When you buy a wireless phone in America, the vast majority of the time, that means you have to buy into a multi-year agreement with whichever carrier has an exclusive deal to carry that phone. These "deals" really aren't deals for consumers, as they entail high fees, blocked functionality, and the inability to take the phone with you if you switch carriers.
Although legislation to enact better consumer protections has yet to become law, some members of Congress are taking another crack at cracking down on the cellular industry.
Members of the Senate Commerce Committee wrote acting FCC chairman Michael Copps today on the subject of competition in the wireless marketplace, urging the agency to take another look at how "exclusive" contracts can hinder both wireless customers and companies from getting the most out of their phones.
"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 Committee wrote.
Senator John Kerry (D-MA), the Committee chair, also said he would convene a hearing on Wednesday to explore whether the marketplace for mobile is best served with or without exclusive contracts.
"Today, we've got a wireless marketplace where four companies account for more than 85 percent of all subscribers," Kerry wrote on SaveTheInternet.com's blog. "In fact, nine of the most popular ten phones are locked in a deal with one of these big wireless carriers, and are only available through one network."
At his confirmation hearing today, incoming FCC chairman Julius Genachowski did not directly address the question of exclusivity contracts, but said more needs to be done to emphasize consumer choice and protect customer rights in the wireless marketplace.
Fans of the ultra-popular iPhone have been complaining to ConsumerAffairs.com and elsewhere that AT&T — the exclusive carrier of the iPhone — cripples the phone's functionality and has made upgrading to the new 3GS model too confusing.
"I purchased an iPhone on May 4th and they are not allowing me to exchange my 3G iphone to a 3Gs when it comes out," wrote Anthony of Lawrenceville, New Jersey. "I have discussed my problem with Apple, who has agreed AT&T; is engaging in poor business practices."
There have been multiple legal challenges to exclusivity contracts in court, mostly centered around the expensive termination fees customers have to pay to switch from one carrier to another. Wireless companies say the fees are necessary to recoup the costs of the handsets, but critics charge they're designed to lock a customer in and prevent them from shopping for the best offer.
All four wireless carriers — AT&T, Sprint, T-Mobile, and Verizon Wireless — began prorating their termination fees and streamlining their customer service plans after judges in several states ruled the contracts were "unconscionable" and violated state consumer protection laws.
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