Democrats criticize AT&T's exclusive iPhone deal
Editor's note: This story was updated at 1:35 p.m. PDT.
WASHINGTON--AT&T's exclusive right to sell the Apple iPhone drew complaints on Wednesday from Democratic politicians, though it was unclear whether they were planning to do anything about it.
"The problem with the iPhone is that the iPhone with AT&T is kind of like a 'Hotel California' service," Massachusetts Rep. Ed Markey said--in a nod to the Eagles hit, of course--during a hearing. "You can check out any time you like, but you can never leave."
Even though the hearing before the House of Representatives subcommittee on the Internet was supposed to be about "wireless innovation and consumer protection," the iPhone popped up among Democrats as a subject of criticism--and, among Republicans, as an example of the free market and consumer choice in action.
Neither Apple nor AT&T testified at the hearing.
To be clear, there are no proposed laws, or even talk of proposed laws, that would forcibly divorce Apple from AT&T. The wireless carrier reportedly has an exclusive deal to sell the iPhone in the United States for the next five years.
Rep. Ed Markey brandishes an iPhone while discussing the device at a Wednesday Capitol Hill event.
(Credit: U.S. House of Representatives)Michigan Rep. Fred Upton, the top Republican on the subcommittee, said of the iPhone: "Its early success is an indication that the wireless market is in fact working. That iPhone is the newest mousetrap and now other carriers will be working to top it."
A more likely possibility is for federal regulators to require an open network standard (that would permit all sorts of mobile devices from all kinds of companies to operate) when some of the valuable slice of spectrum known as the 700 MHz band is auctioned off early next year.
"I think it's time that a consumer become the decider of what their phones do, not their cell provider," said Rep. Mike Doyle, a Pennsylvania Democrat.
Google has been lobbying the Federal Communications Commission to permit just that, and FCC Chairman Kevin Martin seemed to confirm the agency was headed in that direction in an interview published Monday in USA Today.
On Wednesday, Markey applauded that approach. The FCC "should seize this opportunity to create open access opportunity for wireless service," he said, and brought up the agency's 1968 Carterfone decision, which allowed non-AT&T devices to be connected to the telephone network.
Update: Just to be clear, despite their gripes about the AT&T exclusivity and the $175 fee that accompanies ending the mandatory two-year contract early, Markey and some of his Democratic colleagues appeared perfectly smitten with the iPhone itself.
Markey said it "demonstrates the sheer brilliance and wizardry of the new technologies which are available in wireless today" and commented that its Wi-Fi capabilities were a "welcome addition."
The Massachusetts Democrat even gripped the gadget in his right hand while he delivered the iPhone-related portion of his opening statement, although it became evident upon later questioning from his fellow politicos that it wasn't actually his property.
"It's just to hint to my wife as to what I do want for my birthday," quipped the congressman, who turned 61 Wednesday.
Perhaps it belonged to the chairman of the full House Energy and Commerce Committee, Rep. John Dingell (D-Mich.). (A Markey aide said she wasn't sure.) Dingell--who, at 81, also happens to be the House's most senior, albeit not quite its oldest, member--remarked that he was still BlackBerry-reliant but was also "enjoying my new iPhone."
"Is there any reason why, if technical questions can be addressed, that consumers ought not have the ability to determine the devices they're going to have on the network?" he asked.
Consumers vs. carriers
Most Republicans present said they believed the wireless market is a competition "success story" and thus warrants no additional rules. "When we micromanage, when we regulate, we discourage capital flow," said Rep. John Shimkus (D-Ill.)
By contrast, most Democrats and at least one Republican said the FCC may need to take steps during the upcoming 700 MHz auction that they feel would better promote consumer choice.
Rep. Chip Pickering (R-Miss.) and Jane Harman (D-Calif.) said they urged the FCC in a recent letter to force the operators of at least some of the soon-to-be-auctioned-off airwaves to allow customers to hook up whatever devices they please and to offer that band at wholesale prices to companies that want to get into the wireless broadband space.
Those ideas drew renewed resistance from the two wireless carrier representatives on the panel--Ed Evans, the head of a start-up called Stelera Wireless, and Verizon Wireless general counsel Steven Zipperstein.
Both executives said there's nothing wrong with allowing the auction winners to institute open access rules if they please, but they argued that forcing such a business model is inappropriate when there's no evidence of consumer discontent.
Of the thousands of phone calls and e-mails that Verizon Wireless's 60 million customers place to the company each day, "we have not heard from our customers very much about the desire to bring other devices onto our network or the desire to enable Wi-Fi," Zipperstein said.
Pressured later by Rep. Lois Capps (D-Calif.), Zipperstein denied that Verizon Wireless offers its U.S. customers "fewer" features on their phones than does the European carrier Vodafone, which owns almost half of his firm. "We offer different features," he said.
But Jason Devitt, a Silicon Valley entrepreneur who founded the wireless applications start-up Skydeck, argued there's a significant difference in the freedom granted to wireless product developers in the United States vis-a-vis in Europe. He belongs to a coalition that wants the FCC to set aside a chunk of spectrum as an open "sandbox" where innovators could experiment with new wireless technologies without having to secure permission first from carriers.
"If I want to produce a GSM device that will work on Vodafone's network, I don't have to ask Vodafone's permission," which he claimed has led to some 800 devices that could work on that network, he told the politicians. By contrast, "if I want to produce a CDMA device that works on Verizon's network, I have to ask Verizon's permission."
CNET News.com's Declan McCullagh contributed to this report.
They didn't. They tried all the cell carriers to see who wanted to carry the iPhone.
Only Cingular (at that time) said yes. Everyone else including AT&T turned them down.
That's not an exclusivity deal. That's taking the only offer that was there. Only one company was interested in the iPhone. I'm sure if Verizon or Sprint or whomever wanted it, they would have it now.
Have any external info that backs it up?
This is analogous to the days of the AT&T monopoly when everyone was forced to rent a phone from a very limited selection because Ma Bell had to "protect the network from incompatible hardware". It was FUD then, and it's FUD today.
--mark d.
Still, I suppose that Steve Jobs has succeeded in his goal. He really has "changed the world"
I had Sprint for over 10 years. I have three other friends who all left and gladly paid the $200 cancellation fee to get out of their contracts to get the iPhone.
I was more inventive and sold my Sprint smartphone (although it was not very smart) to a friend and he took over my Sprint contract and I did not have to pay them to leave.
Yes, most people do not realize that you can "sell" or transfer your contract to someone else for the duration you have left.
I do agree that it would be great if they enforce open phones and no contracts when carriers want to move to the 700 Mghz Spectrum. That is what they should focus on.
it", or "Republicans don't get it".
Once and for all, its politicians
who take "bribe"/lobby money to decide what is best for this, or
any other country, who don't get it!
you didn't want (AT&T) to get something you did want (an iPhone).
I don't understand why you say it's the Democrats who 'just don't
get it'; what you don't seem to get is that you've been screwed by a
tying agreement. If you could have stayed with Sprint and still
purchased an iPhone, that's what you would have preferred to do,
no? What I don't get is why the Apple/ATT arrangement isn't , on
its face, illegal - tying arrangements are illegal -- where's the FTC?
GSM is based on TDMA. AT&T is GSM.
It's the FCC's fault that this occured in the first place, and the remnants of this awful split in technology has haunted carriers, and Apple alike. This is never going to change, since the architectural and technical underpinnings are broken in this country.
This is why Europe/Asia has better cell coverage and features - they picked their wireless technology more intelligently.
The government f'ed us, and the democrats are blaming Apple and AT&T??
I understand their frustration - and am a democrat. But as usual, no one wants to address the bigger issues.
The iPhone hardware also shows they make as much as 55% profit on each unit at such a high price.
Its Apple they should question !
First, you have no proof that Apple is greedy. Yet, you made an assumption that Apple is. Second, you made another assumption that Apple's profit margin is 55%. Again this is wrong. That number came from iSupply--only after second-guessing as to the actual value of the of the hardware components. In iSupply's assessment, they made no mention the other variables that could affect the margins. All iSupply did was figure out the cost of the hardware.
You already made two assumptions. Both of which are wrong. Don't make yourself to be an ass...well, I guess it's too late.
You probably don't even know the goal of any particular
business. Let me ask you this: if you were selling a product,
would you try to maximize your profit or sell of to break even.
From your comments I can see that you wouldn't want to make a
55% profit, right? What would your desired profitargin be? 1%?
Unbelievable. Here's a tip: don't go into business.
Sorry, but the Democrats lose on this one. This is a negotiated business contract between two companies, which they have no business in interfering with.
Cingular (now AT&T). They each had to make concessions that
would have incurred significant financial risk. As a result of this
significant financial investment there was an exclusivity contract.
So who the hell are you to say what one company can agree to
with regards to it's investment capital? It's the same with the
Patent, Trademark and Copyright system. If I hold the patent, I
get to say who can play and who can not. Maybe it's time for our
politicians to focus on more important and relevant issues
instead of meddling in private business ventures that don't
concern them.
1) iPhone will allow any Web 2.0 app to work on it (unlike
Explorer which is still not fully compliant).
2) iPhone does not allow the cell phone network distributers lock
out capabilities on it (unlike Windoz Mobile which was designed
to get your network providers control on your own device).
2) iPhone is hardware, so Apple does have control over the SDK
(but that can be worked around), because OS X on the iPhone
has no built-in (shall we say preferences of what can be run on
it) again, unlike Vista with builtin DRM (at OS level rather than
application level).
True you can not develop a full-fledge independent app on the
iPhone yet outside of Web 2.0. But that will eventually change.
Apple has demonstrated by being the first to wrestle DRM free
music from the large labels (something MS never sought to do,
so who do you think has your best interest at heart? eh?)
Face it, MS sucks from the end-user plain an simple because
they design with corporate IT in mind and not the actual
customer (unless you are a gamer and don't care about anything
else).
force Verizon, Sprint, and T-Mobile to get their act together and
offer competitive phones. When this happens, prices will come
down as service carriers COMPETE for your business. There
you go. Competition.
carrier for x period of time including Samsung, Treo, Motorola,
etc. Wnat the new RIZR phone? T-Mobile only...is that anti
trust? And Apple was greedy and wanted the exclusive deal?
Doubt that one, they want to sell as many as possible, I'm quite
sure ATT required the exculisivity for the same reason all
carriers pay to have exclusive phones, so they can entice
consumers who are with other carriers to move to them. The
wireless business has been run that way for years.
As for the phone being pricey, their profit margins are too high?
This was a huge gamble for them, of course they priced it high.
It appears that the phone has been a success so volume is high
and prices will eventually come down. Anyone remember that a
few years the razor that is $50 now was $500 WITH A
CONTRACT?!?!?! And that phone did nothing, it was just small.
You pay a premium for the latest and greatest technology,
nothing new. You are paying for R&D, and in Apple's case, for
the fact that they delayed there new operating system to ensure
this thing came out on time.
Get a grip.
about this iPhone this week) that claims the total cost for JUST
the components in the iPhone are around $280. Factor in labor,
packaging, and everything else associated with manufacturing
goods, $500 doesn't seem like such a premium.
yr term contract. (contract to subsidize cost of phone should be
optional). This will promote true competition in all areas.
What makes the iphone the phone any different? It's an phone locked into one provider, just like all the other ones...
us from the Big Bad Corporate America, this is what you get. A
Big Bad Waste of Time and OUR Money! If these liberal idiots had
done ANY homework on the matter before they went spouting
off on capital hill today they'd have found out that Apple
shopped this idea idea around to EVERY MAJOR CARRIER in the
country, and AT&T was the ONLY ONE to say "yes" to all their
requirements for the phone. Maybe AT&T should forced to share
all their iPhone infrastructure with all the other carriers now...oh
yeah, that's right, this ISN"T China!
I think its best that you realize the the republican political party at the national level is no friend of most small business either. They vigorously support anti-competitive practices, protectionism, and corporate welfare for large corporations. None of this is in the interest of small businesses. Not to mention the Bush administration and the last congress has wiped out any notion of republicans having any notion of fiscal responsibility.
I think its time that people start voting for PEOPLE and PRINCIPALS on a case by case basis and not political parties. Block voting for a party does nothing but create artificial divisions, support shadow agendas, and encourage corruption.
with the iPhone customers and those of any other cell phone
manufacturer or wireless carrier is that the iPhone is far superior
to any other product offered in the market. Neither Apple nor
AT&T should be punished for offer us such an amazing product,
especially at the reasonable (yes I'm serious) price that they
have.
Let those who know what they're doing do it best - companies
with REAL experts (aka those that actually work with the
products and services, not just talk about them) rather than
having the government get involved and dilute the possible
capabilities of these companies to offer us unique and
maginficent products to use with their own services.
*hops off soap box*
about Apple starting to dominate areas other than music players..
and what scares them the most is the way that they do it is by
giving customers products that they want to use - not that they
have to - but still allow them to do what they need to, and all in a
very simple but amazing way.
Memo to Congress: It all has to do with control.
I understad that all the other carriers wanted total control of activation and sales outlets. So they collectively turned down Apple. - Including AT&T.
Case in point:
""I think it's time that a consumer become the decider of what their phones do, not their cell provider," said Rep. Mike Doyle, a Pennsylvania Democrat."
Well, then perhaps it is very unfair that Apple is the only manufacturer of the iPhone, and perhaps "consumers" should also have the "right" to force Apple to change it into anything they want. Right, like that might actually produce something better. Yea, from now on we'll hold national referendums discussing what "we want" in a cell phone and what "we don't want," and then we can have Congress pass laws to force every single cell-phone manufacturer in existence to build the very same phone by outlawing all of them except one.
More and more it sounds like some people in Washington today literally got there by falling off of a tomato truck. Sheeesh. I wish they'd all hop right on the truck and go back to whatever Ignorant Utopia they came from.
Good grief, Congressmen! If you don't like any aspect of the iPhone you don't have to buy it, do you? Hey, Congressmen, last time I looked the world was awash in cell phones of all kinds of descriptions which manage to fit all kinds of tastes and preferences. Fancy that--and it was all done without any "help" from the Dumbo side of the aisle, if you know what I mean...;)
But really, isn't it silly comments just like this that explain why these people are sitting in Congress instead of working for a technology company? Next thing you know the Dumbos (which exist in quantity on both sides of the aisle) will be hankering to put their hands into the design of the next space shuttle...;) In that event, however, I'd imagine the number of astronauts who'd volunteer to ride the thing that Congress designed would be few and far between...;) Hmmm...maybe we could put about half of Congress in the crew cabin and see how things worked out...?
seller pushing multiple tied products. It is also illegal for Seller 1
to force a buyer to buy something from Seller 2 as a condition of
buying Seller 1's product.
The legal analysis is, of course, not that simple. However,
because of the way that all of the iPhone's functions are totally
dependent on buying ATT's services, Apple and ATT have a case
to answer. Of course, Apple's lawyers clearly think otherwise, so
it will be interesting to see if the FTC or some consumer group
takes this to court.
- Congress needs to go make themselves usefull
- by jmhal July 11, 2007 5:50 PM PDT
- Well, I'm glade I've been working and paying my taxes so I pay these morons to debate the iPhone and AT&T. I mean holy F***ing hell. Don't these people have anything else to due like figure out a way to secure our borders or here's an idea, run the damn country.
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