We Must Shatter Cellphone Companies' Death Grip

breaklock.jpgMossberg had a great column in the Journal yesterday delivering a shot straight to the skull of cellphone companies and how their oligopolistic ways.

A shortsighted and often just plain stupid federal government has allowed itself to be bullied and fooled by a handful of big wireless phone operators for decades now. And the result has been a mobile phone system that is the direct opposite of the PC model. It severely limits consumer choice, stifles innovation, crushes entrepreneurship, and has made the U.S. the laughingstock of the mobile-technology world, just as the cellphone is morphing into a powerful hand-held computer…That’s why I refer to the big cellphone carriers as the “Soviet ministries.”

It’s like a guy builds a road and tells you what kind of horse you can ride on it. Or, as Mossberg points out, it’s like the 70′s, when you had to rent phones from AT&T and you could only use their phone for fear of “damaging” the network. Only when the government stepped in to break it up was the hammer lock broken.

Free My Phone [WSJ]
(Photo: FastFords)

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  1. weg1978 says:

    “It’s like a guy builds a road and tells you what kind of horse you can ride on it.”

    Um, doesn’t the gov’t restrict the type of cars that are street-legal?

    “Or, as Mossberg points out, it’s like the 70′s, when you had to rent phones from AT&T and you could only use their phone for fear of “damaging” the network.”

    I’m pretty sure I own my phone, which was heavily subsidized.

    “…delivering a shot straight to the skull of cellphone companies and how their oligopolistic ways.”

    Big word…do you know what it means? Please name one industry that is perfectly competitive (i.e. not monopolistic, not oligopolistic)?

    These cell-phone companies have issues, to be certain, but that doesn’t make up for your apparent lack of education.

  2. shan6 says:

    @weg1978: The only problem is when other markets/companies are dominated by so few companies, the government has historically stepped in. Think Microsoft.

  3. shan6 says:

    @shan6:

    edit: “when other markets are dominated”

  4. weg1978 says:

    Sure, but Microsoft and Apple have the market cornered. In the cell-phone industry, you have over a dozen choices for providers. I think that the original analogy made by the author in the WSJ to Ma Bell is inaccurate at best, and Ben’s ‘commentary’ is a lame attempt at a drive-by hit job. Not to mention the cell-phone industry is already trending towards open access, w/o gov’t intervention.

  5. 7j6cei says:

    OK, am I missing something here? He keeps talking about the “I-PHONE”, but dident AT&T and Apple try to lock the I-PHONE to their network only???? ummmmmmmmm….

    :)

  6. QuantumRiff says:

    I have no problem with the “cancellation fee” if you buy a subsidized phone, but dear god, why don’t they add it as another line item to your bill, ie, the plan is $40+$8 for the phone. There is no price break for not having a subsidized phone, I’m still paying the same amount, just no cancellation fee. Or, they could just “pro rate” the fee, so if its a $240 cancelation fee, for a 2 year commitment, and your 1 year in, your fee should only be $120.

  7. Tush says:

    I lived in India for a few months this summer and having a cellphone was great there. No restrictions, I could do want I want with my connection. All I did was go to a local shop and they unlocked my w810i which was locked to ATT service.

    I also paid for the GPRS internet service… rs. 400 per month! That’s 10 dollars for unlimited access.

    I agree with Mossberg, we need to open things up.

  8. MeOhMy says:

    @weg1978: You might be more convincing if you were A) correct and B) less condescending.

    To wit: There is a difference between the owner of a road establishing guidelines on things like safety features and emissions and the owner of a road saying “You can’t drive Fords on the Interstate. Why? Because we said so.”

    “Or, as Mossberg points out, it’s like the 70′s, when you had to rent phones from AT&T and you could only use their phone for fear of “damaging” the network.”
    I’m pretty sure I own my phone, which was heavily subsidized

    You missed the point – ATT required that you ONLY use ATT-approved hardware on the network. Just as today you can (in most cases) only use carrier-approved hardware on your carrier’s network. ATTs excuse in the dark ages was that other phones would bring the system crashing down. The truth was selling/leasing the equipment was more profitable than having to compete in the free market. Subsidizing is just another excuse.

    Big word…do you know what it means? Please name one industry that is perfectly competitive (i.e. not monopolistic, not oligopolistic)?

    I’m not sure why the existence of other *polistic and anti-competitive businesses and industries would serve as justification for their continued existence, but that’s neither here nor there. US mobile providers have for years relied almost entirely on the ignorance of the consumers and the legislators/beaureaucrats to keep prices high and competition low. Remember how the wireless providers cried to congress that allowing number portability would drive them into bankruptcy even though many of these major providers’ partners and subsidiaries had survived elsewhere in the world where WLNP was pretty much ALWAYS allowed? I need not point out these same wireless providers are both still in operation and still profitable.

    Time to end the sham.

  9. jbalsle says:

    @weg1978:

    I have to point this out, in regards to your ‘rebuke’ of the article.

    1) Ad Hominem Attacks, such as ‘that doesn’t make up for your apparent lack of education,’ are logical fallacies, which say that the argument within which they are contained is without merit. If you can’t make your point without resorting to personal attacks, then you need to rethink your point.

    2) Where you put this ‘doesn’t the govt say which cars are street legal’, you missed the whole point. This is NOT the government telling you which phone you may use. This is a private individual telling you which phones you may use on their network. You could make that point, which is valid from a strictly Libertarian view, but when you create an invalid comparison, you come close to another logical fallacy, a Red Herring.

    3) You were right to point out that your phone is yours for less than it costs. However, reading the article, I see that there was a point you missed, or deliberately ignored. He did not argue that you rented your Cell Phone from your provider, but instead, that opening the market in the ’70s caused the ‘clunky’ old rotary phones of the 1960s and before to be replaced with todays landline phones in all of their varieties and functions. By attacking the irrelavent and unmade argument that ‘users have to rent their cell phone’ with your statement that you bought yours fair and free, you’ve created a Straw Man. You know what that is? Yes, yet another logical fallacy.

    In your short comment, you’ve committed four separate logical fallacies, two Ad Hominems, a Red Herring, and a Straw Man. You have also failed to address the article’s main point (“A shortsighted and often just plain stupid federal government has allowed itself to be bullied and fooled by a handful of big wireless phone operators for decades now. And the result has been a mobile phone system that is the direct opposite of the PC model. It severely limits consumer choice, stifles innovation, crushes entrepreneurship, and has made the U.S. the laughingstock of the mobile-technology world, just as the cellphone is morphing into a powerful hand-held computer.”). Perhaps by addressing that main point and the supporting evidence (which you’ll have to find on your own), you’ll do better on your argument.

  10. savvy9999 says:

    LOL @ a WSJ author calling the very free market of cell phones & carriers “Soviet Ministries”… lost all credibility right then and there.

    anyways, a question for the Consumerist intelligentsia… if the US government hadn’t broken up AT&T… what would the US cell phone infrastructure and market look like today?

    Would certainly be unified & standardized. No need to ‘unlock phones’, since there would only be one network. Would phones be any different or better (perhaps making an assumption that AT&T would not have been allowed to be the only hardware vendor)?

    Talk amongst yourselves…

  11. slapBOXmaster says:

    Yes mobile companies compete but they don’t compete on service. If you read this blog you’ll see the cell phone horror stories. They compete for the cheapest phones. They don’t want to change because that would mean that they would have to compete on quality of service and customer service.

    And weg1978 you manage to use alot of words but still manage to say nothing.

    You technically own your phone after your contract is up (and after paying for it in full through fees) or if you leave after you pay the early termination fee. Your comparison to street legal cars is not correct because cell phone companies that use sim cards have already chosen an equipment (cell phone)configuration which it self is tested by the FCC and by spec is interchangeable across the supported frequency range Unlike cars which must meet a very loose emission and modification standard I can put almost anything i like on or in my car so long as I meet emission, noise and safety limits unlike cell phones that as soon as I install a piece of unsupported software (Enabling BT networking on a treo650 from verison for example) or take a soldering iron to not only can I not legally use it but If I interfere with any signals instantly I am violation of alot of communication laws. You rent (to own) your cell phone in this country ( USA ).
    A better comparison might be that the phone is like a key to a rental apartment and once you stop renting the place you can keep the key but I’m changing the locks. Note that this works for verison and spring networks only as sim card using networks are by design more flexible and tend to compete (in Europe) on service feature as well as price.While they (in the USA)too still use contracts as a means to “keep” people with them. If the “service” providers are forced to drop contracting and handset lock-in they would actually have to start providing us with services and innovation (real tv, internet, phone camera advancements free txt chatting etc.) instead of contracts and fees. Granted that this would mean phone prices will rise but the overall quality and features of cell phone will rise much faster as companies try to fight to have the best phone in the market.

  12. slapBOXmaster says:

    @savvy9999: I agree but I would argue that the gov’t didn’t go far enough. There is obviously alot of collusion on the part of the cell phone service industry that needs to be dealt with. Forcing them to stop contracting is at the very least a step in the right direction. Also the gimping of phones to create the illusion of added value in more expensive plans should be made illegal.I’m looking at you verison.

  13. Trai_Dep says:

    @jbalsle: Wow. Just wanted to say, “Wow!” (and “clappa clappa clappa clap clap clap…)

  14. jbalsle says:

    @trai_dep:

    I try. Really I do. :)

  15. ab3i says:

    a moot point perhaps, but you are *free* to use any GSM phone on AT&T and T-Mobile’s network, they just won’t support it if you have a problem with a feature like SMS or so. It is more difficult when you move into the CDMA space, but again its not impossible. Subsidies might not make sense, but the cost of an ‘unlocked’ phone is usually a couple of hundred dollars more, so if the carrier has a phone you absolutely must have, and is subsidizing it, I don’t see a problem with a 1-2yr contract for a subsidy.

  16. hapless says:

    @savvy9999:

    Pre-breakup AT&T offered cellular service. It was just horrendously expensive with poor coverage.

    The system we have now is a product of the breakup.

  17. jbalsle says:

    @ab3i:

    Then what’s wrong with the idea that your phone is open for you to do with as you please? Perhaps instead of locking the phone to the network, make the subsidy dependant on service. A 2 year contract will get you 200 dollars off the cost of your new shiny phone. But if your carrier’s service sucks and you leave six months down the road, the carrier can insist you pay $150 to get out of contract and leave, which would be 3/4ths of the unpaid subsidy.

    It’s my phone, and I should be able to use it with whoever I wish, whether that be AT&T, T-Mobile, or any of the small GSM providers. It is my right to use it with more than one service, if I so choose (say, I’m going up to Canada or over to Europe and I don’t want to pay horrific foreign charges from my local provider). As long as I pay the subsidy off by serving my time or paying my cancellation fee, I should be allowed to do just that.

    That’s the principle behind the complaints about cell service. Why must we pay $200 just for ending a 2 year contract if we didn’t receive anything for signing up? Why must we pay outlandish fees because our phones are technologically blocked from foreign cell phone networks. Why must we buy service from AT&T (which is a horrible company overall AND has bad cell phone service where I live) if we want an iPhone? These kinda questions are what bug us.

  18. gorckat says:

    [i]Please name one industry that is perfectly competitive (i.e. not monopolistic, not oligopolistic)?[/i]

    Snowball stands!

  19. ab3i says:

    @jbalsle:

    1) an excellent point about prorated subsidy / early termination fee. I believe something to the same effect is already int he works @ AT&T, hopefully the others will follow suit.

    2) The phone is yours, and if you are lucky you can even get the handset *unlocked* by your carrier to use on different networks. When i was with T-Mobile, all it took was a call to the CSR and tell them that i was traveling overseas, with AT&T this has been a much more daunting task. However, I am free to get the handset unlocked by 3rd parties.

    3) The iPhone issue – I think that should be taken up with Apple and not AT&T. AT&T and all other carriers want *exclusive* handsets, (think cingular and the Moto Razr about 3-4 yrs ago), this attracts people to their networks. Now Apple made the decision to sign AT&T as an exclusive provider, they didn’t need to, but they did – Nothing to see here citizen, move on, just plain old corporate greed.

    4) We as consumers have the right to a) not buy the iPhone, b) not sign 2 yr contract for cell phone service and use prepaid options, c) not buy subsidized phones from carriers and purchase them from the manufacturer or 3r party resellers at a higher premium. Surely, if you dislike AT&T with such a passion, you can forego the iPhone?

  20. dextrone says:

    We are the laughingstocks, due to the market, there are no useful services, sure they have myspace(on some), but it useless, in fact in some places sms’s actually tell you whwn the next bus will come or something like that. Here we have useless services, or if we have then (e.x. gps, ability to download music, etc.) they cost unreasonable prices.

  21. jbalsle says:

    @ab3i:

    1) No need to comment

    2) I am well aware I can unlock my cell phone, unless of course it’s an iPhone, in which case they refuse to unlock it. That doesn’t change the fact that it is still a hassle to do, and wouldn’t need to be done if the carriers didn’t lock them in the first place.

    3) AT&T and Apple both are to be blamed for the iPhone fiasco. AT&T insisted, Apple complied. Both are at fault. The point of this article is that innovation is stifled because the providers insist on these locks on what we can do with our phones.

    4) a) Of course we have the right to forgo buying the iphone. Guess which option I chose.

    4) b) This only prevents you from using AT&T for the whole two years, but doesn’t let this particular phone work on anyone elses network, even T-Mobile.

    4) c) I didn’t buy a subsidized phone from a carrier. My 8525 is bought clear, for $600 instead of $400, so I wasn’t stuck by AT&T in the revolving phone door.

    As you can figure, I DID forgo an iPhone. The device doesn’t interest me much. However, it’s the principle of the thing. Let’s take my 8525. I was finishing out the end of my 2 year contract, when my old Blue Angel kicked the bucket. Of the phones available in the states, the HTC Hermes was the most attractive option. I wanted one, but I’d already had enough of AT&T. So, I took the option of buying a phone and not taking their subsidy. However, the phone, as delivered to me, would still not work with T-Mobiles service. Thankfully, a batch of intrepid hackers at xda-developers.com managed to crack this little PDA and load WM2006 to boot. Why did I have to do this? Why couldn’t I go to AT&T and say, “I want to buy your HTC Hermes, what you call a Cingular 8525, for use with a service provider of my choice.” Instead, I have to hack my phone to make it work with T-Mobile. Why do I have to do this?

    When you understand the wrongness of those questions, then you’ll understand the whole point of this article.

  22. syncpulse says:

    The crazy thing is that here in Canada it is even worse. we have even fewer carriers and fewer services. If the Us is a wireless laughing stock then Canada’s wireless is a sick joke.

  23. ab3i says:

    @jbalsle: Perhaps you are right about the wrongness of the questions, but i was not questioning the article, I was questioning your comments.
    The discussion of subsidy versus contract versus ethics can go on for years without resolve, so let us not get involved in that. I guess you’ll remain discontented with the state of affairs in the wireless / cellular industry, and I’ll remain unconcerned as long as there are viable options present.

  24. kwsdurango says:

    Maybe I’m missing something, while I agree that US mobile phone networks are not as feature rich or useful as networks in some other countries, it is easy enough to buy an unlocked phone and use any SIM card you want. I have an unlocked Motorola Razr, bought from Tiger Direct, and have SIM cards for the USA (ATT), UK (T-Mobile) and Croatia (T-Mobile) and can swap them at will whenever I travel. Sure the phone cost a bit more but I’m not locked into a contract with anyone and can do whatever I want. Seems reasonable enough, right?

  25. Major-General says:

    @syncpulse: So it’s like Canada’s healthcare.