On the topic of cell phone contracts

Y'know what really grinds my gears? Cell phone contracts.

The intention of cell phone contracts, or any contract for that matter, is to cement an agreement between two parties. You tell me that you are going to deliver a good or service, and I tell you that I will reimburse you for said good or service. I have no problem with this - that's the arrangement that secured me student loans, put a nice car in my driveway, and will get me a mortgage when the time comes.

My problem lies squarely with cell providers utilizing contracts in the guise of cost control - by locking us into the seemingly now standard contract duration of two years, providers can afford to offer us with subsidized handsets.

That's it. You get a cheaper phone.

Your monthly fees on this two year contract are still outrageous when you consider the highway robbery that is texting and mobile data. So don't text or use mobile data - after all, a phone is for making voice calls, right? (More thoughts on that in a future post.)

Does your two year contract afford you any upgrade options for your handset when the battery inevitably starts draining about a year in, or when you drop your phone into a river of hot molten magma? Good luck with that.

What about when the next product cycle hits and you'd gladly pay to "upgrade" your phone (as in the iPhone 3GS upgrade fiasco)? Sorry valued and locked in customer, your reward for being a loyal serf is paying full retail price to help subsidize new suckers/customers.

My thoughts on early termination fees (ETFs) are mixed. Yes, the idea of preventing consumers from breaking a contract by fining them sucks - but at the same time, that's the contract you signed. I'm definitely not a lawyer, so I have no clue how else you'd enforce the contract, other than to sue each user who breached the contract on a case-by-case basis. ETFs are not entirely prohibitive, either - paying a couple hundred dollars to get out of your contract is not as bad as having to pay off the remaining duration of your contract, which could amount into the thousands. I've ETFed my last two contracts - with AT&T when their customer service promised me something they failed to deliver, and T-Mobile when it was time to come back to AT&T for the in-network benefits with my friends and family.

As I'm not a lawyer, I am also not an economist. I believe, though, that the time for phone subsidies in exchange for long-term, prohibitive contracts has passed.

For one, unlocked OEM cell phones are cheaper than ever. The bottom-of-the-line Nokia I'm currently rocking set me back $40 and didn't require me genuflecting at the contract altar to get a subsidized price. Providers should offer cheap, functional, sturdy phones at reasonable prices without the need to recoup expenses for the latest pocket-sized supercomputer phone.

For two, it is increasingly disingenuous to lock customers into a provider. I understand that business plans are based on estimating the number of customers a provider will have at any particular time, and contracts help to make this estimate easier to make. Y'know what'll bring customers in the door, though? Not treating them like criminals or indentured servants. Open up to the free market and let customers make educated and fluid decisions on which provider is right for them.

The cost to providers in dropping contracts is obvious: the power in the relationship gets shifted to the consumer. If provider X fails to deliver, provides shoddy customer service, sub-par network coverage, or isn't providing the best handsets, a customer could leave provider X without first paying provider X for X's ineptitude. As it stands, providers have little incentive to innovate or add value for pre-existing customers, and as long as companies can keep tempting consumers into renewing contracts for a few dollars discount on a handset, any incentive will continue to be minimal.

The benefit to providers in dropping contracts is, in fact, this incentive to innovate, which I think would benefit the industry as a whole. When providers really have to fight for customers, they'll be more focused on expeditious network upgrades, adding new and exciting features (all of the cool things being done in Asia, anyone?), and cracking down on sub-par customer service. All of these things would then benefit the consumer, who would naturally gravitate to the truly quality provider. Give your customers incentive to stay with your service, and the need for binding contracts disappears.

In my opinion, this is what the FCC should be looking into, and not some silly iPhone witch hunt. Forget "exclusivity agreements between carriers and handset manufacturers" and start thinking about "exclusivity agreements between carriers and consumers."