In effort to appease lawmakers, Verizon cuts back on exclusivity deals

Verizon said today it would allow smaller cellular carriers, which are often edged out of the market, the chance to get top-of-the-line phone models faster. The company currently keeps new mobiles locked up for as long as a year – a restriction that has reportedly irked rural carriers.

At the same time, the US Justice Department, spurred on by congress, is in the midst of a review of so-called exclusivity deals like the lucrative and longstanding arrangement between Apple and AT&T – and the one between Verizon and LG Electronics.

"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," Verizon said in a letter signed by CEO Lowell McAdam, according to Reuters.

McAdam said the new arrangement would extend to 24 small wireless carriers. In the future, carriers with fewer than 500,000 customers will be able to sell previously restricted handsets six months after they enter the market. Crucially, the deal does not apply to the BlackBerry Storm, the latest touch-screen phone from Research in Motion.

Twist my arm

In June, Sen. John Kerry and three others on the Senate Committee on Commerce, Science and Transportation asked that the Federal Communications Commission look into mobile handset deals.

“We ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace,” the four senators wrote at the time. A couple weeks later, the acting chairman of the FCC, Michael Copps, said his staff would begin an investigation immediately.

Not enough

In the blogosphere, Verizon's announcement was greeted with applause a mild golf clap. Analysts said the move was the right one, but questioned if Verizon had gone far enough. "This looks like a move that in the end won’t change the game that much," Warner Crocker writes at GottaBeMobile.com. "But I’m sure Verizon is hoping it will have some impact in what is sure to be a contentious time dealing with the Federal scrutiny that is heating up.

And here's PC World's JR Raphael:

All Verizon's exclusivity compromise actually does is allow a limited number of very small carriers to sell the handsets after a six-month period. Specifically, only wireless operators with 500,000 customers or less will be affected. Now, take a moment and think: How many people do you know who use such companies? The top four U.S. carriers make up a whopping 86 percent of the market.... Translation: This isn't exactly something with wide-reaching impact.

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