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Analysts: iPhone Breaks The Carrier Stranglehold

Apple's iPhone, and other similar direct deals, could overcome the "operator bottleneck and go directly to consumers," IDC analysts suggest.

Beyond its stylish design and functionality, Apple's iPhone is likely to have the most significant impact on the relationship between cell phone makers and wireless carriers in the United States, according to a study released Tuesday by research firm IDC.

One practice not so obvious to U.S. mobile users is the disablement and exclusion of features on cell phones by wireless carriers. Since they serve as the primary retail channel for cell phones, they are involved in every stage of the design process and have a lot of control over the types of features and applications that are enabled or disabled.

These features include call timers, Wi-Fi receivers, Bluetooth, GPS, file sharing capabilities, and e-mail clients.

In his February report on wireless network neutrality and carrier control, Tim Wu, a professor at Columbia University School of Law, called U.S. wireless carrier practices a "spectrum-based oligopoly," where the industry is dominated by a small number of players instead of many competitors.

The iPhone, and other similar deals, could break down the oligopoly. Apple is selling the iPhone directly at its retail stores and requires that activation of the phone is routed through iTunes. Before the iPhone, the typical model for activating a cell phone involved the carrier, either in-store or over the phone.

Apple's insistence "must give Nokia (which has struggled in the U.S.) heart that it, too, can someday overcome the operator bottleneck and go directly to consumers," wrote analyst Shiv Bakhshi in the IDC report.

Nokia has Flagship Stores in the United States, where it sells unlocked mobile devices ranging from full-featured business smartphones to consumer cell phones. The first one opened in Chicago last June. There's also a store in New York City. It has been reported that Nokia isn't as popular in the United States as the rest of the world because carriers have revolted against its independent approach.

In closing, the report argued that Apple's and AT&T's working relationship in bringing the iPhone to the masses could open up the bottleneck to innovation in the United States that previously held back so many cell phone makers.

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