Why handsets should be subsidized - but are not today

As I was working on the FCC petition, and especially after thinking through Tim Wu’s subtle (or not so subtle) points around handset ‘Subsidy’ I got to realize that we are looking at a serious case of the misleading rhetoric shaping the discussion.

When you buy a car, you have two options: Put down the whole $10K upfront. Or lease it, pay $1000K and then monthly payments for 24 months of $500. Your car is not ’subsidized’ by the car dealership - you just pay for it over time rather then upfront. And there is full disclosure how the lease payments were calculated.

Now when it comes to cell phones, operators some how managed to get us to think they are ’subsidizing’ the handsets. And that we should be nice and say monthly “Thank you for being so kind and subsidizing my handset ” as we are writing a check for $50 for their great “wireless service”

Handset are not subsidized today. Consumers are paying an arm and a leg for their handsets. And we don’t even know how much we pay for the service and how much for handset. The remedy, as we discussed in petition, is to have operators comply with Carterfone and have a “service only” no handset bundled monthly plan. Then we will know how much we really pay for handsets…

Handsets can be subsidized - for example - through advertisements. “We will give you this handset for free, but we have our ad engine incorporated” - That is subsidy. What we have from cellular operators today is not subsidy, but rather handset leasing.

R