Walt Mossberg makes some good points on why it’s important to open up the mobile telephone industry. The carriers argue that they have to force long-term contracts and lock down access in order to offer subsidies. As Mossberg points out, this is a trap for consumers. I’m sure we’ve all seen those prepaid wireless phones they sell at Target and Wal-mart. They usually run about $60-$100 per handset with the expectation but not the certainty that they will get more money out of you. This price point is not far off from what the carriers charge even if you get a one-year contract. If the FCC mandated handset portability as they have in Europe, carriers would adapt their product to meet the market demands.
But the problem is even worse. The government didn’t require the CDMA companies to include a removable account-information chip, called a SIM card, in their phones. So, unlike people with GSM phones, Sprint and Verizon customers can’t keep their phones if they switch between the two carriers, even though they use the same basic technology. And, the government allows the GSM carriers to “lock” their phones, so a SIM card from a rival carrier won’t work in them, at least for a period of time. Techies can sometimes figure out how to get around this, but average folks can’t.
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.