Today I released a press statement about the Federal Communications Commission’s hearing today on early termination fees for customers who cancel their mobile phone, cable or Internet service contracts early. Quickly after the statement was released, I got reasoned response from Ken Werner, a Senior Analyst at Insight Media.
As reasoned as Ken’s response was, however, it just doesn’t make much sense. Ken argues that, ” bundling of phone and wireless services does not enhance competition; it suppresses it.” He goes on to say that “Unbundling of phone and service sales would create a far more varied and vibrant set of offerings.”
But this simply isn’t true. By forcing unbundling—that means banning subsidized phones—we’re taking away consumer choice. Being able to buy a phone outright and then purchase a plan on a month-to-month but if Ken is right and “Google, the Android open platform, the Open Handset Alliance, and (maybe) even Verizon are moving in that direction,” then there is no reason to force a no-contract model on the wireless industry.
The way to true offer a “more varied and vibrant set of offerings” is to allow the market to continue to operate as it is. Because of exceptional hardware like the iPhone, Ken is likely right that Verizon and other carriers will open up to selling plans separately from phones, but consumers should still be able to buy basic phones that are subsidized through long-term phone plan commitments. Banning the latter option decreases choice, rather than expanding it as Ken claims.
It may take times for American business models to shift, but ultimately it will result in more choice than markets like Europe, where choice is limited by contract negotiation. To say that banning contract options will increase the variety of options is simply a contradiction in terms.