, myTouch 3G, and Pre, respectively.

The Federal Communications Commission is in the middle of a wide-reaching probe into the wireless industry, and is examining whether handset exclusivity damages consumer choice and, or hampers competition. The inquiry appears to have already gotten results, as Verizon said it will allow any carrier with fewer than 500,000 subscribers to offer devices it sells after a six-month exclusivity window.

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