Wireless carriers lock out consumers

Beth Granger of Port Washington, N.Y., was among the first to rush out and buy an iPhone when they hit the market. She loves the sleek new device but hates her forced marriage to AT&T, iPhone's exclusive service provider. Although she had been a satisfied Verizon customer for years and had heard that AT&T's service in her area wasn't as good, she switched.

Now she'd go back to her old carrier if she could take her iPhone with her. But that's not possible; those carriers use incompatible networks, and the phone will work only on AT&T's.


SWITCHING IS DIFFICULT

Although iPhones come with a hefty price tag and no rebates from the carrier, the big U.S. wireless companies generally offer substantial discounts on phones to consumers who sign one- or two-year service contracts. Many phones work only on the carrier's network, and customers pay hefty penalties when they break their contracts. That effectively prevents consumers from moving among providers in search of lower price or better service.

It's legal for carriers to "lock" the phones that they sell into their network, but a 2006 ruling allows consumers to reprogram them. Most people are unaware of this. Even if they know, the process of unlocking a cell phone in the U.S. can be complicated and time consuming.

In Europe, Asia, and elsewhere, many cell phones come to consumers unlocked. Some phones have a SIM card that carries the data needed for it to work with a given service provider. In many countries, changing providers is usually as simple as switching the card.


LIMITED FUNCTIONS

U.S. wireless carriers, working with major cell-phone manufacturers, exclude or disable certain functions on phones sold in the U.S. The carriers might thwart personal ring tones, photo sharing, and Wi-Fi capability to push customers to the carrier's fee-based services.

As a result, U.S. consumers can do less with their cell phones than people in other countries, and they often pay more for similar services.

U.S. wireless carriers are unlikely to drop their lucrative strategies. It's up to legislators and regulators to encourage a truly competitive cell-phone market. One way they can do that is by enacting the wireless equivalent of the rules that have governed landline phones since the 1960s. They give consumers the right to attach any device they wish to their phone network as long as it does no harm, and led to innovations such as fax machines and computer modems.

In late November Verizon took a seeming step in that direction, announcing that it will by the end of 2008 provide customers the option to use, on its nationwide wireless network, wireless devices, software and applications not offered by the company. The news was encouraging but its full impact will not be clear until more details are available.

Phone locking, long-term contracts with stiff early-termination fees, and hobbled handsets stymie competition and consumer choice. Consumers Union, the nonprofit publisher of Consumer Reports, thinks that U.S. cell-phone users deserve the same advantages as consumers around the world. For more information, go to our Web site, www.HearUsNow.org.