[opendtv] News: When Mobile Phones Aren't Truly Mobile

http://www.nytimes.com/2007/07/22/business/yourmoney/22digi.html?_r=1&th&emc=th&oref=slogin

DIGITAL DOMAIN
When Mobile Phones Aren't Truly Mobile


By RANDALL STROSS
Published: July 22, 2007
WIRELESS carriers in the United States are spiritual descendants of dear Ma Bell: they view total control over customers as their inherited birthright.
The younger generation - Verizon Wireless, Sprint Nextel, T-Mobile and the namesake child AT&T - would make their hallowed matriarch proud. They do everything they can to keep power firmly in their own hands. It is entirely at the carriers' discretion to permit, or disable, the features that a factory loads into the newest phones. They also decide which software can be installed and how it may be used. Many wireless subscribers have ruefully become acquainted with gotcha clauses in their contracts.
In most European and Asian countries, a customer can switch carriers in a few seconds by removing a smart card from a cellphone and inserting a different one from a new provider. In the United States, wireless carriers have deliberately hobbled their phones to make flight to a competitor difficult, if not impossible.
If you, the long-suffering subscriber, decide that you have had enough and wish to try your luck with another company, you're free to pay your early-termination fee and go. But you most likely will have to abandon the phone you've already paid for, even when the technology is shared by the two carriers. (Sprint, for example, whose network is based on the CDMA standard, forbids the use of CDMA-based cellphones obtained from Verizon.) The odds are better than even that your cellphone is either locked by your incumbent carrier or forbidden for use on the network by your new one.
In the days when cellphones were inexpensive and could perform only one or two functions, they could be treated as disposable. When smart phones like the Palm Treo arrived, however, the cellphones became too pricey to abandon lightly when switching companies. Now the iPhone is here - if you're willing to pony up $500 or $600. AT&T has received an exclusive contract from Apple, so iPhone buyers have no alternative carrier. But the lack of choices rankles and is drawing more scrutiny than ever.
Two weeks ago, Representative Edward J. Markey, Democrat of Massachusetts, led a House hearing on "wireless innovation and consumer protection" and held up an iPhone as Exhibit A in his assessment that the industry exerted "far too much control over the features, functions and applications that wireless gadget makers and content entrepreneurs can offer directly to consumers." Why is it, he asked, that AT&T imposes a two-year contract with a $175 early-termination fee "even though the phone cost wasn't subsidized and a consumer can't even take it to use with another network provider?"
Wireless customers may soon have a few more options. In a coming auction for wireless spectrum that will be available in 2009, the Federal Communications Commission is preparing to set aside a third of the new capacity for bidders who agree to operate wireless services in a more open fashion.
Kevin J. Martin, the F.C.C. chairman, said in an interview last week that he had circulated a draft proposal among his fellow commissioners that would require the winning bidders to be receptive "to all kinds of devices and applications" provided by independent consumer electronics makers and third-party software providers.
Subscribers of the new services would even be permitted to take their phones with them, freely, from one carrier to another. Imagine: a genuinely mobile phone.
The pressure to provide consumers with more cellphone and software choices has been building for some time. In January, the F.C.C. took another step to loosen the exclusive grip of the cable operators' control over the set-top box that feeds the cable signal to the TV, a move that showed that the commission is open to changes that give consumers more equipment choices.
Then, in February, Timothy Wu, a law professor at Columbia University, published an influential paper, "Wireless Net Neutrality," which made a well-supported case that the government should compel wireless carriers to open their networks to equipment and software applications that the carriers did not control. Mr. Wu called his proposition a call for "Cellular Carterfone," referring to the 1968 Carterfone ruling by the F.C.C. The Carterfone was a speakerphone-like gadget that permitted a phone sitting in a cradle to be connected with a two-way radio. Over the objections of AT&T, the F.C.C. ruled that consumers could plug it or any phone or accessory into the network so long as doing so did no harm to the network. The ruling set in motion the changes that provided consumers with a cornucopia of equipment choices like answering machines, fax machines, modems and cordless phones. Among Mr. Wu's readers was Mr. Martin of the F.C.C.
The wireless carriers are fighting a cellular version of the Carterfone decision. They contend that they must exert control over all equipment used on their networks in order to protect the networks' operations. AT&T says in an F.C.C. filing that only the carrier has the incentive to oversee "the integrity, security and efficient and economical use" of the network.
MR. WU'S paper, however, shows that the landline telephone industry used identical arguments, predicting dire consequences were its customers permitted to use equipment from unknown sources. In 1955, when AT&T was fighting to exclude a gadget called the Hush-A-Phone, the company solemnly argued, "It would be extremely difficult to furnish 'good' telephone service if telephone users were free to attach to the equipment, or use with it, all of the numerous kinds of foreign attachments, which are marketed by persons who have no responsibility for the quality of telephone service."
As a postscript to the landline industry's resistance to opening its networks, Mr. Wu said in an interview last week, "Things turned out not just O.K., but great."
Companies like Google and Skype have called on the F.C.C. to open up more equipment and software options in the wireless industry. Google said on Friday that it would participate in the spectrum auction, committing a minimum of $4.6 billion, if the F.C.C. put into effect its "open access" proposals submitted earlier. Verizon Wireless, however, contended that Google's proposals would open its network to phones that Verizon had not approved and "that cannot reliably communicate with law enforcement," a grave problem "in an era of heightened national security concerns." 

In other words, stick with Verizon-certified phones, or the terrorists win.
The wireless industry is being dragged, ever so slowly and gently, into a scary new age - one that began in 1968 with Carterfone - that will require adjustment to reduced control. The industry can never credibly contend that its business practices foster competition and innovation as long as its customers are prevented from moving easily from one carrier to another. Last week, Representative Markey said: "How crazy is this? You can take your number with you, but you can't take your new $500 phone with you."
Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail: stross@xxxxxxxxxxxx 


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