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."
Just a shakedown scheme.... (Score:4, Interesting)
The Senators in question are probably trolling for campaign contributions.
Re:What a crock (Score:3, Interesting)
[...] innovation must happen at the phone maker level. To support this, operating system vendors need to also be innovative. And to make sure that innovative operating systems can run, advanced chips are necessary.
But none of that involves the carriers. Carriers are merely the pipes: A necessary component, but a wholly replaceable part.
Not entirely true.
Consider the iPhone, as an example. What did AT&T bring to the table, besides their network? Visual Voicemail. My friend has an unlocked iPhone on T-Mobile and he's switching to AT&T and getting the iPhone 3G S (his employer will pay for it). And the the most exciting thing for him is that he finally has Visual Voicemail.
I'll agree that so far, I haven't seen anything really great. Sprint's turn-by-turn directions, maybe. Verizon's V CAST looks ridiculous. But to say that the carriers are "just pipes" isn't 100% true.
Interesting tag (Score:5, Interesting)
The suddenoutbreakofcommonsense is very interesting, but I'm not sure which way:
1. The handset sweetheart deals are creating haves and have nots and should stop.
2. Without the handset manufacturers having to bend over backwards to please the carriers, there might have been fewer, lower-cost, higher-quality handsets available.
When the handset makers can tell the carriers to take it or leave it, and when those handsets have features dictated by the consumers instead of the carriers (abysmal here in the US), and market competition irrespective of long-term contracts hits the handset pricing, then not only would that tag truly apply, but so would whatabreathoffreshairfinally.
Re:Binding Contracts. (Score:5, Interesting)
It made a great deal of sense to select one or two devices, get them to agree to an exclusive contract, which would include us paying to promote their devices, and get the product to market. I don't see this situation being any different. It helped both us as a network provider, and them as a device provider. I don't see this as a conspiracy to restrict trade, just common business sense.
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?
Re:Backwards Argument? (Score:4, Interesting)
Sometimes you have to say "NO".
Oh sure, and it would work for a company in a strong position, like Apple. If the company is hurting like Motorola, or Palm then you really cannot afford to not be sold by them. There is much more manufacturer competition than carrier competition and the big 4 carriers use that. Apple has reversed the roles a bit by having a true *must have* device. Sprint and Verizon got bitten by their own strategy and see a mass exodus to AT&T (I think customer support is not neutral on this).
Look at the last Treo model that was sold without carrier support. Sure you can use it with AT&T and TMobile but you have to pay the full price for it. I'm not even sure they've recouped development cost on this one.
As a customer I would much rather get lower monthly bill and no 2 year lock-in than getting a subsidized phone. This is pretty much paying a high interest perpetual loan on a device that is not that expensive anyway.
Follow the Money trail (Score:5, Interesting)
Instead of debating it in Senate (which exists solely for debates), why put it to Commerce Committee and why now?
The answer can b e got here. [benton.org] It says a former tech exec has joi ned the committee.
Which means he is trying to pre-empt any legislation by the Congress by putting it for consideration in the committee.
Which effectively kills any legislation and also protects the interests of telecoms.
Sneaky, disgusting and probably illegal.
But then the senate has a record of disgust. So nothing new here.
Re:Binding Contracts. (Score:4, Interesting)
Re:Carriers != Manufacturers (Score:4, Interesting)
Yeah, it's the promote part. Forget about the other words they said... you know, the ones that aren't true? As long as there is a bit of truth to cling to, let's focus on that.
The fact is, exclusive deals are very anti-competitive and is especially harmful to small carriers. Furthermore, the exclusivity of the iPhone to AT&T not only enables AT&T to gain an unfair advantage over the other carriers, more recently, it has been used to harm their existing customers. (These "start new plans with the new iPhone deal" is meant to bring in new customers, to hell with the loyal customers they already have -- they are on contract anyway.)
I don't have a prediction on how this may turn out, but I will say that if legislators or courts end up saying "no, you can't do that any more" then my guess is the next time this thing happens, the carrier will buy or accept a range of patents on the exclusive handset and then start suing other carriers who try to sell the same handset.
We have all been very annoyed at the way the carriers play games with handsets and have been doing so for decades. That behavior was halted when the POTS companies did it and I find it amazing that wireless carriers are permitted. It's time it all stops.
Re:Binding Contracts. (Score:5, Interesting)
But you underestimate the challenges we faced after introduction (this was about 20 years ago). The collective genius of marketing predicted the number of subscribers as "X"; when it turned out to be "3X", every other division of the company was scrambling. There weren't enough people in customer service to handle all the complaints, so we got a reputation for lousy service. There weren't enough cell sites so the engineers were working 60 hours to provision and tune them. The billing system was from Cincinnati Bell, and they didn't give us source code. I was the technical liason from Marketing to these other departments. When the upper crust of Marketing decided we needed to add a new billing plan, they would send me down with the admonition "They'll try to give you some excuse about not having source code; it's just their way of stalling". So even though we were getting lots of customers, our costs with all the overtime, rush fees, etc., were very high. We had to rebate a lot of calls because they dropped part way through. And the sales people were allowed to give out "non revenue" lines to clients (read "friends"); when they finally audited that, they were astonished to find that we had given out over 20,000 non-rev lines in Ontario alone - that was about 1 in 8, IIRC. In that environment, trying to adapt to new equipment was, shall we say, problematic. I recall one occasion when I was trying to find the status of the integration of voice mail/paging system, the engineer in charge saw me in the switch room and literally ran away.
Still, it was a tremendous education in how not to run a business. I left after 18 months much wiser.
Re:Carriers != Manufacturers (Score:4, Interesting)
Re:Free Market? (Score:4, Interesting)
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.
I suspect that we agree, but that I am using the term in a different way.
By "free market", I intend what Adam Smith intended: That the only decider of how dollars are spent, on a per-transaction basis, is the person who opens his or her purse. The silent hand.
Is the purse-holder the only decider here? No, the contract participants are making part of the decision. That is antithetical to the principles of a "free market".
What I am trying to do is to wrest back the term "free market" from the "laissez-faire" corporatists. "Free market" necessarily implies that the silent hand is unfettered. And as you note, that requires our government to punish anti-competitive behavior from time to time. But the interference need not be falsely accused of being a step toward socialism. Let us stand on principle, call it what it is, seize the high ground: We call upon the government to defend the free market from those who would inhibit the free action of the silent hand.
Also, consider this: Is the government not already interfering in this case? Whose courts, banks, jails, and guns give those contracts their force? Why it is the government. Of course, even in the absence of the government enforcement of those contracts, collusion would exist. But should we not first seize the high ground by calling this what it is? It is collusion, restraint-of-trade, anti-trust violation, &c. Do not let them hide behind the noble term "free market" or "contract." Contracts are obligations to perform services for consideration -- not restraints of trade that destroy the foundational silent hand of the free market.
Do not give an inch. Do not let those who depend on government interference to destroy the free market accuse you of favoring government interference that destroys the free market. We are those who believe in free competition, the free market, and the noble objectives of Adam Smith. They are the ones who wish to suckle at the government teat at the expense of market efficiency.
And if you have a minute more, allow me to share some Adam Smith quotes:
"The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commo-dities much above the natural price."
"The price of monopoly is upon every occasion the highest which can be got."
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
"To widen the market and to narrow the competition is always the interest of the dealers ... The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted, till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."
All those quotes come from The Wealth of Nations.
It is not the free market which is flawed, it is those who bear false witness about it, who destroy it. They are not us. We are the noble ones, you and I.
Re:Binding Contracts. (Score:3, Interesting)
"It seems to me they don't want to compete, they want to bitch and make the competition less competitive."
Thank you for reminding me of the single biggest flaw in capitalistic competition theory... given the choice, no capitalist would ever compete, and given actual circumstances that happens more often than we might like to think.
Re:Carriers != Manufacturers (Score:2, Interesting)
You cannot purchase an unlocked iPhone in the USA. The expensive editions are just contract-free, they are still locked to AT&T.
Also, I see lots of opinion in your post without any citations to back it up. Lets see some consumer satisfaction surveys to back up your big claims.
Ugh! (Score:3, Interesting)
The whole cell phone market and carriers is overall pretty twisted and generally nasty. I kept myself willfully ignorant of most of it until recently. (I was happy in my ignorance too...sigh.) But my old Palm IIIc was not going to live forever so I thought it was time to finally update my knowledge on ultra-mobile computing.
What I found out right away was that what I really wanted was a Nokia n810 but that it was not going to be a phone. Nor was it going to be online unless I was tethered or on Wifi. Not a huge deal given that those were the only real major downsides. And to make a long story short I did finally end up with a n810 which I love. My biggest complaint is that it is a little big & heavy but overall I'm very pleased.
But at a point the new n810's were out of stock everywhere. I looked around for a used one but it was slow going so I thought I should look at a smartphone option vs my old setup, dumbphone & PDA. Both setups have their pros and cons and at some point I might go smartphone & tablet (I guess calling the Nokia devices PDAs felt passe.) but I digress.
Finally getting to my point here when I looked at the options with smartphones I got pretty annoyed pretty quick. The fact that they mask the price of the devices with rebates and contract requirements is not good. The fact that not only are not all of the devices available on all the carriers but that each carrier can have their own set of rules on how the devices will function is annoying. Nevermind that even if you do have a device that can be used by multiple carriers most if not all of them won't turn it on unless it has their tag on it.
None the less I eventually found a smartphone that I thought I could live with and set about trying to negotiate upgrading my old phone to that with my carrier. I felt like I had walked into the sleezyest of used car dealerships with 'Mark' written on my forehead in glowing ink. The idea that I did not want to upgrade to a plan that was 2 to 3 times what I was currently paying for the privilege of using this phone resulted in political levels of feigned outrage.
In fact when I would be asked about what I was looking for and outline my needs the idea that I don't spend half my day texting seemed downright shocking to these reps. The fact that what I really wanted was a block on all texting on my account had them looking for wooden stakes. For kicks I went to an AT&T rep at one point and worked in the term 'jailbreaking' as often as I could into our conversation. To his credit he did what he could to sell me but developed an unhealthy tick in his left eye.
To me the whole cell carrier/phone business needs a lot of work because from top to bottom it's a mess right now. Hopefully that a light is being shown on some of their nonsense will clean some of it up.
Re:T-Mobile Sucks But I'm stuck on a contract (Score:3, Interesting)
I'm guessing that the GP is on a 2 year contract. A lot can happen in two years. What if you change your job, house, city or whatever? You can't know that in the first month. Not even 6 months. I'm not even certain what will happen in the next 7 days.
Re:Carriers != Manufacturers (Score:2, Interesting)
oh hell no...
GSM and CDMA both have their good sides, such as GSM cannot do analog, which would be very useful in country area that digital signals don't cover well. (CMDA can do digital and analog, and being code differentiated, i think can handle more traffic)
GMS is great for Europe, but if i'm not mistaken i think a large part of Africa and Asia use CDMA...
TDMA i think has gone the way of the dodo, since from my understanding it's much the same as CDMA, but less bandwidth since it's Time differentiated.
As far as saying one is antiquated and the other is still good, I don't think that holds any more water than saying that Mac or Unix is antiquated since MS is newer.
They both come out with new technology, but it's easy to say that Win 95 is outdated, but that's not the MS standard.
Personally I like CDMA more than GSM, which is part of the reason I have sprint service (imagine that, a consumer making a choice on personal preference and not government mandate...), US Cell has great coverage in southern WI and northern Illinois, but their phones just suck out loud.
What Congress should really be investigating. . . (Score:3, Interesting)
In my opinion, a far bigger problem than handset exlcusivity deals, is the practice of charging customers the same price for cell phone service whether or not they are or are not getting a contract for a phone. Most of the carriers will let you buy phones outright, and even pay month-to-month for service. The problem is, I'm paying the same monthly-fee as if I were on the contract. So, it ends up being financially stupid to buy a phone outright, because you're just paying an extra $200-$300 (in most cases), but not paying less for service than the people whose phones are subsidized by the contracts.
If I'm not getting my phone subsidized, I should be seeing about a $10/mo discount on my service. But, no.
Get rid of that nonsense, and also give people the legal right to modify their phones to unlock them from the original network, and you've solved the 'exclusivity' problem in the simplest possible fashion.