Exclusive Carrier Contracts Slow Smartphone Use in Business

By Don Reisinger  |  Posted 2009-07-21

Exclusive Carrier Contracts Slow Smartphone Use in Business

The cell phone industry is an interesting space. It's highly competitive. It has all the features of a mature, yet growing market. And because it has so many products available, few phones are able to make a mark for longer than a few weeks (except, of course, for the iPhone). 

But it's because of that that most carriers are now trying to find the best and brightest phones and forming exclusivity contracts with their manufacturers to capture a competitive advantage over other carriers. The Apple iPhone is exclusive to AT&T. The Palm Pre is exclusive to Sprint. The Android-based G1 is exclusive to T-Mobile. Each major carrier has at least one highly desirable phone totally under its control.

Consumers can simply get out of their contracts, move to another carrier and use the phone of their choice. It's quick and easy. But corporate contracts with vendors are entirely different. Carriers have marketing teams bringing long-term contracts to companies. The terms of the deals are different. The lengths of the contracts can vary. And for the most part, companies won't be willing to get out of that contract until it's time to do so. Because of that, most companies are locked in a contract with a single carrier, making only that carrier's phones available to employees.

That's a real problem. Although from a carrier's perspective it makes some sense to have exclusive phones, it hurts companies. It practically ensures that at any given time, the best phone for the job won't be available to employees. Granted, each carrier has its own set of smartphones that should be able to appeal to business customers, but at this point, it's a three-phone race between iPhone, BlackBerry and Windows Mobile products. And even then, it's debatable how appealing Windows Mobile devices really are in the enterprise.

Before the advent of the iPhone in 2007, this wasn't really a problem. Windows Mobile products were carrier-agnostic and Research In Motion's BlackBerry was available on every major carrier. An employee who needed a BlackBerry to get work done could have one regardless of the deal his or her employer set up with carriers. Furthermore, the iPhone wasn't enterprise-friendly. It was a consumer product with a couple of features that might appeal to enterprise employees. But it had no real appeal for the business world.

Today, all that has changed. Windows Mobile devices are becoming increasingly less desirable because they don't have the features of their main competition. They don't have the multitouch displays or the applications that appeal to users. Windows Mobile, despite a recent refresh, is looking like an outdated platform. 

The BlackBerry is still a fine enterprise choice on any carrier, but the iPhone is now enterprise-friendly as well. It sports enterprise features like Exchange support and push e-mail, calendar, and contacts. It will allow for tethering. And thanks to an outstanding App Store complete with over 65,000 programs, it has the software needed to enhance the employee's experience. Today, there are thousands of applications designed specifically for workers who want to get the most out of their phones.

But since the iPhone is locked down to AT&T, only a fraction of the entire enterprise market can have one. Verizon Wireless or Sprint customers will need to try out an alternative, like the BlackBerry Storm or Palm Pre, respectively. Those devices try desperately to match the iPhone, but when it comes time to compare them with Apple's product, they don't stack up. They have far fewer applications, the software isn't as good and the experience for workers isn't improved by using them. They're simply not on par with the iPhone.

Why Competition Is Better for the Enterprise

Why shouldn't companies have the option of giving employees the phone of their choice? Maybe some organizations think that, with the applications, the iPhone is the best product on the market for them. Without an AT&T contract, they'll need to stick with a second-rate device. And that's not right. If employees can't have the best phone when they need it, it only hurts the company. 

Ubiquity isn't the only issue in play here. RIM's strategy has been one of carrier-agnosticism for quite some time. It has seen that in order to appeal to the enterprise most effectively, phones must be made available on every carrier. But is RIM's strategy also hurting the corporate world?

RIM knows it's the only major enterprise-friendly organization providing phones to companies. It knows that the iPhone is its main competitor. And it also knows that any employee at a company that doesn't have an AT&T contract will probably choose a BlackBerry. Does that breed complacency?

As long as it's available on one carrier, the iPhone probably won't be able to dominate the BlackBerry in the enterprise. RIM knows that. And it also knows that although its devices might not be the most coveted by some, as long as they're good enough, companies will keep buying them when they can't have iPhones.

Competition is good for all parties. It ensures that the best products are being made available to the users who need them most. It leads to better products being released. And it also brings prices down. That's precisely why competition is so important to companies that do business with carriers. Exclusivity ensures that companies simply won't get the features, the prices or the devices they need to be as productive as possible.

So, as exclusivity continues to grip the cell phone industry, it's important to remember that it's having a detrimental impact on the enterprise. The longer that goes on, the greater the chance that companies won't have the products they need. And that's not right.

Rocket Fuel