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iPhone: AT&T deal under scrutiny by government, Verizon

post #1 of 125
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Apple's multi-year iPhone contract with AT&T has become the poster child for the ills of the cellphone industry in a US House committee debate, with Verizon also casting its own doubts on the device.

Although the debate on Wednesday was officially held to discuss the possibility of forbidding individual states from setting their own laws for wireless use, the focus quickly shifted towards what many believe are abuses of the open market that prevent genuine competition.

Representatives from Congress specifically accused exclusivity deals, like AT&T's agreement for the iPhone, of trapping customers. These terms have forced users to stay with their providers as long as they want to use certain devices, no matter the conditions. Subscribers using the iPhone can't switch once their contracts expire or if they are unhappy with network quality, members of Congress said.

The iPhone highlights this problem through multiple restrictions, none of which are explicitly required for it to operate elsewhere. While it would be technically compatible with T-Mobile, the phone's SIM card cannot be replaced with anything but another AT&T card.

And regardless of hardware limits, any AT&T customer is required to pay for two years of service and will only have the option of switching to T-Mobile once AT&T's deal with Apple is at an end. Any cancelations also forced an early termination fee, the politicians noted.

"You're stuck with your iPhone and you can't take it anywhere," said committee chairman and Massachusetts Democratic Party representative Edward Markey.

Private firm SkyDeck's chief Jason Devitt underscored how this protectionism created a "deathgrip" on what cellphones were an option. While Verizon's parent company Vodafone was mandated to allow unlockable phones in its European home and would support as many as 800 different handsets, Verizon itself would only allow 30 -- none of which could be ported to Sprint or other compatible networks, Devitt observed.

Senior officials from the major carriers were expectedly defensive of their policies and said the cellphone business was more competitive today than it would be with unrestricted phones and contracts, which they claimed would lift prices by taking away guaranteed revenue streams.

AT&T's primary challenger in the wireless industry, Verizon, indirectly used the iPhone as proof that exclusive models were no guarantee of success. A high-profile launch aside, the long-term future of the iPhone was still in doubt and Verizon felt no qualms about turning down the iPhone deal because it wasn't the "right opportunity" at the time, said the carrier's legal counsel Steve Zipperstein.

"Despite the hype about the iPhone in the media over the last couple of weeks, the product has only been available for the last 10 days," he said. "The jury is still out and we will have to see how the market reacts."
post #2 of 125
Y'know, I don't really like the exclusivity stuff either. I just hope they think these things through way beyond the soundbite level if they add laws or regulations.

As far as Apple is concerned, I suspect they would be happy to drop the exclusivity. They probably just agreed to it as a bone to Cingular/AT&T for all the changes they were forcing on them.

It will be interesting to see if anything happens...
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post #3 of 125
The tight lock and exclusivity on iPhone is keeping me from becoming a customer.

While I don't mind paying AT&T for wireless service in US, when I travel abroad I want to swap in my SIM card from a local wireless carrier. This saves me roaming charges as well as providing local people a local number to reach me.

While Apple and AT&T may think the lock-in will guarantee revenue for a period of time, it also excludes a number of potential customers.

When you need a contract to retain your customers, that means your company isn't making customers happy.
post #4 of 125
its suprising they are using the iphone as an example, looks to me like someone or someones kid wants the jesus phone baddddddd and does not wanna wait 5 year to hear att its goin to have it 5 more years
post #5 of 125
You are forwarned on the options. If you don't like it, then don't buy the device.

Cellphone providers have been different for the various carriers.

T-Mobile, Verizon, Sprint and Cingular have contracts for certain phones which they leverage in marketing to help persuade clients to use their network over the competition.

This pisses in the faces of the providers who now see the forrest for the trees and call foul.

I don't even own one and I use Verizon. I'm not whining about not having the option to have the iPhone on Verizon.
post #6 of 125
Is it that time already? Next Friday the July puts and calls are expiring... seems like someone is hoping to drive the price of AAPL down a bit...

Where were these politicians before the iPhone had its buzz?
Was there no such problems with any cellular providers before Apple joined the fray?
post #7 of 125
I'm a customer of Vodafone here in Ireland, who are the "parent company" of Verizon Wireless (well, Verizon Wireless is a joint venture between Vodafone and Verizon). At any rate, we don't have crazy 24 month contracts here, and while phones are often shipped locked, obtaining the unlock code is just a 5-minute phone call away.

I don't like the US cell phone market. It's very restrictive for the customer. Usually I'm against regulations, but in this case I think it may be time for the government to lay the law down in the interest of consumers: make it mandatory for cell phone carriers to either supply their devices unlocked, or give their customers the unlock code upon request. That's the least they could do.
post #8 of 125
I want this to turn on verizon: why can they turn off features that are built into the handset like bluetooth file transfer, Todays cell phones dont suck, what sucks is what the carriers do to them...take a fully unlocked and un-artificially-restricted handset for a test on the VZ network and it is a different world...

As a famous preacher once quoted "Don't judge the splinter in your brothers eye when there is a plank in yours"
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post #9 of 125
Congress, quit trying to micromanage the economy. You don't have a right to have a cell phone. If you don't like AT&T, then don't get an iPhone.

Stupid. Let the market decide if the exclusivity is good or bad. But that would mean abandoning the special interests of the rest of the cell phone industry, and whiney Verizon that skipped out on these mad sales.
post #10 of 125
Basically what's really going on is Verizon, T-Mobile and Sprint are behind the scene's calling foul on the iPhone because they can't sell it too. F*** them. Verizon had it's chance and arrogantly (and publicly) turned it down. If they are afraid of the impact that the iPhone may/will have on their business then make a phone yourself or urge Nokia/Moto/LG to make better phones!

Now they will try to get the government to regulate this and all that they will succeed in doing is wasting taxpayer money on some sort of worthless reforms that will ultimately benefit the company with the most lobbyists. Ass hats.
post #11 of 125
Quote:
Originally Posted by JimDreamworx View Post

Is it that time already? Next Friday the July puts and calls are expiring... seems like someone is hoping to drive the price of AAPL down a bit...

Where were these politicians before the iPhone had its buzz?
Was there no such problems with any cellular providers before Apple joined the fray?

I would expect that AAPL to go UP in response to any real threat by the government to bust apart an exclusive deal. Note that I said any real threat. There appears to be none at this time. Why, because the prospect of Apple being unleashed from the exclusive deal with AT&T would increase the prospect of anyone being able to buy the iPhone with any service...thus more potential customers. In fact, I would be not surprised at all to find Apple (deeply) behind the scenes pushing for exactly that to happen.

P.S. I do not advocate, at all, the government intervening into a private contractual arrangement between private parties (AT&T, Apple, customers) on behalf of other "competitors" in the market. In fact, I am an advocate of the government getting its nose and fingers out of places it currently intrudes into and shouldn't be (which is pretty much most things). I'm just saying I wouldn't be surprised to find Steve "Machiavelli" Jobs behind this and that such a move by the government would actually benefit Apple (not hurt it).
post #12 of 125
Quote:
Originally Posted by Chris Cuilla View Post

I would expect that AAPL to go UP in response to any real threat by the government to bust apart an exclusive deal. Note that I said any real threat. There appears to be none at this time. Why, because the prospect of Apple being unleashed from the exclusive deal with AT&T would increase the prospect of anyone being able to buy the iPhone with any service...thus more potential customers. In fact, I would be not surprised at all to find Apple (deeply) behind the scenes pushing for exactly that to happen.

It's just ridiculous posturing.

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post #13 of 125
um, Verizon had an exclusive on the Motorola Q last year. When I bought it on launch day I also had to sign a 2-year contract with them. The Q also had many features crippled by Verizon. What are they complaining about?

FYI- I bought the iPhone, canceled that Verizon contract and gladly ate the $175 ETF. No one forced me into either contract.
post #14 of 125
Must we fix this problem with laws?

Like most people, I agree that AT&T does suck. I love my new iPhone, I miss T-Mobile and wish Apple had gone with them instead.

However, those are just my wishes. I didn't spend millions upon millions of dollars developing an iPhone, nor did I invest my own money to plant cell towers everywhere. If Apple and AT&T have decided on exclusivity, my choice is to agree to their terms, or not deal with them. They're free and I'm free. In this case, I chose to accept their terms. To me, the benefits of the iPhone outweigh the annoyances of AT&T. And you're free to make a different choice.

I believe this freedom is what gave us an iPhone in the first place. If our government had imposed heavier regulations on carriers or device makers, Apple may not have entered the field at all.
post #15 of 125
It's unfair to use the iPhone as an example when this has been happening for years and years on other carriers. All phones aren't built for all networks, that's the manufacturers choice. Perhaps the only validity is the required contract that you MUST sign to get an iPhone which I think is kind of crazy, especially paying $500 or $600 for the iPhone.
post #16 of 125
This is just ridiculous. It's plain and simple: Exclusivity agreements like this are what drive genuine competition.
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post #17 of 125
On one hand, I think Verizon is worse. If they are going to try to incite anything, they are going to get hit as hard or harder for the same practices.

On another hand, I think it sucks that a handset is tied to a specific brand service. I don't buy my toilets or sinks from the water utility, or light bulbs through the power company, my computers from my ISP, I don't buy my cars through my gas station and so on, so I see no justification for a mobile phone be tied through a carrier. One can get an unlocked phone, but not only are those usually more expensive, the service costs the same, whether you buy the locked subsidized phone or bring in an "outside" phone. I think that's the reason that there is a lot of phone turnover, the cost of replacing the phone every two years is negligible, or at least they make it seem cheap, though in part by inflating the list prices of the phones.

It used to be that land line phones were owned by Ma Bell, and the cell phone industry has almost regressed the situation back 50 years.
post #18 of 125
Quote:
Originally Posted by AppleInsider View Post


"You're stuck with your iPhone and you can't take it anywhere," said committee chairman and Massachusetts Democratic Party representative Edward Markey.

He must be trying to re-live his glory days when he (from his website), "was one of the only members of the Commerce Committee to fight AT&Ts monopoly in the early 80s and is a principal author of the requirement that the Bell Operating companies accept local telephone service in the 90s."

So instead of one behemoth of a company to bitch about regarding service, we now have multitudes!

By the way Markey, I didn't see anyone holding a gun to the 700,000 buyers of the iPhone who I am sure the majority of has had some experience with cell phones, wireless providers, and yearly or multi-year contracts.

So no Mr. Markey, no one is stuck with anything. The consumer had everything in front of them they needed in order to make their decision and they either purchased or walked!

It is malarkey from Markey why I don't vote democratic!

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post #19 of 125
Excuse Me! Apple approached other cell phone companies (Verizon, Sprint, AT&T before re-bought Cingular ) and they told Apple sorry no deal because Apple insisted controlling the development and features that they were going to provide the customer. Cingular was the only one that wanted to play ball.

You all do realize that the other companies dictate to the manufactures Motorola, Samsung, Palm, etc... what features they will let you have access to. For instance my Motorola E815 is capable of doing bluetooth file exchange but Verizon said no way in hell, because they don't want you uploading songs, ring tones, etc... from your computer to the phone. They want you to purchase it through them. This is pure BS. I purchased the phone and it should be my decision what features of the Manufacturer I choose to use or not. Subsequently, with the help of a few How-To articles on the Internet, I hacked the phones OS and enabled the features I wanted.

Apple called BS as well and said you are not going to dictate to us what features we can enable or not enable. To me this is the right thing to do. You pay for a product and you should get full access to is features.

Now you get a bunch of Libs, like Hillary and Dingy Harry, who have not followed any of this for the past six months to two years trying to tell Apple what it can and cannot do with its own products and how it must distribute them. This is just stupid. I suppose McDonalds should sell Whoppers, Chevy should sell Mustangs, and Microsoft should sell Linux. Its sick and pathetic that they have so much time on their hands to worry about this crap vs. real issues such as securing our borders and deporting illegals.
post #20 of 125
I think you guys need to read the article more carefully
Quote:
Originally Posted by Wally View Post

Basically what's really going on is Verizon, T-Mobile and Sprint are behind the scene's calling foul on the iPhone because they can't sell it too. F*** them. Verizon had it's chance and arrogantly (and publicly) turned it down.
...
Now they will try to get the government to regulate this and all that they will succeed in doing is wasting taxpayer money on some sort of worthless reforms that will ultimately benefit the company with the most lobbyists. Ass hats.

Quote:
Originally Posted by hughjaas View Post

um, Verizon had an exclusive on the Motorola Q last year. When I bought it on launch day I also had to sign a 2-year contract with them. The Q also had many features crippled by Verizon. What are they complaining about?

Verizon isn't complaining about this. Reread the quote from the actual article. Verizon is defending the current system (as all the carriers seem to be). In the article, Wally, verizon is still arrogant and public! They are saying that they had a chance and refused it so Congress should buzz off. They even go further and say that the jury is still out on the iPhone. Hey, if you are going to be arrogant--go all the way! But they are not complaining as ya'll seem to think.

Quote:
Originally Posted by AppleInsider View Post


Senior officials from the major carriers were expectedly defensive of their policies and said the cellphone business was more competitive today than it would be with unrestricted phones and contracts, which they claimed would lift prices by taking away guaranteed revenue streams.

AT&T's primary challenger in the wireless industry, Verizon, indirectly used the iPhone as proof that exclusive models were no guarantee of success. A high-profile launch aside, the long-term future of the iPhone was still in doubt and Verizon felt no qualms about turning down the iPhone deal because it wasn't the "right opportunity" at the time, said the carrier's legal counsel Steve Zipperstein.
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post #21 of 125
Quote:
Originally Posted by JimDreamworx View Post

I
Where were these politicians before the iPhone had its buzz?
Was there no such problems with any cellular providers before Apple joined the fray?

C'mon. Stop being so defensive for Apple. They are politicians. They follow buzz practically by definition. It has nothing to do with Apple and everything to do with the fact that the iPhone has been plastered over every news outlet for weeks now.

Similarly, the people who don't want to switch to AT&T have been having the iPhone dangled in front of their faces mercilessly. They are much more likely to complain about this than some Nokia you can only get on T-Mobile. And when people complain, politicians smell an opportunity for an "investigation into these practices."

This is how our system works. Hopefully there will be many press conferences full of hot air and then there will be real debate and thoughtfull investigation and good public policy will prevail in the end. (note, I only said hopefully)
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post #22 of 125
i guess the "exclusivity" contract congress has with us sucks too lets get rid of their 2 year contracts and put them home for being so useless maybe the inspiration for 2 years contracts was modeled on congress. bunch of losers.
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post #23 of 125
Quote:
Originally Posted by age234 View Post

If you don't like AT&T, then don't get an iPhone.

There is a problem with this argument. As much as I am an Apple Fanboy, need a GSM phone for international use, and don't really mind AT&T, when two companies act together to create a lock-in between products it is collusion.

The bigger questions are:
-Why is the cancellation fee so high, if there is no subsidy on the phone? Likewise, why is it not pro-rated for the remaining duration of the contract?

-When my contract is up, or if I pay to cancel it, why can't I use the device I have purchased with another provider? This is the fundamental reason for standards, and why the government should encourage them.

-If my provider can no longer offer service congruent with the assumptions made on entering the contract, shouldn't I be able to use my phone with a different compatible service? (Say I move abroad, provider goes bankrupt, or a service that could reasonably be expected as an extension of existing services is not provided in a sufficiently cost and performance-competitive fashion-- like tethering for the people who want that.)

The cell phone industry is really messed up, world-wide. For progress, the government is going to have to step in and limit what they can do to transmitting packets. In this fashion, they do not act as a barrier to the industry with their monopoly/oligopoly status. They are also incentiveized to do a great job with transmitting packets based on market need.

Apple can do a little bit to shake up the industry, but right now it is in their best interests to collude with them. As a stock holder and iPhone owner, I don't feel too robbed. I might change my mind if innovation doesn't continue.
post #24 of 125
I don't really want to see government involved in this kind of piddly nonsense of requiring unlockable phones or anything. The real problem is that they failed in the beginning to mandate a standard. We should have just picked either Japan's system or European GSM. None of this split market of technologies. We did it again in 3G spectrum.

Government should be involved in standard setting. There are advantages to proper standards if they are set reasonably intelligently. Not like HDTVs 50 different broadcast standards, something which is just confusing and fragments the market. But there is absolutely no reason we should not have taken this chance for unification of 3G. Now we just have to patch things up as best as possible.
post #25 of 125
I'd like the opportunity to move from carrier to carrier if they suck without having to wait for a lenghty contract, or 175-275 dollar penalty for leaving. You have to try before you buy sometimes, and they are getting a minimum of $175 to let you try the network. That is BS. Sprint/Nextel was good at my house, but I moved, and had no service at my new place. So I had to switch. And it cost me a lot of money to do so. Even if you buy a shit phone for 50 bucks, you're locked in.
As mobile becomes more prevalent and people drop house phones for cell phones, maybe there should be someone stepping back the companies a bit, and allowing more freedom to move around between carriers. AT&T never gave a damn what phone I had plugged into my wall, and I can't remember Verizon asking me either. Why the hell should they decide what phone I get to use on their wireless network, and why should they be allowed to punish me for leaving if they suck?



Quote:
Originally Posted by Rot'nApple View Post

He must be trying to re-live his glory days when he (from his website), "was one of the only members of the Commerce Committee to fight AT&Ts monopoly in the early 80s and is a principal author of the requirement that the Bell Operating companies accept local telephone service in the 90s."

So instead of one behemoth of a company to bitch about regarding service, we now have multitudes!

By the way Markey, I didn't see anyone holding a gun to the 700,000 buyers of the iPhone who I am sure the majority of has had some experience with cell phones, wireless providers, and yearly or multi-year contracts.

So no Mr. Markey, no one is stuck with anything. The consumer had everything in front of them they needed in order to make their decision and they either purchased or walked!

It is malarkey from Markey why I don't vote democratic!
post #26 of 125
We know why AT&T demanded an exclusive: because they like the lock-in and all the switchers.

We know why Apple agreed to that demand: because they were asking a LOT of a carrier (from new activation methods to visual voicemail development) and thus the carrier could make demands back. No exclusive, no iPhone. Much like Apple had to put DRM on songs at first. No other way to make the deal happen.

And we know why AT&T shouldn't be ALLOWED to make such a demand in the first place!
post #27 of 125
I don't care I needed a contract. I wanted the iPhone, and I signed the contract. No one made me.

I don't have a problem at AT&T; my RAZR was with them: good signal, good service, and drop outs only occasionally (like everyone else). And signal depends a lot on where you live.

And Edge is not painfully slow. My wi-fi is faster, so I don't care.

The less Congress gets involved, the better.
post #28 of 125
You have to love how a legal threat (though it's really more of posturing) at Apple brings out the AI community's inner Milton Friedman.

Truth is (and speaking of as an owner of for-the-most-part pretty amazing iPhone) exclusive multi-year-long contracts do suck, and it's amazing that Americans put up with them. Unfortunately, it's the system we've got.

On the hand, singling the iPhone out for this, or the At&T and Apple deal in particular is just deeply opportunistic. It's obviously a media darling, and everyone knows about it, but it's just a fairly standard example of how the U.S. cell phone business works - very far from either a pioneer or some sign of something new.

Ironically, the iPhone looks to *change* the current U.S. cell phone model, by shifting more power to cell phone manufacturers over carriers, and possibly diminishing the idea of subsidization... as the appeal of "free", crappy phones may become less attractive.
post #29 of 125
Rep. Ed Markey, Is the one that is raising the issue.

Here is is phone number 202-225-2836 and a link to a email form that you can use to contact him.

I think if you have an issue with this BS you should either call his office and complain or send him an email. Maybe they will get the message. Then again maybe not.
post #30 of 125
Quote:
Originally Posted by age234 View Post

If you don't like AT&T, then don't get an iPhone.

Some people will do exactly this, they won't get an iPhone because of the multi-year exclusive partnership with AT&T (poor AT&T coverage in their area, high cancellation fee, etc.) This might hamper sales, I'd like to see Apple sell even more iPhones via other carriers.

AT&T has exclusive U.S. distribution rights on the iPhone for five years, WTF?

Quote:
Originally Posted by AppleInsider - May 22, 2007

Being the exclusive U.S. provider for Apple's iPhone means that wireless carrier AT&T won't have to worry about a competing version of the device for rival cellular networks for at least half a decade.
post #31 of 125
Nobody but the carriers and maybe Apple like the exclusivity deals, however this practice has been going on for many many years.

Most carriers have some exclusitivy or another for a particular model or another. I do not get it ..... why is it ok for all other phones but not for the iPhone?

Maybe the iPhone hit a nerve with politicians that do not want to switch carriers, LOL.

Fair is fair, if they are going after the iPhone then zero exclusivity for every single phone and carrierr, fair is fair.
post #32 of 125
Gee, the last time I checked companies were free to associate with whomever they wished. Enter into contracts with whomever they wished without interference from the Government. This isn't Russia? Is this Russia? It's all part of the word free as in Freedom. I as a consumer am free to choose to enter into an agreement with Apple and ATT. That was my choice.

By the way, love the iPhone, baby!!!
post #33 of 125
Are we seriously at the point where Congress has nothing better to do than worry about baseball, the Sirius/XM merger and the iPhone? Really? Is that what's important to our Congress now? Last I checked, we have a war running in Iraq and Afghanistan, and our healthcare could use some fixing, too! How about fixing that first and worrying about all the other nonsense later?!?! I guess it's a lot easier for them to just complain about the issues instead of working to fix them.

WTF???



--DotComCTO
post #34 of 125
Quote:
Originally Posted by SurfRat View Post

This is just ridiculous. It's plain and simple: Exclusivity agreements like this are what drive genuine competition.

That is a load of BS. What it drives is customer lock-ins, that is it's very purpose, and it is anticompetitive. What drives competition is a level playing field. To be fair it is the fault of the consumer who has (collectively) bent over and taken it from the cell phone companies.
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post #35 of 125
Verizon now has my cell phone, land lines, internet, and television. I am looking forward to banking at Verizon Bank, shopping at Verizon market and sending my kids to Verizon school.
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post #36 of 125
It's simple...

Apple Solution = apple-chosen device + apple-chosen service
Other 'solution' = user-chosen device + user-chosen service

The success of the former directly undermines democratic process (by implying public choice isn't the best solution) so of course the politicians are rallying against it. The runaway success of iPod + iTunes must be such an embarrassment to them (it certainly doesn't sit well with their transatlantic counterparts).

As for Verizon - why would they even be on hand to drip poison into the committe's ear if the following were true...

Quote:
Originally Posted by AppleInsider View Post

AT&T's primary challenger in the wireless industry, Verizon, indirectly used the iPhone as proof that exclusive models were no guarantee of success. A high-profile launch aside, the long-term future of the iPhone was still in doubt and Verizon felt no qualms about turning down the iPhone deal because it wasn't the "right opportunity" at the time, said the carrier's legal counsel Steve Zipperstein.

"Despite the hype about the iPhone in the media over the last couple of weeks, the product has only been available for the last 10 days," he said. "The jury is still out and we will have to see how the market reacts."

...is there anything about the last 10 days which implies iPhone will be a failure? Not only are the jury out but so are the stores!

Both parties of course have an identical hidden agenda. One placates consumers by patronising them with superficial choice (and the belief they are able to make the right one) while in reality exerting control through the underlying infrastructure to it's own end. The other is Verizon.

I hope the iPhone is a howling success.

McD
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post #37 of 125
Apart from the iPhone, AT&T is actually one of the best carriers as far as contracts go. AFAIK, you can walk into an AT&T store and pay full price for a phone and not have to get a contract. Verizon requires at least a one year contract no matter how much you pay for the device.

Also if you pay full price for an AT&T phone, you can fax the receipt to AT&T customer service and they'll give you the unlock code no questions asked. Not only that, if you do get a contract, they'll still give the unlock code after a few months if you ask them for it.

The whole unsubsidized iPhone with contract is kinda screwy but it doesn't affect upgrade eligibility so the subsidy is still there, it just can't be applied to the iPhone. You can get any other phone for free (or discounted) and sell it.
post #38 of 125
Quote:
Originally Posted by Rot'nApple View Post

It is malarkey from Markey why I don't vote democratic!

Or is it because you're too f_____ stupid to know the difference between "democratic" and "democrat"?

post #39 of 125
Quote:
Originally Posted by Rot'nApple View Post

It is malarkey from Markey why I don't vote democratic!

Sure, because under the Republicans, things have gone so well. o_0

The Bush administration has been a reg'lar beacon of competency and reason, as the President's 29 percent approval ratings point out.

.
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post #40 of 125
Quote:
Originally Posted by rjpotts View Post

Microsoft should sell Linux.

Microsoft does sell Linux, btw.
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