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While I understand, the hesitance to subscribe to one mobile provider (I hate subscriptions as well) the government has no business dictating what cell phone providers- such as Apple- can and cannot do with their product. I don't want to make my response too long, but- as we all know- free market is a powerful thing. Apple and ATT are already being punished for their subscription based model. As you noted, you have been a loyal customer of T Mobile for 10 years simply because they you don't have to subscribe to use their phones. That is business (and also probably quite a bit of free advertising) that those companies are missing out on. Now clearly, their model has not hurt them, but that is because for the vast majority of cell phone users a 2 year subscription is not a problem.
Now, do I agree with you that my life would be incrementally better if I never had to sign up for a subscription? Sure. But the solution is NOT government intervention. We cannot ask the government to intervene on our behalf when it come to cell phone subscriptions- then cry out in rage when they dismantle our bankruptcy laws. The government needs to do less regulation not more. And, they certainly don't need to be stepping to regulate the cell phone contracts that we as free individuals sign.
I can certainly imagine an entrepreneurial company that would offer a service in which people could "purchase" their cell phone number. It may have been an existing telecom company or just an individual who bought and resold numbers. In either case, if this rogue company was successful, the major players would be forced to adapt and likely offer a similar service to their customers(or simply give away numbers for free- in order to entice customers).
In either event, number portability COULD have happened without government intervention. And, I would argue that any good that came from forcing number portability down the telecom's throats is greatly outweighed by the damage that is done by such actions. What is worse not having number portability? Or living in an evironment where contracts can be tossed aside on the whim of the politically connected?
However, neither the carrier nor the device maker own the telephone number. The FCC -- and by extension the American consumer -- does. So no carrier should be able to lock up the phone number, which is rightfully yours.
The thing is, nothing can stop you from unlocking your phone. Perhaps it should be easier. But Apple can't stop you from doing it. The only thing they can do is void the warranty.
Should the government be telling Apple what restrictions they can and can't put on their warranties?
Intel says the warranty is broken if you tweak your motherboard and run their 2.6GHz processor at 2.8GHz. Is that anti-consumer? How do you distinguish between these two issues?
I just don't see that government has the ability to determine business models and do this in a smart way. I'd rather see the entrepreneurs take on these kinds of anti-transparency, anti-consumer inefficiencies and defeat them with innovation, because I think it's far more sustainable than a government mandate that, based on past history, is likely to end up stifling innovation more than it helps.
I do think that more transparency would be better for all(maybe not some of the carriers). Allow everyone to see the subsidized costs versus unsubsidized. This way customers could make a decision with all the facts and information.
I don't think it is anti-competitive at all, with an iphone you are buying a device and a network, that's the way it's packaged. That's Apple's choice and you are free to buy or not to.
I have an iphone bought on contract with O2 in the UK. I came away from T-mobile (who are a better network in my opinion, better coverage,service etc). Sure I wish I could have stayed with T-mobile but if I wanted an iphone I had to move. My choice, I moved and boy am I glad I did, I am not an Apple fanboy but the iphone is one of the best pieces of technology that I have ever bought. There is not a device out there to touch it.
In reality I'm sure that now the iphone has proven itself that Apple would love to be able to sell it on every network in the world as long as they could dictate the price they sell it at and get the revenue share that they have negotiated with their existing partners.
In the end the market will sort itself out, another phone manufacturer will come up with something that is either better or good enough to make Apple rethink it's current strategy.
Now I'm all for an investigation into the mobile networks in the UK because they behave in an oligopolistic manner with regard to their pricing but that's a different issue!
One major problem is: that has never before happened in the history of capitalism (government forcing a market to grow and flourish).
I'm against the government forcing Apple (or any other device maker) to sell product at specific pricing. If that pandora's box opens, there will be no end to the innovation that will be choked off because government micromanagement can't keep up with the speed of business in the 1970s, much less the hyperspeed of business in the Internet age.
Far better is to look at what the market is doing by itself. Consumers want exactly what you described. In many cases, they are getting it. AT&T now unlocks subsidized phones after 3 months, unless the device maker prohibits them from doing so (a la Apple). I have a BlackBerry Bold 9000 on AT&T, and it was unlocked with a simple phone call. I will put a QikRoam.com SIM card in and roam in Ethiopia in a couple of months.
The bottom line is that Apple is not only getting the initial subsidy but also ongoing revenue from AT&T through the service plan. Unlock the phone, that revenue stream disappears. So the difference doesn't add up to $399. It probably adds up to $599.
Should the government force them to sell an unlocked version at $599? It's the equivalent of saying the government should be able to force Boxee to sell its IP to Hulu at an affordable price to help them make Hulu Desktop for the sake of competition. Obviously, the scale of the companies are different, but the same principle applies.
Antitrust law needs to stop monopolies from preserving their monopolies against competition. In the best scenario, it shouldn't serve to force business models on companies, because government knows nothing about business models, and when it does, it's outdated within weeks.
Apple should suffer the consequences of lost market share due to not selling an unlocked version of their device. Their choices should create room for competitors (potentially funded by VCs like you) to pounce and steal their market share with a better solution that consumers want.
You might as well accuse Dell & Microsoft of anti-competitive behaviour because those two come in a bundled package. Bundling is simply a strategic move which can make and break companies. I don't like it, but I don't see a legal/logical case for stopping it.
All of that said, call it exclusivity or bundling, partnerships make strategic sense in a competitive marketplace.
And the reason others didn't take it one was that the network features needed to make things like Visual Voicemail work were costly and, while there was a lot of hype about the iPhone, some carriers didn't feel the investment was the right thing to do.
Their demand would be a ton lower if the lowest iPhone price was $599. (How do I know? Go look at the demand when it WAS $599 ;>)
Apple wants $599 per phone with the demand level of a $199 price point.
That being said, it's still just sheer stubbornness on their part that they won't sell a $599 unlocked version. But they want to control the user experience and have decided on a closed platform to get that. This hearkens back to 1984 and the Mac!
Other facts are France makes it mandatory for the carriers to offer the phone unlocked, as stated it costs €749.
The carriers also have the obligation to unlock the phone for free after 6 months.
The number portability is mandatory and offered by all carriers.
Finally the exclusive deal between Apple and Orange, the biggest French carrier has been declared illegal for being anticompetitive.
That makes us a well protected bunch of customers accustomed to changing carriers quite often as we want the latest phones as soon as they're out.
I don't think ideology should dominate in economy neither pro market nor european style socialism, I think we should just stick with what works and this is really working for us customers in France.
The entire thing is messed up. Contracts hide the price of the phones, and the hedonics of which phone is better. Contracts make it hard to move and make it hard to compare prices, because they are inexplicitly tied to the phone you have. Not that I mind leasing a phone. But lets call a spade a spade here. It's a lease. In fact, I could see myself buying or re-leasing a gently used phone*, but the standards keep changing too quickly and coverage is spotty. And the lease contracts are written so you end up buying the phone over the term of the contract, or close to the total cost.
And the uncontracted phone market, where you buy the phone first at true cost, is underdeveloped because they are not the same standard. It makes it difficult to compare cellphone a to cellphone b, because they are rarely the exact same cellphone, for different carriers. The taxes make the market even more distortionary, compared to a land-line, despite the fact that the straight price- it is actually becoming cheaper to own broadband+a cell(all the cheapsake young'un are doing it, and not even for the max minutes).(The newest tax about to be passed- 25% of calls on a cell made by a business owner are now taxed as personal, there you go.)
Add in totally exclusive cell phone deals- how do I know what the value of the damn things are. The plans are fairly arbitrary, the phones are semi-arbitrary. Differentiating the hedonics of what is better for what price for what need under what circumstance between all of this is a nightmare. It starts becoming a product of regulation and arbitrariness from market distortion.
I don't mind contracts. I don't mind leasing phones. I mind the way the current system has managed to totally screw up comparing item a to item b on a contracting phone, or a no contracting system. I'm not dumb, I just want to know what I am buying the way I can tell at the supermarket where they label how much an item is per pound. The fact that there are special plans and phones for the elderly and small children disturb me...buying a phone and servicing it should not be this complicated.
If it hadn't been for the Apple name- I would have found it amazing that phone found a following. It's a nightmare out there. I would not want to suddenly go design a phone today.
*This is actually a really good option if you have a plan and are really cheap. I happen to know factually that one of the writers at Ars is doing this. He seems very happy with his phone. And I did it with my first phone I ever had. But make sure the tech can be supported.
You can't even find a website with fully accurate information. They all explicitly say- ask around about coverage in your immediate area. Cities that may have nearly complete coverage often can have poor coverage in different neighborhoods...or by large buildings, or some other weird situation...
I can give a great example- I grew up right by Manhattan, and am back home for the summer. There is very spotty coverage for T-mobile in my neighborhood for unknown reasons, despite them technically being covered in this area.
Telecomm is just messed up.
In other words, the market can and should fix this problem if enough innovative thinkers tackle it.
But google does :)
The Europeans did not though. a lot of it has to do with the fact that our mobile services across the world, depsite technically being portable, are not seen as inter-country and intercontinentally portable. Having billing schemes and plans that respect the idea that the phone could literally be attached to your hip all day and night except when you shower and charge it, no matter what part of the world, might be useful.
1. The whole current system is broken because of the lack of transparency over real phone prices and the nature of subsidies. None of the carriers wants to make the system more transparent because they fear scaring or confusing customers. But transparency would help a lot, including the carriers, notably in the case of the iPhone 3GS subsidies.
2. The other (large) carriers were also offered the iPhone, but declined, because the conditions imposed by Apple were unpalatable. Apple didn't approach smaller carriers because they didn't have the market share to make it worthwhile - so they are the only ones losing out here.
3. Exclusivity was required because Apple wanted to do something very different from what's been done before, and they needed a carrot to make that happen. Take away the exclusivity and the whole model would change.
4. I'd argue that the whole system of device exclusives exists because it's so hard for the carriers to effectively compete on other items - devices are one of the few real differentiators out there, since network quality, coverage and reliability are so similar, prices are very similar etc.
We need to unleash productivity and innovation with a broadband wireless future, but we can't get there when we are stuck with every carrier demanding exclusive contract for every new innovation that might come along.
I will say though, personally I still pick the subsidy. Even with the contract, I believe (not sure) my breakup fee is 175.00. I still come out ahead breaking the contract and switching. It's the fact that I had to open a T-Mobile account to get my 8900 Curve (now they are also on ATT) that bugs me.
Wirefly is always cheaper by the way, not sure why.
The smartphone market is a small percentage of the overall mobile market. Apple was going into a space in North America against a company with passionate audience with a dominant market share.
This was no slam dunk.
Also consider the source (me) who has almost every Apple product known but never even considered Apple TV - a mini w Boxee, but never Apple TV.. So I may be biased.
part of the reason there are so many problems is because of consumer apathy regarding brands. the fact that at&treason is even considered to be a remotely respectable company reflects american consumers' willingness to tolerate unethical corporations. few if any of us are saints, i certainly am not, but at&t takes it to a whole new level. remember it is a well-documented fact that at&t has participated in NSA wiretapping and surveillance initiatives. this is a violation of the 1978 foreign intelligence surveillance act in addition to being entirely unconstitutional. i know it is trendy to disregard protection of basic liberty and privacy rights in the land of the free, but it is still worth noting for old timers like myself who long for a return to principles of the US constitution.
here is a nice list of why at&t sucks beyond all belief.
we need to make at&t pay big time, free market style, for their immoral behavior. if we put up with it, then we only have ourselves to blame for the telecom problems in the US. a criminal government is no place to look for those seeking justice, but perhaps the free market can be if consumers are vigilant and willing to demand honesty and fair practices.
to clarify for those who may be reading i am not referring to a violent revolution, in fact the exciting thing about freeconomics is that it will bring violent revolutions to an end, as they will no longer be economically feasible. instead revolutions will require psychological warfare and not physical warfare (think mean girls, not saving private ryan), because it will be about getting people to use your currency. control over monetary policy is really all that matters.
also IMHO if we have a full blown revolution, it will have an enormous impact on all companies, including companies like at&treason and crapple. there is a reason why other countries do not produce such companies on a regular basis like we do here in the states, it is primarily because it is extremely difficult to build world-changing companies like that without a stable currency.
there are those who acknowledge all the problems i ruin everyone's day by talking about (i.e. 9/11 truth, global warming hoax, monetary policy, etc) who also think an imminent change is unlikely. ron paul is the most credible member, in my opinion, of this camp. these people basically say revolutions take time, and so we need to plant seeds for the next decade before people wake up. they cite the american revolution and many other historical revolutions as evidence, and thus make a compelling argument. however my rebuttal is that there is a little somethin' somethin' called the internet which is going to drastically accelerate this process this time around. i also believe that there is spiritual stuff going on that will accelerate the process, although that is obviously off the deep end even by kook standards so i don't push that argument too much.
;)
Fred, I think the most forceful piece of this argument is buried in the third-to-last sentence: "It's in the long term interest of the mobile tech business here in this country."
If you had started from this premise and explained why outlawing these exclusive contracts would benefit mobile tech (and, in turn, our economy as a whole) the argument would have had much more currency.
However, the premise you started with was "Of course the contracts are anti-competitive, because they should be required to sell an unlocked version." In other words, they are anti-competitive because they should be anti-competitive.
So, I don't agree with the argument as presented. But I wish we all could learn more about why you think these contracts aren't in the interests of mobile tech. Maybe then I could be persuaded.
I like you hate the idea that someone has me "locked in" and I am always willing to pay an extra $175 to be free.
Am I missing something?
The fact that once that happens the phone is becomes a iPod is beyond ridiculous. Good point there.
Fred is saying it should be an unlocked phone you can use anywhere. Apple doesn't want to do that because they lose the revenue stream when you hook it up to ATT.
But there is a long list of things Apple is stubbornly dumb about (despite their brilliance elsewhere). Should the govt force them to have unsealed batteries, too? Those $85 charges when a battery wears out are pretty anti-consumer too.
My point is simply this is pandora's box and I think those of us in the innovation industry should think twice about wanting it opened. These dumb decisions by big companies are usually struck upon as openings for innovators, not openings for government regs.
That could lead to an argument that Apple could mitigate the issue by selling an unlocked version of the phone at whatever price point suits them.
This reminded me of the original discussions around Apple's strategy. The bottom line is, they wanted services revenue rather than just hardware revenue. At one point, they thought about leasing cell minutes wholesale and you would have to sign up for Apple cell phone service to get an iPhone. Then they realized that would eliminate the free mobile-to-mobile calling people enjoy with half of their friends, so they went to the carrier approach.
But if you get past the services revenue by having a higher price for an unlocked phone, Apple had another impetus for this deal: they wanted to control the user experience. Features like visual voice mail, etc., don't work without specific wireless carrier integration. Apple is one of the most stubborn companies in the world when it comes to making boneheaded decisions in the name of what they think makes something cool (i.e. sealed batteries).
The bottom line is, Apple is a closed platform. They get all their cool factor from the "it just works" and they have bet that people will put up with closed to get that.
It didn't work for the desktop. Will it work for mobile?
As cool as I think the iPhone is, I think it needs to be defeated by all of the other mobile OS vendors getting together and coming up with a single standard for HTML-based mobile apps that install and have full access to the phone. Palm is the farthest along with this.
If I were Palm, I'd be going and cutting deals with BlackBerry right now to make a WebOS for BlackBerry, and I'd be going to Google right now to cut a deal on making a single standard for apps on WebOS and Android.
Microsoft would be the odd one out, but if you open source the app standard, they could build it into Windows Mobile if they were smart.
Then you'd have two app standards for developers to build on, and the battle lines would be drawn: open vs. closed. I know it's not a straight line, but I think the phone makers would quickly adopt the ability to buy the phone "open" as well.
http://www.amazon.com/Whither-Socialism-Wicksel...
I don't think that is fully possible, though you can get close.
If not, why not?
Second, I think we are lacking a healthy retail market for the sales of phones. A government mandate for the sales of unlocked phones would be a step in the right direction. But even with the mandate, one could conclude that the carriers are anti-competitive because their phone "subsidies" stifle the establishment of the retail market. Currently, the carrier still controls the primary distribution channel for phones sold in the US because most people probably buy their phones from the carrier (booths and retail stores set up by the carrier or some store with a partnership with the carrier). By subsidizing the phones with a contract bundle, it is making it hard for the establishment of the retail market because its just hard to compete with the pricing. I think we can see the impact of the lack of a retail market on mobile technology by observing that in other countries where the newest phones with the newest technologies are sold, there is a retail channel.
I have a roaming SIM card and have already tried it, works great.
I would LOVE to have an iPhone. I've been a Mac user since I was 5yrs old. I'm a huge Apple fanboy. But I haven't gotten one because I would have to switch to AT+T. The same for the Pre - It's automatically not an option for me, regardless of features, because I'm not switching to Sprint. Ever.
Also, I work for a company that directly competes (vigorously) with AT+T for customers and I can't justify turning over a chunk of my take home pay to a direct competitor.
My hope is that the Android platform will force Apple's hand. I'm hoping that phones built on Android will have a lot of the same features (plus some new ones) and that it will be a significantly more open platform. If Android can hold its own against Apple, their only response to it will be openness.
Calls to action - perhaps in twitter?
#myphoneshouldtravel
Thousands changed their icons in support of holding new Iranian elections, Can we do it here at home?
Perhaps not since there are still waiting lines for 3Gs in places... but I'll try anyway.
In most Asian countries (ex. Japan), you can basically choose any phone to go with any carrier. You can still sign a term contract with a carrier to get a subsidy but whatever phone you buy is never locked. The end result is you get phones at much cheaper prices and you also get plans at much cheaper prices. The American wireless industry is on the verge of becoming an oligopoly so it's indeed time for government to do something about it and make sure consumers enjoy the benefits of competition.
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Suppose Microsoft offered a hardware/OS platform where software vendors had to sell only through the Microsoft 'store', Microsoft determined which applications were permitted, and ISVs paid a huge chunk of the gross to the hardware vendor.
I love Apple, but they are so dominant in consumer smart phones that they will have to open up.
We are getting a glimpse of what the world would have looked like if Apple had dominated PCs... plenty of 'taste', but not much room for innovation, unless you're Apple.
The government should tread lightly but set rules that foster competition and prevent market players from exercising market power to stifle competition and screw consumers.
You wouldn't have an auto/highway system unless the government set standards, built roads (even including using eminent domain to build highways).
I agree that they will have to open up once the competition catches up or they will make the same mistakes again as they did in the 90's with Macs.
The software is beautiful and priced right, The hardware- overpriced and not driven enough by the market.
Especially for the high end machines- for some niche groupsl, Apple has a great OS, but doesn't provide enough power (the standards graphics card has to be replaced, not 64 bit, ect, ect.) Separating might force innovation, as well expand the market.
Imagine free Internet (broadband+) for everyone. That's where I want to see mobile devices in 5-10 years, with no extra charge for voice data...
We are painfully doing so for TVs, why not phones?
Nonetheless there's no other carrier to take the iPhone to, so the monopoly there certainly is a problem.
http://www.mkoby.com/2009/07/08/short-term-excl...
Regarding the network, althoug it has been paid by a private company, in some ways it could be thought as a public service, so I agree with you that it should be free... As with buses (at least here in Spain), when you get a license you also get the obligation to serve less populated areas that are not profitable but that are considered as public service.
http://www.nytimes.com/2009/07/08/technology/co...
I traveled around the world quite a bit in the past few years, and am always amazed at how inexpensive unlocked GSM phones are in other countries.
Land in South Africa, pick up a phone and a $50 card for around $75... pop in another $50 card in Germany, etc. If the kids lose one, or it gets broke, no big deal.
We left a lot of phones behind as gifts to hosts and new friends.
And here's a cool tip - have your skype local number forward to your newly purchased overseas phone.
The downside - I have a Motorola that has the menus stuck in German. I just loaned it to a friend as a replacement phone, and it is driving him crazy!
Mike
I wholeheartedly agree. To me it feels like one of those things that should have already been always done.
I don't mind being on a contract (contract is usually cheaper than prepaid and I can get my phone for free) but I wouldn't buy a phone that I couldn't get unlocked because when I travel I always buy a local SIM to stick in the phone.
If I wanted an unlocked iPhone off contract I would buy a prepaid one for and get it unlocked. Most carriers in Australia will unlock a prepaid mobile after $80 credit has been added to the account.
I'm not sure if this is the result of regulation or if it's just the good old competition. Generally I'm against the idea of any government regulation, but I think it is wrong that a phone locks you into a carrier. If you are on a contract the phone should be unlocked, alternatively you should be able to buy the phone unlocked for a higher price if you want to.