There has been some complaining lately about the business models of the wireless companies—mostly driven by those who want to own an Apple iPhone, but who don’t want to be tied to AT&T as a service provider.
A recent story in USA Today picked up this theme, highlighting complaints about “handcuffs” on choices of hand sets and contract requirements. Their implied logical solution, of course, is for government to step in and lay a heavy hand of regulation on wireless providers.
What the story failed to note, of course, is that the wireless industry in the U.S. is pleasing consumers and growing like gangbusters in the process. It’s a highly profitable business, and the profits are channeled into research, development and deployment of dynamic advances in future wireless service. But, as the article points out, wireless providers do not make money on the phones and in fact usually offer the phones at a substantial discount which is subsidized through the service plan, which consumers are free to purchase or not as they see fit.
This model, of course, puts advanced wireless technologies in the palm of the hand of many consumers who would otherwise not be able to afford the full cost of the phone up-front.
In the U.S., phones are all but free and service can be half the price of European plans where the handsets are also full priced. Seemingly the “choice” is to spend a great deal more money for the same thing. And those “long-term” contracts actually allow a company to at least reach break even while financing the handset for the consumer—but you can avoid them if you like with a prepaid plan.
However, some just are not happy with this business model. Instead of letting companies determine their own business models and letting the market pass judgment on those models, they would like the government to step in and redesign the wireless industry to their liking.
This is an offensive idea to anyone who values freedom, which includes the freedom of companies to choose their own business models, subject of course to the judgment of consumers through the market. Which also includes the freedom of Apple and AT&T to enter into an exclusive contract for the deployment of the Apple iPhone under terms acceptable to both parties. Government should only get involved in such matters when there is a demonstrable problem, and then only lightly. And the rapid growth of the wireless market suggests that consumers (as opposed to activists) are not encountering too many obstacles.
Competition, not regulation, will determine future advances in the wireless market. Forbearance of regulation in wireless has enabled the advances that we enjoy today. To reverse that course would be a mistake.