Since AT&T gained the exclusive US rights to the iPhone they have added two-and-a-half million subscribers to their rolls. Not a huge number compared to the world’s total number of wireless subscribers, estimated at two hundred and seventy million by the industry; but a serious enough number to put a dent in the competition.
The same is true for those who desperately want to use a Palm Pre phone but don’t have a subscription to Sprint Nextel. Or, we are told, those who are Google Android hungry but aren’t on T-Mobile…
The mobile phone market is one of contracts and exclusivity. Lock in a subscriber for a year, or even two years. Look after them reasonably well and maybe they won’t notice that the contract period is over and they are free to move elsewhere. Don’t take care of them, or confuse them over billings (a very popular complaint) and you lose that subscriber to one of the other carriers – especially when there is a new handset out there that is more attractive.
The providers are very aware of the power of an exclusive handset and they actively work with the manufacturers to get their own exclusives – and often contribute financially to the development process.
Uncle Sam has decided he doesn’t like this free market spirit.
The government sponsored a survey of wireless users and the Senate Commerce Committee met
recently to consider some of the results. There were complaints from subscribers about their contracts, billing practices, handset exclusivity, service, and some of the rural carriers, like Cellular South, complained about their inability to be able to offer a phone with even a touch screen; with all such product going to the big four.
The numbers quoted vary with each report I see, but more and more people and households are relying on cell phone service instead of a landline. The number doing so in younger households seems to be as high as 35%
and may have reached 20% across the whole field. By far the largest percentage of such mobile dependent households are renters rather than owners of the property they live in.
Many areas of the US have three out of the big four competing for your business, and the deals each offers – with the handset exclusivity and discounted prices thrown into the equation – are very difficult to compare to one another. But none of the big four offers truly national coverage. In locations where you might really need phone service in an emergency, you are often not likely to be able to get any coverage at all. Stray off the freeways in rural America and those bars disappear fast, a situation that has become much worse since the end of analog service. It is the smaller carriers that are providing in-fill service for smaller communities and along strategic roads that are neither freeway nor US highway coded.
As a glimmer of some common sense, Verizon has recently been talking of making their Samsung and LG exclusive handset contracts only six months long. Sprint Nextel has already announced that they will only hold an exclusive on the Palm Pre for just six months. There is probably no commercial problem with either of those things happening. Very few people will get fed up with their new phone toy in just six months, and if something new comes along in a year’s time that really catches their eye they will switch anyway. By offering those shorter terms, the two companies will probably hold regulation away for a little longer. But that regulation will come.
Consumers' Union reported to the committee that while carrier costs were reducing – with all their infrastructure basically in place and depreciating – costs for the consumer were rising, with an average $506 paid in 2007: 35% higher than the UK, for example.
Will the government come gunning for the latest version of AT&T all over again? No, probably not. They have a good chunk of the market, but it's but nothing like the total lock-in they had with landlines before the court-ordered break-up, that then became a voluntary divestiture on January 1, 1984. Senator Kerry suggested at the Committee hearing that AT&T’s monopoly prevented the development of other devices that could be plugged into a phone jack, like FAX machines and answering machines. Not surprisingly for a politician, he has a skewed view of history. The first telephone recording machine was invented
by a Danish engineer in 1898 and the first truly commercial machine, the Ansaphone, was launched in 1960.
Likewise the FAX was developed
by a Scotsman, Alexander Bain, in 1843, with the first commercial machine being developed by AT&T themselves – as the telephotographer – in 1924. The FAX machine was an important communications device during WW-II for secret messaging across the Atlantic, but only became commercially popular when the Bank of America started installing them at car dealerships to speed credit decisions.
Personally, of course, my basic use-anywhere-in-the-world Samsung will continue to be in action for a few minutes each week until it falls apart. That is not the case for my daughter who cannot wait to get out of dad’s phone clutches to get that iPhone. The Palm Pre? Forget it, ask any teenager. That’s not where the peer pressure is at all