One of the few bright spots in the current economic gloom has been the telecommunications industry, where competition is robust, innovation forges ahead and consumer prices continue to fall. Leave it to Congress and Beltway planners to mess with this success.
Yesterday, the Journal reported that the Justice Department has begun an informal investigation “to determine whether large U.S. telecom companies such as AT&T Inc. and Verizon Communications Inc. have abused the market power they’ve amassed in recent years.” And last month the Senate Commerce Committee held a hearing on so-called “exclusivity deals” between wireless carriers and handset makers to bring new devices to market.
What’s going on? Well, AT&T is the exclusive U.S. distributor of the Apple iPhone, and other big carriers like Sprint (Palm Pre) and Verizon (BlackBerry Storm) have cut similar distribution deals. Device makers like such arrangements because they can share the financial risks of developing and marketing new products. The partnerships lead to more choices and lower prices.
Nevertheless, some smaller carriers that lack the scale and resources to cut similar deals want Congress to ban them for everyone. To advance their argument, these carriers claim today’s wireless markets are increasingly uncompetitive and underserving rural areas. Hu Meena of Cellular South, a Mississippi-based carrier with about 750,000 subscribers, told Congress that “the industry is trending back towards consolidation and the days of Ma Bell.” Regional and rural carriers, he said, can’t gain access to the latest gadgets because larger carriers have cut these exclusive deals. Mr. Meena is hoping to get some sympathy from Senators who represent rural states, like Mississippi Republican Roger Wicker and Minnesota Democrat Amy Klobuchar.
Wall Street Journal