A brief comment on a paper entitled
Why the iPhone Won’t Last Forever and
What the Government Should Do to Promote its Successor
Robert Hahn and Hal J. Singer
This paper argues that the iPhone, while popular, will be replaced, and therefore that “regulators should be very reluctant to intervene in the mobile handset market.”
What I don’t understand about this paper is that it takes an undeniably true fact — that the iPhone won’t last forever, and ties it to a conclusion that is much less clear, and, in fact, close to assumed.
The authors argue that exclusive contracts are efficient and promote market entry. Why? Essentially, because they exist. They believe, based mainly on the evidence of the Apple – AT&T deal, that handset producers seek out exclusive contracts themselves.
I’m going to keep this comment brief, but my main comment is that it is hard to generalize from the fact that something exists to the idea that it is a good thing. It is the same old problem with the efficient market hypothesis, and also goes by the name the naturalist fallacy. This paper comes close to assuming its answer based on current conditions.
The fact that the carriers have a near-total lock on the retailing of phones, and that it can be hard even for a company like Palm to get a carrier to carry a new handset has an obvious effect on what handset manufacturers do. What they do now isn’t necessarily what they want to do. It is what they have to do to reach customers.
It is harder still to generalize from Apple-AT&T to anything. Apple, or more precisely Jobs, has a preference for closed systems that is not shared by other device manufacturers. The fact that he sought out an exclusive contract does not mean, by itself, that there are, as a general matter “significant efficiencies associated with exclusive agreements.”
I agree with the argument that the iPhone won’t last forever. It is as vulnerable as the Mac was in about 1986 or so. But that doesn’t tell us much about whether wireless carterphone is better or worse for consumers and the nation over the long run.