Re: Free My Phone
Yesterday I ran across an article on the Wall Street Journal’s site titled “Free My Phone.” This article, written by Walter S. Mossberg, argues that it is time for the government to prevent cell phone carriers to control their networks in ways that hurt consumer choice. Of course, I have a few problems with his argument.
Digital capitalism
Mossberg opens with a description of all of the choice and control consumers have when it comes to choosing computer hardware, software, and the internet connection we want. If we don’t like something, we just swap it out with something else we want. He later compares the PC market to the cell phone market, but after he writes:
Oh, and the developers of such computers, software and services can offer you their products directly, without going through the Internet provider, without getting the provider’s approval, and without giving the provider a penny. The Internet provider gets paid simply for its contribution to the mix: providing your Internet connection. But, for all practical purposes, it doesn’t control what is connected to the network, or carried over the network.
This is the way digital capitalism should work…
That’s not how capitalism, or even digital capitalism (whatever that is), works. Capitalism is an economic system that is founded in individual rights. Under capitalism, an individual is in charge of his own life, liberty, and property, and the only way to obtain anything from another individual is through persuasion and trade. This system will naturally tend to produce a large number of options for consumers as producers compete with one another, and the examples Mossberg provides is a good example of how that competition has greatly benefited the computer market. Depending on the situation, though, a market with a small number of options (or no options, for that matter) may exist. Since capitalism allows people to act according to their own will, results will vary.
It’s a mistake to measure capitalism by counting the number of options a consumer may have. The only way to determine if capitalism exists is to check for the foundation of capitalism: respect for individual rights. That’s how capitalism works. If Mossberg wanted to show that a free market really doesn’t exist in the cell phone industry, he should start by showing who is being forced to act against his or her free will, and by whom. And when I say “forced” I mean the physical type, not the “I had to sign a contract before they’d give me an iPhone” type. The latter isn’t really force, it’s just terms that are part of a voluntary agreement.
Soviet ministries
Mossberg writes:
That’s why I refer to the big cellphone carriers as the “Soviet ministries.” Like the old bureaucracies of communism, they sit athwart the market, breaking the link between the producers of goods and services and the people who use them.
What’s missing here is the fact that cell phone carriers are producers of goods. They produce network service that allows cell phones to operate. Rather than break the link between cell phone makers and cell phone users, as Mossberg describes, cell phone carriers build the link. If it wasn’t for the service cell phone providers create and offer to consumers, our cell phones would be reduced to being electronic address books or horrible digital cameras.
I think Mossberg is missing the real lesson to be learned from the real Soviet ministries. The reason the Soviet ministries could not produce what the free market could was the fact that the government controlled everything. While those in the free market were able move and adjust to demand, the Soviet government dictated what would be produced regardless of need or demand. For those who want to avoid the types of results created by the Soviet government, the lesson should be clear: Keep government out of the market. But unfortunately, government intervention is what Mossberg advocates.
Deserves to make a profit…
Mossberg tries to offer some consolation to the cell phone companies:
Let me be clear: Any company that spends billions to build and maintain a wireless network deserves to be paid for its use, and deserves to make a profit and a return for its shareholders.
I disagree. A company does not deserve to make a profit solely by spending billions on a wireless network. It takes more than that to deserve a profit. After building the network the company has to sell its services, and only by making those billions back can the company deserve its profit. The only thing that a company deserves by building a multi-billion dollar network is control over that network. And it’s that control that Mossberg wants to take away:
Not only that, but companies like Verizon Wireless or AT&T Inc. should be free to build or sell phones or software or services.
But, in my view, they shouldn’t be allowed to pick and choose what phones run on their networks, and what software and services run on those phones.
In other words, cell phone carriers should not be “allowed” to control their own networks. When Mossberg says “Free My Phone,” he’s not referring to his ability to control his phone. He’s really referring to his ability to dictate what cell phone carriers do with their own property, and he can’t do that without government intervention.
I don’t read the Wall Street Journal very often, but from what I’ve heard the paper is one of the most pro-capitalist papers available today. If that’s true, I’m very surprised to read an article like this on their website. Technology issues like these might seem complex, but government intervention is government intervention. I believe that the best think for the cell phone industry — or any industry — is to allow individuals to be free to make their own decisions with their own lives and property. Keep the government out.
Tags: [cell phone, government, iPhone, mossberg, wsj]Comments
Apple: Damned if you do…
In Capitalism: The Unknown Ideal, Ayn Rand wrote:
If I were asked to choose the date which marks the turning point on the road to the ultimate destruction of American industry, and the most infamous piece of legislation in American history, I would choose the year 1890 and the Sherman Act–which began that grotesque, irrational, malignant growth of unenforceable, incompliable, injudicable contradictions known as the antitrust laws.
Under the antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. If he complies with one of these laws, he faces criminal prosecution under several others. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly, or, rather, for a successful “intent to monopolize”; if he charges prices lower than those of his competitors, he can be prosecuted for “unfair competition” or “restraint of trade”; and if he charges the same prices as his competitors, he can be prosecuted for “collusion” or “conspiracy.”
If you would like to see an example of the type of prosecution Ayn Rand speaks of, you only need to look at the current plight of Apple. Over the past couple weeks, Apple has been presented with multiple lawsuits from unhappy customers. The lawsuits are centered around three basic issues. The first issue is Apple’s exclusive deal with AT&T and its enforcement of that deal through software updates to its iPhone software. According to those who are bringing suit against Apple, the deal between AT&T and Apple is monopolistic in nature and illegal according to FCC policies and the law (including the Sherman Act). The second issue is, believe it or not, is Apple’s decision to drop the price of its iPhone by $200. And the third is Apple’s decision not to include a removable battery in the iPhone. It’s hard to find a decision Apple made regarding its iPhone release that someone won’t claim is a violation of the customer’s rights.
Now, if you’re like me, you’re wondering how Apple’s deal with AT&T could constitute a monopoly. Apple and AT&T are just two players in a large, competitive cell-phone market that nobody is even close to “monopolizing.” This is where the “unenforceable, incompliable, injudicable” antitrust laws Ayn Rand spoke of come in to play. The litigants in this case are not accusing Apple of monopolizing the entire cell phone industry. They claim Apple is trying to monopolize “portions of the mobile cell phone market.” One of the court documents even refers to Apple’s “monopolization of the Relevant Market.” In other words, Apple is being sued for monopolizing the iPhone market.
But what about the price drop? Aren’t most people happy when the price of a product drops dramatically? Not the woman who is suing Apple for it. She claims that Apple’s price drop was “not necessary” and it lowered the resale value of the phone she had purchased. She wants a million dollars for her trouble. I don’t know how much damages those who are complaining about the battery are seeking, but I’m sure it’s a lot. (By the way, if you don’t like the battery, why not take it back?)
I see a common thread in all of these cases, and it is the belief that Apple should not have the ability to own and control its own property. To these people, the happiness of Apple’s customer is not a requirement to stay in business; it’s a legal requirement to be enforced by any customer who disagrees with a decision Apple made. It doesn’t take much imagination to think of the implications of this type of logic. If the rules and limitations Apple sets for its property is a violation of the rights of its customers, what piece of software or hardware could be considered safe from litigation? Accepting the litigants’ arguments requires the rejection of the idea that property — whether material or intellectual — should be owned or controlled by the individual that created it.
I’m hoping that these cases are rejected by the court or Apple wins handily, but I think it is a shame that we’re at a point where these types of cases are even considered. Good luck Apple!
Tags: [apple, iPhone, property rights]Comments
iPhone hacking
Last week, a teenager named George Hotz announced that he had a hack for the iPhone that allowed it be run on the TMobile network. Apple and AT&T have an exclusive deal that forces US iPhone customers to get service through AT&T’s network, but instructions Hotz has posted on his personal blogs gives customers instructions to move their iPhone to another phone network. Hotz was praised for his work by many media outlets and bloggers, with many praising his work as a way to give customers what they want. Finally, iPhone customers can leave AT&T’s horrible network and make their own decision. Great, right?
Well, I don’t think so. I think that Apple and AT&T have a legitimate argument against Hotz that his actions have violated their rights to their respective property. For Apple, that property is control over the iPhone. Apple created the device, and they should be able to decide who they want to sell it to or through. For AT&T, that’s control over property they’ve obtained through a deal with another company. AT&T signed a deal with Apple to be the exclusive dealer of service for Apple’s phone. These two companies made a deal to work exclusively with one another, and they should be able to so without being interference from the government, from thieves, or from hackers. Hotz’s actions may seem innocent, but they will cause real damage to a relationship between two big companies.
When I refer to Hotz’s “actions,” I’m talking about his decision to post the hacking instructions on his blog, not the actual hacking of the iPhone. If Hotz had just hacked his own iPhone and used it on his TMobile network, AT&T and Apple wouldn’t even know about it, let alone face any real damage. Damage was done when he posted the instructions on his blog, though. Those posts damaged the ability for AT&T and Apple to use their property as they saw fit — which is something that the government should protect.
Many people will say, “I bought my iPhone, I should get to do what I want with it.” That’s right, but only in a certain context. If we’re just talking about the physical device packaged in a box you purchased at a store, then yes, you own that device. However, if the context is who owns the right to the iPhone brand, the right to decide who sells iPhones, and the right to the software that is released with an iPhone, then no, Apple owns the iPhone. Those are the rights Hotz’s actions damaged. Now it doesn’t matter that Apple wants to make an exclusive deal with AT&T with their own property, and why? Because hackers say that the iPhone should be open.
Hotz is not the only person doing this. Another company has announced that they have software that will unlock the iPhone, without the soldering that Hotz’s hack requires. I don’t think that Apple and Hotz are going to sue a teenager, but I think they should go to the courts to stop these types of companies from violating their ability to control their own property. If people want Apple to use other networks, they should ask. If people want better prices and better network performance from AT&T, they should ask. Negotiate. Sign petitions, show that there is a big demand for better service. Just don’t take from them.
Tags: [george hotz, hacking, iPhone]