Wireless Whining

by on July 18, 2007 · 4 comments

This has to be one of the sillier critiques of the wireless industry I’ve seen:

Murray suggests that termination fees make competition between wireless carriers virtually nonexistent, as people are often unwilling to switch from one carrier to another until their contracts are fully expired. Worse still, the long lock-ins don’t always provide any proper consideration for consumers entering those contracts.

“We want lower consumer prices,” Murray said when referring to the $600 price of the iPhone. “Consumers don’t get a single dime of subsidy on the new iPhone, but it’ll still get them locked into a two-year deal or penalty to leave the carrier.”

It’s nonsensical to say there’s no competition because consumers only choose a wireless carrier once a year (or even once every two years). Most people don’t buy computers, cars, or major appliances more often than that, yet no one claims that makes those industries uncompetitive. If consumers get crappy service during their contracts, they remember this fact and switch to a different carrier at the end of the contract period. And consumers comparison shop before they sign a contract, so phone companies have as much incentive to keep their prices low in a contract-based system as they would in a system without contracts.

Moreover, the major carriers all give consumers the option to take a risk-free 14-day trial period on their phone. So I don’t see how you can possibly say consumers don’t know what they’re getting into. If they want to, consumers can get cell phones from all four national carriers, play with all of them for a week, and return the three they like least. Consumers aren’t being railroaded into anything.

The iPhone point also strikes me as especially silly. The iPhone is expensive because it’s a cutting-edge gadget that’s been on the market less than a month. The fact that some of the cost comes in the form of a 2-year contract, as opposed to an up-front sticker price, is beside the point. If you think the iPhone, 2-year contract and all, is too expensive, buy a different phone. There are plenty to choose from.

  • http://www.thenetguruz.com Mohd. Hashim Khan

    Even though a good plan comes out from different service provider, I am not keen in switching over again n again, since I purchased my first mobile, i have changed several handsets but my number and service provider is still the same!

  • http://www.thenetguruz.com Mohd. Hashim Khan

    Even though a good plan comes out from different service provider, I am not keen in switching over again n again, since I purchased my first mobile, i have changed several handsets but my number and service provider is still the same!

  • http://www.mobilediner.com Chris Parandian

    Carriers have an ETF to get some ROI on the consumer (cost per gross add) and the carrier subsidizes the cost of the handset. With the iPhone, its hard to argue that at $600 a pop with a substantial service plan (you are going to want the full functionality of the device) and you can’t take the phone to another carrier — that the ETF is necessary… On that note, you will see the biz model evolve over time. If folks are willing to pay over $500 on a phone – no longer a need for the ETF (VZ already prorates).

    Best, Chris
    http://www.mobilediner.com/

  • http://www.mobilediner.com Chris Parandian

    Carriers have an ETF to get some ROI on the consumer (cost per gross add) and the carrier subsidizes the cost of the handset. With the iPhone, its hard to argue that at $600 a pop with a substantial service plan (you are going to want the full functionality of the device) and you can’t take the phone to another carrier — that the ETF is necessary… On that note, you will see the biz model evolve over time. If folks are willing to pay over $500 on a phone – no longer a need for the ETF (VZ already prorates).

    Best, Chris
    http://www.mobilediner.com/

Previous post:

Next post: