more on Locked In a Cell: How Cell Phone Early Termination Fees Hurt Consumers

[David Farber <dave () farber net>]

Begin forwarded message:

From: Andrew Lippman <lip () media mit edu>
Date: October 10, 2005 6:36:56 PM EDT
To: dave () farber net
Subject: Re: [IP] more on Locked In a Cell: How Cell Phone Early  
Termination Fees Hurt Consumers


It would be nice if the simple economics were that the longer  
duration contracts underwrote the phone discount, but the carriers  
are not that simple.  The longer contract avoids churn, simplifies  
planning and also pays for the phone.  I have not found a deal where  
I could buy reasonable service alone without the term.  Locking you  
in is the name of the game.  I have a monthly contract from Sprint,  
but it was the only one I could find with digital access.  It is more  
expensive.

The larger problem is that the phone subsidy means that cell phone  
manufacturers are separated from their users, so they lack the direct  
feedback that would give better product iterations.  In a handful of  
countries, this is illegal (e.g., Finland, where Nokia is bigger than  
the carrier, I guess.)  It is perfectly reasonable to require that  
they offer competitive shorter term contracts, and longer options for  
those who want the deal with the subsidized phone included.  That  
latter option ought to bring cost savings via carrier mass purchasing.

It's you own political choice as to whether you think this is a  
matter of legislation rather than normal competitive business  
practice.  Personally, I am suspicious about the synchrony of the  
carrier's competitive terms...

andy lippman



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