Wireless Industry Politics: iPhone and Pre Show Where We are Headed

Things change pretty fast in the wireless industry. The re-definition of what an "unlimited" package should look like, and what features those packages should include are in great flux. Customers will get more capabilities and lower prices in their unlimited packages, which in turn is going to put pressure on traditional post-paid plans in general, and on "unlimited" plans in particular.

 

Against the backdrop of increased regulatory scrutiny of handset subsidies and exclusivity, one simply can note that the Palm Pre has just a six-month exclusivity window with Sprint Nextel, compared to the years-long deal Apple (News - Alert) signed. One suspects such long-term deals are going away.

 

The industry will not wait for its fate to be decided by government regulators, and will move voluntarily to offer customers the option of buying unlocked phones at full retail or buying subsidized handsets in exchange for contract terms that likely will change as well.

 

The change in device exclusivity rules will lessen the value of any such deals, and shift the balance of power in the ecosystem away from device manufacturers and back towards the carriers, a shift Apple had pushed in the other direction. But we likely will not see again any similar institutional bias of that magnitude.

 

Of course, since the value of any exclusive device deal is lessened, so is the incentive any mobile provider has to support such devices with marketing dollars. That likely means more of the burden will be shifted back to the handset suppliers. Basically, limited exclusivity means limited financial upside for any carrier.

 

So one might speculate that the "lack of support" the Palm Pre is getting from Sprint (News - Alert) Nextel, and the seeming nonchalance by Verizon Wireless about getting rights to sell the iPhone are related. Devices are important to consumers, and strategically valuable for carriers, but less valuable tactically as a marketing platform.

 

Oddly enough, by pushing "consumer friendly" reforms, policy advocates are giving carriers more power in the ecosystem, and reducing the clout device suppliers have. To the extent that much innovation comes from device suppliers, these moves might affect the pace and scale of innovation in a negative way, though nothing at this point would eliminate the relentless drive to churn out new features.

 

Strategically, wireless providers might be concluding that they have ceded too much power to device vendors, and sharply curtailing exclusivity helps them maintain more influence. You might call that an unintended consequence of "reform" moves, but the unintended consequences sometimes are longer lasting and more significant than the hoped-for changes are.