THE BLOG
01/24/2011 02:53 pm ET Updated May 25, 2011

Verizon iBandAid Doesn't Fix the Real Problem

Think there's more competition in the wireless industry, and thus better deals for consumers, just because Verizon is now carrying the iPhone? It's doubtful.

The truth is, right now the carrier cartel is squeezing consumers as much as -- if not more than -- ever before, and the sense of competition between them is a fallacy.

It comes down to pricing plans and upgrade costs. This week, in anticipation of the iPhone's addition to the Verizon lineup, AT&T and Verizon both announced yet more price hikes that illustrate the way the wireless industry continually snuffs out any hint of competition suggested by outsiders like Apple and Google.

First, AT&T. The outfit formerly known as the iPhone's exclusive carrier took Apple's defection personally, and is acting like Tony Soprano smashing a wall in a fit of rage, lashing out at its customers by changing its text messaging and early upgrade plans. AT&T = Tony's fist; consumers = wall.

New customers will only be able to purchase a 1,000 texts/month package for $10, which works out to 10 cents a text. Want a cheaper plan? You're out of luck; AT&T got rid of all its other text messaging plans.

Upgrade discounts for eligible current customers are kaput as well, meaning that after two years of indentured service with AT&T, a current customer will get no more benefits than a new customer would receive. Thanks for nothing, AT&T.

(Check out Engadget's breakdown of the rest of AT&T's charges for more).

As for Verizon, it's going down the AT&T no-soup-for-you road as well, killing off its popular "New Every Two" program.

What's going on here?

Just a week after Verizon announces it secures the iPhone, AT&T -- rather than trying to be nicer to potential and existing customers -- announces a bunch of annoying price hikes. And Verizon, now that it can lure in new customers with the iPhone, mirrors AT&T's rude behavior toward its own existing customers.

This doesn't look like a functioning market to me.

Here's what functioning would look like: Verizon, AT&T, Sprint and T-Mobile all get the iPhone when it launches. They are forced to compete based on quality of service, pricing plans and customer care. Consumers would get universal access to the best technology, with lower prices thanks to a market in which the carriers actually compete with each other.

But back in reality, we have a quasi-cartel of carriers colluding to keep prices high, force manufacturers to sign exclusivity agreements, and pass artificially high costs on to consumers. The Verizon iPhone is more like a tiny iBandAid on a huge, festering problem.

Maybe some protest from wireless customers, directed at the wireless carriers and an FCC that refuses to regulate them, is what we need now.