The mobile phone business seems to have a serious problem with taking words that have a pretty clear meaning in English, using them in advertising and marketing promotions -- but meaning something entirely different. For example, various mobile operators claimed "unlimited" broadband, but to them "unlimited" meant "really, quite limited." Well, it seems we've got another situation like that, such as MetroPCS's widespread marketing campaign that loudly proclaimed "No Contract." Well, guess what, it actually meant that there absolutely is a contract, and any customer who signed up for MetroPCS after seeing the "No Contract." advertisement would obviously know that, because in the welcome kit it sent, it pointed users to a URL, and at the bottom of that URL there was another link to a terms of service, and in the terms of service there was another link to "start a service request" which included some boilerplate about how you were agreeing to a contract. And, apparently, this is all very legal.

Reader crcb alerts us to a fun discovery made by his sister, who had purchased a phone plan from Tracfone, including the companies advertised "Double Minutes for Life" deal. The idea is that if you sign up and pay for that plan, any additional minutes you buy actually give you double the stated number of minutes. Obviously, for some, that sounds like a really good deal. Except that, at least in this case, it turned out that the "for life" part actually only meant "one year." If she wanted to continue getting "Double Minutes for Life" she had to buy a new plan... which also apparently would only last a year. This seems quite reminiscent to various telcos having trouble understanding the meaning of the word "unlimited." Either way, I contacted Tracfone for comment on this on Monday of this week, using two separate email addresses provided on the company's website, clearly explaining what I was writing about... and have received absolutely no response. Perhaps all the folks there are out living it up... since apparently they believe life only lasts a single year, and they shouldn't waste a minute of it.

A few years back, after noting the trend of laptop companies to start building in cellular data modems into their laptops, we wondered when it would reach the stage where mobile operators would subsidize the cost of a laptop, just as they subsidize the cost of mobile phones in many cases. In early 2006, we started to see such subsidized laptops go on sale in Europe, with the mobile operators selling the laptops directly for well below list price, as long as you bought into a long term data plan. The whole idea seemed a bit strange, as mobile operators have long ranted long and hard about how much they hate, hate, hate subsidies, and how they wish they could do away with them. So, why add them to laptops?

However, the idea has now traveled over to the US as well, in a deal between Acer, Radio Shack and AT&T allowing people to buy an Acer netbook for just $100, so long as they agree to a 2 year $60/month contract for an AT&T mobile data plan. It's still a little confusing as to why the mobile operators are agreeing to this, following so many vehement arguments against mobile phone subsidies, but perhaps they're finally realizing that those subsidies aren't such a bad thing when they get people using their services. Still, how long will it be until buyers start complaining about early termination fees for laptops like they do for mobile phones?

I spent most of my day last Friday acquiring an iPhone 3G. It was a long and tedious process involving several hours of waiting, a visit to the Apple Store, and two visits to AT&T. Part of the reason it took so long is that Apple wasn't willing to let me have the phone until I'd signed up for a 2-year contract with AT&T. Mike has previously discussed the pros and cons of cell phone subsidies, and the associated carrier lock-in. Whatever you think of that debate, the iPhone story is a good example of what a real contract looks like. I was required to sign up for an AT&T service plan and sign an AT&T service agreement before I was allowed to leave the Apple Store with my iPhone. I knew exactly what I was getting into, and had the option to decline before completing the transaction. I think there's little doubt that the courts would enforce the contract's terms if I tried to renege on my commitment.

Now compare that to the shrink-wrap "contracts" that retail software developers keep trying to foist on people who buy their products. When you buy a software product at Best Buy, the cashier almost never informs you about the license agreement, much less require you to read and sign it. In many cases, it's not even possible to open the box and read the agreement until after you've completed the transaction. One of the key differences here is that Apple spent valuable employee time informing me of the contract, giving me time to read it, and requiring me to sign it. This is annoying for Apple, but enforcing some minimum requirements for contract formation also serves an important function: ensuring that firms only resort to using formal contracts when they have a pretty good reason. Forming, complying with, and enforcing contracts consumes resources, so we don't want people forming contracts too lightly. It also ensures that the contracts actually get read, something Apple has had trouble with in the past. The software industry, in contrast, tries to get all the benefits of legally-enforceable contracts without shouldering any of the costs. That approach isn't fair to consumers or to taxpayers.

Back in February, Starbucks surprised an awful lot of people by signing up to use AT&T's WiFi offering, ending the exclusive deal it had for many, many years with T-Mobile (and Mobilestar before T-Mobile purchased that company). Part of the AT&T deal was that it would offer some amount of free WiFi -- something T-Mobile/Starbucks never did. There was some early confusion about the deal concerning whether T-Mobile would continue offering service and how the two services would overlap. It turns out that it wasn't just confusing to us reading about it -- it was confusing to T-Mobile as well.

T-Mobile has now sued Starbucks over the transition, saying that the company has gone well beyond what the two companies had agreed to. The original plan was that T-Mobile would gradually transition the network to AT&T, and the companies would work together to make sure things worked well for customers of each company. However, just recently, Starbucks pushed forward with the plan to offer some number of "free" WiFi hours to AT&T customers -- much to the annoyance of T-Mobile, who says most of the WiFi equipment in use is still T-Mobile's, and the company isn't getting paid at all for the free hours (an interesting question could be whether or not AT&T is getting paid for that usage).

Basically, the infrastructure transition has barely begun, and Starbucks is already acting as though it's complete, shifting over to the business model provided by AT&T, without having that work within the parameters of T-Mobile's model. While the legal result will almost certainly come down to contractual terms, the real issue may be that this suggests the promised "smooth transition" from T-Mobile to AT&T may not be very smooth at all. T-Mobile is going to have less and less incentive to make sure that the network really works all that well, especially if it feels that it's being cheated out of money for the use of its network.

In certain markets, Sprint has always used affiliates to sell its service, rather than building out its own efforts. Some of those affiliate relationships caused problems back in 2004/2005 when Sprint merged with Nextel -- as Nextel's service existed in some of those markets, potentially "competing" with the Sprint affiliates who had agreements that Sprint would not compete directly. So, with the new WiMax joint venture with Clearwire, Sprint knew that the big affiliate iPCS would be upset. In fact, last week, Sprint sued iPCS in Delaware seeking a declaratory judgment that the new joint venture did not break their agreement with iPCS. That lawsuit appears to have been filed slightly before iPCS filed its own lawsuit in Illinois against Sprint. Chances are the two suits will be combined in some manner, but it's yet another hurdle that Sprint needs to clear before it can get this new WiMax offering off the ground. Sprint may have a decent claim here -- as the agreement with iPCS is focused only on 1.9GHz spectrum, whereas the WiMax network is on 2.5GHz spectrum. Either way, it seems like these affiliate relationships may be a lot more pain than they're worth.

Having just run into its own problems with false advertising, Verizon Wireless is now suing competitor Alltel, claiming false advertising in its commercials. The ads, such as the one here, make fun of Verizon Wireless and other mobile operators for forcing people to extend their contracts whenever they make changes, and claim that one of Alltel's advantage is the lack of such requirements. Verizon Wireless doesn't just claim that this is wrong, its spokesperson states: "Whatever merit this comparison may have to other carriers, in the case of Verizon Wireless, the supposed 'advantage' is pure fiction." "Pure fiction" is a pretty strong claim, and it would be a lot stronger if it hadn't been absolutely true until just a couple months ago. Verizon Wireless did, in fact, force people to extend contracts, and only stopped the practice back in October when Sprint got sued over doing the same thing. And, of course, the Alltel ads began running well before Verizon was pressured into making this change. So, while it's technically accurate that these ads are false advertising now, it seems a bit excessive to describe them as "pure fiction," when they were absolutely true until just a few months ago.

It's become quite clear that people absolutely hate the forced two year contracts and early termination fees from mobile operators. It appears that some of the operators are finally getting the message. In discussing how it's going to offer its eventual WiMax offering, Sprint is now saying that there will be no mandatory contracts with early termination fees -- instead, it will be voluntary, based on a sliding price scale. In other words, if you're willing to take a longer contract, it'll be much cheaper. If you don't want a contract, that's fine, but you'll pay more per month. That seems perfectly reasonable and fits with typical pricing systems that lets the customer figure out how much the flexibility is worth to them. It's about time someone started offering this. Hopefully the other operators take the hint and start offering something similar for their regular phone service.

The introduction of local number portability was supposed to force mobile operators to improve their customer service, since now it would be easier for upset customers to simply jump to a competing carrier. Instead, it seems to have only increased the use of early termination fees that the mobile operators charge if you leave a contract early. To be fair, often these ETFs come into play when the customer has purchased a heavily subsidized mobile phone -- which sounds fair. However, the number of irate mobile users who find themselves facing huge bills just because they want to switch mobile operators suggests that the practice isn't doing much good for the reputations of mobile operators. In fact, it's so bad that some folks are willing to play dead in an effort to fool mobile operators into canceling the contract without charging the ETF -- though, as we've noted in the past, there have been times when even death wouldn't get you out of paying. It would seem to make sense for mobile operators to be a bit more understanding. Verizon Wireless, to its credit, prorates early termination fees, so the closer you are to the end of your contract, the less it costs. It's unclear why the other mobile operators haven't come up with anything similar. Perhaps they really think that locked-in but pissed-off customers are better than happy, loyal customers.