Do carriers stifle innovation?

Editor's note: From now on, I'll be alternating On Call columns between answering your questions and discussing hot-button issues for cell phone users.

The fact that I need to ask this question shows that not everyone agrees on the answer. Customers and carriers often find themselves on opposite sides of this debate--customers want more features on their phones, and carriers often lock down those features--and until now, it has received little attention from government regulators.

For the last two decades, the U.S cell phone industry has taken one step forward and two steps back on just about every leg of its journey. Just as carriers and phone manufacturers tout new features, they also restrict old ones and lock phones to a single network (the scene in Asia is a bit different). Sure, you may get 3G access on your cell phone in the U.S., but if that same handset is also locked to Verizon Wireless and comes with restricted limited Bluetooth profiles, is it really that innovative? Of course not.

Fortunately, innovation-stifling carrier behavior has begun to receive more coverage in the mainstream and academic press, particularly amid the many raucous complaints that the Apple iPhone will be locked to Cingular Wireless/AT&T. In a paper published last month for the centrist think tank New America Foundation, Columbia University law professor Tim Wu criticizes U.S. carriers for a variety of restrictive practices.

"The wireless industry, over the last decade, has succeeded in bringing wireless telephony at competitive prices to the American public," Wu wrote. "Yet at the same time, we also find the wireless carriers aggressively controlling product design and innovation in the equipment and application markets, to the detriment of consumers." Media outlets such as the Washington Post and NPR's On the Media have covered his comments in depth with the Post predicting that carrier control of handsets is the coming battleground in telecommunications.

If you ask me, consumers and regulators should've picked up their battleaxes long ago. But as I said in a recent On Call column, carriers have influential friends in Washington, D.C., who represent their interests. And it's worth noting (yet again) that carriers aren't public utilities but for-profit business out to make money. That doesn't mean carriers don't make an effort to provide decent service, but it does mean they don't always have their customers' best interests in mind. In his paper, Wu highlights several examples and pushes for carriers to make big changes. Rather repeating his paper verbatim here, I'd like to highlight two carrier practices that I think are the most egregious. No matter which way you slice it, phone locking is just plain petty, and feature crippling is downright mean. And actions like these really do stifle innovation.

Customers are fond of complaining (rightfully so) about locked phones. Yet as Wu points out, it was only a few decades ago that the Bell Company limited the types of telephones that you could use on your wired lines. The practice continued unabated until 1968 when the FCC issued its landmark Carterfone decision, which stated that Bell had to open up its system to any device.

Wu argues that wireless carriers should be subject to the same requirement, as long as the other devices don't damage the network. Sure, cell phones are a lot more complicated than your landline, but I think his point--that the locked-phone model limits customer choice and discourages real innovation--is absolutely valid. After all, Carterfone paved the way for devices including answering machines and modems. The wireless world could certainly yield equally interesting new gadgets. We may have to shell out more for unsubsidized phones, but I think pricier models are worth it. Plus, landline phones have reached a commodity level since there's been better competition

It's no secret among cell phone aficionados that carriers in the United States exert tremendous control over what kind of features and services go in their approved phones. Players in a fiercely competitive business are less likely to offer features that they don't profit from. The iPhone/Cingular marriage may change this scenario somewhat--Apple doesn't like to give up control to anyone--but too often, phones leave a factory with a particular feature only to see it removed once they enter the carrier's store. For example, Verizon Wireless customers eagerly anticipated the carrier's first Bluetooth phone, the Motorola V710, but eagerness turned to anger when Verizon removed the Bluetooth object exchange profile, claiming network security issues. Verizon eventually settled a class action lawsuit over the issue, but the intent of the move was clear: since Verizon doesn't make money from Bluetooth file transfers, it wanted to force users to pay for its data-messaging service.

Verizon's not the only carrier that changes features at will. T-Mobile has gotten into a nasty habit lately of removing true world phone capability from its phones, and Cingular Wireless makes it difficult to use 3G phones, such as the Motorola Razr V3xx, for browsing third-party applications. Sure, carriers have a right to set standards for their networks, but not at the price of real innovation and consumer choice.

In addition to the above Carterfone recommendation, Wu suggests that carriers do a couple things. First, he says carriers should give full and clear disclosure to consumers regarding the limitations on their phones, including limits on bandwidth usage, restrictions of features and applications, and the conditions for phone locking. Also, he urges carriers to adopt network neutrality rules that let consumers use applications and view content of their choice. He may oversimplify the second issue somewhat, but I agree wholeheartedly with his first point. Shouldn't you have a full, printed statement--not in legalese--that details restrictions placed on your phone? I think so. Do you?