John D. Rockefeller, IVSenatorThroughout the last decade, consumers have grown to rely on the mobility, convenience, and safety that wireless service can provide.Ten years ago, less than 100 million consumers had wireless phones. Today, the wireless industry counts more than 270 million American subscribers.However, in light of this success, we have a serious responsibility to ask what the consequences are for an industry that has grown up so fast in such a short period of time.Have our regulatory models kept up?If consumers choose to make their wireless phone their only phone, do they get the service quality they need for such an essential service?I, for one, have some concerns.I have concerns that too many consumers are bound to confusing contracts with their wireless carriers.I have concerns that too many consumers are confounded by the charges on their wireless bills.I have concerns that the Federal Communications Commission gets so many consumer complaints about wireless service—but then does so little with them.And I am extremely concerned for my great state of West Virginia that we have second-class wireless service in too many rural communities throughout America.We have too many places in this country where wireless call quality is low and service is unreliable—places where wireless broadband is only a pipe dream.This is absolutely unacceptable to me.Let me illustrate.What you see is a map of the Eastern United States. The colored areas reflect places where wireless broadband service—the best wireless service we have—is available.Note the great gap in coverage that is West Virginia. In far too many areas, the state has no wireless broadband service.So when people tell me wireless service is ubiquitous, I have my doubts.I worry that rural states like West Virginia will be left behind and I simply will not stand for that.With that said, I am grateful to all of our witnesses for being here today.Thank you for your willingness to participate in what I hope will be a frank and fair conversation about the consumer benefits of wireless service, the viability of our existing regulatory models, and the pros and cons of handset exclusivity.I look forward to your testimony.###
John F. KerrySenator“Thank you Mr. Chairman. I very much appreciate you holding this important hearing and the opportunity to focus on exclusive agreements in the wireless industry.“We’ve got a very distinguished panel prepared to give testimony on an issue that continues to grow in relevance as wireless services become a bigger part of everyday American life.“Amazing things are happening with wireless technology. My colleague on this committee, Senator Warner, tells a story about how when he was getting into the cellular business, all the big money was saying it would take 30 years to build a wireless network, and how at the end of that period, only 3 percent of the country would have wireless phones.“Well, that’s not quite what happened. Today, there are now 270 million cell phone subscribers in America, and 18 percent of all households rely solely on wireless phones to communicate.“Wireless phones are fast becoming the primary and preferred method for communicating—and they’re becoming indispensible to everyday life. The market share for “smart phones”—devices like the iPhone and the Blackberry, has grown from twelve to twenty-three percent of all handset sales over just the last year. These phones are more like computers in our pockets than like traditional telephones.“As this rapid transition continues, I think the Commerce Committee should consider how the wireless industry is functioning and whether current practices are in the best interest of competition and the consumer.“With that message in mind, our second panel will examine the growing trend of exclusive agreements that are being struck between the four largest wireless carriers and the manufacturers of wireless handsets. These carriers account for roughly 90 percent of all wireless subscriptions, and as a result of these exclusive agreements, their customers enjoy access to the latest and greatest smart phones.“At the heart of this issue is this question: is it better or worse for competition, for innovation, and for the American consumer if the carrier controls the decision over what devices can and cannot operate on their network? More than forty years ago, the FCC decided in its seminal Carterfone case that AT&T should not have that kind of control. For those of you in this room who are as old as me, you’ll remember that before Carterfone, you were stuck with the old, black Western Electric rotary phone that you rented or bought from AT&T. The Carterfone ruling opened the wireline network, and in the years following the case we saw an explosion of innovation that included the fax machine, the computer modem and the cordless telephone.“The Carterfone decision was good for consumers. It separated the network from the end use technologies. Similarly, today when you sit down at the computer and access a broadband connection, you are not told by your broadband provider that you need a Dell, or an HP or an Apple computer to access the network. When you purchase a wireless phone in Asia or in Europe, you typically don’t buy it through your wireless carrier—you purchase it separately from the manufacturer.“Our panel today will explore the issue of exclusive agreements in the U.S. market from both sides of the argument. I want to thank our witnesses for their willingness to testify on this issue. I must say, it was not easy to find witnesses willing to testify to the benefits of these exclusive arrangements, and I greatly appreciate Mr. Roth’s willingness to provide his perspective from AT&T, which has famously offered the iPhone exclusively on its network for several years now. We extended an invitation to every major handset manufacturer, but we were unfortunately turned down in every case.“On Monday, I sent a letter to FCC Acting Chairman Copps expressing concern over this issue, and I was joined by Senators Wicker, Dorgan and Klobuchar on the committee. I will be taking today’s testimony into consideration as to whether legislative action is necessary.”# # #
Kay Bailey HutchisonSenator
SENATOR KAY BAILEY HUTCHISON
SENATE COMMERCE, SCIENCE, AND TRANSPORTATION COMMITTEE
THE CONSUMER WIRELESS EXPERIENCE
JUNE 17, 2009
It is critically important that this Committee listen and be responsive to the concerns expressed by consumers. Likewise, it is imperative that we avoid regulating where the marketplace is actively responding to consumers’ concerns. In the context of the wireless industry, over the last 10 years the nation has witnessed unparalleled innovation and growth. Americans have access to more device options than anywhere else in the world, and the sophistication of the applications available to consumers continues to advance rapidly due to significant investment by manufacturers and the wireless providers.
With regard to exclusive handset arrangements, I understand the concerns expressed by some of my colleagues; however, it is important to note that these arrangements are largely responsible for many of the exciting products in the marketplace today. The marketplace is competitive, and the introduction of a breakthrough new technology by one company, spurred by a competitive desire to offer consumers something new and exciting, in turn drives other providers to invest heavily in research and development of similar devices. That creative force provides direct benefits to consumers through rapid advances in technology. I hope we will be mindful of this and tread lightly when it comes to considering new regulations or restrictions on this industry.
I am concerned that unnecessary regulatory intervention here could risk stifling the remarkable levels of private investment and job creation that the wireless industry – both service providers and equipment manufacturers – bring to our economy. Despite the financial challenges that permeate our economy, this industry continues to flourish and, as our economy rebounds, we must work to ensure that investment and job growth continues.
This Committee has previously examined many of the issues to be discussed here today, and I ask my colleagues to take note of the progress that has been made, in the absence of regulatory intervention, in addressing these concerns expressed by consumers. Providers are already responding too many of these issues, and I note that many providers are using their responsiveness in this respect to promote their competitive advantages.
No other segment of the communications industry over the last 15 years has shown the continual growth and innovation of the wireless industry. To date, we have refrained from micro-managing the business practices of this industry, and as we stand on the verge of the next generation of innovative wireless broadband products, the government should proceed with great caution so as to ensure the best outcome for consumers.
Witness Panel 1
Mr. Mark GoldsteinDirector, Physical Infrastructure IssuesU.S. Government Accountability Office
Witness Panel 2
Mr. Robert M. FriedenPioneers Chair and Professor of Telecommunications and LawPennsylvania State University
Mr. Jack RooneyPresident and Chief Executive OfficerU.S. Cellular
Ms. Barbara S. EsbinSenior Fellow and DirectorThe Progress and Freedom Foundation
Mr. Hu MeenaPresident and CEOCellular South, Inc.
Mr. Paul RothPresident, Retail Sales and ServicesAT&T Services, Inc.