This is based on CA state law, and (from the Mercury-News link in the post):
Whether Sabraw's ruling will stand isn't clear. Experts say an appeal is likely, and the Federal Communications Commission is considering imposing a rule - backed by the wireless industry - which might decree that only federal authorities can regulate early termination fees.
So does this mean it's time to buy a Sprint phone (or even iPhone, if the ruling applies to all carriers) in California on a long-term contract and then break it immediately? Before they change policies?
The fact that the cellular industry still has ETF policies and hardware lock-in is really sad. I mean, imagine if you had to buy your computer from your internet provider, and then it only worked with that provider. Switching from Comcast to Verizon would mean buying a new computer, and agreeing to some two year contract.
The fact that the iphone would cost $399 instead of $199 is not a valid argument in favor of the ETF lock-in. I'd rather actually own my hardware, instead of what basically amounts to leasing the hardware with a modest down-payment and a hefty penalty if you try and switch carriers or end service.
Just like with cars, some people may find it more advantageous to lease their hardware. Good for them, let them lease and make an ETF part of the agreement... but give us an option to 'buy the car' (or iphone).
You already have that option with pretty much every phone except the iPhone. Every carrier will let you buy the hardware at an "unsubsidized" rate, and then get a contract with a higher monthly price, but no lock in. It's just that no one does it, because it is so much more costly.
I was very frustrated when I bought a Nokia N82 so that I could have an unlocked GSM phone, only to find out that the only service that works in my area is AT&T anyways. But hey, I already bought my phone, I should just be able to get a non-contract plan, especially if I'm willing to pay the full (phone-subsidizing) price each month, right?
Nope. You can't get a normal monthly plan without signing up to at least a one-year contract. I even had to pay for the freaking sim card, not to speak of the activation fee. So I paid something like $500-550 for my phone, sim card, and activation fee, and I'm still in a one-year contract, all for the same monthly rate that I would be paying if I had gotten a plan that came with a free phone.
Simple. Buy the iphone for $200, set aside $200 for the ETF. Your iphone is now $400. If you stay put for the two years, throw yourself a party or something.
I don't think the government should be in the business of invalidating contracts that violate no one's rights. Those that don't like the terms don't have to get cell phones - I don't have one for just that reason.
Just because I don't like someone else's terms does not give me the right to bring the government in to give me a "better deal". The moral principle (not the business situation) does not change even if there are hundreds of millions of people that feel the same way.
Would you like it if one of your customers or acquirers agreed to do something in writing and then came back a year later to sue you for better terms? The fact that the cell phone companies are bigger and more established does not invalidate this principle.
If you want quality and value straightforward dealings as highly as I do, be principled and don't buy things you don't like. Try to to change the culture by reason rather than through the coercive force of the government; do it this way, and what you fight for will last far longer than some bullshit court ruling.
One of the primary illegitimate means of preserving oligopoly and other states that economists characterize as "market failure" is regulation. For small-time examples, see the crooked politics and business licensing laws of Louisiana. For larger ones, look carefully at FDR's 1933 National Industrial Recovery Act, which, among other things, actually legalized cartels. Although the act was declared unconstitutional in 1935, both government and business were further corrupted thereafter.
But not all cases of monopoly or oligopoly should be considered harmful - businesses that win such positions by the strength of outstanding execution or innovation (Alcoa in the 20th century, for instance) should be left alone.
What I advocate is removing the government crutch that keeps some businesses in unnaturally advantageous situations. Think of things like the farm bill, or the FDA.
What about business who have won their monopoly not by the strength of outstanding execution and innovation? Should they be left alone?
Are you saying that all anti-monopoly/oligopoly regulation is bad? If so, you need more to back this up than a couple of examples of bad regulation. And if not, then you can't defend the telcos on general principle. You should explain what makes them the "good" kind of monopoly.
Only two categories of monopoly exist - businesses that use the government to maintain their position, and businesses that earn their position.
Examples:
* AT&T enjoyed a monopoly provided by the government; Alcoa did not.
* Aesthetic questions of instruction set aside, Intel is similar to Alcoa in that they earned their spot through execution (and knowing what's important; it's only obvious in hindsight that having the newest and biggest fabs anywhere trumps design in this industry.)
* Apple with iPod+iTunes. (Good)
* Google with Gmail. (Good)
* The United States Postal Service (Bad)
* Rail service through government-run Amtrak (Bad)
You don't even have to do without a cell phone if you don't want to be locked in - you can pay full price for the phone (usually ~$200 more), buy a used phone, or get one of those pay-as-you-go plan. That's what I did. Dammit, should have signed a contract and waited for the government to get me out of it.
"Dammit, should have signed a contract and waited for the government to get me out of it."
I'm pretty sure that you were just kidding, so I'm not directing this at you, but it is worth saying anyway: there are quite a few people (not all) that bought into subprime mortgages precisely because they thought they could get something for nothing, and that the government would "do something" (bail them out) if their overreaching got them into trouble. A fraudulent mortgage is a way bigger deal than a stolen phone, but the difference is just a matter of scale.
My impression is that most people who bought houses with problematic mortgages either didn't understand the terms, or got mortgages with low introductory rates and thought they could exit before the rates started resetting because the housing market was so hot they'd always be able to resell at a huge gain, or use their lower LTV to refi into a better mortgage.
And it's interesting that you bring up mortgages -- the clearest example of how your Libertarian ideology breaks down: what my new neighbor and a bank privately contract to do _will_ affect the value of my property over the next few years.
"Those that don't like the terms don't have to get cell phones" -- Well, cellphones operate in public space. There is limited amount of spectrum available, and the companies that decide to use it, must obey to certain rules. If these companies don't like the terms, they don't have to use the spectrum.
I'd like the goverment to get involved more into allowing fair access to devices, and allowing third party aplications to be installed in devices, without the need of the "blessing" of the carriers.
Imagine, if every piece of software you installed in your computer, have to be "aproved" by your ISP.
Well, that's how it is the current state in the mobile world, and that's why there is a lack of real inovation there.
There is no limit to the amount of greed. In this case, there is clear tacit collusion between carriers, as all of them seem to have early termination fees.
When you have few players in a market (restricted by the limited amount of spectrum), there is a great chance that free market rules wont apply anymore, and just saying the goverment should not get involved, is a way to say let the companies rape the customer as much as possible.
ETF do actually hamper inovation on the device space. All cellphones have to be bought and aproved by the carrier (who resell them at discounted rates), while hampering the adoption of inovative devices. Everytime you pick a verizon phone, and look at the ugly UI the carrier forced the device makers to use, you know the market is not working right.
THe problem, is that the customer is still getting raped. You end up paying higher monthly fees for voice/data/sms messaging, to make up for that device subsidy, yet the customer has less choices on the devices they use.
Look at Europe. They have much more rules in the wireless space to protect the customer, yet usage and the industry is booming there. A lot of inovation going on there (even the SMS was invented in Europe, not here).
If you really want more competition in the telecommunications industry, you'll find the FCC standing in the way. They don't serve any technical purpose anymore (except to keep technology down and to allow old radios to work), but they sure as hell get in the way of new companies that might compete with existing ones.
Keep in mind that without companies to build the radios and service the networks and so on that make the spectrum valuable, who would be able to use it, other than a few thousand engineers? What good would all the oil in Saudi Arabia do you if someone didn't know how to get it out of the ground, how to refine it, and how to build cars to use it? Remember that when you declare something like spectrum public, you inherently lose the ability to maintain everyone's rights.
"There is no limit to the amount of greed."
Not true - at and above a certain price for any good or service, customers won't buy. This is econ 101 stuff.
"limited spectrum" - you would do well to take a signals processing class. Spectrum is only limited in the physical sense (the electromagnetic spectrum is what it is), but beyond that, there are many ways to transfer more information across the same spectrum through additional processing. Surely you know about things like DSL and 802.11, neither of which were possible before cheap processors became commonplace.
Eventually I think the carriers will be forced to replace the contract+ETF with a standard loan, which isn't that different from a prorated ETF anyway. It will still allow subsidized phones and plenty of revenue for carriers, but it's a more familiar concept.
Whether Sabraw's ruling will stand isn't clear. Experts say an appeal is likely, and the Federal Communications Commission is considering imposing a rule - backed by the wireless industry - which might decree that only federal authorities can regulate early termination fees.
3e-3 cheers for the FCC. Sigh.
reply