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Mobile Video: It's Not About the Phone

For those of you who vacation or work in Europe, you know that prepaid SIM chips are a way to keep costs down when making continental calls. Rather than taking your Verizon cell phone (which wouldn't work anyway, unless it's a newer Blackberry) or use the AT&T SIM chip in your quad-band GSM phone, you can pick up inexpensive SIM chips that give you a phone number in the particular country you're visiting.

Interestingly, in the announcements surrounding this week's CTIA show in Las Vegas, Apple has been making news of its own that shows just how entrenched carrier plans are in the U.S. —and are becoming in Europe.

For instance, Apple made an announcement this week that its iTunes Store surpassed Wal-Mart as the top music retailer in the United States back in January; the information was known then but held until now, for obvious reasons. First, iTune's "top of the heap" was an aberration driven by the upswing in gift card sales over the Christmas and New Year's holidays, and it has since settled back to number 2, after surpassing Best Buy. Second, Apple needs to use the announcement to pre-empt other announcements coming out of CTIA that deal with major record label deals with a variety of carriers and third-party media providers.

The news of Apple settling in at number 2, with occasional spikes to number 1, is definitely of interest, given the fact that it's the first time that non-physical sales have surpassed physical sales. And it even gives pause with Apple in the number 2 slot, given just the huge percentage of all music that Apple and Wal-Mart collectively sell. But looking beyond the numbers and into the carrier space, and you see walled-garden models continuing to proliferate.

True, Verizon and AT&T have both announced the ability to use any compatible device on their network, freeing consumers slightly from the grip of a service/phone lock-down. But Verizon's "out" is that the phone has to be approved on its network, and the cost of pre-paid per-kb data service is enough to send anyone into apoplexy—so much so that Viviane Reding, the European Commission’s commissioner for information society and media, has warned the European industry to cap its data rates.

"To avoid regulation, the industry will have to show its responsiveness to consumer concerns by credible reductions of the cost for data roaming both at the wholesale and at the retail level," said Reding, noting that the issue of EU citizens receiving massive data and SMS bills in EU member states other than their home country is contrary to its single market principles.

This industry's answer is a move toward long-term data contracts in Europe, and really anywhere that data services are proliferating—a return to the early days of cell phone service. With data usage growing faster than phone minute usage, while data costs the same to transmit but can command premium pricing, the trend to lock down customers via data service offerings will probably increase.

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