In a concession to small carriers, Verizon Wireless (NYSE:VZ, NYSE:VOD) today announced it will limit exclusivity arrangements to six months for all manufacturers and devices, effective immediately. VZW CEO Lowell McAdam said this would apply to any wireless carrier with 500,000 customers or less in a letter he sent to the House Committee on Energy and Commerce.
This has been a hot topic lately, creating dissention between the small carriers and large. In the letter, McAdam said that 24 small wireless carriers asked Verizon to eliminate its long-term exclusive handset agreements with LG and Samsung, a move it agreed to. Among the most vocal has been Cellular South. According to VZW, CellSouth misrepresented the facts around VZW’s exclusivity agreements, which it said it was happy to limit for CellSouth as well as other members of the Rural Cellular Association. These talks ended when some of the carriers asked to see mobile phone specs during the esclusivity period, which VZW said would overturn the fundamental rationale of trade secrets in the wireless industry. CellSouth fought back saying that any exclusive deal harms consumers by raising prices, hampering innovation and killing competition.
The disagreement was taken to the Federal Communications Commission for review on how it effects competition, but it remains to be seen if the other carriers will follow suite in limiting their exclusive terms. Stifel Nicolaus analysts Rebecca Arbogast and David Kaut believe the debate is far from over.
“We believe, like the early termination fee move, this will put pressure on the other carriers, T-Mobile, Sprint and most notably AT&T to follow suit and limit the duration of exclusives,” they said in a research note. “It will likely not be the end of the debate, in our view, as US Cellular, one of the more vigorous advocates for eliminating exclusives, will not benefit from this move. But with so much current emphasis on rural service, we believe it will take pressure off the FCC to regulate.”