Cell Phone Monopolies and Abusive Pricing by Robert Betts

These identical phones are priced at $499 and $299, a $200 difference. It is quite obvious that so-called “retail prices” are fraudulent.

Sprint, Verizon and others make selective roaming agreements with each other. In a roaming two or more companies agree to accept calls through their network without charging each other. If they refuse to agree with other companies, the result is to block efforts to compete.

In Raleigh NC there is an independent cell phone company, Kiwipcs. They provide service only in the Raleigh area. Their price for service is $40 per month. This includes unlimited calling within the continental US. This is the sort of competition that the major players do NOT want. Kiwi cannot get roaming agreements which limits them to serving the local area and defeats their attempted competition.

Again, let’s look at phone prices. An Audiovox 8910 from Kiwipcs costs $75… and there is NO required contract. The same phone “retails” for $299 at Amazon and Wirefly, distribuitors for Sprint, Verizon and others. However, you can get this phone free if you’ll sign a two-year contract with Verizon or Sprint. The effect is obvious: Force people into a two-year contract so they cannot avail themselves of competitive pricing.

This begs another question. How can Kiwipcs charge $75 for a phone that is supposedly worth $299 and not require a contract if, in fact, the phone is worth $299? Clearly the truth is that the phone is not worth $299, probably between $50 and $75. Sprint, Verizon and others are fixing phony prices then offering supposedly expensive phones for free or at deep discounts. They are also entering into roaming agreements with each other as long as the other but not with companies such as Kiwipcs which would offer fair competition.

While new customers can get a phone for a reasonable price if they lock themselves into a two-year contract, established customers are not so lucky. They might be offered a discount which amounts to perhaps half the highly inflated and unrealistic “price” of the phone.

These contracts deny all consumers the benefit of free competition. Neither new customers nor existing customers can benefit from healthy competition that would result if all phones would operate on all networks as they used to do. Nor can a customer move to another provider because he has a contract to fulfill unless he pays a very large early termination fee. Besides, his phone will not port to the new provider.

All of these practices, price-fixing, private agreements between companies that stifle competition, inflating prices to lock consumers into unfair contracts are clear violations of Federal Anti-Trust law.

How can these abuses happen?

This happens when companies form monopolies, also known as trusts. Recognizing that monopolies lead to unfair pricing which costs consumers billions, congress passed three major federal antitrust laws: The Sherman Antitrust Act, the Clayton Act and the Federal Trade Commission Act. In the United States, enforcement of these laws is one of the jobs of the Justice Department. Many states also have anti-trust laws.

Unfortunately the Justice Department hasn’t yet stopped cell phone companies from engaging in vertical trusts. A vertical trust is when a company controls a service from end to end; cell phone companies control service and the phones themselves, a vertical trust.

Here’s a quote from the Justice Department:
“Effective antitrust enforcement requires public support. Public ignorance and apathy can weaken antitrust enforcement more than anything else. Whether you are a business person or a consumer, if you encounter business behavior that seems to violate the antitrust laws, do not hesitate to inform the enforcement agencies of your suspicions. That is often the only way violations can be uncovered, and failing to uncover and punish antitrust violations not only penalizes consumers and taxpayers but also penalizes the vast majority of honest business people who scrupulously observe the antitrust laws.

If you detect an antitrust violation, you can perform a triple public service: (1) you can help put an end to unlawful conduct that is costing consumers millions or even billions of dollars; (2) you can put money in the form of criminal penalties into the federal treasury; and (3) you can help recover other unlawful charges, because the government or affected consumers may bring an antitrust action to collect damages”

I urge you to report, preferably in writing, your displeasure with the present monopolies and the attendant abuses to the Justice Department so that Sprint, Cingular, Verizon can be prosecuted for anti-trust violations.

At the bottom of this page there is a list of Justice Department Phone Numbers and Addresses where you can write and/or call to request enforcement of anti-trust laws: Justice Department Addresses and Phone Numbers

Although the Attorney General as the head of the Justice Department is responsible for enforcement of anti-trust laws, Senators and Congressmen can and will often petition a government agency to act. You may wish to contact your elected official as well and request that he contact the Justice Department.
Your Senator and Congressman

What consumers need are:

1) Cell-phones that are REQUIRED to operate on ALL networks, as they did in the beginning when the average phone was less than $50. This alone would curb the majority of pricing abuses that we are now seeing.

2) The present system of requiring 1 to 2 year contracts needs to be abolished. Do you have to sign a contract for your Electric? Heat? Cable Service? These contracts are clearly aimed at killing competition, especially from small, independent providers.

3) Require that all companies must make roaming agreements with other company that wish agreements.

Feel free to send a link to this article to the Justice Department, your Senator and your Congressman.

bob

** At tracfone.com there are four phones priced under $50. Tracfone is a prepaid provider. The true price and value of phones is more realistic with prepaid providers such as tracfone. These providers are impractical for people who use the phone quite a bit because the
service, paid by the minute, is quite expensive.

see also: google, cell phones, abuse, abusive, abusive practices, over-pricing, price-fixing, fraud, fraudulent, Sprint, Verizon, Cingular, Alltel, T-Mobile, monoploy, monopolies, trust, vertical trust