Some iPhone owners crave freedom to unlock from AT&T

By Leslie Cauley, USA TODAY
Who really controls your Apple iPhone? If you think you do, think again. AT&T, the U.S. distributor, requires iPhone owners to use its wireless networks exclusively. Those who "jailbreak" their devices and use another carrier void the warranty.
Even if you pay full retail ($500 to $700), you still have to agree to use AT&T's network, or it won't sell you the device. Subsidized iPhones start at $199 but require a two-year service agreement.
As for trying to use your state-of-the-art device to place calls over the Internet, good luck. The iPhone's Skype application works on Wi-Fi but not on AT&T's 3G network. Other iPhone apps work on both. AT&T says the block is justified, because Skype is a direct competitor.
Customers have two choices: They can suck it up and stay with AT&T, or storm the wall. So far, more than 300,000 iPhone owners are now using T-Mobile's network and data plans, according to two people with direct knowledge of the situation. Those scaling the wall include owners of the new iPhone 3G S, which hit retail shelves in mid-June. The sources declined to be named because they aren't authorized to talk publicly about iPhone customers.
The lesson?
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"Consumers are craving greater control," says Joel Kelsey, a public policy analyst with Consumers Union. So much, he says, that "they're willing to risk turning their $300-plus investment into a brick."
The problem for consumers: Carrier obsession with customer control is growing. Profit is the driver. As the USA reaches wireless saturation — meaning everybody who wants a cellphone already has one — carriers have to hustle hard to add customers and grow revenue. The USA (population about 300 million) currently has around 270 million cellphone subscribers.
The real pot of gold is mobile data, widely regarded as the next frontier of wireless. That's why carriers are so hot to get their hands on the latest, coolest devices — so they can sell consumers pricey data plans.
To land exclusives, carriers typically pay handset makers a certain amount of money, or subsidy, per device. AT&T, for example, pays Apple more than $300. That's why AT&T's iPhone policies are so tough: It's trying to lock down customers long enough to earn back that money.
But the crush of iPhone jailbreaks is just the beginning of what could become a full-tilt consumer revolt, predicts Sameer Mithal, an independent wireless consultant.
"There's a consumer movement to controlling the service," as well as wireless devices, Mithal says. U.S. "carriers will be very reluctant to make this change," he adds. "But they're not going to have a choice."
Shifts in U.S. lifestyle are a big factor, he says. Currently, about 18% of U.S. households are wireless-only, and the trend is gaining, thanks to souped-up devices such as the iPhone.
Exclusive deals under scrutiny
The iPhone is available on a non-exclusive basis in many countries, including France, Belgium, Italy and Australia. In those markets, consumers can buy the device and use it on any network.
Outside the USA, wireless devices typically aren't subsidized — consumers pay full retail. While devices are more expensive, buyers don't have to lock into long-term contracts. Carrier-imposed bans on applications, such as AT&T's Skype block on the iPhone, are practically unheard of.
Once U.S. consumers get a taste of true wireless freedom, Mithal thinks they'll like it — a lot: "More choice is always better" than less.
The U.S. wireless industry is unregulated, so carriers can do as they wish in terms of prices, devices, service plans, customer policies and more. AT&T, for one, believes an unregulated wireless industry is good for consumers.
The U.S. wireless industry "is a highly competitive market," says Jim Cicconi, head of public policy for AT&T. In most markets, he notes, consumers have their pick of three carriers, at least.
Consumer gripes about AT&T's tough iPhone policies are unfair, he says. The fact that so many people — 2 million in the fourth quarter alone — flocked to AT&T for the iPhone "is ratifying the (exclusive) arrangement" with Apple, he says.
"Consumers have the ultimate option of buying or not buying" an iPhone, he adds. "And the fact is, they're choosing to buy in overwhelming numbers."
Without AT&T's discounts, he says, "The device would be a lot more expensive."
AT&T's position assumes that rivals, given the opportunity, wouldn't charge less for the iPhone, Kelsey notes. Likewise, he says prices on mobile voice and data plans, which start at $70 for iPhone users, might also improve if others were competing.
The Senate Commerce Committee recently held a hearing to explore the impact of exclusive handset deals on consumers. The Federal Communications Commission— whose new chairman, Julius Genachowski, is a confidant of President Obama— is examining the same issue.
The telecom enforcement section at the Justice Department regularly reviews wireless industry practices. But Justice Department spokeswoman Gina Talamona declined to comment on whether a specific investigation is underway.
The Senate Judiciary Committee, in a letter on Monday, asked the Justice Department to examine handset exclusivity agreements, among other issues.
Rural phone companies, meantime, have asked the FCC to ban, or at least limit, handset exclusives. Historically, exclusives lasted no more than a few months. AT&T has had its exclusive deal with iPhone since it was launched in 2007. Verizon's exclusive on LG's "Chocolate" cellphone runs for the lifetime of the device.
Small carriers don't have enough subscribers or financial clout to land exclusives on the latest devices, says John Rooney, CEO of U.S. Cellular, which has 6.2 million customers. As a result, he says, many are losing customers.
Consumers Union, Free Press and other consumer groups are calling on Congress to step in. Their goal: to end practices such as application blocking and long-term device exclusives that they say limit choice and tamp down competition.
"The time has come for regulation," says Ben Scott, public policy director of Free Press.
The Big Four
Size is part of the problem, Scott says. Thanks to years of megamergers, the U.S. wireless industry is dominated by four giants — AT&T, Verizon, Sprint and T-Mobile. They control 85% of the market. The bulk — 65% — is controlled by two: AT&T and Verizon.
AT&T is an amalgamation of four Bells — SBC, Ameritech, Pacific Telesis and BellSouth— plus former wireless giant Cingular and long-distance icon AT&T.
Verizon is a patchwork of two Bells —Bell Atlantic and Nynex— plus GTE and long-distance icon MCI (formerly, WorldCom). It recently acquired Alltel, the No. 5 wireless player.
Their Bell-centric makeup means AT&T and Verizon are potent competitors, Kelsey says. Each controls miles of local phone networks that connect to buildings and cell towers. Known as "special-access" lines, they haul mobile data traffic from cell towers to local phone networks.
Without access to those lines, called the "middle mile," Sprint and other rivals couldn't exist.
Special-access lines are unregulated, so AT&T and Verizon can "bleed their competitors for access to them," Kelsey says. Those costs ultimately get passed along to consumers.
Tom Sugrue, vice president of government affairs for T-Mobile, says the issue is manageable in big cities, where alternative providers such as Level 3 help keep prices in check. But in suburbs and smaller markets, where AT&T and Verizon are often the only providers, T-Mobile and other carriers are basically stuck.
"When the supplier is also your major competitor, the problem (of special access) can be acute," he says.
AT&T's Cicconi says rivals can build their own facilities if they don't want to pay AT&T and other carriers. He also says it's unfair to accuse big carriers of price gouging.
Scott and Kelsey say the real problem isn't special access, or even consolidation. It's the lack of regulatory oversight in wireless, which is quickly becoming a fixture in American life.
"Big isn't necessarily bad," Scott says. "But big and completely unregulated is bad."
Locked down and waiting
For locked-down iPhone users, the wait continues.
Peter Tögel, a Web development manager for Clemson University, says he recently asked AT&T to unlock his 2-year-old iPhone. Tögel says he and his wife were going to Australia, and he hoped to use a "SIM" card there so he could get a better rate on data roaming. SIM cards are removable data cards containing subscriber information. They can be swapped out so you can use your phone on any compatible network. AT&T and T-Mobile, for instance, use similar technology standards for their networks.
Since he'd fulfilled his two-year contract obligation, Tögel says he didn't think his request would be a problem.
It was. AT&T said no. Apple, citing AT&T's exclusive arrangement, also said no, he says.
Tögel, a self-described geek, says he's considering jailbreaking his device, "but that's a last resort." He's also considering buying an iPhone in Australia, where it's sold on an unlocked basis.
Tögel says he's not mad at AT&T — he likes the carrier's service. He just wishes AT&T would show a little compassion, particularly when it comes to iPhone customers who have fulfilled their contract obligations.
"I was bound for two years, but after that, please unlock it," he says, offering some advice to AT&T. "I paid my dues. That's all I'm asking."

Russia, US agree nuclear arms cuts in Obama visit

Russia, US agree nuclear arms cuts in Obama visit
By Anna Smolchenko and Stuart Williams – 15 hours ago
MOSCOW(AFP) (AFP) — Russian and US leaders Dmitry Medvedev and Barack Obama announced agreements on Afghanistan and cutting their nuclear arsenals as they sought a new era in battered relations.
The ex-Cold War foes issued a declaration on replacing a key disarmament treaty -- including figures for major cuts in nuclear warheads -- and clinched a breakthrough deal for US military transit for Afghanistan across Russia.
But as Obama made his first visit to Moscow as president, they still remained divided over US plans to install a missile defence shield in eastern Europe and Moscow's policy towards the pro-Western ex-Soviet state Georgia.
"The president and I agreed that the relationship between Russia and the United States (has suffered) from a sense of drift," Obama said at a joint news conference in the Kremlin with Medvedev.
"We resolved to reset US-Russian relations. Today after less than six months of collaboration (since coming to office) we have done exactly that," he added.
The declaration signed by the presidents pledges to reach a new nuclear arms reduction pact to replace the 1991 Strategic Arms Reduction Treaty (START). Obama said it provides for cuts of "up to a third" from current limitations.
It "commits both parties to a legally binding treaty that will reduce nuclear weapons," the White House said in a statement.
START is due to expire on December 5 but the declaration gave no target date for a renewal, instructing negotiators to complete the work as quickly as possible.
The declaration called for a reduction in the number of nuclear warheads in Russian and US strategic arsenals to between 1,500 and 1,675 within seven years and the number of ballistic missile carriers to between 500-1,100.
The cuts go beyond those levels set in the 2002 Strategic Offensive Reductions Treaty (SORT) which calls for both countries to reduce the number of deployed warheads to between 1,700 and 2,200 on either side by 2012.
"The declared reduction is a real agreement and it suits everyone," said Alexei Malashenko, analyst with the Carnegie Centre in Moscow.
"The Americans have decided to accept Russia as it is. Obama does not have the complexes from the Cold War and does not consider Russia to be an enemy of the United States."
Obama also proposed that the United States host a global nuclear security summit next year and suggested to Medvedev that Russia host a subsequent one in order to draft a new, "reinvigorated" non-proliferation treaty.
"We are seeing a pace of potential proliferation that we have not seen in quite some time," Obama said, pointing to "deep concern about Iran's pursuit of nuclear weapons capability" while "we've already seen North Korea flout its own commitments and international obligations in pursuit of nuclear weapons."
The Afghanistan agreement means Russia has authorised the use of its airspace for the transit of US troops and arms, a major boost for Obama's bid to step up the fight against the Taliban.
The deal permits up to 4,500 military flights per year, or about 12 per day, which can be loaded with troops, firearms, ammunition, military vehicles and spare parts, a senior US official said.
The official said military flights would not be charged air navigation fees and that they would not stop on Russian territory.
Previously Russia had only allowed the United States to ship non-lethal military supplies across its territory by train.
The two sides also signed an agreement to resume bilateral military cooperation suspended last August over Moscow's war in Georgia, an event which sent ties plummeting to a post Cold War low.
But amid the smiles and expressions of goodwill, the US plan to install missile defence facilities in the Czech Republic and Poland -- which Russia says threatens its security -- remained a major sticking point.
"The discussions on missile defence are proceeding with great difficulty because the approaches are very different," Russian Deputy Foreign Minister Sergei Ryabkov said, according to ITAR-TASS news agency.
Obama expressed hope however that "over time we will have seen that the US and Russian positions can be reconciled" and announced that both sides would step up their joint analysis of missile threats.
He also bluntly repeated the US dissatisfaction with Russia's recognition of two breakaway Georgian regions as independent, stressing Georgia's sovereignty and territorial integrity "must be respected".
"There are areas where we still disagree... we had a frank discussion on Georgia".
Obama was on Tuesday morning due to meet with Russia's powerful Prime Minister Vladimir Putin, a man who he described in the run-up to the summit as having "one foot" in the past of the Cold War.
He did not repeat that comment in the news conference, acknowledging that Putin was one of the "influential" figures he was going to meet and noting that Russia's ruling tandem were "working very effectively together".