Verizon Caps Handset-Exclusivity Deals

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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 subscribers.

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 investments."

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.


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