Monday, July 09, 2007

What's Hidden in the iPhone's 'Fine Print'?

Telecom Analyst Bruce Kushnick has inspected the iPhone's terms of service and offers some surprising revelations (emphasis mine):

1) iPhone Requires a 2-Year Contract with AT&T.

2) Expensive: Requires $2,280, Over $1,730 in Wireless Costs.

3) Double Billing. You and the Caller Both Get Charged for the Same Call.

4) All Use of the Networks Are Always Rounded Up to the Nearest Kilobyte or Minute.

...This practice is now standard and is anti-competitive. In the 1990’s, phone companies, to be competitive, created “6 second billing”, where the call was rounded to the nearest 1/10th of a minute. This change adds 15+% to the average bill. Moreover, the companies now have all gone to full minute billing, full kilobyte billing, so that they can make an extra minute on almost every transaction...

5) Customers Are Billed for “Network Errors” and “Network Overhead".

6) Billed Even Though the Call Doesn't Go Through.

7) Bogus Fees Added to the Bill: Regulatory Cost Recovery Charge

The “Regulatory Cost Recovery Charge” is a made-up charge that should have been included in the cost of service instead of a separate line item. Most carriers are charging this fee, even though it is not government mandated or a legitimate tax. By making it a separate line item, the phone company gets more money and doesn’t have to include this line item in the advertised cost of service. According to AT&T:

"The Regulatory Cost Recovery Charge is a charge assessed by AT&T and is not a tax or government-mandated charge. This charge is subject to change from time to time as the cost of compliance changes.... The purpose of the charge is to defray AT&T's costs associated with payment of fees and compliance with various initiatives imposed by the government. Please note that costs may be incurred and charged prior to initiation of any of the respective services."

8) $175.00 Termination Fee.

9) International Messages Are Charged Additional Fees as Are Files Over 300Kbps.

...While it cost[s] nothing extra to send an email overseas using the Internet, AT&T has decided that all messages outside the US or larger than 300 K should cost extra:

“International messages not included. Charges for international messages sent from the U.S. are 20¢ for Text Messages and 50¢ for Picture/Video Messages. Additional charges for premium messages and content apply. Messages over 300 KBs billed an additional 50¢/message.”

10) Over Your Quota: Get Gouged: 40¢ Per Minute and 69¢ Roaming Offnet.

11) The Services Are Not Secure and Can't Block Your Phone Number.

12) The Current Mobile Email Service Doesn't Support Attachments.

13) Prohibited Uses and “Unlimited” Sales Hype.

Even though the service is called "unlimited" they are simply using that word as a marketing concept, not an actual service description. You can't use the service for VOIP and worse "unlimited plans cannot be used for uploading, downloading or streaming of video content (e.g. movies, tv), music or games." Here are just some of the restrictions [prohibited services]:

* With server devices or with host computer applications, including, without limitation, web camera posts or broadcasts, continuous jpeg file transfers, automatic data feeds, telemetry applications, peer-to-peer (p2p) file sharing, automated functions or any other machine-to-machine applications...
* for voice over ip...
* in conjunction with wwan or other applications or devices which aggregate usage from multiple sources prior to transmission...
* Except for content formatted in accordance with at&t's content standards, unlimited plans cannot be used for uploading, downloading or streaming of video content (e.g. movies, tv), music or games. Furthermore, unlimited plans (except for dataconnect and blackberry tethered) cannot be used for any applications that tether the device

14) Service Is Not Intended to Provide Full-Time Connections: Unlimited is Hype - Don’t use the service too much or the phone company can terminate your service.

15) Wi-Fi Service is Limited - "To ensure that the Wi-Fi Service is not being used fraudulently, AT&T limits your usage of the Wi-Fi Service to 150 uses per month" ...Does that mean that if you lose signal a few times during one session, or you are traveling and go between ‘hot spots’ you can rack up lots of ‘uses’?

16) “Offnet” Restrictions - If you have a service and you happen to call other ‘offnet’ services, including wireline phones, or non-AT&T subscribers, you have to ‘limit’ your use, be charged or be terminated.

17) Plan Goobly-gook - ...There are plan fees, taxes and surcharges, roaming fees, text fees, Night and Weekend Minutes, Mobile to Mobile Minutes, Anytime Minutes and Rollover Minutes, EDGE/GPRS and BroadbandConnect, offnet, AT&T Video clips, Data Connect Unlimited, WI-FI CONNECT, constraints on ‘unlimited plans including “20% of 6 Megabits offnet”, “150 uses of Wi-Fi”, and other restrictions...

18) Comparing US and Other Broadband Countries: America Is being Laughed At.

Why did iPhone get deployed on a slow, closed network? That answer may not be known, but it is clear that iPhone is being deployed on an old-technology network, and is neither state-of-the-art nor fast. Here’s some info about the [wired] networks... "The median U.S. download speed now is 1.97 megabits per second — a fraction of the 61 megabits per second enjoyed by consumers in Japan ... Other speedy countries include South Korea (median 45 megabits), France (17 megabits) and Canada (7 megabits)."

19) The Upcoming Wireless Spectrum Auctions - The upcoming 700 MHz wireless spectrum auctions are underway [and] the bottom-line is [that] America needs open wireless networks, and it should be clear to anyone who is considering buying an iPhone that the AT&T networks should not be the only network for this innovative product.

These types of anti-innovation restrictions make it clear why the incumbent telcos shouldn't be permitted to bid on the newly liberated 700MHz spectrum.

Go to Save the Internet now and take action.

Update: Tim Wu has more.

Update on 8/18/07: Check out the $5,000 iPhone bill... for a month's service!


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