2 Comments

1. seva says:

   October 22, 2007 at 1:22 pm

   I don\’t know about terrific, since he skims over some very important points.

   for example:
   —-
   The carriers defend these restrictions partly by pointing out that they subsidize the cost of the phones in order to get you to use their networks. That\’s also, they say, why they require contracts and charge early-termination fees. Without the subsidies, they say, that $99 phone might be $299, so it\’s only fair to keep you from fleeing their networks, at least too quickly.

   But this whole cellphone subsidy game is an archaic remnant of the days when mobile phones were costly novelties. Today, subsidies are a trap for consumers. If subsidies were removed, along with the restrictions that flow from them, the market would quickly produce cheap phones, just as it has produced cheap, unsubsidized versions of every other digital product, from $399 computers to $79 iPods.
   —

   Considering all the other countries that offer unsubsidized phone, why haven\’t the market magically produced $79 phones as the author advocates?

   To me capitalism is a natural balance between consumer power and seller power. That\’s why I am uncertain why the author can complain about the Big Boys\’ \”legions of lobbyists and lawyers\”, but at the same time suggest that consumers need their own legal reform. Surely, just like with every other market-driven service, both sides have a right to demand the biggest slice of the pie?
2. Chris says:

   October 24, 2007 at 2:54 pm

   One Good Monopoly Begets Another
   As Mossberg points out, particularly for the CDMA phones, the carriers have control over which phones may connect to their network. Even you went out and bought a $79 CDMA phone, that isn’t enough to get it to work. You need permission and an account with the carrier – and a CDMA carrier won’t let you buy an account without a phone. So – who will pay an *extra* $79 when you already have a phone? This is for CDMA phones, a system largely unused outside of North America. So – the market for unlocked CDMA phones is miniscule, because the carriers ensure there is no value in an unlocked CDMA phone. GSM is slightly better, but even there, a GSM carrier can insist that you buy a phone with your SIM card, even if the phone you really want is down the street in another seller’s window.

   Carriers use their seller power to ensure that you always buy a phone from them, even if none of the phones they have is the one you want. The carriers have what is close to a monopoly on the spectrum they have licenced, and they are using that control to gain a near-monopoly on the devices for connecting to that spectrum. Leveraging one monopoly to get another is an activity that has long been frowned upon by anti-trust regulators.

   This is an important topic in Canada with the upcoming spectrum auction. Don’t let anyone from the federal government tell you this issue has never been raised to the government, either. In the comments to the spectrum auction is this item…

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