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iPhone has its limits

With Apple and its competitors restricting wireless Web use, the airwaves aren't as free as you think.

June 11, 2008

For the second time in a year, Apple has slashed the price of its coveted iPhone by $200. The basic model now sells for less than the cost of an iPod Classic (not counting the $70 monthly charge for using AT&T's mobile phone and data network, which eventually makes the purchase more expensive than an iMac). Given Steve Jobs' hypnotic appeal to consumers, one can expect that every single person in America between the ages of 3 and 100 will soon be using an iPhone to surf the Internet whenever they're away from their computers. And make calls, in the unlikely event their friends aren't logged into Facebook.

They'll soon find that the iPhone doesn't deliver everything that the Web has to offer. It doesn't support Flash, one of the most popular forms of online video. Nor can it play songs or videos in Microsoft's copy-protected Windows Media format. Those limits reflect the trade-offs Apple made in designing the iPhone, and if consumers don't like them, they can buy a competing manufacturer's phone.

There's one other restriction Apple imposes: It won't permit iPhone users to run Internet-phone programs such as Skype through AT&T's network. Instead, they can use them only through the iPhone's WiFi connection, which works in far fewer areas. The rationale is simple: Skype's cheap calls compete with AT&T's voice service.

Apple's anti-Skype stance may be unusually explicit, but it's not uncommon for mobile-phone carriers to include such prohibitions in their subscriber agreements. That's why Skype, which is owned by online auction giant EBay, asked the Federal Communications Commission last year to consider rules that would allow consumers to connect any compatible device to a wireless network and run any application on them. The petition drew stiff opposition from the wireless industry, which argued that competition within the market was enough to protect consumers and that regulation would stifle innovation.

The FCC is scheduled to act on the petition Thursday and is widely expected to reject it. That's a fair approach, given that the carriers paid the government billions of dollars for the right to use the airwaves without the regulations Skype seeks to impose. Besides, market pressures have led all four of the major national wireless companies to announce or implement plans to open their networks to devices and applications. Yet the commission should make sure the carriers follow through. Devices like the iPhone will be limited enough without the carriers imposing their own handicaps.

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