The U.S. mobile industry is largely built on users willing to pay outrageous fees and sign pricey service contracts in exchange for buying subsidized handsets.
Slate’s Matthew Iglesias caught my attention last week with a provocative post claiming “someone needs to smash AT&T and Verizon” for real innovation to occur in wireless. Yglesias’s piece leads with the fact that Verizon charged him a $30 upgrade fee when he bought the iPhone 5S last week one year into his two-year contract. And, he estimates, his monthly payments over the course of those two years cover the initial cost of his subsidized handset plus 30 percent a year. Leaving Verizon to buy a new phone from a competing carrier, of course, would incur a hefty termination fee.
That kind of price-gouging is nothing new for carriers, of course. For years they have charged outrageous fees for SMS despite the fact text messaging barely taxes their data networks, and operators’ early termination fees have been so onerous they’ve drawn the attention of federal regulators.
They can get away with that stuff because the massive price of building and operating a mobile network is high enough to stifle almost any new competition, as Yglesias rightly notes. Apple and Google wrested some control from the carriers by building wildly popular app ecosystems, but after an initial disruption the OS providers have settled comfortably into their roles. So Yglesias calls for government intervention but opines that handset manufacturers must take on their carrier partners “to really fix these problems.”
Via
Francisco Pontes Estevan
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