12 Comments

Summary:

With AT&T’s proposed deal to purchase T-Mobile now effectively dead, consumers have won, right? Yes and no. There’s much cause for consumer rejoicing, but the U.S. is still pro-carrier because we can’t easily use our phones on different networks. We really don’t have true carrier competition.

SIM cards galore
photo: Flickr / mroach

SIM cards galoreWith AT&T’s proposed deal to purchase T-Mobile now effectively dead, consumers have won, right? T-Mobile customers that enjoy lower rates have no cause to worry a new owner will raise their monthly bill. AT&T still has plenty of spectrum to roll out its LTE network, so most of the country will have speedy mobile broadband access. And existing T-Mobile subscribers won’t have to buy new phones that work on AT&T’s network.

We still have a pro-carrier situation

However, consumers are no better off than before. I realize that’s a bit of an obvious statement, but the end of the AT&T-Mo situation looks like a potential missed opportunity for consumers to benefit from more carrier competition. Let’s face it: We have four major networks in the U.S. providing voice and data — plus a number of smaller, regional carriers — but unlike most other consumers around the world, we can’t move our phones amongst these networks.

Here’s the problem

Our two GSM networks — AT&T and T-Mobile — use the same network technology and share one of two frequencies for voice, but use completely different frequencies for mobile broadband data services. That’s why the more than one million T-Mobile customers who bought iPhones only get slow Internet speeds on their devices: The iPhone’s radio doesn’t support the 1700 MHz frequency used by T-Mobile. Sprint and Verizon have built CDMA networks that actually use similar frequencies, but the phones are generally locked down for use on one network or the other.

Essentially, we don’t have true competition in the U.S. cellular market. This differs, for example, from Europe where GSM networks are prevalent. Instead of GSM carriers that use different frequencies, they all use the same ones. And there are multiple GSM operators to choose from. This means you can buy a handset from any retail outlet — not just a carrier affiliated store — and buy a SIM card from the operator who has the best price at the moment.

Roadblocks and solutions

I won’t go as far to suggest we need government intervention here. I’d rather see carriers simply stand behind their words and allow for true competition. Perhaps that means AT&T and T-Mobile start offering phones that support data frequencies for both high-speed mobile broadband networks. The Galaxy Nexus I just bought from the U.K., for example, does exactly that. I put a T-Mobile SIM in it yesterday to test their network — quite fast at nearly 9.5 Mbps down — and will swap in an AT&T SIM this weekend. I was able to choose my device first and the carrier second in this case.

Unfortunately, even if all of the GSM phones sold in the U.S. did support both major networks, there’s still the problem of the handsets being locked to one network or the other and how that relates to contracts. Because the carriers often subsidize the price of a smartphone to keep the up-front costs low, it’s not in their interest to pay for part of the hardware only to have the buyer move that hardware to a competitors network.

Talk about bad timing

At this point, both the networks and the technology cycle are changing too quickly for carrier contracts to be 24 months long. T-Mobile doubled its network speeds in 2010 and then again in 2011, for example. In the past 24 months, smartphone processors have jumped from 1 GHz single core processors to 1.2 GHz dual core chips, and we’re on the cusp of seeing quad-core phones. The contract cycle is out of whack with the technology cycle.

I don’t know what the answer is, and to be honest, as I said in the beginning, the situation hasn’t changed for better or for worse, even after the AT&T-Mo deal falling apart. The problem is: I don’t see this issue going away anytime soon. And I don’t believe this market can continue with long-term carrier contracts and phones that can’t be moved from one network to another. My hope is that LTE — which will eventually support voice and data — will help solve the problem, but early indicators signal that even then we won’t see true carrier competition in the U.S.

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  1. Even without AT&T-Mo, we still have no competition http://t.co/2NTNNAfT

  2. **** Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effe… http://t.co/T5yOVIQU

  3. Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/v1csteYw

  4. Even without AT&T-Mo, we still have no competition http://t.co/o47emLzZ @amarchugg #news

  5. Even without AT&T-Mo, we still have no competition http://t.co/3WpWXMgQ @amarchugg #news

  6. Ray Informatics Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/llhj25Ol

  7. Crunked On Tech Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/7PPrtyzB

  8. Searle Morris Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/HVU2iJ3Y

  9. Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/zGh6vWOE

  10. Even without AT&T-Mo, we still have no competition http://t.co/PjWeeFj4

  11. amazinginteriors Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/UxPrPLaQ

  12. Even without AT&T-Mo, we still have no competition http://t.co/rRkqLI7K

  13. Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  14. Roberts Chapman Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/jJs3pxdo

  15. Even without AT&T-Mo, we still have no competition http://t.co/3fxO3Q6s

  16. Peter Alexandrov Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/p7rVw6iA

  17. Yasbella Sebastian Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/3ByDWKmy

  18. Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/O7HkDYwp

  19. Mitanshu Saini Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/yDxClCha

  20. Even without AT&T-Mo, we still have no competition http://t.co/c0SvafKQ @om #mobile

  21. Even without AT&T-Mo, we still have no competition http://t.co/G7AybtMN

  22. Technology News Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/jvkfj8dP

  23. David Cornish Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/CUf44rPK

  24. Even without AT&T-Mo, we still have no competition http://t.co/xu1lST1R

  25. And @kevinctofel on fallout of AT&T-Mo on mobile competition: Even without AT&T-Mo, we still have no competition http://t.co/Pf7L799m

  26. Deb Tech’s Only Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/0IaJ0C3o

  27. All Trends IT Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/5skKWiDL via Kevin C. Tofel

  28. Even without AT&T-Mo, we still have no competition http://t.co/be2EynVw

  29. Having worked in the wireless industry (retail) for some time, consumers need to not be so cheap when it comes to devices. Most wireless customers come into a store and start complaining about the subsidized price. They want a deal, they saw it online for X, Verizon will sell it for 15% less, whatever. To respond, the carriers lock phones and do long contracts. If consumers were willing to just drop the $800 on an iPhone 4S without crying about it, there would be more room to negotiate with the carriers on better plans. Hopefully once the world moves to LTE, the idea of true unlocked global phones will be a reality, but with multiple GSM frequencies plus the doomed CDMA options, it’s cost prohibitive for the manufacturers to support every network tech/frequency there is.

  30. Stacey Higginbotham Friday, December 2, 2011

    RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  31. Core problems: Tech, frequencies and carrier lock RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/XkdHK9uc

  32. Even without AT&T-Mo, we still have no competition http://t.co/UV4kudgD

  33. Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T… http://t.co/upPPe5O4

  34. Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T… http://t.co/upPPe5O4

  35. Kevin – I don’t disagree with your overall premise, but I think your solutions are wanting when you state that the two GSM carriers should offer “phones that support data frequencies for both” without some sort of outside influence. I hate the idea of the government getting involved, but what impetus exists for AT&T (for example) to tell Samsung/HTC/LG etc. that they want their phones to be pentaband? Unless they start building a network that requires the AWS bands, there isn’t a reason for them to make that request.

    As for the contract lengths (and I think an argument can be made about pace of innovation vs. contract term and who that really means something to. Likely a different discussions for a different post though), I would love to see them shorter, but in order to do that, you would have to convince a populace conditioned by decades of subsidized handsets that they need to start spending $400+ on their Androids and iPhones. Tall order, that.

  36. gigaom: Even without AT&T-Mo, we still have no competition http://t.co/bqYsSb8e

  37. Scott Cranfill Friday, December 2, 2011

    RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  38. Scott Cranfill Friday, December 2, 2011

    RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  39. gianluca carrera Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition #socialmedia http://t.co/H0KPvDjm

  40. Even without AT&T-Mo, we still have no competition http://t.co/taeJSGnE

  41. Cyril Simonnet Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/WavRAKZR #BYOD

  42. Cyril Simonnet Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/RToKU0wq #BYOD

  43. GigaOM EcoHub Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/51apyANd

  44. Data Center Blogs Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/nfhkumA7

  45. OriginalSignal Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/CtdVEWXT

  46. Even without AT&T-Mo, we still have no competition http://t.co/HzlPkQah

  47. Even without AT&T-Mo, we still have no competition http://t.co/VoxO6TrL

  48. Today American Friday, December 2, 2011

    [281] Even without AT&T-Mo, we still have no competition
    http://t.co/fud9Mpa3

  49. Carriers should be out of the phone business altogether. The electric company doesn’t sell appliances, the water company doesn’t sell faucets – and yes, the mobile carriers are equivalent to a utility.

    The phones are high priced because of the fake subsidized prices, which are a marketing tool. If the phones were not ‘subsidized’ then phone makers would have to sell the phones at market prices which would be close to the subsidized prices. Could you imaging anyone spending $600 on a mobile phone with any sort of regularity? Apple phones notwithstanding, eBay and Craigslist are the true measures of market value for these phones and they indicate prices near the ‘subsidized’ prices. Its similar to how mortgages for homes and loans for cars drive up prices for those items. If people had to pay cash for a house or car and loans were not available, the prices for those items would go down significantly because the demand at higher prices would be significantly less.

    Ug – so aggravating in the mobile technology space.

    I really REALLY wish all of the blogs and other mobile technology websites would quit listing the ‘subsidized’ prices and list only the list prices – and quit doing the marketing for the carriers.

    1. So is there room for a company that finances pentaband phones for consumers? It would operate like the aircraft leasing companies – buy the phones, then lease them to people for monthly amounts they can handle. It could offer damage/loss insurance, maybe even negotiate app bundles for extra revenue.

    2. Kudos to Brian for summarizing the root problem so well. Too bad the carriers couldn’t modularize the radios for the phone. Pick the one you want, and then buy the carrier specific radio.

    3. I agree with Brian on many points. If the tech blogs would list the no-contract price of the phones as the price instead of listing the subsidized price, people would have a true cost of the phone. Pentaband 3G, unlocked phones are really worth it when you consider that besides postpaid plans you can also use them with prepaid plans which might save even more.

  50. What we need to get real competition in wireless service is for the FCC or the DoJ to force carriers to unbundle service and equipment, like they did with wireline phones in the 1980s. There is no reason why manufacturers cannot sell phones that work on all networks, they just don’t have an incentive to do that now, as their phones are mostly tied to a specific network.

    Right now, T-Mobile will charge a lower monthly fee for service if you provide your own phone. This has to happen on all four carriers for real competition to occur, as the subsidy masks the true cost of the equipment. The subsidy is liked by carriers, because it locks in subscribers, and they get back far more than the cost of the subsidy over the life of the 2-year contract; and it’s liked by manufacturers, because most people don’t see the real cost of phones. Please tell me why a phone, with a dual core 1.2 GHz SoC and a 4″ screen, with maybe 1 GB of DRAM and 32 GB of flash, has to cost twice as much as a dual core laptop, with 4 GB of DRAM, a $40 HDD, a 15″ LCD, and much bigger battery? If people knew they were paying $650 for a phone (not to mention an extra $20/month for service after the subsidy has been paid for), they might think twice. Or at least, there would be better deals offered.

    If customers had to buy phones, they would shop around for service, and the prices would drop for both. Why does the FCC allow bundling in wireless service, when it has outlawed it for landlines?

  51. Christoph Schmitz Friday, December 2, 2011

    RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  52. Chris Barnhart Friday, December 2, 2011

    [GigaOM] Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now … http://t.co/AlL9Qa49

  53. Even without AT&T-Mo, we still have no competition http://t.co/r6gLqMlL

  54. Web Tech Update Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now effective… http://t.co/tG0lhMud

  55. Mohammed Maqsoud Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/vbIyMGX4 #technology

  56. As a European moving to America, I’ve experienced all of what Kevin wrote – it was really mind-boggling at first to find out how things work over here. And every time I show my Samsung Captivate (AT&T branded) to someone and the person asks why in the world I’m on AT&T, I explain that I’m using it on T-Mobile, which then leads into a longer discussion, and the person usually perplexed.

  57. RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  58. After reading the headline I thought that you would talk about how T-Mobile’s policies are tightening to converge with AT&T’s, diminishing their position as a low-cost provider.

    I had the unlimited data plan with them, then they made it “Unlimited” with a 10GB threshold for throttling data, then they lowered the threshold to 5GB, and then they offered a new 10GB “Unlimited” plan at a higher price. Sleazy.

    They just cut off the data to my wife’s Android phone a few months after she’d put her SIM into an Android device. Apparently they screen for type of device, and they’re asking her to commit to a year or pay much more for the same plan even though her commitment was up. Kind of undermines the promise of GSM.

    Last year they screwed up my account, then pulled the Verizon trick of secretly adding services I did not request (loss/damage, and another $5/month extra) when I asked them to restore the plan I had.

    I’m a long-time T-Mo customer, have put up with their poor coverage in part because of their integrity and good support, but they’re no longer living up to their reputation, and they’re no longer the honest alternative to the big boys.

  59. Craig Settles Friday, December 2, 2011

    RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/RjYO4RPr <- Sad, but true.

  60. Bill St. Arnaud Friday, December 2, 2011

    RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  61. Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T… http://t.co/uXY32fbO

  62. Bharat Raghunathan Friday, December 2, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/Yj9Uq58s

  63. RT @gigaom: Even without AT&T-Mo, we still have no competition http://t.co/VEkiRGw4

  64. Interesting comment on “Even without AT http://t.co/Kt20UjM7 via @gigaom

  65. (seems like my comment went awry, 2nd try)

    Counterpoint: I use an N8. I don’t have a problem choosing AT&T, T-Mobile, or any GSM MVNO and using all that they have to offer in terms of voice and data capacities on their network. I don’t see such mobiles as a frequent “favored” selection for “app” and “developer support” reasons, and yet in this country, for the choice that looks most like “land of the free, home of the mobile,” this would be probably one of the better devices to choose from. And I say that knowing that there is possibly one Android device that’s pentaband, but 3 or 4 Symbian devices.

    [end counterpoint]

    The solution is (as some folks stated below here), to talk more transparently about devices and their capacities. Yes, that means that there’s got to be some granular accounting for what some regions can and can’t do with mobile devices. But, given this article, we shouldn’t by any means claim that the US is in a position of a wireless leader when its more like a 2-horse race because of the decisions from the FCC and carriers just about 2 decades ago.

    Now, back to that dead and burning platform to see what other flexibilities that it offers me ;)

  66. Antoine RJ Wright Friday, December 2, 2011

    This article from @gigaom is what I meant the other day; banging the drum on features and u miss the real usage points http://t.co/Z2ubgo4w

  67. Robert A. Rosenberg Friday, December 2, 2011

    There are three other issues with subsidized vs unsubsidized phones. First if I buy my phone outright, I pay the same monthly fee as I do with the phone subsidized (IOW: They are charging me not only the monthly usage fee but the payback of the difference between the subsidy and the full price). Second is the EFT on a subsidized phone. It is not prorated or the same as the difference in prices. If the difference is (to use an example) $360 on a 24 month contract then it should go down $15 a month of usage (ie: After 1 year it should be only $180). I will ignore the issue of interest on the loan that the subsidy represents. Lastly, once I pay off the phone, not only does my monthly fee drop (another manifestation of the No Full Price Phone situation mentioned above) but they will not unlock the phone I now own.

  68. Even Without AT&T-Mo, We Still Have No Competition http://t.co/Mir2Lt4Y #cellular

  69. Tuck Takagawa  Saturday, December 3, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/BtbrQFOj

  70. Brandy Luscalzo Saturday, December 3, 2011

    Even without AT&T-Mo, we still have no competition: With AT&T’s proposed deal to purchase T-Mobile now e… http://t.co/cd7o1x5V #gigaom

  71. kevin fitchard Sunday, December 4, 2011

    Good debate in comments of @kevinctofel’s Even without AT&T-Mo, we still have no competition http://t.co/2YvV7FZ0

  72. Fresh Digital Group Monday, December 5, 2011

    Even without AT&T-Mo, we still have no competition: http://t.co/QXDcrB0g #mobile

  73. With FCC rejecting AT&T/T-Mobile merger, consumers no better off; no true competition in the U.S. cellular market. http://t.co/nbpaEMi7

  74. Kevin,
    I just wrote about this last week. It’s shocking that the GSMA hasn’t stepped in and standardized the bands to be used for GSM, 3G, HSDP etc. Not that I think they should control it but I think TMO for example should have to provide some bandwidth even if it’s rented to work on the more common 3G bands.

  75. Derek Gendvil Monday, December 5, 2011

    Even without AT&T-Mo, we still have no competition http://t.co/fHuLMary

  76. Grellan Larkin Tuesday, December 6, 2011

    It amazes me how the US mobile market is setup to be so anti-competition. All lock-ins and no portability. http://t.co/JNpMlkDJ

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