Abusing the airwaves

April 19, 2005

"We have a tremendous opportunity to make a big impact in music," says Verizon Wireless CEO Dennis Strigl. The question is, what kind of an impact?

The widely disseminated rumors - as yet unconfirmed, to the best of my knowledge - that Verizon, Cingular and the other big cell phone carriers are trying to sabotage the Apple-Motorola iPod phone are troubling. Because the carriers subsidize most phone purchases with big rebates tied to service agreements, they have something of a chokehold on the phone market. It's clear that they would also like to control the sale of songs to be played on cell phones. Reports suggest that they're doing just that by refusing to sell or offer rebates on phones that can play songs downloaded from other sources like the iTunes Music Store.

I'm no antitrust lawyer, but to my admittedly untrained nose this smells rotten. In essence, we have a small set of companies with oligopoly control over mobile phone service (using the public airwaves), leveraging their power in that market to exert considerable control over the handset market, which in turn may now enable them to control a big chunk of music retailing - not to mention video and other future information services delivered wirelessly.

The fact that the carriers want to open their own music stores is great. And if they want to offer phones that only play music downloaded from their stores, that's fine, too. The more choices, the better. But using an unfair advantage to prevent competition in music distribution is bad on all counts. People don't want to have to buy two copies of every song they like, and they certainly don't want to have a phone company dictate what device they can play their songs on. Watch closely, because how this all plays out could indeed have a "big impact" on the future of digital media, for better or for worse.

Posted by nick at April 19, 2005 10:33 PM