I keep wondering if there isn’t an element of illegal tying in the two-year AT&T contract for iPhone. After all, you are, in effect, forced to buy two-years of voice service — something of declining value — to obtain a music player and a web browser — two things of real value.
Simply put, a tying arrangement is an agreement by a party to sell one product but only on the condition that the buyer also purchases a different product (often known as a positive tie), or at least agrees that he will not purchase that product from any other supplier (often known as a negative tie). The product that the buyer is required to purchase in order to get the product the buyer actually wants is called the tied product. The product that the buyer wants to purchase is called the tying product. In the most basic sense, the seller has tied two products together, as if in a knot.
Why can’t I have a better iPod and a nice wifi device without having to subsidize rapidly-obsoleting and declining-margin voice services from AT&T?