Phones in the U.S.A.

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.

CNET users constantly ask me why the U.S. cell phone market is so far behind Europe and Asia. Typically, they've lived in one of those regions (or even just visited) and are struck not only by the wider availability of high-end models overseas but also by the better reception. As reader Sbee says, "The U.S. cellular phone system is ridiculous. …It is an embarrassment to compare your new phone with [those of] your friends from Europe or Asia."

So what gives? Why are things in the States so different? Unfortunately it's not an easy question to answer, and if I had the time and the column space I could write a thesis detailing the many reasons. But I have to go for brevity here, so I've simplified it into three main points: competing network, carrier control, and cultural differences. Each of these factors plays a big role in explaining why U.S. users remain a bit behind our overseas friends.

For those readers who don't know, the United States uses two competing cellular networks. Sprint, Verizon Wireless, and a selection of smaller carriers such as Alltel use a technology called CDMA, while Cingular/AT&T and T-Mobile use another (and incompatible) technology called GSM. In contrast, GSM is the sole standard for Europe and for many countries in Asia (Japan and China also use both while South Korea uses CDMA). While free-market evangelists will tell you that competing technologies and a lack of government regulation are better for consumers, I'd say the exact opposite is true in this case. (Incidentally, 70 percent of CNET readers would prefer GSM as the sole technology in the United States.)

Let's take Europe for example. When you have one unifying technology (GSM), you can take almost any GSM phone and make calls, from Greece to Finland. But in the United States, the incompatible technologies prohibit roaming from CDMA to GSM and vice versa. The result is a mishmash of coverage where some users can get service and others can't. In contrast, employing only one technology eliminates coverage gaps and barriers to carrier interoperability. Remember when you couldn't send text messages to a friend with another carrier in the United States? Blame those competing networks. Arguing which technology is better isn't the point, but establishing interoperability is.

A single network standard also encourages the faster development of high-speed services such as 3G, which arrived in Europe and Asia far sooner than it did here. Instead of spending millions to build wireless broadband for two networks, developers have to create only one standard. That saves a lot of time, money, and resources. And when you throw in government benchmarks to introduce 3G services (as has happened abroad), carriers have more incentive to roll them out. Yes, 3G coverage is growing in the United States, but the networks remain relatively immature for the moment, which is why we see fewer 3G phones with fancy features. The networks just can't support them. Allocating wireless spectrum for these services is also an issue, but I'll have to save that for another column.

A single network also makes it easier for manufacturers. When Nokia introduces a new phone for Europe and/or Asia, it can make one version for the whole region. But in the United States, Nokia would have to introduce one model for the GSM operators and another model for the CDMA folks. Again, that takes more time, money, and resources. Most companies don't even bother with dual versions, including Apple, which plans to bring its iPhone only to GSM.

In many countries (it's certainly true in Hong Kong), the cell phone buying process goes something like this: You go to an electronics store with a huge selection, choose a phone of your liking, and then go to your carrier for service. In the United States, however, the vast majority of consumers purchase handsets directly from their carriers. Though that often entitles you to a free or discounted phone (who wouldn't love that?), you're choosing from a selection of handsets that your carrier already has chosen for you. What's more, that handset will come locked to that one carrier. Does that sound like real choice? No, of course it doesn't, but it's the way the U.S. market has developed. And it has a lot do with why our phone selection tends to be more limited.

This carrier-driven buying process ensures that carriers control the product pipeline. And they succeed by dangling free and discounted handsets in front of their customers. There are a lot of good phones (both GSM and CDMA) that never make it to prime time in the United States because they're not picked up by a carrier. Granted, some of those phones may go on sale here (like the Sony Ericsson K790a), but the lack of a carrier rebate make them too expensive for most consumers. Moreover, because GSM carriers are reluctant to support unlocked phones (handsets that aren't restricted to one carrier) and CDMA carriers restrict their use outright, there's much less consumer choice. And don't forget that carriers want to use features such as flashy multimedia to their advantage. If they can't figure out how to make money off of them, those goodies might never see the light of an American day. See my recent On Call for more on this issue.

How people use their phones also makes a big difference. For example, Japan was much quicker to adopt cell phone use and develop a superior network because of a number of intangible reasons that can't be replicated in the States. In a city like Tokyo, you have a much denser, more concentrated population that spends less time at home. Commute times are longer, people are more prone to use public transportation, and they are more likely to see friends out on the town than entertain in their homes. For these reasons, cell phones filled a real need that couldn't be served by landline phones, and there was more substantive demand for comprehensive networks and advanced handsets. A "cell phone culture" developed much quicker.

In contrast, cell phone usage habits are a bit different in the United States. People spend more time in their cars and are more prone to rely on their landlines as their primary connection. Geography also plays a role here. Compared with most European and Asian countries (China and India being two obvious exceptions), the United States covers a larger area with a more thinly spread population. As a result, carriers have to build more expansive networks over a diverse terrain to cover all those people. In contrast, the whole of Taiwan can be covered a little more easily.