The Rural Cellular Association (RCA) has asked the FCC to investigate the common practice of exclusive handset distribution deals for major wireless carriers. RCA claims such practices are anti-competitive and deny rural consumers access to newer and popular wireless devices. Perhaps the poster child of this issue is the iPhone, and the exclusivity AT&T has with it in the U.S. But there are numerous other examples. The RCA assembled an outline of some of the leading handset exclusivity deals in an appendix of their filing. RCA says the situation is “… creating another ‘digital divide’ between urban and rural America.”

This is a tough issue. Exclusivity is a key weapon in the intense competitive battles between wireless carriers. You could easily argue that exclusivity is fair game in this competitive landscape. But RCA brings up valid points – wide swaths of consumers, almost at the statewide level, are unable to enjoy the benefits of these advanced devices, in large part due to exclusivity deals. Perhaps the more concerning argument is do these exclusivity deals create higher prices for consumers, which would not be the case if the devices were offered by competing carriers. The issue will only intensify as new 3G and 4G devices begin to penetrate the marketplace. These newer devices and the “cool” applications they provide will be fertile ground for exclusivity deals by wireless carriers, as they try to differentiate their service from their competitors. Unfortunately, there are no easy answers for this issue. It’s one of many debates created by a marketplace where multiple competitors are chasing billions of dollars of potential revenue. The stakes are quite high.

The Wall Street Journal is reporting (subscription required) that Yahoo is courting Time Warner to combine AOL and Yahoo into a new company, with Time Warner holding a minority stake. The effort is an attempt to either stop Microsoft’s Yahoo bid, or at least force them to sweeten their offer. Whatever the outcome, it appears that Yahoo will enter into some transaction that will significantly alter the online search and advertising industry and will certainly impact the mobile wireless arena as well. Time Warner is reportedly putting the “finishing touches” on a proposal, which will soon be given to Yahoo’s board. In a separate note, Yahoo delayed the nomination process for its board to thwart a proxy fight with Microsoft. See the below video for more details.

The Wall Street Journal postulates that Microsoft is still likely to prevail, despite Yahoo’s efforts to court others, including AOL and News Corp. The implications on the Internet business are somewhat obvious. But a combined Microsoft and Yahoo would become a true wireless powerhouse as well. Both companies have well defined wireless strategies. Microsoft has Windows Mobile which will ship on over 20 million handsets this year. Yahoo has developed a suite of wireless applications that are featured on several wireless carriers including AT&T and T-Mobile. Both Yahoo and Microsoft have an interest in slowing Google’s wireless foray, Android. The next frontier for the Internet, search, and advertising is mobile wireless. Globally, mobile handsets will soon take over as the number one way that consumers access the Internet. Yahoo would be a prized asset for any company looking to effectively compete in this new frontier.

If you take a look at AT&T’s latest quarterly numbers, you have to be impressed with the apparent competitive advantage that the iPhone has given them, at least initially. They added 6 million gross wireless subscribers, which is the best on record for quarterly growth in the wireless industry. That beat their 2006 4th quarter comparative number by almost 10%. They had a total net addition of 2.7 million subscribers, 1.2 million of which were postpaid net additions, which amounts to an impressive 37% gain from the previous year’s 4th quarter, also a record. Churn was also reduced by 10 basis points from the previous year’s 4th quarter. At the end of the 4th quarter, AT&T had 2 million iPhone customers. AT&T claims that 40% of those current iPhone customers came to AT&T from other carriers.

It’s somewhat difficult to draw comparisons to their chief rival Verizon, because Verizon won’t report 4th quarter results until January 28th. But it’s safe to say that the iPhone had a definite positive impact on their record growth numbers and provided them a solid competitive advantage. Its impact will surely grow as well, because AT&T reported that wireless data revenue grew by 57% and now represents 20% of their total wireless revenue and $12/month of wireless ARPU. The iPhone is a data heavy device and will only add to these data numbers. Early returns look good for AT&T and their decision to become the exclusive iPhone retailer.

Targeting heavy text messaging and data users, Qwest announced the launch of their Message & More wireless plans. The new plans offer unlimited text messaging, Internet access picture messaging, and free Qwest Wireless Mobile-to-Mobile calling. The new plans start at $59.99/month with 500 minutes of wireless access. Qwest operates an MVNO, using the Sprint wireless network.

Google unveiled their long rumored wireless strategy, code named Android. Also known as the Open Handset Alliance, Android comprises of several leading mobile wireless heavyweights, including T-Mobile, HTC, Qualcomm, and Motorola. Noticeably absent are either of the big two U.S. mobile carriers, AT&T, and Verizon. According to the Open Handset Alliance press release, “This alliance shares a common goal of fostering innovation on mobile devices and giving consumers a far better user experience than much of what is available on today's mobile platforms.” In other words, we intend to shake up the mobile wireless industry.

The heart of this shake up lies in Android, a new mobile wireless operating system platform. Android is “…a fully integrated mobile ‘software stack’ that consists of an operating system, middleware, user-friendly interface and applications.” It will be based on the open Linux platform, and hopes to empower its own extensive developer network, which in turn will create thousands of Android applications for the mobile experience.

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