Is AT&T breaking the law by changing iPhone upgrade eligibility?
It's the question to ask today, when Apple is expected to announce the new iPhone, and as AT&T subscribers continue to see their upgrade eligibility dates moved up. From one perspective, changes in upgrade eligibility would seem like good customer service -- AT&T allowing iPhone owners to get the new model subsidized sooner. But, unless in a few hours Apple announces that iPhone will be available from other US carriers, the smartphone is exclusive to AT&T. The Federal Trade Commission and Justice Department often look critically at exclusive distribution arrangements, particularly if there is any hint of price fixing.
I've been reading about iPhone full-discounted upgrade eligibility changes for weeks, where a customer sees the date moved up many months to June. This morning, over at Apple Thoughts, Jeff Campbell asks: "Are you eligible? Find out today." He writes: "When I first checked mine months ago, I had my eligibility moved up to July of this year...I checked again on the AT&T website and found that not only had my phone eligibility been moved up but the other 4 iPhones on the account had also been moved up. Previously the other iPhones had varying dates of eligibility from August of this year to September of next year."
September of next year? AT&T moved up eligibility by 15 months? Well, hell, Campbell and other iPhone owners should be happy about that. I wonder if either the FTC or Justice Department will share the same sentiments. AT&T institutes the upgrade restrictions because it pays Apple considerably more for each iPhone than customers pay; like most other handsets, the phone is subsidized. From one perspective, AT&T is giving away money by letting customers get early access to the new iPhone. But from another perspective, AT&T is fixing prices for iPhone compared to other smartphones -- assuming, of course, users of, say, BlackBerry or Nokia E71x aren't getting the same upgrade offers. I can't say, because I'm no longer an AT&T customer.
Exclusivity is the clincher. Most lawyers I consulted during Microsoft's US antitrust trial said that had the software giant not engaged in exclusive deals that shut out Netscape, the Justice Department probably could not have pursued the case. But exclusivity changed everything. AT&T has an exclusive distribution deal for iPhone -- or it does as I write. AT&T is only the second-largest carrier in the United States, and Apple doesn't have a monopoly on smartphones.
But Apple does have a monopoly in mobile applications, which are exclusively tied to iPhone OS, which runs on Apple's smartphone. To reiterate, the iPhone is exclusively available through one carrier. The FTC and Justice Department reportedly already are investigating Apple, as they work out which agency should take jurisdiction. There have been additional reports about the Justice Department investigating Apple's music business. The point: Investigations are underway and for seemingly less legally offensive acts.
Much hinges on the answer to this question: Is AT&T providing deals favoring iPhone over other mobile phones? There are potential competition/consumer protection violations if iPhone owners are exclusively getting their eligibility changed or other smartphone users are getting their eligibility changed exclusively for iPhone. As such, AT&T would be favoring an exclusively distributed product over others, which could be construed as limiting consumer choice with the carrier's products and those from competitors.
Remember, in this context there are two recent AT&T policy changes: On June 1, upping smartphone early termination fees to $325 from $175 and today's new data plans, which replace the unlimited option with 200MB and 2GB metered plans. Mix it all together and there are some pretty good reasons for either the FTC or Justice Department to look into the AT&T-Apple exclusive relationship.
In this context, either agency could ask legitimate questions about price fixing. It's my understanding that Apple sets iPhone prices rather than AT&T. If that's true and Apple asked -- or even demanded as one criteria for keeping exclusivity -- that AT&T change eligibility dates, there would be reason for the FTC or Justice Department to investigate price fixing. In the United States, price fixing violates Section 1 of the 1890 Sherman Act. Exclusivity, Apple's mobile applications monopoly and burgeoning competition in the smartphone market would all be reasons for investigation.
The question I can't easily answer, perhaps you can. Is discounted upgrade eligibility exclusive to iPhone users? If you're using another smartphone, please check your upgrade eligibility against what you know it should be and report back in comments.