A thought occurred to me on my way to work today listening to an Engadget podcast where Phil was reporting from Mobius. The problem I see currently with smartphones is that they can be held hostage by the carrier. They have a lot of functionality that has nothing to do with communication, true, but carriers can affect everything from when phones come out to what kind of hardware they have. This is done partially based on marketing or partnering agreements, and partly on what these companies see as their bottom line.
That’s all fine and good, you say? Maybe. We have a system of capitalism which means that money is the primary measurement of gauging anything. If phone companies can’t make money, they can’t be in business. Of course this is true, but just as many other industries have done in the last 5-10 years, the mobile phone industry has been consolidating. Verizon was one of the first when Bell Atlantic Merged with Vodaphone back in was it 2000? Then Deutche Telecom’s T-Mobile bought Voicestream a few years ago, and finally Cingular just merged with AT&T. Now it’s official that Sprint will be merging with Nextel, at least if the merger is approved by stockholders and the FTC. There’s even talk that Verizon might want in on this deal. If that happens, then T-Mobile would be puny compared to the others in the U.S. market and so would probably be gobbled up Cingular. So in a year or two we could basically have two mobile phone companies in the U.S. – one for GSM and one for CDMA.
Don’t get me wrong, a certain amount of consolidation is good for the consumer, but in general the less competition, the less hard a company has to work to win or keep you as a customer. You may consider 2 companies enough competition for each other, but the fact that they use different mobile technologies that are imcompatible means that consumers will have to buy new phones when they switch from one to another. This isn’t a huge problem if you paid $50 for a little cameraphone with rebates, but what about smartphones that start at $300?
The decisions that these companies make are not always in the best interest of the customer, but rather of the company and its stockholders. Often this does benefit the customer, but sometimes not. I’ve had first-hand experience with some of these decisions with T-Mobile’s Sidekick II. First and foremost, and the reason that I dropped the phone eventually, was the refusal on T-Mobile’s part to offer a solution to synching your phone data with MS Outlook or other personal information management tool, despite the fact that such a solution had been created. This was, as far as I can guess, a marketing decision. T-Mobile decided their target market for the phone wouldn’t be interested in it. Of course there were lots of people who bought the phone who didn’t exist in this target market and all of our pleas were just ignored. But even within this target market, there was a decision to cripple the ability for the phone to either record audio or to use recorded audio as a ring tone. You could listen to it on the phone – say wav file as an attachment to an email, but you couldn’t use that as a ringtone. This was much more a business decision. As phone companies have been forced to continually lower their rates for just talking due to COMPETITION, they have been seeking other sources of revenue, and ringtones is one of these. They concluded, of course, that if they allowed people to create their own ringtones, they might not be able to charge $2 for 15 seconds of “music.” When the Treo 650 came out a few weeks ago on Sprint, we learned that it would be available ONLY on Sprint for the rest of this year, and possibly until at least February, 2005. This was some kind of strategic partnering deal that Sprint and Pa1mOne must have signed. Admittedly this is better than the complete stranglehold of exclusivity that T-Mobile has over the Sidekick, but it still, I think, is bad for the consumer in general. Then we hear that Sprint would disable the Bluetooth functionality so that users could not use their 650 as a cellular modem. There was an uproar causing Sprint to say that there would be a patch to download which would remove this restriction, but this is nothing new. This kind of policy has existed for T-Mobile and Voicestream before it for years, mainly because they sell their own cellular modems for laptops and charge extra rates for these. Finally, the whole issue of why Wifi has not been made available for the Treo, I’m sure, is due in large part to Pa1mOne’s wanting to be in good standing with carriers. Let me explain. First of all, Wifi capability for a smartphone means that you could potentially use it to make voice calls via internet telephony/Voice Over IP. This of course, would mean that you would circumvent the whole model of minutes for cell phones and could significantly cut down on the number of those minutes. You wouldn’t even be using the carrier’s data network, but rather some other person’s (or your own) internet connection via wifi. While rates have gone down significantly over the last 10 years, they are still not low enough to where making this loophole available wouldn’t strip the companies of a decent amount of revenue. After all, if you go over your monthly allotment of minutes by just 15, you could end up paying a couple extra dollars per month. Multiply that by a few million, and you see how big a deal it could be. Smartphone manufacturers could certainly sell unlocked phones for at least the GSM carriers and they could be usable whether your carrier sells you that phone or you buy it from some guy in Indonesia. However, CDMA carriers like Sprint and Verizon do not use sims, the chips that you can move from phone to phone and thus use any compatible phone, at least they don’t yet. But even if they did, it would still be hard to find the phone in mainstream retail channels. The carriers stores themselves wouldn’t sell them, of course, but neither would places like Best Buy or Circuit city, or Radio Shack, which partner with various carriers to sell not only phones but service contracts. I’m sure their partnership agreements give the carriers a right to tell them which phones they can and can’t sell.
So, what’s the solution? To be honest I’m not exactly sure. I’m a little pessimistic, especially with all the mergers. There are a few possibilities that I see that could make all of this moot, but how realistic they are I have no idea. One possibility which I think is least likely is the making of cellular communications into a regulated utility. Already we have seen some municipalities like Philadelphia agreeing to make Wifi available for free to all its residents and visitors. The importance of the internet as a resource for almost everything from communication to information has accelerated in huge ways and will continue to do so for the foreseeable future, making it so critical a service that people will demand ubiquitous access. Even President Bush has hinted at free access for everyone being an eventual goal. But the telephone became an indispensable thing last century and what happened toward the end? It got deregulated! Not that regulation is necessarily a good thing, since it’s been known to hamper innovation. Another possibility is that an upstart might come in and one-up the big guys to provide something far more innovative than what these others could see. When companies merge with each other, they can often get so bloated that innovation is also hindered. We’ve seen this with airlines and Jet Blue, we’ve seen it with DSL and Covad, and we’ve seen it with the phone system and all the upstart VOIP providers like Vonage, Broadvoice, etc. You never know when one of these upstarts will come out of the woodwork and provide some new cutting edge technology like Wimax or a satellite-based system that makes cell towers irrelevant. While I’d love for something like this to happen, I can’t count on it, simply because these increasingly mammoth companies can throw all kinds of money at lawmakers to set up hurdles and roadblocks that make the innovators ability to offer these competitive service next to impossible. Yet another possibility might be that we start seeing some upstart electronics manufacturers offering devices that do everything, wifi, voice, etc., but these companies simply do not approach the carriers and sell only through the internet. I’m sure there are already cases like this, but as the percentage of the population who uses the internet grows, and the percentage of those who use CDMA phones (primarily in the US) decreases as countries like China and India become the dominant consumers, we may yet see such manufacturers become just as successful as the current major players like Nokia, Motorola, Sony-Erickson, and Samsung.
Which of these might happen, or which combination or other possibility that I haven’t even considered, I can’t say, but while things look somewhat bleak at the moment, you never know what could happen as new technologies come out, or new visionaries appear that can think up new ways of doing business most of us couldn’t imagine.
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While I’m generally not a huge fan of network TV these days, there are a few shows I still enjoy watching, and lots of sporting events still are aired on local channels, local news, etc. In the spring when we moved into our new house, we bought an HDTV and an HDTV satellite receiver and I subscribed to the Local channels and the HDTV package. But of course these were two separate deals. The local channels are only standard definition. Five or so years ago when I first got Satellite where I was living at the time, local channels weren’t even an option. Luckily some laws were passed that enabled satellite providers to offer the channels in local markets. So why can’t I get them in high definition? I called my satellite provider, DirectTV, and they said they would have to submit a waiver request for me to the local channels. After several weeks, I finally got a postcard in the mail saying that all but one of the broadcast networks had turned down my application to receive their content in high definition over satellite. Why? I’m sure there’s some kind of marketing or business decision behind these regulations but for the life of me I can’t guess why. Now, it’s true, I could receive these channels “over the air” with an antennae, but my attempts to do this have so far not met with great success. At least using your standard Antennae, I am sometimes able to receive CBS and a local PBS station, but it’s hit or miss. Occasionally NBC or ABC will come in briefly. Fox has never come in at all. I suppose there are special HDTV antennaes and I could actually install something on the roof, but the point is I shouldn’t have to. It’s inconvenient if nothing else. Can someone explain why these rules exist?