Wireless Providers and Exclusive Deals – Cutting Down on Consumer Choice

Just when you think you can relax! We’ve finally gotten to a comfortable place with cell phones and providers where the plans are comparable and we can take our numbers with us, making it easy to get the device and service you want whenever you want. Well, breathe a short sigh of relief. The latest disconcerting trend in providers’ attempts to maintain their customer base and find new ways to stay competitive is the “exclusive deal”. Is there a cool new device you are drooling for? Content you can’t live without? Sure you can have it all, but only if the device works, and the content is provided, on your network and you are willing to be locked into a 2 year contract. What happened to our flexibility? What happened to choice?

The iPhone is generating heated and emotional debate because of Apple’s exclusive long term deal with AT&T. Even democrats are criticizing the deal. One Massachusetts representative was quoted as saying “The problem with the iPhone is that the iPhone with AT&T is kind of like a ‘Hotel California’ service – You can check out any time you like, but you can never leave.” While I appreciate the analogy and the metaphorically handcuffed image it provokes, it isn’t entirely true. You can leave if you are willing to pay an early cancellation fee, but are you that desperate for a particular device that you want to pay $150 or more just to change providers? Of course the alternative is waiting out 2 years on a contract, by which time that device you so wanted will likely be obsolete anyways. Maybe he did have it right after all.

While the hype around iPhone keeps Apple and AT&T at the heart of this conversation, they are far from the only ones making exclusive deals out there. And these deals aren’t just around service; they span functional capabilities that get restricted, and prioritized access to preferred content. Yet we continue to accept this behavior and allow others not only to shape our experience, but also keep us from openly accessing content that is freely available on computers. This is a vastly growing infringement on the openness of the Internet that we have come to know and love; how much will we continue to put up with?

The FTC seems to feel, at least for the current moment, that this kind of data prioritization and exclusive deals can benefit consumers, but only because they can’t say yet what the overall benefits of legislation prohibiting this kind of activity would be. This is a very weak argument for a very strong movement against what we as Americans believe in regarding our freedom of choice and information. Some major content providers like Google are taking a stand though, and are lobbying politicians for change when they next auction off air space. They want legislation put in place that will not allow service providers to make exclusive deals for content and devices, keeping the airspace more flexible and open for consumers.

This struggle over how much control is too much will continue to be a problem as new technologies emerge and more and more mobile content is available. Instead of driving innovation and opening competition, this trend of exclusive deals does quite the opposite. I see the proof every day with the newsletters I receive whose main headlines on a regular basis talk of small mobile content providers/application developers who are being acquired by bigger companies. I also have learned the hard way myself that being a small company makes it almost impossible without the support and money of a big name to get your mobile application out there across providers and devices. This kind of limitation and censorship will stifle innovation.

This isn’t to say AT&T doesn’t have their work cut out for them in this deal. They will have to do some sweet talking to convince customers to switch from their existing plans if they want an iPhone. And they had to make major changes to their network to accommodate the iPhone voice calls. And they will have to do this for an extended period of time given their rumored 5 year deal. Most exclusive deals last something more like a year and then the market becomes more saturated as the price goes down as we all know. Who doesn’t own a Razr these days after all?

But the precedent a deal this large and so long term sets raises a lot of questions in my mind as to the impact on the marketplace and consumer choice. Will this long term deal keep the prices up and keep the customer base smaller than it would otherwise be because consumers just can’t afford the costs of the device combined with cancellation fees? And what happens when the competition makes a comparable device that keeps customers with them, making it difficult to achieve successful market share from a financial perspective? Will it only mean more and more exclusive content as a bargaining chip? We need to speak up now before our choice becomes so limited there isn’t really a choice left.