Chris Butler, ATR’s Chief of Staff, wrote a piece that appeared on NRO”s The Corner yesterday explaining the dangers of the FCC and the U.S. Senate creating new regulations that interfere with the private contracts between providers and manufacturers.
The rapid technological advances in mobile technology are due in large part to the funding provided by exclusivity agreements.
FCC and Senate Flirting with Crippling Cell-Phone Regulation
If you like the frantic pace of technological development in the wireless arena, and fierce free-market competition between the iPhone, the new Palm Pre, and Research In Motion’s Blackberry, you should be concerned by the prospect of new FCC regulations.
Thanks to rapid technological advances, mobile phones are turning into handheld computers with more power than desktop PCs had just a few years ago. While consumers love the multiplying choices and the technological leaps, many don’t understand how they get funded.
The most important developments in mobile technology have required creative funding streams that have necessitated carrier exclusivity agreements. For example, the iPhone’s “natural” cost would be well north of $600, were Apple not able to create a subsidy for purchasers through an exclusive partnership with AT&T.
Exclusive and exciting technology generates more subscribers to the carrier, which allows it to subsidize the technology on the front end. Further, exclusivity creates incentives for new phones to be developed in partnership with competing carriers. (Case in point: the Palm Pre.)
Enter the dark clouds of FCC regulation. The Commission is set to determine whether these private contracts between providers and manufacturers are “anticompetitive” and “contrary to the public interest,” which would be a reversal of its own decision in 1992. Unfortunately, the Senate seems eager for such a reversal; today the Commerce Committee is holding hearings on the subject.
These hearings, and subsequent FCC proceedings, could be a bellwether of how the Obama administration and Congress will handle telecom and technological issues. If they embrace heavy-handed, meddlesome regulation, that will bode ill for one of the U.S. economy’s few remaining growth areas.— Chris Butler is chief of staff at Americans for Tax Reform.