Claims carrier exclusives are anti-competitive

Apple's practice of selecting one or two "exclusive" carriers in a country to sell the iPhone -- at least for a period following the launch -- has come under scrutiny in India, where a complaint has been filed with that country's Competition Commission, The Wall Street Journal reports. Not allowing all compatible carriers equal access to the popular phone immediately gives those who have it an unfair market advantage and is anti-competitive, the complaint alleges.

India is the world's second-largest mobile phone market, with almost 827 million subscribers -- though the market for smartphones is significantly smaller, currently less than three percent of that number. The iPhone 4 only just recently finally launched in the country on May 27th, nearly a year after its initial introduction in the U.S.

As with other countries, the smartphone percentage of sales is expected to increase rapidly in the coming years, almost doubling in sales compared to 2010. The Indian market is very different to how cell phones are handled in more industrialized countries -- subsidized phones or bundle deals with the actual phone companies is rare, with most phone sales sold directly at full price through retailers due to the majority of the population not having much credit history, which has suppressed sales of the more-expensive smartphones over "feature phones" and more basic handsets.

Apple tends to align itself with carriers when it enters a country, previously having offered the iPhone 3G and 3GS through Bharti Airtel (India's largest carrier) and Vodafone Essar. The iPhone 4 is currently available with service from Bharti and Aircel, the latter being the country's fastest-growing carrier with 57.1 million subscribers. Consumers can either buy the phone outright (started at around $768 for the 16GB model) or subscribe to a plan that credits the cost of the phone back over the course of two years.

The complaint in India is that by tying itself to just two of the country's five compatible carriers, Apple is limiting choice of carrier in the market. India's Competition Act of 2002 bars agreements that are "likely to cause an appreciable adverse effect on competition within India." Neither the commission nor Apple have formally commented on the merits of the complaint, which could spark a probe of the company. A spokesperson said that the agency will examine the matter "to see if [Apple] is violating the law" but added it was not necessary for the commission to act unless a violation were found.

The agency declined to name the party that had filed the complaint or release further details. Conceivably, the agency could request Apple end its contracts with Bharti and Aircel and offer the iPhone from any compatible carrier, as most other cell phone manufacturers do.

Apple's partnerships with carriers varies from country to country. In the U.S., the iPhone was for many years exclusively offered through one carrier, AT&T (in exchange for that company's initial acceptance of the new technology and assistance in development). Apple later developed a variant of the iPhone 4 that would run Verizon as well -- but so far those are the only official options, in spite of the fact that other carriers (such as T-Mobile) are compatible with the existing GSM iPhone. Until recently, the two versions of the iPhone 4 in the U.S. were always factory-locked to their respective carriers.

By contrast, in Canada the iPhone is available from every compatible GSM carrier -- over half a dozen companies -- but is generally "carrier-locked" to each one through a three-year contract, a year longer than U.S. carriers offer. Canadian and other non-U.S. carriers do offer to unlock the iPhone after a certain period on the contract, or in other countries sometimes sell them unlocked as required by law.

Apple's COO Tim Cook was spotted in China yesterday, meeting with China Mobile -- opening the possibility of the iPhone being available through a second carrier there in the near future.

Currently, China Unicom is the exclusive carrier for the Chinese market, which is the world's largest with nearly one billion total users and almost 70 million smartphone users. The combined Asia and Pacific markets are expected to account for 40 percent of the world's 3G/4G use overall, compared to North America's 10 percent. [via The Wall Street Journal]

by MacNN Staff