Verizon Wireless commits to maximum 6-month exclusivity deals

Wireless carriers get a lot of flack. Everyone’s always putting them on blast for their exclusivity contracts, crippled handsets and questionable rate hikes. Today, Verizon (NYSE: VZ) Wireless has taken the first step in changing its image as an anti-competitive wireless carrier. Big Red has officially committed itself to limiting any future handset exclusivity agreements to no longer than six months – allowing regional wireless carriers with less than 500,000 subscribers to pick up the hottest hardware in a reasonable time-frame.

Verizon Wireless submitted a letter to the Congressional Subcommittee on Communications, Technology and the Internet’s Chairman Rick Boucher, indicating that VZW is reaffirming its previous agreement that allows smaller wireless carriers to have access to exclusive LG and Samsung hardware after no longer than six months. The letter goes on to say that “any new exclusivity arrangement we enter with handset makers will last no longer than six months – for all manufacturers and all devices. ”

That’s refreshing news in the wireless industry. With AT&T (NYSE: T)’s three-year choke-hold on the Apple (NSDQ: AAPL) iPhone, it’s good to see a national wireless operator willing to make changes that might not necessarily boost its bottom line. The letter says it all: “This new approach is fair to all sides.”

Full letter after the break.

July 17, 2009

The Honorable Rick Boucher
Chairman
Subcommittee on Communications, Technology and the Internet
House Committee on Energy and Commerce
U.S. House of Representatives
2187 Rayburn House Office Building
Washington, D.C.  20515

Dear Chairman Boucher:

Last February, a group of 24 small wireless providers asked Verizon Wireless to eliminate long-term exclusive handset agreements with LG and Samsung.  We agreed to do so for those small providers.  Today I am writing to reaffirm that commitment and to let you know that Verizon Wireless is taking an even bolder step to transform exclusive handset arrangements.  Effective immediately for small wireless carriers (those with 500,000 customers or less), any new exclusivity arrangement we enter with handset makers will last no longer than six months – for all manufacturers and all devices.

This new approach is fair to all sides.  Exclusivity arrangements promote competition and innovation in device development and design.  We work closely with our vendors to develop new and exciting devices that will attract customers.  When we procure exclusive handsets from our vendors we typically buy hundreds of thousands or even millions of each device.  Otherwise manufacturers may be reluctant to make the investments 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 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 investment.

Moreover, we have no objection to small carriers having full access to any manufacturer’s portfolio of prototypes and products in development, without being informed which may have been selected by Verizon Wireless.  Obviously our pre-launch product selections are proprietary and must remain confidential between us and our vendors.

Our actions today are consistent with our long track record of leading the vibrant, highly competitive wireless industry in new and innovative directions that benefit consumers.  We would be happy to meet with you or your staff to discuss this further.

Sincerely,

Lowell C. McAdam

cc:  Chairman Waxman
Ranking Member Barton
Ranking Member Stearns

[Via: MocoNews]