Monday, July 6, 2009

Antitrust Administration to go after Operators

According to WSJ, Department of justice has started looking into whether big Telco operators like ATT, Verizon Inc and Sprint are ignoring Antitrust laws. Look’s like obama’s administration is very aggressively pursuing antitrust enforcement.

Why should ATT,Sprint or Verizon worry about this move? Exclusivity agreements! ATT has an exclusivity agreement with Apple for iPhone, which is a bigger selling point for ATT and a drawback to most of the other operators. Though this should be good news to Verizon. However, they have their own exclusivity problems( BlackBerry storm and some other phones). Sprint has exclusivity with Palm for Palm pre.

Antitrust laws have played a bigger role in shaping the telecom sector. We all know how Ma Bell” was broken into multiple regional carriers. I guess lately the reverse is happening with big operators. AT&T merged with SBC,Cingular wireless. Verizon bought some small operators like Alltel wireless. Together, these two operators own 60% of the 274 million US wireless subscribers.

This should be good news to all the folks who are happy with their wireless service providers, and don’t want to switch their service providers for that cool handset. Be it iPhone, Palm Pre or Blackberry storm. The issue still remains as to whether these antitrust laws could be applied against these operators for exclusivity deals.

According to WJS, Here is what carriers have to say about the exclusivity:

The carriers say such exclusives enable them to take risks on expensive new smart phones and bring them to market at discounted prices. The deals limit the ability of manufacturers such as Palm, Apple and HTC Corp. to distribute their devices widely. But some analysts say those companies benefit by getting a significant share of a carrier's marketing and sales resources.

"If you are launching an absolutely new product to the market, pairing up with a Tier 1 carrier gives you instant visibility and buzz and a first-rate marketing campaign," said Andy Castonguay, a wireless analyst at Yankee Group.

Paul Roth, AT&T's president of retail sales and service, told Congress last month that the billions of dollars the company invests in its network and services would be put at risk if government were to "impose intrusive restrictions on these services or the way that service providers and manufacturers collaborate on next-generation devices." Mr. Roth said there is plenty of competition and innovation in the wireless industry

Some Antitrust experts believe that it would be hard for the antitrust administration to open Sherman Act case against these operators. For now, let’s keep our fingers crossed and hope something better comes up for consumers.

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