Hazlett in BusinessWeek: Uphill Battle for DOJ

Justice Department officials will have difficulty proving the nation's largest telecommunication service providers are striking a blow to competition, according to Professor Thomas Hazlett. "It will be a very tall hill to climb," he says.

In early July, the Wall Street Journal reported that the Department of Justice (DOJ) was in the early stages of a review designed to determine whether telecom giants were acting to impede competition. But in order to obtain charges against the companies, the government will need to prove that competition has been stifled and comsumers harmed, something Hazlett and other legal experts doubt is possible.

In the current political climate, there are clear signs that DOJ will take a more aggressive posture on antitrust matters, as well as calls in Washington for greater regulation of the wireless industry. Assistant Attorney General Christine Varney has promised "vigorous antitrust enforcement" by DOJ, and the department has recently added experts favoring increased government regulation of telecom companies to its staff.

Justice: Tough Case Against Telecom, BusinessWeek, July 7, 2009. By Olga Kharif.

"A big concern for regulators and lawmakers is the industry's affinity for partnerships that wed a particular wireless handset to a single service provider, such as the arrangement whereby AT&T (T) is the sole distributor of Apple's (AAPL) iPhone in the U.S. Smaller service providers say these deals bar them from selling some of the hottest phones on the market. Consumer advocates allege they limit consumer choice; the iPhone is of little use to a Verizon Wireless customer, for instance. The Federal Communications Commission has agreed to examine whether handset exclusives harm consumers and stifle competition.

"Law Experts Are Skeptical
"Yet, exclusive devices account for only a small percentage of overall mobile device sales, making it hard to prove they give one carrier an undue advantage over rivals. In June, Apple iPhone's had 8% of retail sales at the nation's largest carriers, according to a survey from Avian Securities. That month, of about 600 handsets available through all U.S. carriers, only 14 were exclusive to a given carrier, mobile service providers say. There's no question that AT&T has benefited from its pairing with Apple, attracting more than 1.2 million new customers in the first quarter alone, in large part due to the iPhone. At the same time, there's little evidence its closest rival, Verizon Wireless, has suffered much. Verizon Wireless added 1.3 million new subscribers in the same period."

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