Verizon to cap new handset deals

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WASHINGTON/NEW YORK (Reuters) -- Verizon Wireless is dialing back on its exclusivity agreements with handset makers after pressure from U.S. lawmakers and smaller carriers.

The biggest U.S. mobile service said on Friday it will limit exclusivity periods with cellphone makers to six months and then allow the country's smallest wireless service providers to sell the devices.

The move comes after reports that the U.S. Department of Justice was taking a preliminary look into whether U.S. operators had violated antitrust laws by obtaining exclusive deals to sell specific phones.

Exclusivity deals are common among the biggest U.S. carriers but have recently faced strong opposition from small, rural carriers, which say they lack the clout to make deals to carry the most popular advanced phones.

The iPhone has drawn such deals into the spotlight because AT&T Inc. (T, Fortune 500), the second biggest U.S. wireless service, has had exclusive U.S. rights with Apple Inc. (AAPL, Fortune 500) since 2007.

In an apparent effort to preempt any regulatory changes, Verizon Wireless, a venture of Verizon Communications (VZ, Fortune 500) handoff Group (VOD), sent a letter to major lawmakers on July 17 offering to limit exclusivity.

Verizon said the offer would apply to carriers with 500,000 or fewer subscribers. However, Verizon spokesman Jeffrey Nelson said it applies to all "small" operators with more subscribers without giving a definition. Cellular South, a vocal activist against phone exclusivity deals would be able to avail of the offer even though it has roughly 800,000 customers, he said.

However, the offer will not extend to larger companies such as U.S. Cellular Corp., which has about 6 million customers and has been a vocal opponent of the practice, Nelson said. U.S. Cellular did not immediately comment.

"Effective immediately for small wireless carriers ... any new exclusivity arrangement we enter with handset makers will last no longer than six months -- for all manufacturers and all devices," Verizon Wireless CEO Lowell Mc Adam said in the letter.

He said 24 small wireless carriers had asked Verizon to eliminate its long-term exclusive handset agreements with LPG and Sam sung in February. The company was now expanding that idea to all handsets.

The letter was sent to Senate Commerce Committee Chairman John Rockefeller, a West Virginia Democrat, and committee members John Kerry of Massachusetts and Republican Kay Bailey Hutchinson of Texas. The letter was also sent to Representatives Rick Boucher, Henry Wax man, Joe Barton and Cliff Stearns.

A spokeswoman for the Justice Department was not immediately available for comment. The DJ's preliminary examination is believed to be focused on deals like AT&T's with Apple and Sprint's (S, Fortune 500) with Palm's Pre cellphone. Another is Verizon's deal with LPG for its Voyager phone.

AT&T spokesman Mark Siege declined to comment on how it might respond to Verizon's move, but defended exclusive deals.

"Without question exclusive handset deals have given America's wireless customers big benefits, including more choices, lower prices, and a level of innovation that is the best in the world," he said in an emailed statement.

Sprint was not immediately available for comment nor was a spokesperson for the U.S. telecom regulator, the Federal Communications Commission.

Boucher, chairman of the House Energy and Commerce Subcommittee on Communications, who met with Mc Adam on Friday, praised Verizon's actions.

"Verizon has taken an important and forward-looking step. I think it does ensure that smaller carriers get rapid access to the latest devices," Boucher told Reuters.

Smaller telecommunications firms and consumer advocacy groups have also complained that bigger companies use their size to squeeze out smaller rivals by refusing roaming deals, or block applications like the Sky Web-based phone service.