updated 11:55 am EDT, Thu September 17, 2009
Sprint argues for exclusivity limits
Sprint and AT&T revealed signs of tension between carriers this morning over cellphone exclusivity in back-to-back presentations at the Goldman Sachs Communacopia conference. Speaking at the New York City event, Sprint chief Dan Hesse said it would be a "fair question" for the US government to challenge the length of exclusive phone deals and implied that he might agree to shortened periods of sole access to a given model.
AT&T executive Randall Stephenson, however, disagreed and argued that these deals were imperative for the cellular industry. The executive contended that "innovation would not take place" without such deals and pointed to both rapidly falling device prices as evidence. The availability of the $99 iPhone 3G, as well as Sprint's own $149 Palm Pre, was interpreted a sign that phone designers were taking advantage of exclusivity to sell to more people than if they sold to everyone. Single-carrier deals give carriers more room to heavily subsidize device costs knowing that customers are less likely to exit their contracts early.
Stephenson further claimed that network upgrades at AT&T and others to accommodate the extra data load from the iPhone and other 3G smartphones also benefits everyone, not just those using the device that sparked the original upgrade.
The dispute sets the stage for a larger battle in the industry spurred on by legal and competitive issues. The FCC recently began a formal inquiry into anti-competitive practices in the phone business that, among other points, will challenge the legality of long exclusive deals, particularly when they prevent rural carriers from offering the same hardware when other major carriers don't co-exist.
Sprint has to some extent been hurt by long exclusivity deals as it hasn't been able to offer the BlackBerry Storm or other high-profile devices for much of is recent history. That turned around in recent months with the launch of the Palm Pre and the soon to ship HTC Hero, but it's believed that Sprint' deals are short. The Pre should be available to Verizon or other competitors as soon as early 2010.
Meanwhile, AT&T has repeatedly benefited from the iPhone's exclusivity as it has seen a surge in its data revenues and drawn many more customers to more lucrative smartphone plans.