WASHINGTON--U.S. lawmakers are scrutinizing cellphone companies and their manufacturing partners, worried that service providers aren't customer-friendly and exclusive deals are impeding competition.

An independent government auditor says 84% of cellphone subscribers are happy with their service, although some have trouble with billing and contract terms.

"I have concerns that too many consumers are bound to confusing contracts," Senate Commerce Committee Chairman John Rockefeller, D-W.Va, said Wednesday at a hearing on wireless issues.

Rockefeller wants to focus the private sector's attention on wireless blank spots like those in his home state of West Virginia. He displayed a chart depicting wireless networks across the country, pointing to rural areas that don't have any coverage.

"This is called Maine. It is white. White means nothing there. This is called West Virginia. It is white. White means nothing there. It makes a very powerful point to me, and it makes a point that resonates emotionally," Rockefeller said.

Four other senators on the committee have asked the Federal Communications Commission to examine whether exclusive arrangements between carriers and handset manufacturers are limiting consumer choice and hampering competition.

Large carriers like Verizon Wireless, AT&T Inc. (T) and Sprint Nextel Corp.(S) argue that exclusive arrangements encourage entrepreneurs to take risks on different kinds of phones and Internet gadgets.

Apple Inc.'s (AAPL) partnership with AT&T to produce the widely popular iPhone has spurred an "unprecedented competitive frenzy" in the mobile handset and wireless Internet market, AT&T's president for retail sales and service, Paul Roth, told the Senate committee.

Verizon Wireless, a joint venture between Verizon Communications Inc. (VZ) and Vodafone Group PLC (VOD), sent extensive comments to Capitol Hill last month saying it would be "totally unworkable" to regulate exclusive handset arrangements.

Verizon pointed out that AT&T and Verizon use different types of wireless networks, making it impossible for Verizon to support an iPhone.

Banning exclusive handset arrangements could force Apple to build a completely new version of the iPhone at great expense, Verizon's letter said.

Consumer advocates dismiss that argument. "The simple fact of the matter is if the device manufacturers were untethered, they would, in my opinion, develop a full range of devices for all the technologies," said Mark Cooper, rsearch drector for the Consumer Federation of America, in a telephone briefing Wednesday.

Manufacturers appear quiet about their plans. At the hearing, Sen. John Kerry, D-Mass., said all the major handset manufacturers declined invitations to testify on the issue.

Smaller companies like Cellular South Inc. say they would be happy just to sell devices that operate on their networks. Cellular South can't access the iPhone, for example.

Before the hearing, Cellular South President Hu Meena said he also can't give his customers a BlackBerry Storm, produced by Research In Motion Ltd. (RIM) and marketed exclusively through Verizon Wireless. Nor can Cellular South offer the Palm Inc.'s (PALM) Pre, which is marketed exclusively through Sprint Nextel.Both of those devices could operate on the company's network.

Meena and United States Cellular Corp. (USM) President Jack Rooney both told the Senate committee that the top four wireless companies--Verizon Wireless, AT&T, Sprint, and T-Mobile USA--have hijacked the handset market. T-Mobile is a unit of Deutsche Telekom AG (DT).

Kerry said he isn't sure whether legislation is needed. Carriers may have a right to make deals that help them share risk, he said.

Yet U.S. customers are generally happy with their cellphones and wireless e-mail services, an independent government auditor told the Senate committee.

Eighty four percent of wireless customers are very or somewhat satisfied with their wireless phone service, Government Accountability Office Physical Infrastructure Director Mark Golstein said. GAO conducted a survey of more than 1,100 wireless customers.

Some problems remain. Four out of 10 people who were unable to switch carriers (42%) declined to do so because of high early termination fees, Goldstein said. One-third of customers responsible for paying bills encountered unexpected charges or had other billing problems.

The GAO noted that the four major wireless carriers have taken steps to remedy these problems. All of those companies are pro-ating their early termination fees.

Rockefeller wants the GAO to conduct a regional study, saying a national random survey doesn't illustrate problems in rural areas.

-By Fawn Johnson, Dow Jones Newswires; 202-862-9263; fawn.johnson@dowjones.com