Will Open Access Change the U.S. Cell Phone Market?

On Monday night we had ourselves a bit of a debate over here.  We're a little divided on how important the open access stipulation is to the 700MHz auction.  Open access is a term we've been throwing around a bit and I feel like we should explain it. 

The internet is a prime example of an open access network.  You can use whatever type of equipment you want (PC, Mac, etc.) and, provided you sign up through an ISP, you're online.  None of the ISPs make restrictions on what type of computer you can use to access the internet.  GSM mobile phone networks (outside of the U.S.A.) are the same way.  You get your service, generally prepaid, from one company and then purchase whatever phone you want to use with that service.

In theory, that is how the 700MHz spectrum is going to work.  You would buy your cellular service from whomever ends up owning the network (which will still need to be built after the auction is over) and then you can buy any phone capable of operating on that network, regardless of the manufacturer. 

The reason that this is so weird in the States is that the handsets and the carriers are so intertwined.  We get our service and our phones from the same people.  In fact, a good price on the handset is almost always used as a way to get you to sign up.  Sign a 2-year contract, get the phone for $150 off plus a $100 mail-in rebate.  I think this is why open access isn't that big of a deal over here and is also why it was pretty uncontested when Google brought it up.  Whichever carrier wins the spectrum auction (and we're just assuming that it will be a cellular carrier that wins) won't necessarily suffer any real monetary loss from open access.  It will still be financially beneficial for its customer to by its own proprietary handsets as opposed to an open access device.  Sure, there will be some people who have hundreds of dollars to spend on a phone who go the route of open access and get themselves a "G-Phone."  There are some people who will do it just on principle, to try and snub their noses at the American cell phone market.  But the vast majority of U.S. cell phone customers aren't going to be willing to shell out the money needed to use an open access device.  Because the network owner can use contracted services to reduce the price of a handset they'll have no problem selling their own devices, the accessories to go with them and locking in contract after contract.

Unless we Americans are willing to change the way we look at the cellular phone industry we're never going to get to the same level of open access and wireless freedom seen elsewhere in the world.  It seems like we're doomed to keep signing away our lives, 2 years at a time.