What decade are we living in? There are protests on the streets around Iran, raising gasoline prices and now the government is looking at the telecommunications industry, including AT&T! Ask any student of recent history, and they’d say that those were pages from the chapter on the 1970s, but ironically those things describe the state of affairs this week.
The latter item on the surface sounds like the beginning stages of the breakup of AT&T. First some history of that historic breakup: It began with filings by the U.S. Department of Justice in 1974, which led to an antitrust lawsuit against Ma Bell. The case of the United States vs. AT&T even led to a settlement that broke up the company, with the creation of seven “Baby Bells.” Three of those companies were bought by a fourth, Southwestern Bell (later SBC), which eventually acquired AT&T Corp. to form the AT&T we know today. Meanwhile, two other Baby Bells (Bell Atlantic and NYNEX) eventually became Verizon. As a side note, the final Baby Bell, US West was acquired to become Qwest, which now offers wireless through Verizon! And that’s where we are today.
Verizon Wireless, which is in fact co-owned by Verizon and U.K.-based Vodaphone, remains the number one wireless carrier in the United States followed by AT&T. Ma Bell should be proud that these off spring have done so well. Of course where there is success in the U.S. government eyes will soon be looking at you. Personally, this reporter finds it an odd trend, we’re taught all through school to do our best, to try to be winners, but succeed too well in business and you get the regulators looking at you!
This week several U.S. senators have started a campaign that calls for regulators to review the exclusive arrangements between mobile carriers and cell phone makers. According to Bloomberg News, in a letter to Michael Copps, acting chairman of the Federal Communications Commission (FCC), the senators said they were concerned about exclusivity, and how this affects competition and choice in the marketplace.
The letter is quoted as saying:
“We ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace.”
The four senators signing the June 15 dated letter include Democrats John Kerry, chairman of the Senate Commerce Subcommittee on Communications, Technology, and the Internet; Byron Dorgan of North Dakota; Amy Klobuchar of Minnesota and Republican Roger Wicker of Mississippi.
This isn’t the only item that Copps is likely reading on the subject either, as The Rural Cellular Association, a trade group that represents more than 80 rural wireless providers, also recently filed a petition to the FCC urging it to look into how the arrangements between carriers and makers might affect consumers.
The irony of this is that the big issue seems to be that AT&T has an exclusive arrangement to carry the Apple iPhone, a deal that has been in place for two years and will expire next year when Verizon will begin carrying the iPhone as well. Meanwhile, Sprint has the sole rights for the Palm Pre, which was released just a week ago, and was seen a boost for a company that is trailing in third place to its rivals.
So the question to the respected gentlemen and gentlewomen is why go after the carriers and makers? Yes, there are exclusive deals, but the break up of AT&T was to provide alternative choice, and thus competition in the marketplace. Doesn’t having carriers with unique products somewhat better for the marketplace? Doesn’t this encourage phone makers to try harder?
If the iPhone had been released on all carriers, AT&T might not have seen a jump in subscribers. Of course the flip side is that unlike landlines, mobile service can be “dodgy” in some parts of the country and even in some urban centers. So there is the argument that would-be iPhone owners were left without all those apps because the coverage precluded ownership of the device based on lackluster AT&T coverage.
My response is simply, “that’s a shame.” Unlike life, liberty and the pursuit of happiness, mobile coverage is not a guarantee to American citizens. And forcing mobile phone makers to develop equipment that works for all carriers actually goes against the principles of a free market economy.
The idea to break up the original AT&T was to provide competition in the marketplace. And where there is competition, there is innovation. For example, Apple and AT&T worked together to create the visual voicemail functionality in the iPhone, which is now being seen in other devices. If the U.S. government forced all the mobile carriers to provide the same handsets, the innovation could be lost. What if Verizon was forced to carry the iPhone, but wasn’t ready to build visual voicemail, should we all lose out? And at that point, we might as well go back to one carrier, so everyone at least gets the same coverage (good or bad) from one large carrier.
But doing so would turn back the clock. Unfortunately, given the state of events around the world, as well as in the halls of the capitol building, it looks like the clock has already started heading in that direction.