U.S. Mobile Phone Carrier Practices Questioned

[applehero]

The first poster to make these points kind of glossed over the fact that this led to plummeting prices. Not a small deal. Where do you think our current telecom tech would be without the dirt-cheap phone rates that make the cost of long distance calls virtually negligible?

Breaking up AT&T was, by most accounts, a great move which led to a lot of our (and, by extension, the rest of the world's) current telecommunications technologies. Our trailing in some areas is not due to an excess of competition.

You really think flying is a worse experience now than it was in 1980 (security requirements aside)? Fares have withered in real terms, and yet been able to invest in planes that give every passenger a personal TV screen with a dozen channels.

As for gas / oil companies, that's complicated and getting off-course.

And... they tried it with health care? What exactly are you referring to?

First off, I don't think our phone rates are cheap. Flying has gotten progressively worse, especially over the last 10+ years (not security related). I agree on the gas/oil companies (which unfortunately are related to everything else..inflation.) The reason you probably don't know what I'm taking about on the health care is because it was such a huge and utter failure it didn't last long enough for many to remember.

Everyone has their own opinions about the divestiture, but the reality is that it was catastrophic to the consumer. It may have resulted in competition, but the overall consumer experience was lost in companies trying to get rich. AT&T was not screwing its customers with outrageous prices and outdated technology. Now, what do we as consumers get...slamming, cramming, telemarketing calls, complex contracts, confusing service packages, 2nd rate service and a complete lack of customer service. I don't think people realize that even though they may not be an at&t customer, 90% of the network that they use is owned and maintained by at&t. If at&t were allowed to focus on their own networks and technology instead of dealing with every other phone companies BS, we would still be way ahead of the game. It's pretty hard to continue to advance service and technology when the government tells you...1st, you have to lease your network to any company who wants it and maintain the network for them, 2nd, you have to fulfill all other companies service request before your own(in other words, screw your customers), and 3rd, you can't charge any lower than these regulated amounts for your service(so much for competition when you're not allowed to compete). To this day, the government is still enforcing certain anti-trust rules within the operational functions of at&t (I just experienced one of them). We will never truly have a free enterprise in telecommunications until the government steps out and lets the companies run things, I seriously doubt things could get any worse.

 

[whatever]

Wow the iPhone is changing the way our telecommunication network will be setup in the future. Awesome!

Perhaps the iPhone will be able to do to the mobile industry (and I'm not just talking about in the US, but world wide), what FairPlay/DRM is doing to digital music.

Think about it for a second. If the iPhone is such a huge success and AT&T and the other Apple partners begin to steel market share, then the other telecoms will have to rethink the way they do business.

Just like FairPlay/DRM is doing with the music industry. Apple played by the rules and used DRM and now the industry has realized that this might not be such a good thing.

 

[whatever]

I think there won't be any "real" competition until the U.S. cell market opens up considerably. I agree with the Skunk...

I cannot believe Apple has such an expensive phone (that only works with one carrier) and does not offer insurance!

How can Apple feel that they can make more money with an exclusive carrier of the iPhone. I am sure there are thousands of people who would use it if it were available outside of AT&T... What a crazy decision to lock it for so long with one carrier. AT&T must have really sweetened the pot for Apple...

Well, the thing is Apple is making money on the iPhone, most likely more than Motorola is making with all of their phones combined.

Bottom line Apple will make more money long term than working just with AT&T then they would with everyone else, due to the revenue sharing they're getting on the service side of things.

Also in the last 10 years I have used the old AT&T, Sprint and Verizon. And I have to say that Sprint was the worst of the bunch. And I had them longer than everyone else, I would have dropped calls in NYC and most major cities in the country. I've heard good things about T-Mobile, but have never used them. And I would rate AT&T and Verizon the same as far as service goes (although my AT&T phone was better because they did not cripple it).

 

[whatever]

jeez, there are some fanatical people in here.

This isn't about forcing manufacturers to open up their devices. It's about carriers not forcing devices to be locked to their network. If it was up to the manufacturer (ie: Apple) they would LOVE to have their device unlocked.

No, you are completely wrong here.

Apple choose to close the iPhone.

They did not want the iPhone experience to be damaged by XYZ Telecom, who refused to implement things the Apple way. For example, Apple does not control the visual voicemail feature of the iPhone, AT&T does. No what if the iPhone was unlocked and Verizon (and there is no doubt in my mind that they wouldn't do this) decided not to implement this feature. Anyone using Verizon would be complaining to Apple, not Verizon, and the negative reviews would be geared towards the iPhone and not Verizon.

Do you honestly believe that all of the major players want to be on equal footing with one another and just be a checkbox on iPhone activation screen?

 

[rob@robburns.co]

We will never truly have a free enterprise in telecommunications until the government steps out and lets the companies run things, I seriously doubt things could get any worse.

I guess you don't understand what a natural monopoly is. Basically it implies you don't want to have free enterprise in that industry. It means you want to have nothing resembling free enterprise in that industry. The only reason anyone would come up with leaving a natural monopoly industry up to free enterprise and let "the companies run things" would be if you were trying to swindle an entire population. I would say that's what's being done. However, its disappointing to see someone advocating for it on a channel like this.

 

[whatever]

...but a 5 year exclusive contract is suck retarded. Steve must have gotten some good **** when he signed that deal.... he practically signed the iPhone's soul away.

I hope this reply is not back to back with my other replies, but...

AT&T has a 5 year contract with the product called the iPhone.

This does not prevent Apple from creating another communicator device down the road called iPod, that will have a similar feature set of the iPhone, but be an unlocked device.

Stuff like that happens all of the time.

 

[ccrandall77]

The U.S. telecommunication systems are totally messed up. CDMA sucks but they have a much larger EVDO network compared to AT&T's HSPDA network. There needs to be one network with super fast data network. Unfortunately that costs money and I don't think any of the huge corps are down for spending any of it.

How does CDMA suck? Voice quality is usually better and since it does soft handoffs between towers, it typically is less susceptible to dropping calls. The only things I dislike about CDMA is from what I gather you cannot do data and voice simultaneously and CDMA phones don't use SIMs so you can't own 2 or more phones that use a single line.

If I were Verizon or Sprint, I'd never consider switching over to HSDPA. WiMax is the future and Sprint is already working on implementing it. I would guess that eventually they could do voice and data over WiMax alone.

 

[3282872]

No it isn't. If you loose your phone your screwed.. PERIOD. Apple won't give you a new phone if you just lost it and told them that you lost it or if it were stolen. If Apple did do that then they wouldn't do it a second time. The Apple Care does sound nicer than most other AppleCare plans Apple has but it isn't anywhere near what Sprint offers for insurance on the Treo or other smartphones.

Sorry man.

If you're dumb enough to lose your phone, that's on you (and how do you know that loss isn't covered as they haven't even released the iPhone's plans?). However, when compared to the posters stating that Apple isn't offering any protection plans or insurance and they are, that is better than nothing. Aside from losing your phone, paying a one time fee of $69 and NO deductible IS better than $4.99 a month plus a deductible, and some insurance plans/company's don't cover water damage.

 

[mccldwll]

Bottom line Apple will make more money long term than working just with AT&T then they would with everyone else, due to the revenue sharing they're getting on the service side of things.

If you're saying apple making more locked to at&t than would if unlocked is certainly unknown, and in all probability, flat out wrong.

 

[Random Ping]

It will be a long time until you see laws passed on this.

And I doubt the current President would sign it. However, just the fact that they are having these discussions at this level and it is getting the press coverage that it is will probably prod the wireless carriers to change their behavior somewhat.

If Apple is able to offer iChat and VOIP on the iPhone, it would surely signal a strong change by the carriers.

(Side note: The conventional wisdom is that Apple has a revenue sharing agreement with AT&T, so if Apple offers iChat and VOIP on the iPhone (thus cutting into voice minutes and SMS charges), then it might actually cost Apple revenue.)

 

[mccldwll]

AT&T has a 5 year contract with the product called the iPhone.

This does not prevent Apple from creating another communicator device down the road called iPod, that will have a similar feature set of the iPhone, but be an unlocked device.

Stuff like that happens all of the time.

First, the 5 year term has been tossed around a lot, but no specifics have been released so it's uncertain exactly to what extent and for how long, the exclusive relationship lasts. Second, you have absolutely no idea what the contract terms are and assuming that a contract with AT&T would just cover the "iPhone" is absurd. That's not how things work in the real corporate world.

 

[3282872]

um. no. free enterprise allows carriers to sign exclusive contracts. maybe other countries will allow laws to pass that tell companies they need to open their products but here in the US, that isnt how things work.

Unless it is a monopoly (which this isnt), they cannot tell Apple the product needs to work on all networks. Apple for example could create their own wireless service and make it exclusive to that. They are selling a product, they can limit it as much as they like. People do not need to buy it, nor do they need to use AT&T. There are plunty of other phones and plunty of other carriers out there. No part of this is a monopoly. Except for the fact that AT&T has a monopoly on the iPhone (but no more than any football team has on a player... it is called a contract). If you don't like it than move on, nothing to see here.

Explain how great capitalism is to the uninsured in the U.S. health care "system". Some times, capitalism is NOT a good thing.

 

[Random Ping]

How can Apple feel that they can make more money with an exclusive carrier of the iPhone.

One reason is that Apple struck a deal with AT&T to receive some of the monthly subscription fees. If Apple sold an unlocked phone that the customer could take to any carrier, then Apple wouldn't be able to tap the monthly subscription revenue stream.

 

[applehero]

I guess you don't understand what a natural monopoly is. Basically it implies you don't want to have free enterprise in that industry. It means you want to have nothing resembling free enterprise in that industry. The only reason anyone would come up with leaving a natural monopoly industry up to free enterprise and let "the companies run things" would be if you were trying to swindle an entire population. I would say that's what's being done. However, its disappointing to see someone advocating for it on a channel like this.

I understand perfectly, the problem is that this isn't a natural monopoly, it's a government created one. The original monopoly with AT&T was due to an original concept that everyone wanted and was marketed by brilliant business people who created a monopoly (not a natural monopoly). The government stepped in, broke it up, and tried to 'create' competition, not allow it. They enforced competition, not allowed it. What we have now is not a natural monopoly, we have a bunch of consumers who realized that the government screwed things up by breaking up at&t and now want the single network that they started out with.

 

[Random Ping]

I agree, but the rest of the capitalist world is enjoying a very good and vibrant cell phone market with options galore, and here in the US we are about three years behind in cell phone tech and business practices.

That would be the biggest argument against the current business policies. But a similar argument could be made with respect to the quality of broadband to the home -- the US is woefully inadequate compared to most of the industrialized world.

I think with respect to telecommunications, the US is a 2nd or 3rd tier country.

 

[rob@robburns.co]

I understand perfectly, the problem is that this isn't a natural monopoly, it's a government created one. The original monopoly with AT&T was due to an original concept that everyone wanted and was marketed by brilliant business people who created a monopoly (not a natural monopoly). The government stepped in, broke it up, and tried to 'create' competition, not allow it. They enforced competition, not allowed it. What we have now is not a natural monopoly, we have a bunch of consumers who realized that the government screwed things up by breaking up at&t and now want the single network that they started out with.

As I said, you don't understand what a natural monopoly is. It's got nothing to do with AT&T's original monopoly. A natural monopoly is an industry where the provision of each additional product leads to a decline in the marginal and average cost of the product. In this case the marginal cost is virtually nothing. The average cost approaches zero in the limit.

The government didn't create those circumstances. It doesn't have amagic wand to wave to refactor the universe. Its just the nature of such industries.
The natural monopoly isn't a bad thing: its a blessing. The bad part is when the government and corporations use that good fortune to swindle the entire population.

[EDIT: And what people want is not government to step out of the way. They probably want both government and these big corporations to stop veiewing them as a bunch of chumps waiting to buy snake oil from them. They want an end to the collusion between government and uber-large corporations to screw the public. The claim that this is all governmen'ts fault (as in government in the abstract; as in all government) is an attempt by the players in this swindle to distract the public and displace the obvious blame from themselves]

 

[Random Ping]

This type of non-absolute thinking is completely irrational. By your logic, free speech (a good thing) is dangerous if not regulated, therefore, the government should start regulating speech occasionally.

There was an article in the New York Times yesterday (or was it WSJ?) about the dogma in economics like free trade is always good, or free markets will always resolve issues, and a small but growing minority of economists are starting to challenge this dogma.

An example I use when discussing this is acid rain. Economically the best choice for one state (say in the midwest) is to use high polluting coal to generate power. The problem is the polution falls on another state (say in the northeast) in the form of acid rain. In general, when one person receives a benefit but another person pays the cost, then free markets tend to lose their functionality.

Regarding free speech, it is regulated. For example, you cannot hide behind free speech when you strongly encourage others to commit violence (e.g., a mob boss cannot use free speech to get out from a murder charge when someone else (the hit-man) did the killing). Likewise, slander is not protected free speech.

 

[EagerDragon]

Apple is going to offer Apple Care Protection Plans for the iPhone later this month. I asked the Apple Store on 5th Ave where I purchased my iPhone and was told any one who purchased the iPhone will be able to buy the extended warranty plan, which has been rumored to extend coverage to water damage, for $69. I find this to be a much better deal than spending the typical $4.99/month for phone insurance that is currently offered by most mobile phone providers - not including the standard $50 deductible (a one time fee of $69 for three year coverage is a much better deal than $59.88 a year + a $50 deductible for a normal phone).

I heard Apple coverage was a single year and that it was not going to cover acts of wars, acts of God, accidents or stupidity (going swiming with the phone).

Hope your source is better than mine.

 

[Random Ping]

I bet apple is very much playing the same game, and possibly intentionally making it so not everyone can get one? part of a much grander scheme?

Steve Jobs scheming? Never!

If this were the case, my guess is that it is to help them build a solid core and experience with that core before expanding. Apple's announced goal for the iPhone in 2008 is something like 10 million phones, or just a very tiny percentage of the market. Jobs has also admitted that they expect that they still have a lot to learn.

But I am sure Apple wants to eventually have iPod-like dominance in the cellphone market -- or at least on the high-end, profitable segment of the market.

So maybe the strategy is: Establish a large enough segment where you can test your technologies, test your strategies, generate revenue for continued investment, and learn all the ins and outs of the market. Then in about 18-24 months break out of your core market by (1) selling unlocked phones, and (2) sell a wider range of phones to target more niches.

 

[EagerDragon]

It's no so much locked phones that are outlawed here, but rather selling a plan coupled to a phone (or vice versa) that is strictly illegal here. And that's not explicitly in a mobile phone law, it's just a general consumer-friendly law that buying something shouldn't oblige you in buying anything else.

Sounds like the law permits the sale of a phone that only works with a single carrier as long as you have to visit a different vendor to buy the contract.

 

[EagerDragon]

Well, whatever. Just pass a law that get's iPhone on Verizon and I'll be happy.

Don't hold your breath for long. This may take several years for the laws and they maybe ruled "not constitutional".

Someone is bound to pay off some polititians and it will draaaaaaagggggg.

Each an every carier in the US want to keep the phones locked. Expect a lot of lobying.

Then the two chanbers have to agree, then an effective date selected, and it will be taken to court as unconstitutional after all of that. Then wait 6 to 12 months for a ruling.

Hope I am wrong.

 

[EagerDragon]

This type of non-absolute thinking is completely irrational. By your logic, free speech (a good thing) is dangerous if not regulated, therefore, the government should start regulating speech occasionally.

I see your point but the goverment does regulate free speech. There are some things you can not say and if you incited someone to do something, you may find yourself in either criminal or civil court.

Along that line the a judge also tells you when to shut up and sit down or he sends you to jail.

 

[EagerDragon]

Freedom of religion- good, but for good measure, we should restrict the concept to include everything except Buddhism and certain flavors of Christianity.

Kool human sacrifice is allowed!!!!!!!!!!!!

 

[Plutonius]

Not really. The iPhone would make Apple stinking rich if they opened it up to better more capable service providers.

Give Apple some credit. They have teams of people crushing the numbers to find the best strategy for maximizing the iPhone profit.

I'm not saying that Apple could be wrong but they didn't choose AT&T and a locked phone on a whim.

 

[pherplexed]

No, you are completely wrong here.
Do you honestly believe that all of the major players want to be on equal footing with one another and just be a checkbox on iPhone activation screen?

No, they don't want to be just check boxes in iTunes, but it's better for consumers if they were. Apple had to chose a carrier to partner with and my guess is the 5 year exclusive deal was AT&T's doing -not apple's- in response to Apple's requests.

Anyone who thinks Apple would make more money sticking solely with AT&T and getting a percentage of contacts is crazy. They make their money from hardware sales...they always have. Why would Apple not want to sell the iPhone to all 125 Million cell phone users compared to only 62 Million AT&T subscribers (according to AT&T's website)?

So, again...the end goal of all of this that if the US had a unified cellular network like Europe then the consumer gets to choose their carrier based on customer service, price, and reliability. How is this not better for the customer? Likewise, if all the carriers support the same cellular network, how is this not good for cell phone manufacturers who want to build un-crippled phones??