Antitrust: Apple and AT&T in DOJ's sights
The U.S. government agencies in charge of policing antitrust violations — long dormant under the Bush administration and newly revitalized under Barack Obama's — seem to be circling closer to Cupertino.
According to a report Monday in the Wall Street Journal's online edition, the Department of Justice has begun an initial review of the U.S. telecommunications industry to determine whether the two dominant players — AT&T (T) and Verizon (VZ), which together control 90 million U.S. landlines and 60% of the country's 270 million wireless subscribers — are abusing the market power they have amassed in recent years.
Although not a primary target of the probe, Apple (AAPL) could get ensnared in it, according to the Journal's report.
"Among the areas the Justice Department could explore," writes the WSJ's Amol Sharma, "is whether wireless carriers are hurting smaller competitors by locking up popular phones through exclusive agreements with handset makers, according to [people familiar with the matter.] In recent weeks lawmakers and regulators have raised questions about deals such as AT&T's exclusive right to provide service for Apple Inc.'s popular iPhone in the U.S."
The same sources suggest that the DOJ could also review whether telecom carriers are unduly restricting the types of services other companies can offer on their network. The features provided by the iPhone's 50,000 apps are a key competitive advantage over its rivals.
"Antitrust problems with telecom consolidation have been evident for a while — it's not just wireless," says Gary Reback, an antitrust attorney at Carr & Ferrell in Palo Alto, Calif., and author of the famous "white paper" that laid out the antitrust case against Microsoft (MSFT) in the 1990s. "There has been a lot of public opposition to the consolidation, but the Bush Administration just shrugged it off."
This is the second time this spring that Apple's name has come up in a federal antitrust probe. In May the New York Times reported that the Federal Trade Commission had begun an inquiry into whether the ties between the boards of directors at Apple and Google (GOOG) could violate antitrust laws.
The companies share two directors — Eric E. Schmidt, chief executive of Google, and Arthur Levinson, former chief executive of Genentech.
Apple has also caught the eye of the Securities and Exchange Commission, which investigated — and ultimately exonerated — Steve Jobs for his role in the options backdating case. The SEC is also reported to be looking into whether Apple was sufficiently forthcoming earlier this year about the severity of Jobs' health problems.
Asked for comment on the report of a DOJ probe, an AT&T spokesman wrote:
"We are not aware of any formal investigation by the Department of Justice, nor have they asked us to provide any information. The U.S. wireless industry is highly competitive and, as a result, delivers terrific innovation, many choices and attractive pricing for all customer segments."
Sounds like the government is looking for money from the big companies that could afford to take their antitrust law penalty.
I don't think I have seen so many whiners who think they are "deserving" and that somehow they are "owed" the priviledge of acquiring an iPhone.
Next they'll be snivelling about not being able to have a Porsche or Rolls Royce, or live in the Hamptons and by golly "THE GOVERNMENT OUGHT TO DO SOMETHING ABOUT IT"!
Grow up, stop being a baby! Waaaaa! Waaaa!
This is rediculious. I own a few Verizon Stores locally and this is just people wasting their time. The same consumer who wants a free phone, walks into my store with a $5 cup of coffee? Secondly would you tell the auto industry that every company must sell the same cars for the same prices? Would nike be forced to sell the same shoes at the different stores for the same prices. Its called supply and demand. Every carrier is looking for the next big hit, its that simple. Products and services offered should be different from carrier to carrier. If not what are we really in business for. In my opinion this is the only industry where we practically stroke the customers ego to do business. Remember the last time your cable provider gave you a free Tv becuase you completed to years of coverage with them? Didn't think so! If you sign a contract, you understand from the get go, services and products are being subsidised for your agreement into that contract. If you complain about it later, perhaps its time to grow up.
I believe you are misquoting the WSJ article WRT AT&T and VZ's share of wireline. The article states, "90 million customers." In fact AT&T and VZ only operate wireline networks covering approximately two-thirds of the US households.
Antitrust based on popularity of iPhone apps? Yep sounds like the government doing what they do best – trying to screw things up.
Every time I have ever even thought of going into govermemt service of one form or another I remember that just getting hired by "it" causes a sphincter muscle to grow around ones head as the individual suddenly gains superhuman insight into every concievable problem that has ever even had a possibilty of appearing, which of course are only solve-able by *gasp*, more government intervention.
If the DOJ rules against the exclusive contract between Apple and AT&T that should be good news for Apple. They could get out of their supposed 5 year contract with AT&T and start selling more phones to more carriers.
Maybe the DOJ should also look into how consumers are being screwed with the high cost of SMS & MMS messages. It makes no sense that these items cost more than an actual phone call when less data is being pushed through.
"The U.S. wireless industry is highly competitive and, as a result, delivers terrific innovation, many choices and attractive pricing for all customer segments".
If this was not such a sad topic this ludicrous statement would be outright laughable. The wireless industry in the US performs at the bottom globally in all those criteria: you have more competition everywhere except outright communist countries with national telco monopolies; you have more innovation in Bangla Desh and Zimbabwe than in the US; the '"terrific choices" still stop at 3G (if you happen to live near a big enough metroplex) and the "attractive" pricing looks much less attractive when you consider the range and quality of services you don't get for it.
I have been to more than 50 countries, developed and developing ones, on all continents. The scale, range and quality of wireless services in the US trails those in all other places I know by a significant margin.
I would wish we could open our markets to carriers and other service providers from Asia and one day be able to use our wireless devices like the people there.
And yet conveniently continue to ignore the practice of sim-locking, or dvd region-locking for that matter.
I believe the government should regulate that all carriers should offer same phones and that should not be a way to attract customers. Customers should be offered the best available service at the best price. In my case I used Verizon Blackberry and want the Iphone as it has superior quality and features. So what can I do? Break my contract and endure a cancellation fee? It is not fair as totally unhappy with the Blackberry I am pretending to myself that it is a great phone…. I have no choice or change carrier. Even with Palm a certain model is available only with a certain carrier and another model with another carrier ! It Is ridiculous to treat the customer that way! Yes it is time that the government imposes to carriers to offer all same products so that they will have to ameliorate their core business to attract customers meaning the quality of their bandwith and network etc…
“We are not aware of any formal investigation by the Department of Justice, nor have they asked us to provide any information. The U.S. wireless industry is highly competitive and, as a result, delivers terrific innovation, many choices and attractive pricing for all customer segments.”
I call BS on this.
Apple tried to partner with other vendors but they turned Apple down because, in order to support the iPhone's software, changes had to be made to the vendors back-end services and software. Of course everyone was so sure the iPhone was going to be a complete flop, they didn't care at the time. AT&T took the gamble and it paid off. But of course, they should be punished for this. America has become a land where innovation and success is hated.
I can't really see how Apple's App Store can actually cause a liability because of unfair competitive advantages. It seems ridiculous. I also don't believe it's fair to tell companies where they can distribute their products. Despite the advantages AT&T has gained from having the iPhone, Verizon and other companies also have exclusive contracts. If only one company was participating in these contracts, it might be more of an issue, but since others are doing it as well, I don't think it should be cause for concern.
De-Witt,
You left out the end:
Jon Muleta, former wireless bureau chief of the FCC, said exclusive handset deals won't be an issue the government can pursue on antitrust grounds unless major handset makers say they're being forced into the deals. "The equipment providers enter into these deals willingly," Mr. Muleta said.
You make it sound as if Apple is in trouble, linking this investigation to the SEC's investigation into Apple's options backdating. But in fact, it would BENEFIT Apple if the telcos were forced to stop their restrictive practices, since Apple would then be able to have multiple sales partners for the iPhone. Apple's exclusivity deal with AT&T is not unique in the industry – the telcos have long used their power to cut such deals with handset manufacturers.
Personally, I hate AT&T (they laid me and my friend's off and sent our jobs overseas) and I wouldn't STOOP to give them my money which means never owning an iPhone. However, I don't understand why the Obama administration feels it necessary to interject in this affair. There is plenty of competition from multiple carriers and HUNDREDS of phones available. Heck, you can get all the iPhone apps WITHOUT EVEN HAVING AT&T (through the iTouch). This is just another form of affirmative action where the liberals have to take money out from the "haves" and divert it to the "have nots" i.e. another example of "taxing the upper-income" people. It seems to be a running theme in this administration.
we should learn from Europe who have a single cell provider with a wireless network that is LIGHT YEARS beyond ours.
"The U.S. wireless industry is highly competitive and, as a result, delivers terrific innovation, many choices and attractive pricing for all customer segments.”
I hope they lock this guy up in a cell next to bernie madoff.
Notice how he claims it is the wireless industry who deliver "terrific innovation". Like WHAT? Like the iphone apps that don't work, such as tethering and MMS?
Now admittedly, AT&T are not guilty of an crime. Heck, I don't even live in the US. I just hate telco companies like bad kids hate Santa.
When the revolution comes, teleco's will be first up against the wall.
if they want to chase anyone concerning antitrust, consider Microsoft. They block more competition than anyone.
Let me see if I have this right: Wall Street and the banks rip off pretty much everyone in the world for oh, say a TRILLION or so, weak havoc on the entire world economy….and these morons [DOJ] are after the phone companies? Talk about misdirection !
Att has done it again, its so large, even the Fed is in on the game with fees that just add more and more to the consumer bill. Someone should ask the fed where are all the fees being paid to them go and who benefits. It seems to me the consumer is getting the short end, again. Who is checking the checker?
Bloody AT&T is ruthless and doesnt care bout you- the California consumers. Any problems, bet At&t will less likely to help work w/ customers / refund $$. Jack up prices as they wish, dont like it, go to Verizon. So thanks to Bush, options are the better of the 2 evils. PreBush era, Cingular, Att, SBC, etc.
Now, anytime an unhappy consumer calls At&t on any issue, will less likely get a break cos ATT motto-" No competitor, why bother "
A tad misleading. WIreless carriers are in the DOJ's sights, not Apple. Apple is just caught in the crossfire.
Well of course we're all getting screwed with these hot phones going only to 1 carrier, and being forced into 2 year contracts. We should really copy the Asian/European system and buy phones that are unlocked, and let the carriers compete for our business. Each carrier could offer different services that would entice a user to pick it over another. Sure, the phone would be more expensive initially, but the monthly cost of service would likely go down, so in in the end it would be a win-win for the customer.
It's about time. Wireless carrier are all in cahoots with each other. I mean really, why is the cheapest cell phone plan nearly $34.99 at all carriers? Because they all keep the same prices to screw over the consumer. Cell phone service should actually be cheaper than a home phone line because there is less networking involved.
Awesome! I'd be totally excited about removing any incentive for wireless carriers to provide incentives for purchasing a device!
Either they are going to lock people in with tighter contracts, or just start charging more for these "popular" devices… either way consumers get the shaft (again).
the investigation is informal and centered on telcos, not apple. the title of your post is misleading
Aww, c'mon now – putting Apple "in DOJ's sights" in the title of this article, instead of Verizon, was a shabby. The body of the article goes on to describe Apple as "not a primary target of the probe" and can only quote a WSJ reporter as saying the Apple "could" become a target.
anyone who thinks there's even a remote chance of an antitrust charge against apple is smokin' the good stuff. more likely any news story with "apple" gets more hits which is why there's a reach going one here.
This might be a good thing for Apple. It could give them a graceful way out of their exclusive contract with AT&T; a relationship they were forced into back when AT&T held the stonger hand and Apple was just tring to break into the cell phone market. Wow how things have changes in a few short years.
An SEC ruling releasing Apple from exclusive relationship with AT&T would allow Apple to sell another 15 million phones in the U.S. within a year. That's about $8 billion worth of business, and would come just as the growth rate on exclusive AT&T is beginning to diminish.
Everyone here thinks the wireless industry is so competitive. Why is a cell phone tied to the carrier, after I pay for the phone and fulfill my service contract, why can I not use that phone on another carrier. Instead, if I wanted to switch carriers, I would need to buy a new phone. Also, many carriers require a 2 year service agreement when you get a new phone. We are told, this is to recoup the subsidy the carrier makes to the phone purchase. After the 2 year agreement is up, how come the monthly service charge does not go down? There are just two issues that I feel there is an unequal distribution of power. Now I know, one option is for me not to have a cell phone. But, is that a realistic option? I can go to Walmart or Target and buy a wall phone that will work with any phone company I have. Why can I not do this with my cell phone. – There is competition in the cell phone industry. However, there are areas within the industry that could be improved.