Free My Phone

[Ed Hansberry]

<a href="http://online.wsj.com/public/article/SB119264941158362317.html">http://online.wsj.com/public/article/SB119264941158362317.html</a><br /><br /><i>"Suppose you own a Dell computer, and you decide to replace it with a Sony. You don't have to get the permission of your Internet service provider to do so, or even tell the provider about it. You can just pack up the old machine and set up the new one. Now, suppose your new computer came with a particular Web browser or online music service, but you'd prefer a different one. You can just download and install the new software, and uninstall the old one. You can sign up for a new music service and cancel the old one. And, once again, you don't need to even notify your Internet provider, let alone seek its permission."</i><br /><br />Those of you familiar with how cell phone companies operate in the US know exactly where this article is going. Read the full article as Walt Mossberg discusses what he calls the "Soviet Ministry Model."

[emuelle1]

Good article. It almost seems like the telcos (and Apple) are caught in sort of a cold war with their users. It would be nice to see the market oligopoly busted open and consumer choice provided among devices and services.

[cgavula]

It's an interesting article, but we are forgetting a little bit of history and a few facts in the middle:

The AT&amp;T monopoly existed on a network that was standardized (because of the monopoly) and mature. The cell networks are not mature yet - they have yet to hit a plateau where the network isn't changing dramatically. That should be in the near future, however, as some of the 3G (and 4G) data services somewhat become the same.

The article also seems to forget that in the early days of the consumer Internet (until the market matured) we accessed it using proprietary and often incompatible software from different carriers like AOL, COmpuserve, and GEnie. If you got a new computer it was not always a trivial thing to hook your new computer to the network. It got better over time and eventually access became consistent and ubiquitous.

What needs to happen is for the CDMA proprietary service to become a standard (which GSM already is) rather than a licensed proprietary technology and then for the 2 standards to merge (or devices to support both). Once that happens, then handsets can be based on standardized network access technologies and any arguments tied to subsidizing network development become somewhat moot or at least manageable.

--Chris

[Horus]

If your ISP was paying for half your PC, they might decide they had some part in the decision.
If your medical insurance is footing the bill, they have some say in what doctor you go to and whether you get generic or name brand drugs.

Such it is with wireless. One of the hidden prices of subsidized hardware is that you are inviting another party into your decision-making process because they paid for part of your phone.

If you want to avoid that, buy unsubsidized hardware that works on GSM - and then complain to your friends that your phone was too dang expensive. :-)

[SteveHoward999]

It's an interesting article, but we are forgetting a little bit of history and a few facts in the middle:

The AT&amp;T monopoly existed on a network that was standardized (because of the monopoly) and mature. The cell networks are not mature yet - they have yet to hit a plateau where the network isn't changing dramatically. That should be in the near future, however, as some of the 3G (and 4G) data services somewhat become the same.



I think the point you missed is that virtually every other market in the World, outside of the USA, long-ago shrugged off the restrictions that strangle the American mobile market - if they ever suffered them at all. No amount of historical justification changes the fact that its only the American market that allows the telcos to so powerfully strangle the consumer and the innovator.

[whydidnt]

If your ISP was paying for half your PC, they might decide they had some part in the decision.
If your medical insurance is footing the bill, they have some say in what doctor you go to and whether you get generic or name brand drugs.

Such it is with wireless. One of the hidden prices of subsidized hardware is that you are inviting another party into your decision-making process because they paid for part of your phone.

If you want to avoid that, buy unsubsidized hardware that works on GSM - and then complain to your friends that your phone was too dang expensive. :-)

Actually the iPhone pretty well disproved this myth. It costs the same whether you buy direct from Apple or AT&amp;T, no subsidy at all. Yet, you can't buy it without agreeing to a two year commitment with AT&amp;T. Previously we saw Palm have to RAISE the price of it's "unsubsidized" unlocked Treo 650 to satisfy Cingular, since the locked version Cingular was selling was only $50.00 cheaper. The reality is that cell phones are now a commodity item and most carriers aren't selling a majority of their phones at a loss.

The biggest problem in the US is that the FCC has been extremely greedy in auctioning off wireless spectrum. Rather than setting rules of use that would be considered consumer friendly, the FCC has agreed over and over again to allow carriers to impose restrictions on the use of "their" network. The only reasonable explanation for the FCC's action is they know they can get more $ if they allow the licensee's to place these restriction on the consumers. I personally feel the FCC has really failed to live up to it's mission in this regard. The FCC doesn't exist to generate huge $$, it exists to regulate the use of common air-waves for the benefit of us citizens. The recent debate over the 700 Mhz spectrum is a perfect example the FCC forgetting its charter and bowing to the almighty dollar.

[possmann]

How many times have I :soapbox: about this subject!?!?

Just give me the OPTION to do things myself. GSM carriers certainly are better suited to accomplish this - in fact I can buy any GSM phone and theoretically it should work on any GSM carrier network I subscribe to.

All I want from the carrier is just that - carry my signal. Kind of all I want from my ISP is to send recieve data (quickly of course). I am the type of person that wants to tweak things my own way and not settle for dumbed down and limiting devices for the sake of appealing to the masses. If the masses want a cookie-cutter solution where all they need to do is flip open a phone then offer those but Don't stop me from buying whatever phone I want to buy and pay you (the carrier) for the service of your network.

What if your ISP told you that you could only use a few certain PC's that you HAD to buy through the ISP? Can you imagine the outcry?

History is past - it's high time that the US Market get on board with what the rest of the world has proved works. Look at the Europe and Asia markets... their use of mobile technology is spanking anything here in the US. Sure they started later than the US and therefore had the benifit of starting with better technology - and OK I'll even give you thye fact that they are able to place more cell towers in more locations (population density and land mass - all that) - but that shouldn't preclude the US carriers from sitting still.

It all boils down to profit and control. They literally control us - which was good for way back when but not now. I am eagerly awaiting the day when a Cell Phone company in the US offers you the option to buy a phone and service from them - or to just buy the service - perhaps just getting a new SIM card in the mail or at a store to "activate" your phone with that carrier.

Now wouldn't that be cool?

[Miz]

@whydidnt:

Actually, the price you get from Apple is also the subsidized price. That is why you cannot use it elsewhere even if you bought it from Apple. One of the "innovations" of the iPhone is that you can select AT&amp;T's call packages from your home rather than from the mobile Outlet. For this to work, Apple worked together with AT&amp;T and of course the costs are all included. There is no way the iPhone is not subsidized.

As for me, I believe the network providers can choose which phones to subsidize and how much of the contract to lock the user with, but I don't see why they should be allowed to lock the phone's softwares or features. At least they're not yet blocking unsubsidized phones but if we aren't vigilant they might just do that.

[whydidnt]

@whydidnt:

Actually, the price you get from Apple is also the subsidized price. That is why you cannot use it elsewhere even if you bought it from Apple. One of the "innovations" of the iPhone is that you can select AT&amp;T's call packages from your home rather than from the mobile Outlet. For this to work, Apple worked together with AT&amp;T and of course the costs are all included. There is no way the iPhone is not subsidized.


Step away from the kool-aid and quit listening to the marketing hype. :roll:

Compare the price of the 8 GB Touch to the 8 GB iPhone. The Touch is $100 cheaper for almost exactly the same hardware. The only difference being the phone radio, which costs Apple FAR less than $100. You think Apple is selling the Touch at a loss? The innovation you refer to is Apple scraping some EXTRA profit from ATT each month from what you and I pay ATT for phone service, it's not a subsidy, it's Apple saying we have a phone that no-one else does and we want to make a huge profit on it. Some of us might call that extortion, but business is business, I guess.

I apologize for coming on strong, but people believing things like you state above is one of the reasons we are in this mess. Apple could sell an unlocked iPhone for $399 and STILL make money. We could buy the phone and use it with whichever carrier we wanted. The carriers would have to compete for our business and we would all save money. A true subsidy in this case would be Apple selling an iPhone locked to ATT for $99, and an unlocked one for $399.00. Fact is "subsidy" is more marketing hype than anything else these days.

[Miz]

Well .. first, if, as you said, Apple is scraping extra profit from AT&amp;T each month, then that's how Apple is offering the iPhone at a lower price. That's what I would call a subsidy.

Second, by not having the phone radio, Apple does not have to work with the carrier on implementation of some features (such as their new random access voicemail, or even the voice call itself), and along with that QC and technical support, not to mention a lot of overhead R&amp;D. They also don't have to deal with the collective headache of cooperating with a carrier on sales/administration/distribution. That would be where the $100 went. It's not just a radio chip.

I'm sure you are correct that Apple probably could sell an unlocked iPhone for a lot less and still make some money. But ask yourself: if you were Apple's CEO, and your company had to innovate so much yet had to sell at cookie-cutter margin, would you even do it in the first place?

While subsidy is an undesirable and unfortunate artefact left in the development of U.S. cell network, it is far from just a "marketing hype". You would also do well to distinguish between "subsidy" and "monopolistic price distortion".

[whydidnt]

Well .. first, if, as you said, Apple is scraping extra profit from AT&amp;T each month, then that's how Apple is offering the iPhone at a lower price. That's what I would call a subsidy.

Well, you seem to be taking this out of context. We hear the reason we are locked into 2 year contracts is because we get discounts on the phones and the carrier has to re-coup that investment. The iPhone disproves that myth. ATT is not subsidizing the cost of the iPhone, they are paying Apple every month for the right to exclusivity. There is a difference in the two. If I buy an iPhone and only use it on the ATT network for 2 months, and then go elsewhere, ATT has NOT spent hundreds of dollars on phone that I'm using somewhere else, they simply have lost potential future revenue (and in this case Apple has too).

Apple may want to make more on the phone than what their current price is, but because they DON'T have a monopoly on cell phones, they can't sell these for more than $399 en mass. Which in reality shouldn't be an issue because they can obviously make a lot of money selling these at $399. It's only because of the government's policies that enable the carriers to set onerous rules on the use of Public airwaves that ATT and Apple can reach a revenue share agreement (your subsidy) and use those rules to lock us to a carrier.

THIS is the whole point of our complaint and it's bothersome to see otherwise rational people try to justify this for anything other than what it is, pure and simple -- A cash grab that is enabled by poor government policy. If we had free and open airwaves, along with the use of those airwaves, Apple would be content to take their profit on the sale of hardware, and we would all have more and better cell phone options.


Second, by not having the phone radio, Apple does not have to work with the carrier on implementation of some features (such as their new random access voicemail, or even the voice call itself), and along with that QC and technical support, not to mention a lot of overhead R&amp;D. They also don't have to deal with the collective headache of cooperating with a carrier on sales/administration/distribution. That would be where the $100 went. It's not just a radio chip.

Sorry, but your starting to sound like an Apple mole. Your kidding yourself if you think the cost of all that is really $100/phone. If it was we would never see $100 phones in the market.

[Ed Hansberry]

Apple makes over $800 on each iPhone sold and used on AT&amp;T's network.

http://apple.slashdot.org/article.pl?sid=07/10/28/1929203&amp;from=rss

[Miz]

Damn .. indeed, the more I argue, the more I sound like Apple fanboy and even defender of the carriers while in fact I am merely pointing out the exaggerations in people's conception. I do not disagree that today's affair with the cell phone business is a rather exploitative one, but to say such things as, for example "subsidy is a marketing hype" is too much of an exaggeration.

First, as Ed provided the link, Apple makes over $800 per iPhone. But it sells an iPhone for only $399. How does it make the rest? By taking it from AT&amp;T. So how does AT&amp;T make up for this? They lock consumers into contracts. Isn't this the whole point of whatever is currently called "subsidy"? The details of whether AT&amp;T actually paid for R&amp;D or only paid in a revenue sharing scheme is, for all practical purposes, irrelevant. Subsidy is not simply a buzzword used to fool customers, but a real business technique. The thing is, we are not happy with the way they arbitrarily lock software or features out of an otherwise functioning phone, which is more of an undesirable side effect of repulsive carriers.

And might I provide a little more context here: Asia-Pacific has no such thing as a $99 Blackjack, because there is no subsidy model there. You have a $99 Blackjack here in the U.S., and subsidy is how it becomes possible. It's not all bad.

Still, I do not disagree about having the government intervene at a good time with the right measures so that the cell phone industry can grow up like landline telephones did.

As for the $100 thing, I'll just let you win on that because I have no further evidence to show.