iPhone's false bargain

Tag : mobile phones only


JUDGING FROM the pre-release publicity, the $199 iPhone is a marvelof the age, but it's also a lure for people to sign with theAT&T mobile network. Despite its many charms, the iPhonecontinues the uncompetitive practice in which cellphone companiesmaintain tight controls over which phones can be used on theirnetworks.

AT&T and Verizon, the two largest providers, say that they favor openness, buttheir business plans are based on control of the telephones as wellas their wireless networks. That's not the case on theirold-fashioned wired service, where a customer can connect anyphone, fax, or answering machine. The new iPhone is a bargain onlybecause AT&T subsidizes the prices in the expectation that itwill recoup the money from a long-term service contract, minimumtwo years.

The cellphone companies say they sell phones below costs to attractregular customers, and perhaps this marketing technique wasjustified when they needed a reliable revenue stream as they builtout their networks. But mobile phones have become almost asubiquitous as their wired counterparts.

After failing to make a deal with Verizon on the first-generationiPhone, Apple turned to AT&T, where it got kid-glove treatmentbecause of the success of the iPod music player. Apple received amonthly fee for every phone that AT&T sold. Apple, however,decided to give up the fee to help AT&T bring the cost of thenew phone down to $199. Is Apple being kind-hearted? Of course not.It seeks to dominate the market for high-end cellphones and all theapplications they are capable of performing.

AT&T and Verizon have become the dominant cellphone companiesin the United States, and while Apple may muscle its way to anincreasing share of cellular revenue, this battle of titans won'thelp the consumer. The big companies will divvy up the money andkeep monthly wireless rates high. Since the signals move across thepublic airwaves, it's time the public had a greater say in how theyoperate.

The wired telephone monopoly only unlocked its network in the 1970sbecause of a federal antitrust suit. There's no need for suchdraconian action here. But promises of cellular openness are beliedby the Apple deal.

The Federal Communications Commission should insist that thewireless telephone companies allow their customers to shop freelyfor their phones and let manufacturers compete for their business.Then perhaps the iPhone will be available, at a realistic price, toany consumer who wants one, and not just those willing to sign onAT&T's dotted line.