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My Fellow Americans, We Really Do Have A Strange Wireless Market

· February 27, 2013

Categories

BARCELONA–I knew before heading out to Mobile World Congress that the rest of the world doesn’t treat wireless the way the U.S. does. But the degree of this difference didn’t hit me until I discovered the strange creature that is the dual-SIM phone.

Accommodating two Subscriber Identity Module cards in a single phone is not a matter of multiple redundancy, but of multiple choice. You can switch to whichever carrier has a better offer at the moment: free calling to a given person, more room under a data cap, better coverage, whatever.

And–contrary to my initial suspicion–these aren’t a niche product. Double- and even triple-SIM phones see wide use.

Put another way, while in the U.S. you usually have to dump your handset to switch carriers, overseas you can play them against each other inside your phone.

That’s a consequence of three features absent from most of the American market: a shared wireless standard, unsubsidized prices and unlocked phones. 

In the U.S., the government has not mandated a particular “air interface” since analog cellular. In those early days, the Federal Communications Commission required carriers to support the AMPS (Advanced Mobile Phone Service) standard to ease competition and roaming.

But as different digital-wireless technologies arrived, the FCC changed channels, allowing each carrier to pick its own system. That fostered competition between the GSM technology debuted in America by Sprint Spectrum (which, after a series of corporate transitions, became the T-Mobile we know today), the D-AMPS AT&T employed before moving to GSM, Sprint and Verizon’s CDMA and Nextel’s iDEN 

But it did not allow for much customer flexibility. Only GSM, with its SIM Cards, allowed for any easy phone portability. That early diversity of standards has faded as well, with only GSM and CDMA still around. LTE is replacing both for data; over the coming years, voice calls should finally migrate to LTE as well, leaving (in theory) only different frequencies to separate the carriers.  

At that point, we may finally get the interoperability that prevails in most of the rest of the world (thanks in large part to the European Union mandating GSM as its standard in 1987).

In other markets, carriers don’t all act as phone-procurement intermediaries. Handsets cost more without the usual subsidy (paid for in higher monthly fees that don’t shrink after the operator recoups that advance), but customers get to pick the phone that they want instead of the one that a wireless service thinks they want.

Getting the carrier out of phone procurement also means its SIM card slot should come unlocked. In the U.S., by contrast, carriers insist on SIM locking, subject to varying rules–AT&T won’t unlock them until you’re out of a contract, T-Mobile does so after 40 days of active service, and Verizon and Sprint require slightly longer waits on “world phones” they sell with SIM cards. 

(I’ve never seen the economic logic for SIM locking; early-termination fees should ensure that carriers recoup their subsidy if a customer bails out.)

T-Mobile is dumping the subsidy model, a move I applaud. But unless other carriers follow its example, phone manufacturers won’t have much of an incentive to push direct sales to Americans.

All of these peculiarities don’t stop the U.S. market from being where flagship devices like the iPhone make their debut. But as any look around the MWC show floor here can confirm, a great deal of lower-profile innovation–from advanced Android phones to cheaper models running Mozilla’s new Firefox OS–is either waiting for an announcement of support from a U.S. carrier or will never make its way here.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.