Show me the math!


So it seems to me that the whole exclusive, subsidized handset business model is causing the wireless industry a lot of grief – unnecessary grief.
For example:
1. The FCC was working with Verizon Wireless to create a national early termination fee policy. The nation’s carriers would have abided by the ETF policy, which would include pro-rated ETFs, and in exchange the government would have prohibited class-action lawsuits over ETF charges.
2. Google, Skype and others have been screaming for “open” networks, arguing that it’s unfair and just plain mean to tie handsets together with service. The din is such that Verizon Wireless has promised to open its network, and the FCC set open-access requirements on a large chunk of its auctioned 700 MHz spectrum.
3. Rural carriers are petitioning the FCC to outlaw handset exclusivity deals between carriers and handset makers, arguing that such arrangements are a snub to those rural residents desperate to get their hands on gadgets like the iPhone.
These various items all are related to wireless carriers’ widespread use of the exclusive, subsidized business model for handsets.
So, is this business model a bad thing? I can’t see that it is; after all, the federal government provides subsidies on a wide range of goods and services. Indeed, one could argue that welfare is a subsidy aimed at helping people back into the work force.
And other industries make use of similar exclusive, subsidized business models. After all, “free” satellite TV installation isn’t really free, it’s subsidized. And most new Toyotas are only available through Toyota dealerships.
My point is that the wireless industry isn’t inventing new and potentially illegal business models; industry players are simply picking and choosing from among a variety of well-established ways of doing business.
In fact, perhaps the only logical solution to this would be to require wireless carriers to supply the calculations driving their business model. It would be like the nutritional information supplied on food packaging, but would outline how much you’re really paying for your handset over a specific amount of time.
Of course, such a suggestion is ridiculous, which is why I fully expect to see it come up in the ETF or open-access debate shortly.

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