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Report: A Telecom Antitrust Inquiry?

Phil Harvey
LR Cable News Analysis
Phil Harvey, US Bureau Chief
7/6/2009

The Wall Street Journal is reporting that the U.S. Justice Department is taking a look at whether the nation's big behemoth telecom firms have behaved like, er, big behemoth telecom firms.

Issue #1: Exclusive device deals
A story published by the newspaper today cites sources that say Justice could explore "whether wireless carriers are hurting smaller competitors by locking up popular phones through exclusive agreements with handset makers."

The Apple Inc. (Nasdaq: AAPL) iPhone's exclusive arrangement with AT&T Inc. (NYSE: T) could be seen as a catalyst here. That is, unless someone, somewhere, is still sore about Cingular (now part of AT&T) getting the first crack at the awful Motorola Inc. (NYSE: MOT) Rokr music phone, back in 2005.

Issue #2: Service restrictions on networks
But device exclusivity may not be the only issue here. The paper also cited a single source that claims Justice "may also review whether telecom carriers are unduly restricting the types of services other companies can offer on their networks."

AT&T, for example, has noted that it blocks peer-to-peer (P2P) applications on its wireless network. (See Et Tu, AT&T? )

The WSJ's full story, complete with no comments from the Justice Department, AT&T, and Verizon Communications Inc. (NYSE: VZ), is here.

For a quick refresher on how the iPhone's popularity has helped AT&T's profits (while sometimes skinning its margins) in the U.S., see:

— Phil Harvey, Editor-in-Chief, Light Reading

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Honestly
Honestly
12/5/2012 | 4:01:16 PM
re: Report: A Telecom Antitrust Inquiry?


The idea that At&t is hurting smaller competitors by locking up iPhone through an exclusive agreement with its garbage network is really great satire.  Gee, how about the consumer, da/it is so true.  The iPhone has everything, but the ability to make calls with QoS in almost any city.  How many calls have you been on with an iPhone buddy where you either have had to redial 5 times?, or where you cannot understand the conversation?.  Apple would win should they get freed up to sell iPhone to whom they wish, the consumer would win because they could get an iPhome with whomever carrier and At&t would get what they deserve, less market share.  Their covergae is horrible, so are the costs of their monthly plans compared to other carriers like Sprint, do nthe numbers.


I can hardly wait to have both a Pre and an iPhone on the same net.  Geek nirvana.


 


At&t needs to be downsized again.


macster
macster
12/5/2012 | 4:01:14 PM
re: Report: A Telecom Antitrust Inquiry?


In the UK, Apple went with O2 'cos they were willing to "share revenue" (unlike VF). In other countries where the iPhone has been made available, Apple has entered into an exclusive deal with a single operator of that particular country (please advise if there are exceptions).


If this is also the case in the US, then the finger ought to be pointed in Apple's direction!


Saying that, O2 does not heavily subsidise the iPhone - unlike AT&T.

abashford
abashford
12/5/2012 | 4:01:12 PM
re: Report: A Telecom Antitrust Inquiry?


Apple (and AT&T), have made big investments in a product which is clearly successful.  Why should they not have the choice of how to sell or market the product for their own gain?


If Apple so chose, they could decide not to sell the phone at all (not likely, but it is their right).


Its not like Apple is selling some commodity that they have the exclusive right to dig out of the ground; they are selling intellectual property which should be protected in all ways, including the way in which they decide to sell and market it.  The public does not suddenly have the 'right' to a product once it is produced, they have to meet the terms of the seller.


In a free market, this 'exclusivity' between AT&T and Apple should offer an opening for other innovators to come up with a product that will appeal to those on other networks.  It seems to me that there are several others: Nokia, RIM, Palm, HTC/Google to name a few, that should be able to take advantage of this situation.


Somebody in the DoJ is trying to make their career by taking on AT&T and Apple... hands off government, here is an industry that is actually working.  Go look at your SEC, or banking system if you are looking for problems with how companies are behaving.


I hope Apple and AT&T shareholders file suit on the DoJ for any drop in stock price attributable to their ignorant shenanigans.


...and yes, I have been reading Ayn Rand again... 

Honestly
Honestly
12/5/2012 | 4:01:11 PM
re: Report: A Telecom Antitrust Inquiry?


Apple may agree to work with the manopolist, but they do not own the network.  My point is that the At&t network is horrible and their monthly pricing to high for such poor servive.

Honestly
Honestly
12/5/2012 | 4:01:11 PM
re: Report: A Telecom Antitrust Inquiry?


Apple may agree to wrok with the manopolist, but they do not own the network.  My point is that At&t network is horrible and their monthly priving to high for such poor servive.

macster
macster
12/5/2012 | 4:01:10 PM
re: Report: A Telecom Antitrust Inquiry?


"Apple (and AT&T), have made big investments in a product which is clearly successful.  Why should they not have the choice of how to sell or market the product for their own gain?


Its not like Apple is selling some commodity that they have the exclusive right to dig out of the ground; they are selling intellectual property which should be protected in all ways, including the way in which they decide to sell and market it.  The public does not suddenly have the 'right' to a product once it is produced, they have to meet the terms of the seller."


Microsoft?




abashford
abashford
12/5/2012 | 4:01:09 PM
re: Report: A Telecom Antitrust Inquiry?


Hmmm... you did a lot of damage to my argument with the one word: "Microsoft" (I remember hating Microsoft for their Internet Explorer shenanigans vs. Netscape).


Lets see if I can rationalize that situation:


- Microsoft decides that all the money is in software, and gives IBM a black-eye


- This creates a business model that creates a paradigm shift in the industry towards commoditized hardware, when the hardware was overly expensive 


- Because people are lazy, they default to what everyone else is using as the OS (Windows)


- A long period of near-monopoly ensues, and the anti-trust mooches have a field day


- Apple, seeing a market opportunity,  comes up with a different plan, which includes the integration of the hardware and OS to form a better combined product (OS X + proprietary hardware)


- Apple applies this same philosophy to the iPhone and smart phone market


- Apple's share grows to the point where people are starting to murmur 'anti-trust'


- And so it goes... 


Now would Apple have survived without Microsoft's $600M infusion way back when (to try and stave off anti-trust concerns)... hard to say.  All I know is MSFT is now wishing they had held on to that stock.

abashford
abashford
12/5/2012 | 4:01:09 PM
re: Report: A Telecom Antitrust Inquiry?


"Apple may agree to work with the manopolist, but they do not own the network.  My point is that the At&t network is horrible and their monthly pricing to high for such poor servive."


So they deserve to be investigated for anti-trust?!


I agree with 'Honestly' below... if the service is so awful, the government doesn't have to step in, the free market will correct itself.


Either some other phone provider will have more success on another network, or the poor service will force Apple to rethink tying their brand to AT&T's.


Anti-trust is a bullshit regulation that is there to promote the 'common-good'.  What is that exactly?!  As an AAPL investor, I have less rights than someone who wants to buy an iPhone from Verizon?  If the case hurts Apple, it hurts my pocket book (i.e. stock) so someone else can pick a (maybe) better carrier?  Basically it means their rights are more important than mine.


That isn't how a free market is supposed to work.





abashford
abashford
12/5/2012 | 4:01:07 PM
re: Report: A Telecom Antitrust Inquiry?


"I do not think any of our chat will matter.  I do not think the court can do much about this.  Hand set envy does not make a rational for a court to over step its role."


I sure hope so.


Unfortunately that isn't the way things ended up in Europe.

abashford
abashford
12/5/2012 | 4:01:07 PM
re: Report: A Telecom Antitrust Inquiry?


"As an Apple shareholder you will win either way."


Maybe, but if you assume that Apple did the deal with AT&T because there was mutual benefit to both parties (there must be, or why would Apple bother?), then severing the deal early will probably have negative market consequences for Apple too.  


This may come in the form of a significantly reduced subsidy on each phone (I am sure a fat subsidy was part of the exclusivity deal).  If so, either Apple will have to reduce their profit on the product to maintain price levels, or <GASP> increase the price of the iPhone to maintain profits!


Does the shareholder win if AAPL's profit drops?  Do consumers win if you force the price of the product up?  


Let the customers use their wallets to vote on whether they want to buy an iPhone from AT&T or not, not the bungling elected officials of the DoJ.


 

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