Exclusive mobile handset deals under DoJ spotlight

The US Department of Justice (DoJ) is to investigate whether exclusive distribution deals between mobile handset makers and network operators reduce competition and lead to higher prices for consumers.

The US Department of Justice (DoJ) is to investigate whether exclusive distribution deals between mobile handset makers and network operators reduce competition and lead to higher prices for consumers.

The news came as Telefonica, the Spanish network operator, signed an exclusive deal to distribute the Palm Pre "iPhone killer" in Germany, Spain, the UK and Ireland.

Ofcom and the Office of Fair Trading, the two main regulators of the UK mobile sector, say no one in the UK has complained about exclusive deals.

Mobile exclusives

Many network operators gain an edge by qualifying a new handset on their network first. Apple's multiyear deal with O2 in the UK is believed to be the only multiyear exclusive deal between a handset maker and a network operator.

The DoJ investigation is informal, and relates to Apple's exclusive deal with AT&T, according to a report in the Financial Times. The DoJ appeared concerned that consolidation among network operators may reduce routes to market for handset makers. The US has four, compared with the UK's five, but Vodafone may buy T-Mobile UK.

Happy with O2/iPhone deal

Retailer and virtual mobile network operator Carphone Warehouse said it was happy with Apple's UK distribution arrangements. It buys iPhones from O2 and resells them with O2 contracts. "We have very good relations with O2," said Carphone Warehouse spokesman Shane Conway. "We would never buy iPhones on the grey market to resell them with other airtime contracts."

Conway said that even though the UK handset market is in decline, Carphone Warehouse had increased the number of connections it set up in the past year. "Most of that was due to an increase in smartphone sales, and most of that was due to the iPhone," he said.

An important deal for AT&T 
 

A leaked memo published on the TechCrunch blog showed just how important the iPhone deal has been to AT&T. The memo said:

"iLaunch day 2009, the day the iPhone GS was launched, was one for the record books, as AT&T customers scrambled to get their hands on the fastest, most powerful iPhone yet.

Here's a look at some of the milestones we achieved:

  • Best-ever sales day in our retail stores
  • Second-largest traffic day in our retail stores
  • Most transactions processed via our IT systems in a single day
  • Most upgrade eligibility checks in a single day
  • Largest order day in att.com history
  • Largest features sales day in att.com history

On this year's launch day, iPhone sales exceeded sales recorded on 2008's iPhone launch day, Black Friday 2008 and Dec. 26, 2008 - all heavy-volume sales days. In fact, this year we surpassed 2008's launch day sales at about noon Central time, and sustained our previous peak hour record, also set in 2008, for 11 straight hours."

 

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