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Verizon Caps Handset-Exclusivity Deals

Basking Ridge, N.J. – Verizon Wireless will cap the maximum
length of its handset-exclusivity deals to six months so smaller carriers can offer
new handsets sooner, the carrier said in a letter to a key subcommittee in the
U.S. House of Representatives.

The promise applies immediately to handsets from any vendor,
Verizon Wireless CEO Lowell McAdam said in the letter to the chairman of the
House subcommittee on communications, technology and the Internet. The promise
follows a February agreement between Verizon and the Associated Carrier Group
to limit Verizon’s handset-exclusivity deals with its two primary vendors – Samsung
and LG – to six months. The group represents 25 CDMA carriers with 2.6 million

In the letter, Verizon defines small carriers as having no more
than 500,000 subscribers.

Handset-exclusivity deals have come
under fire
by rural and regional carriers and consumer groups. Opponents
claim exclusivity deals by the big-four carriers limit consumer choice and harm
the competitiveness of smaller carriers, who get access to in-demand handsets
only after they become obsolete.

McAdams called the six-month limit “reasonable,” given the risk
that Verizon assumes when it commits resources to help vendors develop exclusive
product and makes quantity buying commitments. Typically, Verizon commits to “hundreds
of thousands or even millions of each device,” the letter said. Without
up-front quantity commitments, McAdams continued, “manufacturers may be
reluctant to make the investments in of time, money and production capacity to
support a particular device. This, of course, constitutes a major risk for us
because if the device is not popular in the marketplace, we could end up with
excess inventory and potential competitive losses.”

“On the other hand, if the device does well in the market, six
months is a reasonable time for us to earn the benefit of our risk and our

At least one carrier wasn’t impressed. A Cellular South spokesman
said the promise leaves out smaller carriers with more than 500,000
subscribers, such as Cellular South and U.S. Cellular. The spokesman also said
the letter confirms that large carriers have the market power to control CDMA
handset distribution to the disadvantage of smaller carriers.