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Paying more for handsets if the FCC were to regulate subsidising

Discussion in 'Wireless News' started by Fire14, Sep 11, 2008.

  1. Fire14

    Fire14 Easy,Cheap & Sleazy
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    Wireless Carterfone Proposals Would Raise Mobile Handset Prices for Consumers

    A Phoenix Center analysis has found that US consumers would pay higher prices for mobile handsets if the FCC were to regulate the custom of subsidising mobile phone prices - the so called wireless Carterfone rules.

    "It is ironic that proponents of wireless Carterfone tout their rules as being 'pro-consumer,' because our analysis shows that such rules would likely drive up the cost of equipment with little, if any, reduction in wireless service prices," said Lawrence J. Spiwak, President of the Phoenix Center and co-author of the study. "The pricing implications of wireless Carterfone are about as anti-consumer as you can get."

    Carterfone regulation, named after a landmark FCC case in the 1960's, was originally implemented to prevent the regulated, vertically integrated Bell System monopoly from requiring customers to use only telephones provided by the Bell System. Those rules were largely lifted in the 1980's and 1990's for the landline telephone network as competition emerged, but several advocates have called for similar regulation to be applied to the U.S. wireless industry, despite the competitive nature of the wireless network environment.

    The study develops an economic model that demonstrates that "early termination fees and handset locking rules directly increase the equipment subsidies that wireless firms provide to consumers. If such practices were eliminated or restricted by regulation, then one should expect to see handset subsidies decline, which would force consumers to pay a higher price for those handsets. At the same time, those higher prices would not necessarily be offset by lower per-minute wireless service prices."

    "There is no free lunch," said George S. Ford, Chief Economist of the Phoenix Center and co-author of the study. "The typical consumer wants a free or very low cost cell phone, and mandatory wireless Carterfone rules would eliminate the incentive to offer such discounts. That will have consequences -- all consumers will pay higher prices, while only the few more sophisticated users would likely receive any benefit from such regulations."

    "Handset subsidies have helped put cell phones into the hands of millions of Americans, especially low-income households," said Thomas M. Koutsky, Phoenix Center Resident Scholar and co-author of the study. "Given the high stakes, we urge careful study and analysis of the costs and benefits of proposed regulation that would limit or even eliminate those practices."

    The full report (pdf file, 11 pages) can be downloaded from the Phoenix Center website.

    Wireless Carterfone Proposals Would Raise Mobile Handset Prices for Consumers
     
  2. Kalimotxo

    Kalimotxo Bronze Senior Member
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    This is an excellent study and I couldn't agree more with its findings...

    Yes, I'm annoyed by contracts and ETF's. Who isn't? While I don't like them I completely understand why they are there. That's why I'm willing to overlook contracts and phone locking when purchasing a new phone - because ultimately I want to pay a cheap price for the phone!
     
  3. QLR

    QLR RIP Note!
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    I agree with your sentiments! I'm willing to deal with the contracts since I was able to get a Pearl for $50... If the system only allowed for full retail pricing, I will still be stuck with my 3 year old LG VX3300... And I don't think that the phone makers will lower their phone prices... Or the reductions will be minimal as many will be vultures waiting for a bargain! I do wish that more carriers allow the user to have an equivalent, conventional postpaid plan without a contract if the customer brings his equipment... If T-Mobile can do it, what's holding Verizon, for example, back?
     
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  4. KyleAndMelissa22

    KyleAndMelissa22 Woot Woot, Splat !!!
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    If you can go your entire contract with a locked phone,
    IMO, they should unlock it when your contract is up, to be fair,
    this way you can take "your" phone elsewhere if you want to.
     
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