Why DoJ Won't Get You a Verizon iPhone

Posted by: Stephen Wildstrom on July 07, 2009

News (subscription required for full article) that the Justice Dept. has launched an antitrust investigation into wireless phone carriers probing, among other things, whether handset exclusivity arrangements violate antitrust laws, has again raised hope that AT&T’s exclusive grip on the iPhone may soon be broken. It’s not going to happen, nor will T-Mobile have to share the Android G1 and myTouch handsets or Sprint the Palm Pre.

I’ve written before about the problem of technological exclusivity, which can make contractual exclusives largely irrelevant. Pressure, or a suit, from Justice might force the mega-carriers to play more nicely with an assortment of small rural carriers who get frozen out by exclusivity deals, but it’s not going to do much to affect relations among the majors, unless the government plans to take the dubious and unlikely step of getting into the business of engineering handsets.

The problem is that the four big U.S. carriers use two incompatible technologies on a hodgepodge of frequencies. For a phone to work on a given networks, three conditions all have to be met: The phone must be authenticated on the network, it must have the right kind of radios, and the radios must operate at the right frequencies. Sprint and Verizon use both 2G and 3G versions of the CDMA2000 technology developed by Qualcomm. AT&T and T-Mobile use GSM standards developed by the 3rd Generation Partnership Program (3GPP) and the European Telecommunications Standards Institute. And no two carriers using the same technology share all of the same frequencies. The table below shows the details:

 
AT&T
Sprint
Verizon
T-Mobile
2G data GPRS/EDGE @ 850 and 1900 MHz 1X RTT @ 1900 Mhz 1X RTT @ 800 and 1900 MHz GPRS/EDGE @ 1900 Mhz
3G data UMTS/HSPA @ 850 and 1900 MHz EV-DO @ 1900 Mhz EV-DO @ 800 and 1900 Mhz UMTS/HSPA (AWS) @ 1700 Mhz up and 2100 MHz down

The bottom line is that 3G handsets made for AT&T, inlcuding the iPhone, will generally work in 2G mode on the T-Mobile network but not in 3G, and vice-versa, because of the frequency differences. Most European handsets will also have difficulty using 3G in the U.S. For example, the U.S. version of Nokia's E71 smartphone, the E71x is designed for the AT&T network and has 850 and 1900 MHz 3G radios. The European version is designed for 3G at the European standard of 2100 MHz. The iPhone does 3G at 850 and 1900 MHz for AT&T and 2100 for the rest of the world.

Things are a bit better in CDMA-land. Verizon phones will generally work--from a purely technical point of view--on the Sprint network. 1900 MHz-only Sprint phones will work on the Verizon network, but may get poor coverage in some places where a Verizon handset will do fine. The Palm Pre is an exclusive on Sprint but there's no technical reason why it won't work on Verizon--it has both 1900 Mhz and 800 MHz 3G radios.

In general, it's much easier to re-engineer a phone to run on different frequencies than it is to make it work on a different technology. A version of the iPhone that would work on Verizon or Sprint does not seem likely any time soon, no matter what Justice does. But Palm is making a GSM version of the Pre that will show up in Europe by the endof the year, and could come to the U.S. on AT&T or T-Mobile, more likely the former.

There are a handful of phones that offer both CDMA and GSM technology, most notably the BlackBerry Storm (Verizon), 8830 Global (Verizon and Sprint), and the forthcoming Tour (Verizon and Sprint). But the dual technology adds significant cost and also requires complicated business arrangments for roaming. I expect these dual-mode phones will continue to be niche products aimed primarily at corporate buyers.

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Reader Comments

Johnnu Bravo

July 7, 2009 12:03 PM

Again an over stepping federal government meddling in markets it has no business meddling with. Technological exclusivity does not violate anti trust laws. In fact without technological exclusivity there would be no competition or any incentive for wireless phone companies to create new technologies or offer phone plans at a competitive rate. If all phone companies had the same technology and handsets, then there would be no need for multiple carriers, and the lone carrier that would emerge could then charge an excessive amount of money for the service and handsets being provided. Again, government needs to leave the markets alone. They cannot control it and never will be able to. Capitalism has not failed us, a federal government with a socialist and communist mindset that wants to regulate all markets has.

James

July 7, 2009 12:19 PM

Great article on your view of the DOJ investigation and its potential outcome.
I agree with 99% of your argument and am an engineer in this industry.
Technically you are spot on. However from the big picture, the DOJ seems to be looking at these as communication devices with exclusivity. To most end users, it would seem, they could care less about the technical network stuff as most of the big 4 basically handle all the same work load (talk, data, messaging).
In all fairness, stopping it now before LTE really blossoms seems to make sense to me. But as for right now, it seems a little ridiculous.

dean

July 7, 2009 12:21 PM

more for siri/xm radio!!!

Ben

July 7, 2009 12:22 PM

This would be true, unless Apple has been developing a CDMA phone nearing the ending of their contract with AT&T.

Umm, what?

July 7, 2009 12:22 PM

All that takes to make one phone compatible with another is changing out the radio and a bit of code. If a carrier wants a phone bad enough it WILL happen. There are already plenty examples of this in the market, and you even gave one with the Pre going GSM for Europe. A phone doesn't need to have dual radios to work on either or network. Just has to be built with that network in mind. :) So if they did, which i doubt, rule against the exclusive contracts, apple would have a CDMA version out within a year if not sooner.

Mike

July 7, 2009 12:34 PM

It used to be that plumbing companies made their own pipes. These pipes were of unique size and thread to each plumbing manufacturer and were protected by patents. This doesn't exist anymore since the Federal government said that it was anti-competitive; if you needed your plumbing fixed you had to buy from the same manufacturer.

Mobile phones are as much a commodity as plumbing, save for the fact that the wireless industry is doing everything they can to prevent commoditization.

So, the road block isn't the 3 conditions you mention that prevent handsets from being used on any network, its that the U.S. allows competing stadards to continue to exist.

Lets switch to one international, GSM standard and cut bait.

There is no reason for competing standards anymore and there would be increased competition if handset makers could sell their wares on any network... and the reverse is true as well.

The only thing preventing this is the carriers.

This issue is no different than that of net neutrality... imagine if you had to be on a certain broadband network to get Business Week to load fast, or at all?

Anthony Nichols

July 7, 2009 12:40 PM

The real reason "DoJ Won't Get You a Verizon iPhone" is that Verizon doesn't have the iPhone... But all the other reasons make since too!

Rick Zabala

July 7, 2009 12:43 PM

RE: Why DoJ Won't Get You a Verizon iPhone:
Cell phone tech. Good writing, good story, good info for someone who is curious about how it works.

rjay

July 7, 2009 12:50 PM

Too many people waste their time piddling with their cell phones because they are afraid to spend a moment alone with themselves. Very important to check the weather when you’re at the beach soaking in the rays or to twitter that you’re sitting on the toilet waiting for the big event or you saw a green baboon on Main St. Make a call and communicate with someone or forget about it. All this PID crap is just that. People afraid to be where they are, doing what they’re doing, in the present. Instead they’re a bunch of sheep buying up every little piece of self diversionary technology that some money sucking cell phone company is marketing to make more money.

Sammy Susa

July 7, 2009 01:03 PM

I agree exclusivit probably doesn't violate anti-trust laws. I also agree that elminiating exclusive deals hinders technological advancement. But on the flip side, having technological exclusivity means there's no incentive for a carrier (like AT&T) to improve their capabilities and features (such as 3G coverage, tethering, MMS support, etc) when they know customers can't go elsewhere for the device. It is basically a system designed to hold customers hostage without consequence. There's an easy solution here. 12 month exclusivity limitations. I don't think it should be elminitated, but 3 year deals clearly have zero benefit to the consumer.

Chris

July 7, 2009 01:04 PM

Actually - the need to sell phones and services beyond connectivity is a myth. People pay for the best coverage at the best rate. I predict down the road - "cell telephone service" will be replaced with cellular isp service - with any phone being able to be used. Google will usher in the change. The companies actually take a hit on the phones - and if they did not sell them would have one less source of loss.

MPB

July 7, 2009 01:06 PM

the point is not that one company has a technology that makes it exclusive. I'm an electrical engineer. All of the phone technologies work basically the same way, the differences are merely kept to maintain the high prices pretending their stuff is better than everyone elses stuff. They have convinced us all that 2G or 3G or GSM is the best, but they're all basicalyl the same. If we set a communications STANDARD for ALL cell phones, the manufacturers would actually be forced to put in clever features to make us buy them. And of course, the prices would all go down on phones if you could buy one from anyone and have it work on any phone plan. Sorry I had to make you so wrong el-capitalista-Bravo.

Numbay

July 7, 2009 01:07 PM

iPhone with different chipset for corresponding technology should not be a problem. It is if Apple is willing to do it.

P.Wells

July 7, 2009 01:07 PM

"and the lone carrier that would emerge could then charge an excessive amount of money for the service and handsets being provided."


As if they don't already charge excessively. Where have you've been? In a cave?

p cohen

July 7, 2009 01:10 PM

Govt has to step to avoid monopoly and bad business practices.

Brian

July 7, 2009 01:11 PM

Maybe, though, the cellular carriers should provide SERVICE and not hardware. In response to Johnnu Bravo, why is there competition for land lines? Why should I go over one or the other? There is a variety of phone companies available, and you pay for the SERVICE, not for the PHONE. I would prefer the cell companies to focus on offering better services (ie, faster data rates, better coverage) than which new "hit" phone they'll have. At my house, I can use any phone I wish on my landline, however, the same isn't true for my cellular service...why is that?

nmg

July 7, 2009 01:12 PM

@Johnnu Bravo

What about the fact that people were able to jailbreak the iphone and get it to work on other carriers?

All the federal government is trying to do is have it so you can use what ever phone you want on the carrier of your choosing. Nothing socialist about that.

Which is what the DMCA was supposed to do, but somehow it's not being applied to this market.

Speed Racer

July 7, 2009 01:13 PM

It's pretty hard to take seriously an obviously political posting about a technological issue from a guy that can't spell Johnny...

Gary Avery

July 7, 2009 01:16 PM

This country is based on "free enterprise". The deal with Apple and AT&T was their deal. If Verizon, for example, wants a competing phone to the IPhone let them find one and make their own deal. The government should stay the hell out.

Cartoon Network

July 7, 2009 01:25 PM

Johnnu Bravo Capitalism and Communism both look great on paper. But in the real world no system is perfect and must be tweaked constantly by the participants of that system. Otherwise both systems become monsters in need of being destroyed.

Andrew W

July 7, 2009 01:31 PM

Smart mobile phones are not a commodity...they represent the leading edge of high-tech deveopment and mass production. If you want the next iPhone like device to cost 3 to 4 times more...then go ahead, limit exclusivity agreements, which help to share and spread deveopment costs. WHile you are at it, take away the right lock in customers for a year or two. Then the average joe will never be able to shell out the 600-1000 bucks up front, and the device won't reac the sales volume levels needed to lower the price to mass market levels.

There is no magic, no "free lunch". These things take billions to develop and build. The networks behind them take billions to upgrade and maintain. That's just plan old reality....and people need to understand that investors who take on these risks (and often lose) need to see a reasonable return. Also, the thousands of employees who build the devices and maintain the networks need to be paid. You cant do all that in a fantasy world where leading edge tech is some how magically provided to all for free.

Tom

July 7, 2009 01:32 PM

Johnnu,

Technological exclusivity serves as a way to lock customers in to a carrier and limit their choices. Let's say you have an iPhone and AT&T decided to jack up your rates. Would you be free to take your business to another carrier to get a better deal? As it is right now, to do so you'd have to throw out your iPhone and all of your purchased apps and get another phone with a different carrier. That is not something that should happen in a "free market".

I am also tired of people talking about "socialism" and "communism" when the government tries to regulate business. It's not either of those things. Trust me. But if you want to see the glory of laissez-faire capitalism, look no further than our current economic crisis which was caused by the government pulling out regulative stops from the financial institutions and letting them do whatever the hell they wanted. These guys ripped the people off hand over fist, so would you say that they shouldn't be regulated because that would be "socialist"?

Alex

July 7, 2009 01:34 PM

Stupidiest comment a ever saw.What in a hell setting up a single standart for all service providers has to do with an emerging lone carrier? Its like saying that federal safety rules for car builders would leave us with a lone car company. I guess you like to throw away perfectly good phones and pay for new one if you need to switch service providers. Another point - I would love to buy and use i-phone with many helpfull apps available but can't afford to do that due a crappy coverage and bad reception from AT$T service (been there and done that), so i have to stick with Verizon even so there is nothing close to i-phone. Do you call it a competition?

Robert

July 7, 2009 01:36 PM

$20 for unlimited texting. $30 dollars for unlimited data. $129 for unlimited talk. When unlimited texting was first released it was $5. On a technological basis, a cellular carrier could handle every text message it sends in one day for less than the cost of one, 1 minute phone call. All text messaging does is utilize redundant or available resources. If it can't be sent the first second it is sent, the network can retry as many times as they want until a connection is made. Unlike telephone calls, which require a two way, dedicated connection. It's a scam. Even at the lowest priority level, text messages should never take longer than a couple of seconds to get through. In really busy traffic, maybe a minute.

You know who

July 7, 2009 01:37 PM

Why VZW doesnt have the Iphone

Andy Rodriguez

July 7, 2009 01:39 PM

If you look at the iPhone not as a cell phone but as a mobile computer that can make calls, especially since you can reformat and crack it like a computer if it breaks or wish to have more featuers... Then ultimately, all we'd need is for an ISP type company to gain control and provide network service to make calls or use VOIP services on mobile internet connections... The Game Will Change.

ConsumerRights

July 7, 2009 01:45 PM

While I question whether exclusivity violates anti-trust laws, there is no doubt about the fact that it LIMITS technological advancement and is certainly anti-competitive. All the majors here charge an arm and a leg... hardly "competitive", and our handsets are hardly cutting edge compared to say, Japan. A simple look around the world destroys any argument that exclusivity promotes competition and technological advancement.

Robert

July 7, 2009 01:46 PM

Also, the iPhone was originally created for the Verizon network, so a CDMA version already exists. I am usually open to free-market, but when cellular providers close up the free market with contracts to get advantages for themselves, it never helps the customer. I was a verizon customer for years and never dropped a call or had no service and I am a nationwide traveler. With AT&T, I drop calls all the time and in the same places I had service with Verizon. Even my hometown gets better coverage with Verizon. Contracts witholding technology from the masses distracts the carriers from providing the best service to customers. It is a carrier's job to have as good of service as possible, not to have the best phones possible. A good phone like the iPhone is just about worthless if the company carrying it cannot offer good coverage.

ktek

July 7, 2009 01:46 PM

The author's point is ridiculous. The examples of the blackberry devices does not even make sense since they are all CDMA devices, at least in the US. A better example would HTC which successfully make the same phone models for both GSM and CDMA; so we know the technology is NOT a barrier. By eliminating phone exclusivity with carriers, it would force each carrier to provide better service to stay in business which is GOOD for consumer. If the Iphone is available through T-Mobile and/or Verizon, who here would chose to go with AT&T? If the same phone exists for multiple carriers, I will chose the carrier with the best price and coverage (for your area).

Steve Wildstrom

July 7, 2009 01:52 PM

@Robert--No, Apple originally discussed the iPhone with Verizon, but VZW rejected the terms and Apple went on to make a GSM, not a CDMA, product. If a CDMA iPhone exists, there's no evidence for it. Apple has never hired CDMA engineers to design it and they never submitted it to the FCC for approval.

Steve Wildstrom

July 7, 2009 01:55 PM

@ktek--You are wrong about GSM BlackBerrys. RIM make BlackBerrys in GSM and CDMA versions for AT&T, Verizon, Sprint, T-Mobile, and even iDEN versions for Nextel. And as I pointed out in the original post, three models--the Storm, the 8830, and the new Tour--are dual-mode GSM-CDMA

Mean Guy

July 7, 2009 02:02 PM

"--rjay"
July 7, 2009 12:50 PM
Too many people waste their time piddling with their cell phones because they are afraid to spend a moment alone with themselves. Very important to check the weather when you’re at the beach soaking in the rays or to twitter that you’re sitting on the toilet waiting for the big event or you saw a green baboon on Main St. Make a call and communicate with someone or forget about it. All this PID crap is just that. People afraid to be where they are, doing what they’re doing, in the present. Instead they’re a bunch of sheep buying up every little piece of self diversionary technology that some money sucking cell phone company is marketing to make more money."
This person's choice of words clearly indicate a chronic masturbator stricken with guilt and looking to divert that guilt onto others. Examples: "piddling with, afraid to spend a moment alone with themselves, on the toilet waiting for the big event, afraid to be where they are, doing what they’re doing, in the present, bunch of sheep, little piece, self diversionary, and sucking."

Probably missed a call while glazing his knuckles.

Sean

July 7, 2009 02:02 PM

@ Mike

A few problems with your argument.

1.Verizon (and Sprint, as well as any regional carriers on CDMA) would lose HUGE amounts of money on their investment in infrastructure if the US implemented a GSM standard. Cell phone towers are a little more expensive than pipe (even the copper ones). Using your pluming metaphor - you are talking about ripping out the ENTIRE Water/Sewer system in a municipality (costing tens of millions of dollars)! For what purpose? Because your $50 faucet didn’t work right? And how do you think these carriers will absorb that cost – by raising your monthly fees, or from the Government (since your plan seems to involve the DOJ making GSM the standard). The last time I checked cell phone companies are in the business to make money. A consumers best friend is competition.

2.If you want to buy a handset from the manufacturer, you can (at least for most networks, including the very paranoid Verizon)! Hope you’re ready to pay $400 for the same handset you get from AT&T and Verizon for $50 – because your carrier will take a loss on the handset to have you sign a contract on your data/voice/text plan (even carriers that don’t require a contract have been known to subsidize handsets).

3.How is this ANYTHING like net-neutrality? Can a Verizon customer only call other Verizon customers? Has AT&T blocked subscribers on T-Mobile? NO…

Great plan Mike – more expensive handsets and higher monthly fees!

Let’s not forget that it is rumored that Apple went to Verizon FIRST - a sign that handset makers can make phones for either technology with minimal changes and investment.

As mentioned in other comments before, dual radio phones are not the only solution...there are a number of phones that have a GSM and a CDMA models...

Homer

July 7, 2009 02:05 PM

Show me a market that functions without any government regulation. The fact is, all markets rely on government regulation to work, whether it's monetary, transparency, enforcement of contracts, the government plays a central role in setting up and regulating every market. So get off your high horse about "socialist and communist" governments already. What we're arguing about here is the degree of government intervention, and what is and isn't an appropriate role for government to play.

Dalmatian28

July 7, 2009 02:10 PM

This is the best news I have heard in a long time when it comes to cellphones. Hope this starts chain reaction. The first step will be to free up the phones from the service providers. That will make a job of the manufactures much harder so they will ask government to free up frequencies so they can all operate on same frequencies. Hope that government will force all of them to use LTE in order to avoid this with next generation of the networks. This should have been done long time ago!

RLT

July 7, 2009 02:10 PM

"Technological exclusivity does not violate anti trust laws. In fact without technological exclusivity there would be no competition or any incentive for wireless phone companies to create new technologies or offer phone plans at a competitive rate."

Oh really!

Remember when there was only one phone company? Remember when the government broke up Ma Bell and created all the little Bells and long distance phone companies? Remember all the new technologies and services that emerged from the break up that did not exist before?

Yeah that's right, government intervention was a bone for the telecommunications industry.

Nobody benefits from a closed system. There should be a standard. That way people can buy and phone they want and use it with any service they want. That's the American way. Not this product/service lock in.

Oh, FYI, Apple is looking at Verizon to be their new carrier.

Jackass

Andrew W

July 7, 2009 02:17 PM

I wouldnt say that any set Japan sells is superior to the iPhone. The iPhone and Blackberry are the cutting edge of SmartPhone technology, both created in North America. Also, costs in Japan are not lower. Try equipping your business with telecom in Japan and just see what it costs you. The other factor most dont consider when comparing telecom in America to Japan, Europe and Korea....the anternnas, support and infrstructure covers twice the area of Europe, much of it in significantly lower desity. Japan and Korea are only the size of California. The comparison is apples and oranges when some of these broadband coverage stats are thrown around. Every major metro in te USA has 4 to 8 cellular providers, and at least one telco and one cable wwire everywhere. In addition, business in concentrated areas have a choice of several fiber based services. America has more tech, or more variety...availible in more places than most countries. In those coutries where consumers may pay less $$$ per gigabyte as indiviuals...the govt is subsidizing somehow. And guess what, everyone pays for it in taxes. Once again...no magical free lunch to be had...

Steve Wildstrom

July 7, 2009 02:49 PM

@ktek--You are wrong about GSM BlackBerrys. RIM make BlackBerrys in GSM and CDMA versions for AT&T, Verizon, Sprint, T-Mobile, and even iDEN versions for Nextel. And as I pointed out in the original post, three models--the Storm, the 8830, and the new Tour--are dual-mode GSM-CDMA

AnalogPhreak

July 7, 2009 03:01 PM

MPB States:
"the point is not that one company has a technology that makes it exclusive. I'm an electrical engineer. All of the phone technologies work basically the same way, the differences are merely kept to maintain the high prices pretending their stuff is better than everyone elses stuff. They have convinced us all that 2G or 3G or GSM is the best, but they're all basicalyl the same. If we set a communications STANDARD for ALL cell phones, the manufacturers would actually be forced to put in clever features to make us buy them. And of course, the prices would all go down on phones if you could buy one from anyone and have it work on any phone plan. Sorry I had to make you so wrong el-capitalista-Bravo"

Right on, dude.

I know this is off topic, but much of the same goes for the ole "standard" phone switch down at the CO. The phone company tries to sell me caller ID for $8-12 a month when it is already built into the software/firmware on every port on every dang switch manufactured nowdays. "They're killing me..."

LeftCoastBlue

July 7, 2009 03:02 PM

@Numbay - I agree that there is no *technical* reason why Apple could not build a CDMA phone, but I agree with Steve and think there are two reasons why that is unlikely to happen. First, the CDMA business opportunity is quite small on a global scale; GSM is used in about 200 countries and CDMA in two: the US and Korea. That works out to about 3 billion GSM users against 100 million for CDMA. Second, Apple has a culture of limiting the number of variations of any product that they build. As things stand, they had to build a unique version of the iPhone for the North American market; had they built just a "world iPhone", it would have used the 2100 MHz standard, which does not work in the US.

Side note: if the US carriers had all adopted GSM back in the day, we would likely all have much better coverage than we do today. Recall that AT&T made the decision to convert their existing network from TDMA to GSM when they acquired Cingular with its GSM network; too bad that they didn't adopt the international standards for frequencies, too.

AnalogPhreak

July 7, 2009 03:05 PM

MPB States:
"the point is not that one company has a technology that makes it exclusive. I'm an electrical engineer. All of the phone technologies work basically the same way, the differences are merely kept to maintain the high prices pretending their stuff is better than everyone elses stuff. They have convinced us all that 2G or 3G or GSM is the best, but they're all basicalyl the same. If we set a communications STANDARD for ALL cell phones, the manufacturers would actually be forced to put in clever features to make us buy them. And of course, the prices would all go down on phones if you could buy one from anyone and have it work on any phone plan. Sorry I had to make you so wrong el-capitalista-Bravo"

Right on, dude.

I know this is off topic, but much of the same goes for the ole "standard" phone switch down at the CO. The phone company tries to sell me caller ID for $8-12 a month when it is already built into the software/firmware on every port on every dang switch manufactured nowdays. "They're killing me..."

Micah

July 7, 2009 03:11 PM

In countries where the iPhone is offered by multiple carriers, the rates for data plans and voice plans are more competitive relative to other data and voice plans offered by the same carriers. I do agree that we need to have one wireless standard in the U.S., which will essentially happen with LTE and possibly WiMax. With LTE, Verizon, AT&T and T-Mobile will all be on it. Sprint is still considering LTE in addition to WiMax. We do need have industry standards to ensure users have the freedom of choice. Imagine if you spent hundreds of dollars on a phone in the 80s and that phone only plugged into a phone cord connected by AT&T. People would have been outraged. Consumer choice always spurs competition and innovation. Wherever competition is stifled, you will see consumers bear the brunt.

realitybites

July 7, 2009 03:20 PM

All you well-meaning pro-Verizon carrying the iPhone, me too, kind of opinionators are all forgetting one thing.

Apple chose not to go forward with Verizon not only because they wouldn't step up to the revenue sharing trough but also because their schedule for upgrading their network to the successor of GSM/3G was many years down the road and AT&T said they'll start tomorrow.

CDMA is going away and Apple was not getting behind a standard that had such a short shelf life.

Steve Wildstrom

July 7, 2009 03:27 PM

@realitybites--Not sure where your information comes from but Verizon is probably a year ahead of AT&T in migrating to 4G. Both will be moving to LTE--a 3GPP standard--at 700 MHz. But Verizon will be trialing service by the end of the year with commerical rollout beginning in 2010. AT&T has not given a date for commercial service, but it is not expected until 2011.

Daniel Wharton

July 7, 2009 06:15 PM

@Johnnu Bravo - I think the inverse of your argument may be true. If there were no exclusivity deals the phone companies would have to compete on things like quality of service, plan pricing, and subsidized pricing of devices rather than who can craft the more lucrative exclusivity deals.

The competition on the handsets is mostly between the handset developers, not the phone companies (Apple vs Blackberry vs Palm vs Nokia vs HTC etc).

Without exclusivity deals, I could go down the checklist:

- I live in NY, who has the best service? Verizon
- Which phone suits me best? iPhone
- What plan do I need?

Instead I have to chose between crappy phones with crappy SMS plans and bandwidth capping OR crappy service with great phone selection. How does the consumer win in that scenario? I wish what you said was true, but it seems like they are not trying to be competitive right now.

That being said, I don't believe exclusivity deals should be illegal. I just prefer they didn't exist and I really believe not having them would move us forward.

Joker

July 7, 2009 08:56 PM

the good thing about the article is that once again it sparked a discussion about jailing consumers with their service providers. I am afraid it is the only good thing . The "technical" arguments made me laugh. It's like Microsoft argued that it was not possible to separate MS Explore and Windows. All it took is a European court order and MS started selling Windows without Explorer preinstalled. Changing a couple of chips in hardware would not be much harder, sure Apple could do it quickly if they did not have a choice.

This great country was built on competition. Take it away and soon you'll get something completely different. It is natural for a corporation to protect its business advantages by any possible ways, including monopoly. It is a government’s task to set up rules to support competition.

Steve Wildstrom

July 7, 2009 09:09 PM

In response to several comments: Turning a GSM/UMTS/HSPA phone into a CDMA/EV-DO handset is a lot more complicated than just popping in a different radio. A simple radio swap will work at some level, but it won't perform at all satisfactorily. The two protocols are very different, and some aspects of CDMA, particularly power management, are really tricky. And as several posters have noted, CDMA is approaching the end of its useful life, making it harder to justify the investment.

Joker__XPEH

July 7, 2009 09:19 PM

the good thing about the article is that once again it sparked a discussion about jailing consumers with their service providers. I am afraid it is the only good thing . The "technical" arguments made me laugh. It's like Microsoft argued that it was not possible to separate MS Explore and Windows. All it took is a European court order and MS started selling Windows without Explorer preinstalled. Changing a couple of chips in hardware would not be much harder, sure Apple could do it quickly if they did not have a choice.

This great country was built on competition. Take it away and soon you'll get something completely different. It is natural for a corporation to protect its business advantages by any possible ways, including monopoly. It is a government’s task to set up rules to support competition.

Bob

July 7, 2009 11:50 PM

I'm an engineer who actually made cell phones for a while. It was during the 3G technology summits. The 2G technologies are very different and some are definitely better than others. (CDMA was by far the best) The international standards committees tried to have only one technology for 3G but all the countries couldn't agree. CDMA was clearly a better technology than TDMA or GSM but the European and Asian countries didn't want a technology based on the US Govt controlled GPS satellite system. So proposals were made for 3G technologies which tried to take what made CDMA the best and work it into a new technology that didn't depend on GPS. That gave us wCDMA (wideband CDMA aka UMTS) There was also 3G CDMA called CDMA2000 (aka 1xEVDO). Both are good technologies but they are very different so you can't use the same phones on each. Trying to make one phone work on both has challenges because its not just differences in the radios or signal modulation. There are core differences in the technologies.

Some countries adopted different 3G technologies early on because they wanted a jump on the rest of the world, like Japan which has an insatiable hunger for new technology. Others waited and took the best from existing technologies and from the new proposals. But there was no way all the service providers were going to just abandon their existing networks and equipment. They would go bankrupt starting over with the new technology, not to mention what would we use in the interim? So the trend moved to adopting a new air interface technology but continuing to use their existing backbone networks. So phones with the same new 3G air interface may not work on different networks with the same air interface because the networks are different.

The harsh reality is, there is no way to have one standard without some companies profiting greatly from it and others going out of business. Our government just won't do that and besides, they can only control what happens in our country. Do you think we can ever get all the countries in the world to agree on anything? Japan buys far more wireless devices than all of the US so why would they listen to our govt? One world standard just isn't possible and one US standard isn't either because it would put companies out of business.

All that being said, I do think exclusive deals are bad for competition. Apple should make their iPhone for everyone on every carrier. I also think locking people into contracts is bad too. The service providers, especially Verizon, start charging more for something when demand goes up for no reason other than they can. Then you have to pay more for it or pay an early termination fee and a new activation fee and buy a new phone on another carrier. So in effect, they have a captive customer base. I also hate that service providers (esp Verizon) lock out features of the phone to make you pay for their services to do the same things, like downloading photos. Then what's the point of buying a phone with all the latest features if you can't use most of them? (I always hack the phones and reactivate those features) Of course, the phone manufacturers still advertise the features the phone can do even though they know the service provider will block those features. I've seen so many people buy a phone expecting it to do something only to find out when it doesn't that it's the service provider disabling that feature, not the phone. That is just wrong!!! And should be illegal.

Open competition should be just that, open. If one provider starts charging too much for their service, I'd like to just take my business to another carrier. Even if I have to buy a new phone. While Apple making an exclusive deal with AT&T did reduce their cost of developing the iPhone, everyone on AT&T is paying for it even if they don't purchase an iPhone. AT&T just passes the costs on to its customers. Does anyone really think the service providers lose money on the phones they give you for a discount? No way after 2 years of paying to much for their service. I'd much prefer paying full price for the phone and not being locked into a contract. I wouldn't mind if they offered both options, discounted phone with contract or full price phone with no contract. At least you have a choice.

So in conclusion: (I know, about time!)

Let the phone developers develop the phones for all carriers and thus all customers. They will profit if they have the best product or the cheapest product. (imagine how many iPhones Apple could sell if everyone could buy one, not just AT&T customers) And we consumers will have less garbage on the market trying to be something another provider has. (ie. all the worthless "iPhone copy cats)

Let the carriers concentrate on service. They will profit if they have the best service or cheapest service or best coverage. Then they will have to gain customers by improving their networks or their pricing, not by making exclusive deals like the iPhone or Palm Pre which is far cheaper and easier for them. (I want a Pre but I refuse to go with Sprint because their network just isn't good enough, so I have to wait...)

Eliminating exclusive deals and buyer contracts keeps the competition truly open which will absolutely benefit the consumer on both fronts, phones & service, and will drive technology even more.

You can't have an open market with captive consumers...

(Just my humble opinion...)

Bob

July 8, 2009 12:13 AM

re: MBP & AnalogPhreak

There are huge differences between 2G and 3G technnologies. Communications isn't just about sending out radio waves anymore. That would be AM Radio. There just isn't enough bandwidth or even frequencies available to keep doing things the old way. Therefore new digital technologies are absolutely necessary.

TDMA was created to get more users on the old analog AMPS system because the demand was so high and the just weren't enough channels to use. TDMA was a very, very basic digital signal to allow 3 users to timeshare a single channel. GSM was better but still just digitizing the analog techniques. CDMA was a brand new way of putting multiple users on the same channel at the same time and was a definite break through. That's why all the new air interface technologies are based on CDMA, not GSM. It's the backbone networks that are GSM based but only because they already existed so extensively it would be way to costly to replace them. They aren't better than the CDMA networks, in fact, a good argument could be made they are worst. They can not route a call to a single use to multiple base stations to prevent call drops in tricky areas like CDMA can.

Now as people demand more and more of their mobile devices, we need to be able to send more and more information across the same about of bandwidth and frequencies. Not to mention the ever increasing number of users on the networks just means more users on the same bandwidth and frequencies.

The US can't use the European frequencies for our phones cause they are used for something else. We can't change that and neither can the Europeans or Asians. The frequency differences are a trivial part of making the phones compatible, it's the technology differences in the air interfaces and the networks that's the problem. But it can be done and has been done.

So one world standard just isn't possible.

(by the way, you two need to catch up with the digital world...)

Bob Lamberson

July 8, 2009 01:12 AM

The iphone is fun tecnology. I am a software developer and anything beyond a phone and tether for laptop access to internet is an un required extra. It is difficult, from a business standpoint, to "run a business" on a hand sized computer. So, leave the computer technology in the computer and the mobile connectivity in the phone, and simplify the use of the phone for everyone. No need for government involvement - if users would vote with their spending, the market will adust.

Joseph Ellis

July 8, 2009 08:11 AM

I see a great deal of people on here bashing AT&T's service...I don't see it. I live in Williamsburg, VA, population 11,000 and have 5 bars of service EVERYWHERE. The call quality is impeccably clear. When I first got my iPhone a year ago, I did drop calls every now and then but in that year, I have received several text messages from AT&T giving me exact locations of new towers that had been completed that improved my service.

As far as all of this talk about rates going up on contracts, this simply does not happen. When you sign a two-year agreement, your rate plan is locked in for those two years. My rates have not changed a single penny in the year that I have been on AT&T. If your rates are changing and you are on a contract, I would suggest you confront your carrier about the situation and contact an attorney.

Andrew

July 8, 2009 10:27 AM

Owning an iPhone is not a right. Verizon customers should be mad at Verizon for not working with Apple. AT&T took the chance to work on Apple's terms which AT&T was scrutinized by the industry for and worked out something that ended up being a huge success.

Verizon is going to be trialing LTE in 2010. Apple will not make an LTE iPhone until the coverage is readily available to the masses, not to just a couple of initial trial cities. The whole reason there was a 2G iPhone is because it is what Apple wanted not AT&T. Apple wanted as many users as possible to have some sort of service than for the few to initially have 3G. It's not like Verizon at the end of this year is just going to flip a Switch and all of a sudden they have LTE, it's going to take a few years and billions upon billions of dollars to upgrade the networks.

If owning an iPhone is a right and you are entitled to pick your service but get the device you want shouldn't we have that in all areas of business. I prefer the service of my Toyota dealership in town but I want to buy a Chevy, shouldn't the Toyota dealer who's service I prefer be able to sell me that Chevy? A great local american food restaurant has outstanding service and the Chineese restaurant doesn't, well I choose the service of the american style cafe but want Chineese food, shouldn't I be entitled to that?

I know my examples aren't really the same thing as cell phone exclusivity so I'm an idiot for even suggesting such a thing but we do have a free market. Here's a newsflash, you don't have to use AT&T's service! Verizon, Sprint T-Mobile all have their own smartphones that are comparable to the iPhone.

I know people will disagree with me on this but if Verizon had worked out a deal with Apple, I would be willing to bet that there would almost be just as many complaints about the iPhone not being available to AT&T customers and there would be former AT&T customers frustrated with Verizon's network because it doesn't provide the same coverage they used to have with AT&T. The fact is all providers have pros and cons in their networks. The iPhone being a great device just magnifies AT&T's deficiencies. Verizon or anybody else would be getting an earful as well if they had a device with such a strong following.

Vishal

July 8, 2009 11:18 AM

@ Johnnu Bravo
Sorry to be just another response to your post. Obviously you have not lived/ traveled in Europe, Asia or the rest of the world - hence your limited view regarding cell phone business.
All over the world you can buy ANY phone and sign up with ANY provider. That I think is competition my friend. Not what you call competition here in the US - where you are locked in with one provider and one phone (that you may not want) for 2 years! Phone companies here in USA have no incentive to improve call quality, coverage area, customer service, and rates since they know we are all locked in!

Where else do you pay for incoming minutes other than USA? I think its cheating when the caller is already paying for the airtime used to make the call - and we the receiving party pays for the airtime too! If these are the fruits of a free economy and free market then a hint of so called socialism is needed!

Its just the government's inability to stand up against the all powerful telecom lobby that we have to live with such bad service and bad phones.

summorgan

July 8, 2009 12:17 PM

How many decades have we had 'plug-n-play' landline phones? Why not the same with cellphones? I'm fine with paying for my service from one company but owning my equipment (that I purchase with no service contract requirements) from any manufacturer as I've had no issue with the same practice for landline service since the 80s. The monopoly of Ma Bell was able to be broken because there were standards in place and all the players wanting a piece of Ma Bell pie were willing to adhear to those standards. Standardization didn't halt competition in the landline market and it's not likely to do so in the cellular market either. Just as there are areas without DSL/broadband services, there will be areas that have poor cell service - much of that has to do with population density and the cost of delivering services to remote locations. What's to stop inter-carrier services in the mobile market? I hope nothing other than legislation (usually something that limits flexibility more than technology). Let me buy a phone but let me select a carrier for my mobile needs.

Jeff

July 8, 2009 12:32 PM

Apple knows what it is doing. If I was going to make a product that I could sell to 89% of the world vs. a product that I could only sell to 10% of the world I would definately make the GSM phone and not the CDMA phone. That is one of the reasons that Verizon always seems to get the crappiest devices. Verizon has already said that they are converting their network technology to LTE (which is the GSM evolution) over the next 2-3 years so why would I choose to invest in developing a phone for a handful of carriers on a dead end technology when I could make a phone to sell to the world. So Apple got the best deal that they could by signing with AT&T who is subsidizing $400 of the cost of the phone to the customer. Why should the government be able to force Apple to develop a phone for a market that they made a business decision not to participate in? The irony here is that this same government owns the radio spectrum and has collected billions of dollars from the carriers licensing that spectrum in all different frequencies most of which are incompatible with the competing carriers and non of which are compatible with the international frequencies essentially prohibiting any type of device standardization that could address the very problem they are investigating.

Jeff

July 8, 2009 12:57 PM

Vishal,

What are the rates that you are paying in the rest of the world? In the USA the average is $0.06 per minute which is comparable to Asia, but much less than the average $0.19 per minute in Western Europe and $0.11 in Latin America. Also, how much did you pay for your device? The iPhone that you can get for $200 in the US is $600+ outside of the US so you can take it with you to whatever carrier you want but you end up paying more for that benefit even with your free incoming minutes.

Gary

July 8, 2009 08:40 PM

I made a comment earlier about government staying out of private business. We do not have to worry about a monopoly as there are so many providers. As Andrew stated "owning and I phone is not right". I say it is a "choice" which I would prefer to make myself. I like AT&T because of the plans and phones they offer. I like Verizon because of their coverage. What I like most is that I am free to make a choice for myself without the government forcing companies to make decisions of any kind. If any company makes bad choices, they fail as it should be. Maybe Verizon's choice not to team up with Apple was a bad decision but at least it was theirs.

Bob

July 8, 2009 10:28 PM

There seems to be a common misunderstanding. Just because the (2G) GSM carriers went to UMTS doesn't mean UMTS is an evolution of GSM. If you look at Wikipedia, you'll see all the different air interfaces that are part of UMTS are based on CDMA technology. It's only the service providers switching network that is based on MAP which was GSMs network. And that was only done so the service providers didn't have to replace everything in the systems.

So while LTE is the "next set of enhancements" for UMTS, is simply is not an evolution of GSM. It's actually an evolution of CDMA. GSM ended with EDGE which is only a 2.75G technology.

As for frequencies, it is the Europeans and other countries that should have adopted our frequencies. Where was the cell phone invented? Here in the US. But many countries had already assigned other technologies to the frequencies we used so they just picked a different frequency. No one thought ahead to when people would want to travel world wide and take their phone with them. Nor did they think ahead to having a global market to sell the same product to. Now it's just too late to reconcile the frequencies as too many other technologies would have to change too because they are already using the frequencies.

Having made cell phones, I can also tell you that the different frequencies is not a problem for the manufacturers. The different technologies and how different companies implement the features and options of each technology differently is the problem. But that problem can be resolved and has been by some.

It all comes down to who drives the market, the end consumer or the service providers...

matrix2004

July 21, 2009 09:51 PM

@Steve Wildstrom

You say Apple has not hired CDMA engineers? Wrong buddy. They did hire them a few months back. Verizon has been talking with Apple and there is supposedly a prototype in existence for testing.

George

October 1, 2009 05:00 PM

Just to be difficult... I have yet to buy or use cell phones or service. I don't like being at the beck and call of anyone who has my ph#
I'm not on Facebook or Myspace and I don't use Twitter. But I do like owning AT&"T" stock and their dividends.
The Boob Tube, Brain Washing, burgeoning "anything for a profit" culture, has been eroding family values, decency and basic human survival skills for over 50 years & will be the downfall of our hedonistic technologically advanced civilizations.
Hopefully the meek (non-aggresive socialble fair minded people) will inherit the earth. Oh by the way, MEAN GUY? me thinks thee protest to much. You need to look in the mirror for your sicko choice of interpetation and personal attack on a stranger for your own personal gratification. What was your point? Shame on you. 99% of all people critize others for their own shortcomings.

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BusinessWeek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, Douglas MacMillan, and Spencer Ante dig behind the headlines to analyze what’s really happening throughout the world of technology. One of the first mainstream media tech blogs, Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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