Hardware subsidies are one of the greatest scams that have ever been perpetrated on American technology buyers--yet it has been going on in the cellular industry forever. Now, the cell carriers and their henchmen in the computer business are trying to bring the same evil game to netbooks.
You know the drill: Since American cellular carriers sell their own (mostly proprietary) handsets, when you choose a carrier you are locked into purchasing a specific family of carrier-specific phones.
Alternatively, if you want to buy a specific handset--the iPhone comes immediately to mind--you have to get a specific carrier's service. I did not want AT&T wireless service, but I did want an iPhone. So, I said goodbye to Sprint and hello to iPhone.
A large part of the cost of the handset is often hidden in your monthly cellular charge, both as a way to make hardware sales and new accounts attractive and to lock the customer in for a two-year term of service. Essentially, every time you buy a piece of cellular hardware, you end up locked in for two years of service with the carrier.
Apple's twice-the-speed/half-the-price sales pitch for the iPhone only told a part of the story, because AT&T raised its wireless service rates to more than offset the increased handset subsidy. Steve Jobs deserves special credit for that bit of reality distortion.
This all relates back to how our lapdog-for-the-carriers FCC organized American cellular services in the first place. Not the hardware subsidy itself, but the lack of compatibility between handsets and carriers. The subsidy is a natural consequence when carriers have near total control over their customers' handset choices.
It is not that way in most of the world. In other countries, the choice of a handset is not tied to your choice of carrier, at least not so exclusively. This means customers can often use a single handset across multiple carriers, so the choice of handset and choice of carrier are made independently of each other.
I think American cellular customers, businesses especially but also individuals, are not well served by linking handsets and carriers so tightly. Is it going to change? Not likely. Unless consumers speak up, Americans will probably continue to get second-rate cellular forever.
Now, the cellular carriers are trying to do the same thing with data cards and netbooks. Some are subsidizing the netbook selling prices and using that to sell a wireless card and a two-year service contract.
This is worked so well with cellular voice that it only makes sense the carriers would take the model to data, where the cards themselves are already subsidized by the carriers. But with netbooks it makes little sense at all, since these dirt-cheap machines are unlikely to perform up to consumers' expectations for two years at a stretch. A $100 netbook is hardly a steal when it comes tethered to a $1,400 data plan over the course of two years. The carriers know this, and consumers should be skeptical.
I do not know how we end these subsidies. I do not expect the government to intervene, though I do wish the FCC would take a deep breath and show some gumption for a change.
Hardware subsidies by wireless carriers are anti-customer and need to stop. Wireless hardware and services should be purchased separately, which will lead to enhanced competition in both areas and wider choice/lower prices for customers.
David Coursey doesn't much like any cellular carrier, especially whichever one(s) he has at the time. Feel the same? Disagree? Drop him a note using the contact form on his Web site.