An iPhone Isn’t An Unalienable Right
Several organizations, including the Free Press, Mozilla and some rural carriers, have asked the Federal Communication Commission to forbid exclusive deals between device makers and carriers. You know, like the deal AT&T has with the iPhone, or the myriad others that keep certain hot phones with certain carriers? The complaint was filed last year, but with the FCC focused on an election, the DTV transition, white spaces, universal service fund reform and a ton of other issues, it never made it as a big concern.
Earlier this year the groups tried again, sending out press releasing to members of the media trying to raise the issue a second time, possibly before a more favorable FCC chair. They’ve succeeded at drumming up some press. Anyone who wants to buy an iPhone without committing to the AT&T network will likely sympathize with the cause.
But today, TechDirt Wireless argues that the ability to move a phone from carrier to carrier would make device prices higher for all, because carriers could lose a subscriber before the carrier recouped the value of their subsidy. There are two problems with the argument.
One is that exclusivity and unlocked phones are different issues. A lack of exclusivity means someone could buy the same phone at a variety of carriers but still be locked in to a particular network. This keeps subsidies as a viable strategy. The second reason, even if devices were to be unlocked, is that carriers could require customers to pay a termination fee should they choose to leave before the carrier could recoup the value of the subsidy.
That said, I do think we need some actual debate on this campaign. Exclusivity is a good way for carriers to differentiate their service for customers, who may see one wireless carrier as just like another. There’s no inalienable right to an iPhone on your preferred network, much like there’s no right to an In-n-Out resturant in your city. Without proving pricing problems associated with such deals, getting the government to regulate this seems pretty extreme — even if people in Alaska can’t buy iPhones.
Mozilla has nothing to do with the complaint regarding device exclusivity to carriers. In February 2009, we joined the Electronic Frontier Foundation in supporting the EFF’s petition to the US Copyright Office to give a DMCA exemption to iPhone jailbreaking, which is an entirely separate issue from device exclusivity. The BusinessWeek article you link to is a bit confusing on this connection, but if you read through to the second page you’ll see we’re not a part of the rural cellular complaint.
Back in the 70s, we heard the same argument from Ma Bell: you can’t use anyone else’s telephone device on our network because it will break the network. Once this was relaxed, the marketplace saw an explosion of new devices – cordless phones, answering machines, etc. And guess what – the phone network did not collapse from the new devices.
Why do we tolerate the same insanity from the mobile phone operators?
I agree that people have gotten addicted to the “free” phone subsidy. Even Apple learned that the iPhone sells much better with the subsidy. And while the exclusive contracts may benefit the mobile phone companies, they do not help the consumer. I expect to see this debated further among government regulators, with the usual complaining from big business and the usual arguments from consumer advocates.
Paul, I will make that adjustment. Thanks for the clarification.
Greg, you’re arguing against a closed wireless network. I agree with you that they should be open. However, the exclusivity deals between a carrier and a network operator are different. You can have open networks and still two companies can agree for exclusivity of a device on a certain network. It’s less likely once networks are truly open, but we’ll see how that plays out in the coming years if/when networks open up a bit more.
I would think that an exclusivity deal should have some kind of term length unless the provider (in this case Apple) could make a case that they would lose revenue if the exclusivity was dissolved.
Maybe the relationship should be allowed a 12-18 month period, then it becomes available to other carriers.
I guess the issue would be if a new product model would revert to the exclusivity again while the older model is widely available.
I do not see a viable alternative to a wall around the phone platform as long as revenues to the carrier are from voice. If a VOIP app can be added with one click in the app store and ATT allows unlimited data their business model is dead.
However not allowing unlimited data just restricts the uptake on data services, so ATT is doing a delicate balancing act.
If this passes, Apple (or any mfr) can just sell an OEM phone to AT&T (or any one carrier), which will brand it an AT&T (or carrier) phone. This law can’t force one carrier to make its phone available on a competitor – how silly would that be.
By the way, AT&T already has phones branded as AT&T, i.e, Quicksilver.
1% U.S. market penetration, and I see that we think the mobile phone is synonymous with “iPhone”.
Ivory towers indeed.
The lawsuit should be fighting any exclusive privileges Apple gets from AT&T. Ie If AT&T allows Apple to do ringtones, then it should open that up to ANY manufacturer. Similarly if AT&T allows Apple its own app store, then it should allow any manufacturer … This will level the playing field a little.
Stacey: The iPhone ATT combo is bad for consumers because in a way it reduces choice. Om himself, loves the iPhone but hates the ATT service and coverage … I had to shift to ATT because of the iPhone. I would love to have stayed with my old carrier because the rates I got were awesome and coverage better than ATT… This exclusive phone deal sucks because it reduces my choice of carrier …
Also there really is no magic that ties a phone to a carrier … The iPhone runs fine unlocked on TMobile and many many carriers worldwide … So any “experience” arguments ARE fake…
I can see the benefit of exclusives for marketing purposes. But having a perrenial exclusive hurts consumers in the long run and is a slippery slope to go down …
This issue has nothing to do with unalienable rights; it has to do with bundling and consumer choice. Greg Glockner hit the nail on the head: unbundling devices from both carriers and service plan lock in schemes would cause prices on devices to go down. Competition does that.
The issue is not whether carriers do or don’t bundle together various bits of the solution; the issue is transparency and choice. Meaning, I should at least have the option of buying an unlocked iPhone and using it with whatever carrier and whatever service plan I want. If a user wants a cheaper, subsidized device and a player offers that option, let them have it. But users should also have the option to buy an unsubsidized device and a monthly service plan that doesn’t lock them into anything.
This is all technologically doable, and everyone knows that. Go into any Carphone Warehouse in the UK and you can buy a pay-as-you go SIM card from multiple carriers, then purchase an unlocked phone to drop it into. Are there carrier deals offering subsidized devices there as well? Sure, but the consumer gets a choice in their purchasing decision. Do they pay more for their device? Yes, but they aren’t locked in to a contract. Many folks are willing to pay for that freedom.
But the industry players here in the US won’t do this because they will lose margin. As is often the case, it will be consumer advocate groups and the government that will have to come to the aid of consumers to give them greater choice and ultimately better value. The market doesn’t always look out for the consumer. Case in point: the banking industry’s recent misadventures reeking havoc on folks savings and 401(k) accounts.
“Exclusivity is a good way for carriers to differentiate their service for customers, who may see one wireless carrier as just like another.”
the main reason that customers see carriers as indistinguishable is that the carriers don’t have to compete on service quality or price – AT&T has no reason to lower its prices (my service bill, with minimal voice, the iPhone data charge, and text messages, is nearly $100/month) or to improve the quality of its service because it’s instead winning customers over who want the iPhone. if you take away that “market differentiation” factor, the service provider decision will be made on the basis of price and the experience of friends and family with service quality, reliability, and customer service – i.e. the things that wireless providers should be competing over.
i suggest you read through the comments that Free Press filed – they make that point pretty clearly.
“Exclusivity is a good way for carriers to differentiate their service for customers, who may see one wireless carrier as just like another.”
Said differently, exclusivity is a good way for carriers to NOT differentiate their networks and reduce capex.
QDub and iPhoneFan, I would tend to disagree. Om dumped his iPhone and I have chosen not to buy one because each of us value the differentiation (better network quality) offered by other networks. AT&T has cool phones, but Verizon has a better network. Verizon has high prices, but T-Mobile works well and is cheaper. These are differences and consumers can choose based on them. Sprint is working hard at its customer service for precisely that reason.
Sure Om and I don’t get the iPhone, but we have access to other phones that perform many of the same functions. There’s always a iPod Touch ( both Om and I have one) for those who chose to go with another network.
Hi there,
I am not sure you are aware or if this has been already mentioned, but here In France Orange lost the exclusivity of the iPhone distribution. Soon the 2 other main carrier here in France will be able to sell the iPhone.
I think it is good for the french market and customer that wants an iPhone but don’t wan’t to join the Orange Network for any reason. Competition will probably bring the user more services, better prices, don’t you agree?
K.
not to belabor the point, but initially, you said consumers could not tell the difference between carriers, and that’s why handset exclusivity is valuable; then in your subsequent comment, you said that Verizon is expensive but has a better network, and that T-Mobile is decent and cheaper.
“even if people in Alaska can’t buy an iPhone…”
Stacey, you continue to amaze me with your ignorance. Om should let you out of that bastion of liberalism called California every once in awhile and you might get a clue. Been available up here for close to 18 months now…
“Exclusivity is a good way for carriers to differentiate their service for customers, who may see one wireless carrier as just like another.”
True but isn’t that an artificial differentiation? That’s like saying that I’m loyal to my local energy company because I send them a check each month. I don’t have much choice if I want power for my home. I’d like to see wireless companies differentiate themselves based on coverage and service. Wow! That’s a concept. In fact, I’d prefer to pay a non-subsidized rate on a handset if the wireless company needed to work everyday to keep my business.
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