Is the iPhone a Monopoly?
Meanwhile back at the Department of Justice, the Wall Street Journal is reporting (may require subscription) that the government is looking into anti-competitive practices in the telecom industry.
Specifically, it's trying to determine whether the telecom carriers are flexing monopolistic-ish powers and engaging in anti-competitive practices. Points that may be explored are:
- Exclusive phone agreements like AT&T's (NYSE: T) iPhone deal with Apple (Nasdaq: AAPL), Verizon's (NYSE: VZ) Blackberry Storm deal with Research in Motion (Nasdaq: RIMM), and Sprint's (NYSE: S) Pre deal with Palm (Nasdaq: PALM).
- Rumors that the carriers restrict competition on their networks.
- The fact that Verizon and AT&T dominate the market with 90 million landlines and 60% of the U.S.'s 247 million wireless subscribers (that's about 150 million).
A few points to keep in mind before we declare a monopoly:
- Anti-competitive practices like restricting content is one thing, but is it really a monopoly when there are four major U.S. wireless carriers and landlines face stiff competition from cable, Vonage, and Skype?
- Do we care that AT&T, for instance, has an exclusivity agreement with Apple? Sure, I'd love the competition and lower prices that opening up the iPhone without a jailbreak (may require WSJ subscription) would provide. But I'd also love not having to use DirecTV to get the NFL Sunday Ticket. That doesn't mean I want the NFL (except the Lions) or DirecTV brought up on anti-competitive charges.
- As investors, a lot of us are leery of telecoms because of increased competition, the possibility of rulebreaking technology from upstarts, huge capital expenditures just to keep up, and the commoditization of services. That certainly doesn't sound like a business model that's taking advantage of the consumer.
I'm still mulling all these things over. What do you all think? Will the DOJ find anything untoward? Do you think exclusive phone agreements are anti-competitive? Are there any monopolistic or anti-competitive practices in the telecom industry (besides dreadful customer service) that should be ended? Comment below...
-Anand Chokkavelu (AT&T wireless subscriber, Comcast landline)
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