Our wireless services are shackled. Hefty early-termination penalties, hidden overage fees, exclusive deals for wireless devices, loopholes in roaming regulations, and other problems are crying out for solutions.

Yet the FCC, the federal agency charged with protecting wireless consumers, is instead spending its resources on ways to make life easier for the wireless industry – to get it more spectrum and to make it easier for them to build towers. Sure, these are useful goals, but it’s past time for some real reform that matters for consumers.

To be certain, the wireless market is productive on many levels. Technology companies like Motorola and Apple continue to introduce new handsets, and wireless carriers are increasing their 3G and 4G services. But one thing that remains stuck is the price of it all.

Carriers compete over some things, like the devices you can use exclusively with their services, or how many friends you can call for free without using minutes, or whether "night" calls begin at 8 p.m. or 9 p.m. But aggressive competition over price in the post-paid market (read: contracts) among the four major national carriers has not emerged. We don't have national carriers offering $20 per month, 200-minute voice plans, and we don't have carriers offering post-paid $0.10 per minute daytime use plans without bundles. Instead, we have standardized $39.99 per month, 450-minute voice plans, with minor variations.

Profiting from consumer mistakes

The truth is, we have a wireless market designed to profit from customer mistakes, whether people buy too many minutes and pay too much per month, or buy too few and pay inflated overage fees. And that doesn’t include the price-gouging that occurs with text messaging and data fees.

How has this happened? If customers could be paying less -- and they certainly could -- why haven’t market forces made it happen? In short, the major national carriers are avoiding a "price war" with one another, and are instead competing to see how much they can get away with charging without losing customers.

As we’ve noted, Verizon recently announced it’s increasing early termination fees from $175 (already well in excess of the true device subsidy) to $350. Worse, Verizon has applied this fee to all of its popular phones - not even just smartphones. These fees have no clear (or even possible) relation to the loss Verizon would suffer from a broken contract. As public interest groups have been saying for some time, these fees are simply penalties imposed on any customer who wants to switch to another carrier.

The missing price war

Given these excesses, you’d think smaller wireless carriers could find an opening. But they aren't really making inroads into the market. In large part, this is because smaller carriers cannot get the spectrum, the roaming rights or the handsets they need to compete with larger players. But the bigger problem is that wireless consumers cannot easily switch service providers, even if they could save a lot of money or improve their service quality by doing so.

There's a chicken-and-egg problem here: Since customers can't switch, the carriers have little incentive to engage in a price war. But the advantage of switching from one carrier to another is unclear, so customers aren't fighting the shackles hard enough to force carriers to remove them.

We do have some examples of how this circle can be broken. There are wireless markets with no (or, very few) service contracts, ETFs or exclusive deals for devices. In fact, many countries in Asia lack these consumer shackles, yet have healthy rates of adoption and deployment as well as strong industry revenues and staggering levels of innovation.

A better wireless market

Allow me to paint a brief picture of how much better the wireless market in the United States could be.

Imagine that early termination fees could be lowered, yet still compensate providers and encourage subsidies. Early termination fees could be based on the difference between the amount paid by the subscriber for the device, and the amount paid by the provider -- for example, 10 percent more than that difference. Imagine that you could pay that now-nominal fee and take your (now paid in full) phone with you to another carrier, and sign up for service without a contract or an early termination fee. Carriers could offer the same monthly prices for wireless service with or without a contract, and clearly itemize the fee being paid for wireless service and the fee for repayment of the subsidy.

Imagine that you could buy your subsidized phone from the carrier you want in the first place, instead of having to move it over to the network after completing a contract or paying a fee. That could also be accomplished through a prohibition on exclusive deals for wireless devices, which would allow device manufacturers to work with each of the four national carriers as well as smaller regional carriers to offer a device on a variety of networks.

If these changes were made, customers could choose devices and services independently, creating powerful incentives for wireless carriers to compete over the quality and price of their service – not to compete over exclusive access to popular devices. And if customers could pay a reasonable early termination fee and unlock their phones and bring them to a new carrier, these incentives would be multiplied. Wireless customers would have better and cheaper service, and greater choice. And the carriers would still get their customers – and their profits.

Free our phones

These are clear opportunities for the Federal Communications Commission to step in and reform an insufficiently competitive market. Public interest organizations have repeatedly filed comments with the FCC about these issues – not just high ETFs and handset exclusivity, but also confusing and misleading information about wireless services (and $5,000 service bills, thanks to severe hidden fees for excessive data usage) and other problems.

Individual members of Congress have raised concerns as well. Four senators wrote a letter asking the FCC to investigate handset exclusivity arrangements, and Sen. Klobuchar has already expressed her concerns with Verizon's high early termination fees. In fact, while serving as interim chairman of the FCC, Commissioner Michael Copps promised to open a proceeding on handset exclusivity.

It seems we’re ready for some real reform. So, what is the FCC doing about it? Apparently, reforming tower siting, which would make it easier for the carriers to install new towers and expand their service territories. Sure, that's helpful, but it doesn't really fix anything. It doesn't create incentives for wireless carriers to compete with one another over price and quality of service, because it does nothing to remedy the obstacles to effective competition that plague the American wireless market.

It's time for the FCC to do something about early termination penalties, exclusive deals for wireless devices and hidden and abusive overcharging for mobile data usage. It's time to break open the shackles on consumers and on the entire wireless market, and make it into the free market that Congress envisioned with the 1996 Telecommunications Act. It's time for the FCC to free our phones, because the myth of the competitive wireless market sure isn't doing the job.