Senators To Examine Exclusive Handset Deals 234
narramissic writes "Based on a request that a group of rural operators sent asking the FCC to examine the practice of handset exclusivity, four members of the Commerce Subcommittee on Communications, Technology and the Internet sent a letter to the FCC expressing their concern. Small operators, like U.S. Cellular argue (PDF) that 'exclusive handset contracts divide wireless customers into haves and have nots.' But nationwide operators, including Verizon, maintain (PDF) that 'in the absence of exclusivity agreements, wireless carriers would have less incentive to develop and promote innovative handsets.' The Commerce Committee expects to hold a hearing on the issue tomorrow."
Carriers != Manufacturers (Score:5, Insightful)
'in the absence of exclusivity agreements, wireless carriers would have less incentive to develop and promote innovative handsets.'
I wasn't aware that the carriers were in the business of manufacturing...
"Innovative", as in having features disabled? (Score:5, Insightful)
Um... yeah.. carriers would never disable features on cellphones, now would they?
Backwards Argument? (Score:5, Insightful)
It seems to me that in the absence of exclusivity agreements the carriers would have greater incentive to introduce new features because they wouldn't be allowed to dictate terms to handset manufacturers in order to maintain their current level of mediocre offerings.
Here's a game.. (Score:4, Insightful)
Name one innovative handset developed by carriers such as Sprint, AT&T, et all.
Nokia, RIM, Apple and (previously) Motorola have developed all the 'innovative handsets'.
What'd sprint give us?
Rebranded, OEM, disposable turds
Re:Carriers != Manufacturers (Score:5, Insightful)
"Would have incentive to..." (Score:5, Insightful)
"Without longer than a century copyright, I would have no incentive to develop anything useful." "Without being able to patent walking using both feet, I wouldn't have incentive to make anything useful." "Without being able to grant myself a monopoly on something, I would have no incentive to create anything useful." "Without the Shoot Anyone Using Anything But My Stuff Act, I would have no incentive to develop anything useful."
I am getting quite tired of seeing that, and we should really quit listening. If you don't want to, then by all means, don't, and feel free to fade away. In the meantime, those who still have plenty of incentive to do so (by finding creative ways to make money off of it, out of simply enjoying it, out of their own need for a tool to do something or a wish to create something for their own enjoyment, what have you), will do so.
I'm getting less and less tolerant of this temper tantrum. And that's really all it is-"I don't WANNA share!!!!! I thought of it FIRST!!!!" If the dinosaurs mean it, then by all means, their time has come and we should let them go. Good riddance to them, something better suited to modern times will take their place. On the other hand, they do tend to like paying themselves those large bonuses, so I would wager they'll start getting really creative in the absence of these artificial restrictions enabling them to be lazy and rest on their laurels.
"Develop and promote"? (Score:5, Insightful)
Since when does Verizon or any other carrier have anything to do with the development of a phone? They just take whatever you can get from HTC/Motorola/Samsung, throw a logo on it, change the name to something stupid, and pick 5 random features to cripple for no apparent reason. As for promotion, while I guess that charging customers 200% more for the phone than it's actually worth unless they sign a 2 year contract (if you let them but it unlocked at all) is technically "promotion", I don't think that is really in the spirit of the true definition.
What a bunch of tools.
Re:Carriers != Manufacturers (Score:5, Insightful)
They sure seem to want to make all the customers think that they are. Heck, all their marketing seems to be about the "phones they offer" almost more so than the "service they provide".
People need to wake up and realize that their beloved phones come from Apple, RIM, HTC, Palm, Nokia, etc, and *not* from AT&T, T-Mobile, Verizon, or Sprint.
Of course in the US its a little more complicated in that every carrier seems to use a different radio technology, sometimes with overlap and sometimes without. (i.e. AT&T and T-Mobile are both GSM, but diverge for 3G) And of all the hot smartphones, it seems like only RIM actually cares about supporting all carriers and radio technologies (for the most part, as the Storm is an exception, sorta).
Re:Carriers != Manufacturers (Score:5, Insightful)
If the carrier doesn't market the phone then the manufacture will. These manufactures do just well in non US markets, in fact I doubt it would hurt the manufacture at all.
Re:Carriers != Manufacturers (Score:5, Insightful)
Well, if they couldn't strike these handset deals, the carriers might have to...focus on their damn networks...
Because right now the carriers seem to just be playing lip service to their networks.
Oh, you want an iPhone, but AT&T has a crappy network in your area. Right now, AT&T has a negligible incentive to upgrade their network in your area, but you have to take their network in your area to get the iPhone. If it weren't exclusive, AT&T might actually improve their network if they see a large group of people remaining on T-Mobile and using the iPhone instead of having a small group switch to AT&T anyways.
And just maybe MMS and Tethering might have been possible for the past year if AT&T wasn't able to dictate to Apple that they couldn't be used.
"innovative handsets?" (Score:4, Insightful)
In other words, exclusivity deals breed ripoffs. Yeah, that's one form of competition, but it doesn't really seem like "innovation" to me when the release of one product that everyone wants causes every manufacturer to try to make an exact copy with a different exclusivity deal. If everyone carried the iPhone, these companies would be trying to differentiate themselves by coming up with the next big thing, not making copies of the last big thing.
I'm not from this industry, but I don't believe wireless providers develop handsets. Handset manufacturers (e.g. LG, Samsung, Motorola, etc.) do.
Re:Backwards Argument? (Score:5, Insightful)
I used to work for a big name smart phone manufacturer. The versions for Sprint/Verizon were crippled at the carrier's request, i.e.: disabling internet sharing to your laptop. The unlocked (GSM) versions of the phones had all the features, not because they were more expensive, just because there was nobody requiring to remove the features.
One of the problems with Sprint and Verizon is that the radio has to be specifically designed for them which mean you can only use a phone that they sell directly. With GSM providers (AT&T, T-Mobile, and most of the world) you just need to put the SIM card in and it works (granted the local frequencies are supported by the phone).
Normally the manufacturer has no interest to cripple it's own product, but when the carrier control what devices will work on their network you don't have any choice but to comply. It is pretty much the same situation as when you had to use the land phone from the One phone company and were not allowed to plug you own.
Shouldnt be just exclusive handset deals (Score:5, Insightful)
It should be deals (including the way spectrum auctions are carried out and regulated) that result in carriers *cough*Verizon*cough* getting a monopoly (or near monopoly) in certain areas just because they are the only carrier with coverage. (like the deals various carriers have made to get exclusives in subway systems, high-rises and other places where extra equipment is needed to give sufficient coverage)
Re:AT&T Does the same thing (Score:3, Insightful)
Re:Carriers != Manufacturers (Score:3, Insightful)
Not sure if you caught my comments on a previously posted related topic, but handset manufacturers currently serve the interests of the carriers, NOT the end users.
This practice is merely exemplified by exclusivity contracts such as the iPhone or Palm Pre. The real issue here is that handset success is based largely on the whims of the carriers, not on functionality or usability. Exclusivity is a byproduct of the common subsidized handset for reduced contract rates system we have in the US. If this practice were ended, so too would be exclusivity deals.
If you'll notice, there are now just a few "classes" of handsets, all with very similar functionality based on the desires of the largest carriers. Tying handset purchases to carrier contracts needs to end!
Re:What a crock (Score:4, Insightful)
And this is exactly what should be happening. The carrier can develop technologies such as these to differentiate themselves from their competition, instead of relying on phone manufacturers. There is no reason they couldn't have done this without the iPhone. Phone manufacturers would much rather add features such as these to their phones, instead of the current situation of having to remove features because the networks demand it.
Free Market? (Score:5, Insightful)
But nationwide operators, including Verizon, maintain (PDF) that 'in the absence of exclusivity agreements, wireless carriers would have less incentive to develop and promote innovative handsets.'
Why are wireless carriers involved in the development and promotion of innovative handsets? Isn't the free market supposed to motivate handset developers to develop and promote innovative handsets?
Or do the wireless carriers not believe in the free market? I, for one, think the free market is a pretty good thing. You know, when it genuinely lets the purse-holder freely decide.
Aren't these the same corporations who cry "free market" every time the government tries to regulate them?
Perhaps, and I don't want to sound like a conspiracy theorist here, but just maybe; the wireless carriers actually are not objective supporters of the free market? Maybe what they want is not the free market, but laissez-faire capitalism. But then must we not ask, without a free market, how can laissez faire capitalism seek efficiency?
Re:Binding Contracts. (Score:5, Insightful)
wireless carriers would have less incentive to develop and promote innovative handsets
I'll buy "promote" but when was the last time a wireless carrier ever "developed" a handset? And no, I don't count taking a good handset someone else made and crippling all of its features with a shitty firmware overwrite that turns the phone to crap.
Re:Carriers != Manufacturers (Score:4, Insightful)
Re:Free Market? (Score:5, Insightful)
On a technical note, this is all something being done mostly under the "free market". That is, it's completely up to the handset providers and the carriers to decide, freely, for themselves, if they want to have exclusivity deals. And it's completely up to the end users if they want to purchase them or not within the constraints of these deals.
Beyond that, you get into very hairy situations.
The key point though, is "Free Market" does not necessarily mean "Fair Market".
I am in no way a supporter of a "free market" and I believe in heavy regulation and oversight from 3rd parties to ensure that we have a fair market for consumers. I'm just simply pointing out that you can't have "free market" and "fair market"--it just doesn't work.
Some people would argue that a free market is a fair market in that anyone who wants to enter the market can do so by coming up with a better product or service and offering that. But unfortunately, under a completely free market that wouldn't happen--since the larger providers would enter agreements to force you out of the market.
So at the end of the day, a free market system is not the best--and a regulated, fair market, ran by 3rd parties unrelated to the corporate interests of those involved is the best type of market.
Of course....whether or not we have that today is a completely different debate. I'm simply pointing out the flaws in a "free market" system.
typical... (Score:4, Insightful)
Re:Carriers != Manufacturers (Score:5, Insightful)
That's how the cell phone companies see it. The only "features" on the phone for them are things that cost you money. E.g. $1/MB mobile web browsing, or text messaging.
This argument from U.S. Cellular is a non-starter, or at least I hope it is. What we really need is to unbundle the phone from the service entirely. Make the plans cheaper because the company isn't paying for the phone, and end these ridiculous contracts. Sure, you'll have to pay more up front, and the phone manufacturers will have to compete on price in a very large market.
Re:Carriers != Manufacturers (Score:2, Insightful)
Really its the "promote" part of that statement that matters- Verizon puts a lot of money into marketing the BBerry Storm, AT&T helps market the iPhone etc.
The carriers do not pay a dime for "marketing" the handsets. It's all paid for by the vendors via MDF (marketing development funds).
The carriers are gate-keepers. Want your handset to be easily accessible to a captive market? Play ball with the carriers. Even Apple, with the brand behind them, has had to make concessions to AT&T. So has Palm with the Pre (no discussion of tethering on Sprint!!!)
Many consumers would choke on the retail price for a non-subsidized phone with even moderate capability. Just ask Nokia. If you can't get a carrier to position your phone with subsidies and the backing of customer support, you're going to face a very uphill battle for marketshare.
Yes, the carriers dicate and direct handset development, but unless the vendor has substantial momentum behind them to negotiate with, it will always be in the favor of the carrier. Not the consumer.
Re:Backwards Argument? (Score:4, Insightful)
And the manufacturers are enabling this behaviour.
Bullshit. Nokia said "No", and look what happened to them! The carriers said, "Fine, no thanks, we'll get our phones from someone else." And now Nokia has just a fraction of the US market because of it. Nokia realized that it was a mistake, and now even it is playing by the carriers' rules.
Verizon is funny. (Score:5, Insightful)
But nationwide operators, including Verizon, maintain (PDF) that 'in the absence of exclusivity agreements, wireless carriers would have less incentive to develop and promote innovative handsets.'
You've got to hand it to Verizon for trying to confuse the congressmen with idiot logic. Are wireless carriers really developing innovative handsets? (or handsets at all)
I am trying to think of more than 3 revolutionary handset lines besides the iPhones, the Blackberries and Nokias. I guess we can throw in Motorola for their early efforts and Sony Ericsson for cute design too. But where are the carriers?
I think Verizon is really pissing their pants because they are thinking "in the absence of exclusivity agreements, wireless carriers will have a harder time locking down good phones with carrier-specific crappy software."
In theory, non-exclusive phones would also reduce the number of overall phones brought to market and increase the quality since the developers would be competing against a larger market.
Really, with non-exclusive handsets, both consumers and cell phone companies win. Large carriers will be the only ones losing... they will have to choose between market share, profit, and handset control. Of course, who are we kidding, nothing is going to change because they probably own half of the senate.
Re:Binding Contracts. (Score:4, Insightful)
So Apple can't choose which market to develop for? For example if they decided not to make a CDMA phone, would you rather the government force them to?
I think locking a phone out of contract should be illegal. But locking a phone to a carrier while in contract is fine with me. They are subsidizing my phone, so they should have rights to keep me using it on their service only until I "pay it off".
Don't get me wrong, I'd love to have an G1 with AT&T. But I think it's the phone manufactures right to make exclusive agreements with carriers as long as I can take the phone to any network compatible provider after my contract has been for-filled.
I do think the line "wireless carriers would have less incentive to develop and promote innovative handsets" is a bunch of bullshit though. I can't see AT&T putting a huge budget into developing phones. I would suspect LG, apple, etc are using their own R&D money then recouping it with exclusive contracts.
There are other ways to compete besides phones. You could stop charing for text messaging, stop the per minute billing, start providing features that all US carriers are currently hating on (tethering?). Hell you could of jumped on the open source bandwagon and backed something like open moko.
It seems to me they don't want to compete, they want to bitch and make the competition less competitive.
Re:Binding Contracts. (Score:4, Insightful)
And, on an unrelated note, could anyone tell me why the HTML "li" code now works erratically? Is there another code that just gives me a simple new paragraph?
"BR""BR" (replace "'s with angle brackets)
As for your statement about when data was added to the wireless networks. I can understand that happening in the beginning. In the beginning there were no data standards. There were just a bunch of different companies with different handsets which sent data all in different ways. But, now there are these things called standards. Like GSM, GPRS, HSDPA, CDMA, 2G, 3G, EDGE, 3.5G, 1xRTT, and EV-DO. And many phones support multiple standards or can be configured to support a specific standard. All that should matter now is what standard your cellular network supports and that is it. ANY phone that happens to support that standard should be allowed to be used. It doesn't matter if you are AT&T, Verizon, or Joe's Fancy Wireless... If they all happen to use 3G, then any phone that supports 3G should be allowed to be purchased and used on that carrier, because they are just that, a carrier. They are selling access to a network service. They are not and should not be the gatekeepers of what device is allowed on that network as long as it follows the communications standard (just like the internet providers, and cable TV networks, they can not say that only Comcast Cable users can purchase the 70" Sony XRB8 OLED LCD TV, and if you want to use that TV to watch DirectTV satellite, well FU).
The cellular companies are a carrier and service provider who provides a wireless access for phone and data. They should be held to the same requirements as other providers of services in which the hardware that connects to the service is freely usable by anyone on any provider that has a network which supports the same standards that the hardware supports.
Re:Binding Contracts. (Score:3, Insightful)
They shouldn't be locking your phone whilst on contract. Since you are on contract, you are still paying them back through your monthly fees regardless of which carrier you are using your phone on.
Only time they need to lock a phone is when its subsidized but not on a contract (e.g. discounted prepaid phones).
Re:T-Mobile Sucks But I'm stuck on a contract (Score:2, Insightful)
Do you honestly feel ~2 years of grief and frustration is worth less than $200? Then by all means, don't cancel, stand up for your principles.
Re:"Innovative", as in having features disabled? (Score:4, Insightful)
Here is a something regulators should consider:
Do any service providers disable *bluetooth* on their handsets?
Why? Surely, bluetooth capabilities don't cause an extra burden of technology they need to support, since bluetooth doesn't impact the provider's wireless network, right? (like, say, transferring a photo from your phone to your laptop?)
Yup, it's the carriers (Score:4, Insightful)
If the carrier doesn't market the phone then the manufacture will
There is no point manufacturing something and marketing it (both *hugely* expensive operations) if the carriers are not going to provide it to customers, and customers can't switch to competing carriers who will.
US handsets are in general a year or two behind the handsets available in the rest of the world largely because of this. The US mobile comms market is a nice little walled garden for favoured (by the carriers) manufacturers. Take a look at the handsets which Verizon actually provides vs what the *same* manufacturer provides to the rest of the world.
Nokia (largest phone manufacturer in the world) for example:
Verizon:
Nokia 7205 (silver keypad)
Nokia 7205 (pink keypad) just LOOK at that innovation...
Nokia 6205
Nokia 2605 Mirage
All (wow, a whole, 3 of them) of these are ancient.
And take a look at the handsets available from Nokia:
http://shop.nokia.co.uk/nokia-uk/searchresults.aspx?page=1&culture=en-GB&search_id=47&chka=0&chkp=1&pagesize=9999&sortorder=desc [nokia.co.uk]
124 produced and available (in the UK) vs 3 from a carrier.
The rest of the world, the carriers want the latest phones and network services because if they don't provide it, someone else will. The US, far less incentive, you take what you're given. I like the spin that monopoly promotes innovation though.
I doubt it would hurt the manufacture at all.
Not the manufacturer. You are the one getting the bad deal.
Re:Ugh! (Score:3, Insightful)
At any rate, you COULD use bluetooth to upload pictures or download ringtones from your computer to your phone, but its been disabled in the firmware. Also, you COULD use that built-in GPS with Google Maps to see where you're at, but that's disabled too unless you subscribe to whatever GPS mapping software they're getting kickbacks from this year.
Stop. Patronizing. Verizon.
I have had fairly smart phones (bluetooth, data etc) from T-Mobile, Edge Wireless, and AT&T. Each one has had all features enabled. Furthermore, except for my RAZR V3i from Edge, each phone was free. Right now I have an HTC Fuze which was free. The GPS works great with Garmin (which I added) and even the AGPS functionality works great.
Re:Carriers != Manufacturers (Score:3, Insightful)
Yes, without exclusivity, the carriers wouldn't be motivated to market themselves based on their exclusive handsets. That's not really an argument, though, just an observation.
Instead, they'd have to compete based on the things THEY actually create - their network, their customer service, and their plans. Which would be great for everyone - except them.
Re:Carriers != Manufacturers (Score:3, Insightful)
More often, I think, carriers block features that would otherwise be on phones. "No, you can't include a USB port; then they won't need our service for sending pictures," or "No, you can't build in VOIP; then we can't charge them the way we want."
I'd rather have a cellular ISP - I pay for my bandwidth, and I do what I want with it. Including anything a handset maker can come up with.
Re:Binding Contracts. (Score:3, Insightful)
Which is why all cars should come with a clutch pedal - after all, the driver controls shouldn't care what the hell runs underneath them, including whether the transmission is manual or automatic.
Re:Binding Contracts. (Score:1, Insightful)
I think Apple is behind this... (Score:1, Insightful)
Consider... at the last WWDC, Apple took a lot of ribbing about AT&T being slow to add MMS and tethering. iPhone users complain about slowness, dropped calls, etc. Apple is stuck in its agreement until 2010 unless it can convince AT&T to let go, which AT&T won't do because the iPhone brings in too many customers and locks them in once they're there (ignoring jailbreaking and such).
Not too coincidentally, Sprint just announced an exclusive deal for the Palm Pre, and already offers the Blackberry. This makes it a purveyor of the two biggest competitors to the iPhone. There is a waiting list at many Sprint stores to get the Pre, which shows that Sprint is on to something. But the Pre needs work to be a serious competitor to the iPhone, though the Pre is a nice phone already. If Palm was forced to drop the exclusive with Sprint, it would have to focus effort on modifying the phone to work on other carriers, slowing the addition of new features and applications (which means it would be less effective at competing with the iPhone). So killing exclusive handset deals might actually hurt the Pre. But it HELPS the iPhone, since it allows Apple to move the phone to more carriers (something that Apple's been doing internationally, so adding more U.S. carriers ought to be relatively trivial).
Then there's Sprint. It's one of very few networks that can't use the current iPhone, which is GSM-based while Sprint's network is CDMA-based. Taking away Sprint's exclusivity for the Pre would hurt one of its best chances for survival and success in the coming months. Killing off Sprint and the other CDMA carriers saves Apple lots of expense in having to create a CDMA-based iPhone model.
There's an old saying that if you want to know what's really going on, follow the money. While killing off exclusivity deals would help small carriers and the consumer, we all know lobbyists and politicians rarely pay more than lip service to small business (even though they should) and consumers (even though we elect them). So the question is, where does the "real money" in this deal go?
Let's see... Apple gets out of its AT&T deal without penalty, saving face and selling lots more iPhones on more U.S. networks (without losing overseas exclusivity). Development of the most-likely rival to the iPhone is set back by a need to support more carriers, which benefits Apple and the iPhone. Severing the exclusive deal between Sprint and Palm sticks a knife into Sprint, which was already in trouble anyway, and which just happens to offer the two best alternatives to the iPhone. Looks like lots of money flows Apple's way if this goes through, and Apple loses nothing if it doesn't.
Just to make the tinfoil hat scenario complete... Consider that Al Gore (former Democratic Vice President of the U.S.) is on the Apple Board of Directors, and that this particular anti-exclusivity effort is headed by fellow Democrat John Kerry. It doesn't take too much of a paranoid fantasy to imagine Apple management going to Al Gore and asking for help getting out of the AT&T deal early, Gore calling up his old buddy John, and John suddenly "noticing" all these letters he's been getting from small carriers over the years wanting an end to exclusive handset deals.
Al Gore connection not enough? Consider also that Apple CEO Steve Jobs was a consultant on the John Kerry campaign. Don't believe me? Search on Google for "Did Apple contribute to John Kerry campaign" and see what you get.
I'd like to think that Apple and Steve Jobs aren't that "evil" but this timing is awfully coincidental...