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Verizon Offers Compromise In Exclusivity Debate 106

Posted by Soulskill
from the if-you-can-call-it-that dept.
For about a month now, Congress and the FCC have been investigating the exclusivity deals between mobile carriers and phone makers which require that certain handsets only operate on certain networks (for example, the iPhone on AT&T). Now, Verizon has volunteered a compromise to Rep. Rick Boucher (D-VA), chairman of the House Energy Subcommittee on Communications, Technology and the Internet, which would allow smaller carriers access to the restricted phones after a six-month delay, while continuing to block the major carriers. "From now on, when Verizon strikes a deal with a manufacturer for exclusive access to a handset, it will allow the phone be sold after six months to any carrier with fewer than 500,000 customers." In a letter to Boucher, Verizon said, "Exclusivity arrangements promote competition and innovation in device development and design. We work closely with our vendors to develop new and exciting devices that will attract customers. When we procure exclusive handsets from our vendors we typically buy hundreds of thousands or even millions of each device. Otherwise manufacturers may be reluctant to make the investments of time, money and production capacity to support a particular device." Many remain unimpressed by Verizon's generosity.
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Verizon Offers Compromise In Exclusivity Debate

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  • by Anonymous Coward

    Because obviously this is going to be tons better for consumers. Think they'll keep to this if they get the next iPhone contract deal as has been rumored?

    • by leadfoot (159248)

      What was the last Verizon exclusive phone?

      As far as Palm goes, I've had to wait for Sprint exclusivity deals to end in order to get the Centro. Now I'm waiting for the Pre exclusivity on Sprint to end in order to get one from Verizon.

  • Hmm (Score:4, Insightful)

    by dakohli (1442929) on Saturday July 18, 2009 @10:45AM (#28740747)

    How many carriers are under 500,000 in the states?

    I'm thinking they thought long and hard on that number, and made sure they came up with a promise that will not affect their overal sales.

    • Re:Hmm (Score:5, Insightful)

      by rsmith-mac (639075) on Saturday July 18, 2009 @11:00AM (#28740841)

      How many carriers are under 500,000 in the states?

      None that own their own networks, which I suspect is the the other half of the point. Letting their vassals have their "exclusive" phones doesn't really change anything for Verizon.

      • Me personally, I don't know if I'd want to do business with a carrier with that small of a user base. They could fold suddenly, my "out of area" charges could be rather high, there's no advantage I see to small business in the cell phone industry.

        Now, assuming that people start signing up with some small carrier, I'm thinking Verizon chose that number because Verizon knows they'd buy them out if things started to swing the wrong way. Suddenly you're a Verizon customer again, like it or not.

        So how was this

      • by perlchild (582235)

        I was thinking "well what happens if your indep carrier gets bought my a major" but it seems I was thinking too hard.

        Can regulators get the really simple idea that "if the customer is restricted in changing, it's exclusive, and bad", or do we have to write it on their dead bodies first?

    • Re: (Score:1, Interesting)

      by Anonymous Coward

      As a consumer, which do you like more:
            1. AT&T pays 80% of the cost of your iPhone, so the phone only costs you $99 (but you have to use AT&T in order to get that amazing deal)

            2. You pay the full $600 price for your iPhone and you can choose between the only 2 carriers (in the US) and 1 of them will be AT&T anyway.

      • by sadler121 (735320)

        Actually, only 1 carrier. AT&T and TMobile have different spectrum allocations for UTMS, so you wouldn't be able to take the iPhone over to TMobile anyhow...

        • Re: (Score:2, Informative)

          Interesting, I guess that means the iPhone 3G I've had that's been running on T-Mobile for the past year has been a clever illusion then.
    • Probably not very many, but how many "carriers" will pop up that have terrible or no service, no contracts, no phone subsidies, and either no locking or a "call us to unlock" policy?

      I expect it wouldn't be hard to make a "carrier" that would essentially be a store for unlocked phones that would otherwise be far more expensive.
  • Hmm. (Score:4, Interesting)

    by ground.zero.612 (1563557) on Saturday July 18, 2009 @10:45AM (#28740753)

    Exclusivity arrangements promote competition and innovation in device development and design.

    Citation needed.

    I would argue that it is either an antitrust [wikipedia.org] issue, or dances on the fine line. To make a car analogy, wouldn't it be illegal if Ford and BP paired up to make Ford's only run on BP gasoline/diesel? Of course IANAL.

    • Re:Hmm. (Score:4, Informative)

      by larry bagina (561269) on Saturday July 18, 2009 @11:25AM (#28741027) Journal

      Consider the iPhone. Apple went to Verizon and said "Hey, we have this phone. But we need you to add support for visual voicemail. Also, you're going to act as a dumb pipe only (did we mention the reasonably priced unlimited data plan?). We'll handle the ringtones, music, wallpaper and anything else like that. One more thing: you'll give us a cut of the monthly revenue."

      That was too much innovation for Verizon, so AT&T got the exclusive deal.

      • Consider the iPhone. Apple went to Verizon and said "Hey, we have this phone. But we need you to add support for visual voicemail. Also, you're going to act as a dumb pipe only (did we mention the reasonably priced unlimited data plan?). We'll handle the ringtones, music, wallpaper and anything else like that. One more thing: you'll give us a cut of the monthly revenue."

        That was too much innovation for Verizon, so AT&T got the exclusive deal.

        Sticking with my Ford/BP analogy, was this argument meant to say it would be completely legal for Ford to pair up with BP to lock you (the consumer) out of any other gasoline choices? I ask because at the end of the day, the iPhone/Pre isn't some new magic device that requires a new magic infrastructure. It's a phone, and it only works on the existing telephone infrastructure.

    • Exclusivity arrangements promote competition and innovation in device development and design.

      This sentence really pisses me off. The only competition going on is the big carriers fighting for exclusive handset contracts, they sure as hell aren't competing with each other on price and/or service quality. Also the handset makers are the ones doing all the work, how exactly is Verizon innovating?

      We work closely with our vendors to develop new and exciting devices that will attract customers. When we procure ex

      • I agree ... the handset makers are the ones innovating. Most phones are designed for the WORLD market ... the few 100 million phones that end up in the US market are the tip of the iceberg, the world market is MUCH larger than the US market! (the European market is over one billion ... the Indian market is over 1 Billion ... the US market is ...
    • Re:Hmm. (Score:5, Insightful)

      by aldousd666 (640240) on Saturday July 18, 2009 @01:13PM (#28741791) Journal
      just exactly what is the problem here? Consumers didn't invent the technology, but if consumers don't buy it it's bad for those who did. There is no 'inherent interest of the consumers here.' They didn't have a right to 'buy and use this cell phone' before it was invented, so now, all of the sudden when some smart guy invents it, they suddenly gain the right to have it how they like it regardless of what the guys who invented and brought it to market want to do with it? Consumers are essential to making successful businesses, but business can screw themselves over if they like by making whatever contracts they want. Anti-trust is not defined. What is "anti-competative?" You'll know it when you see it? So.. you don't know if you've committed a crime until after you have, and the jury hands down an indictment? Hmm... I'm pretty sure that you can't have anti-trust over a particular MODEL of phone, when everyone and their uncle has some kind of smart phone somewhere. Consumers put fuel into the engines of the companies that make things by buying them, so it's wise for companies to consider the interests of those buying their stuff. But there is no law (nor should there be) against being stupid and making stupid business decisions (locking out a portion of the market you might have had based on exclusivity deals.) Look at the iPhone... they asked verizon first if they wanted to invest... and they said no. AT&T paid money to enable the very thing to come to market at all. Without that, apple's brilliant design would be sitting on a hard drive somewhere.
    • by FtDFtM (873257) *
      and why is it that Europe and Asia have better and more sophisticated devices without exclusivity?
  • Understandable (Score:3, Interesting)

    by sanosuke001 (640243) on Saturday July 18, 2009 @10:49AM (#28740773)
    I would love to see the major carriers have to compete with their services alone, but Verizon does make a valid point.

    However, they also talk out of their asses. "Exclusivity arrangements promote competition and innovation in device development and design" but they fail to realize that we want a choice for where to go with whatever phone we want. Handset manufacturers would make new handsets regardless; I don't think the major carriers have as much influence as they think they do. Unfortunately, its tough to force them to do anything because people are tethered to their cell phones; a boycott would be impossible since nobody cares enough to do so. They care enough to complain but when push comes to shove, nothing.
    • by ceoyoyo (59147)

      I'm not sure I see where their valid point is.

    • Re:Understandable (Score:5, Insightful)

      by Anonymous Coward on Saturday July 18, 2009 @11:16AM (#28740969)

      "but Verizon does make a valid point."

      No they don't. They along with other mobile providers in the US are among the very few carriers of any sort of consumer service in the world that enjoy this sort of exclusivity.

      This shit wouldn't fly if you could only use Samsung TVs on Comcast. Nor would it fly if Earthlink required you to use a Dell computer to access their dialup service.

      • by DJRumpy (1345787)
        Mod up. If I had points, I'd use em.

        These to my mind are excellent analogies. Vendor locking in certain hardware to their network. Don't get me wrong, I have no issues with AT&T other than the ridiculous texting rates but all of the carriers are guilty of that sin. That doesn't mean I don't want or need a choice of going to someone else should I get totally pissed at AT&T.
      • You can only use your PS2 on PS Home and your XBox 360 on XBox Live. No one publicly complains there either.

        And computer makers are exactly doing what you're saying. If you want a DISCOUNTED Acer Netbook, you have to use it on AT&T Data. If you want an HP DISCOUNTED Netbook, you have to use it on Verizon.

        • by BenoitRen (998927)

          You can only use your PS2 on PS Home and your XBox 360 on XBox Live. No one publicly complains there either.

          The problem with that analogy is that game consoles aren't interchangable. They don't have the same software or the same hardware.

          And computer makers are exactly doing what you're saying. If you want a DISCOUNTED Acer Netbook, you have to use it on AT&T Data. If you want an HP DISCOUNTED Netbook, you have to use it on Verizon.

          Discounts are promotions. They don't lock you. Plus, you can still use

      • by True Vox (841523)
        AOL used to require Windows to use their dialup. Maybe they still do, I donno. Not QUITE the same, but close.
        • Re: (Score:1, Interesting)

          by Anonymous Coward

          AOL has been available to Mac users for 20 years

          • by True Vox (841523)
            Sorry, my mistake. I was actually thinking Linux, it just didn't occur to me to mention it. Though I didn't know it worked on a Mac either, so thanks for the heads up! :)
      • This shit wouldn't fly if you could only use Samsung TVs on Comcast. Nor would it fly if Earthlink required you to use a Dell computer to access their dialup service.

        Gather around, Grasshoppers. For I present to you the tale of the Magnavox Odyssey, the first home video game system to go to market.

        Although there was no true exclusivity involved anywhere, there was an appearance of exclusivity, as customers were under the impression that it would only work on Magnavox television sets due to the system being sold only at Magnavox stores. This hurt the Odyssey's sales tremendously.

  • Really? (Score:4, Insightful)

    by Darkness404 (1287218) on Saturday July 18, 2009 @10:52AM (#28740797)

    Exclusivity arrangements promote competition and innovation in device development and design. We work closely with our vendors to develop new and exciting devices that will attract customers. When we procure exclusive handsets from our vendors we typically buy hundreds of thousands or even millions of each device. Otherwise manufacturers may be reluctant to make the investments of time, money and production capacity to support a particular device

    Really? Because T-Mobile, even though they don't have an iPhone offered still supports it. (see http://consumerist.com/5243325/t+mobile-provides-iphone-support-despite-not-offering-iphone [consumerist.com] for a reference).

    Exclusivity arrangements do not provide competition, competition should be done with -gasp- the networks. Lets see, AT&T is pretty expensive, but they have a decent 3G network, T-Mobile is a bit cheaper, but their 3G is lacking outside of major cities. Verizon is CDMA and so is Sprint and I'm not a fan of CDMA phones so I doubt I will ever use them. That is how competition is supposed to work. Not -insert major phone maker here- just announced a new phone exclusive to -insert network here- so you buy the plan to get the phone. Thats not how its supposed to work at all.

    • Re: (Score:3, Insightful)

      by mariushm (1022195)

      And furthermore, US has some of the worst cellphones and some of the most stripped down cellphones. Here in Europe I can buy retail any Nokia phone and just insert my SIM card and it just works. The worst I've seen when buying a phone from a GSM company like Orange or Vodaphone with a plan (so the cellphone is much cheaper than retail) is having VoIP or FM radio disabled but otherwise there's no such thing as not being able to use your own ringtones or stuff like that..

      • Exactly, plus the fact that in the USA depending on your carrier you might end up with a strange phone. For example, you might have a ton of functions on your AT&T Razr (though mixed in with all kinds of awful crap from AT&T) then you go to Verizion and their phones are totally neutered. I mean, aside from having a horrid UI, there are some things that you simply just can't change that you can on every other phone.
  • by erroneus (253617) on Saturday July 18, 2009 @10:56AM (#28740825) Homepage

    It simply can't be allowed. What we need is the exact same deal that exists for POTS. The phone company pulled nearly the same crap with phones years ago until the government stepped in and said "no more!" In this day where people are increasingly dumping POTS for mobile phone services, it won't be long before we're trapped in the same situation. The time for action is now rather than later... truly, the time for action was at least 10 years ago.

    As it stands, phone makers have a technological means of restriction in that AT&T and T-Mobile operate on GPRS while Sprint and Verizon operate on CDMA. But really, those could be pluggable modules installable at manufacture time. Not sure that would be terribly hard to overcome.

    But when handsets are "free" (as in freedom) I think we will see not only a drop in prices of the phones but also of services. The control of phone prices and availability by the carriers has raised prices, nearly eliminated the used handset market, has essentially prevented a 3rd party phone market and created a disincentive for people to change carriers because they know it means buying another new expensive phone. This is a rather perfect example of anticompetitive behavior that should make Bill Gates envious.

    • Re: (Score:3, Insightful)

      by PJ1216 (1063738) *
      There is a small difference. Not all cell networks are compatible. If all cell phones had to work on all networks, manufacturers would have to spend more to create different phones or just jam every chip in there like they do with world phones. It *could* cause handset prices to jump (above retail, not subsidized) at least temporarily until the market works itself out and they can figure out how better to address the issue (ie: how many of each phone generally goes to each network, is it cheaper to make dif
      • Any GSM phone works on any GSM network, as long as the phone supports the frequency band they use and that's rarely a problem. New (3G) phones support UMTS, in addition to GSM, and use GSM, when they are out of range of UMTS network (or low on battery). The "other standard" is CDMA2000 and has a few percent market share (Wikipedia says it's 12%), some phones are sold in both GSM and CDMA versions. afaik CDMA phones are permanently locked down to a single network, but I don't think there are any technical re
        • Re: (Score:3, Insightful)

          by PJ1216 (1063738) *
          CDMA world phones will actually also carry a GSM chip as well so it will work abroad (CDMA is bigger in the US than the world in general). So it can use GSM when CDMA is absent. The only technical reason is that it requires an entirely different chip in the phone. So, most phones come with one or the other, however, some will come with both.
    • by maxume (22995)

      Seeing as each configuration would still need to undergo FCC testing, it is likely that the pluggable modules you speak of would actually introduce complexity into the situation (namely the plug). Sure, it would make it so that a technically adept user could swap the modules in order to switch carriers, but the overwhelming evidence is that most people like to switch to shiny new phones as rapidly as possible.

      Really, the solution is not to ban exclusivity arrangements, it is to make it relatively straightfo

      • Really, the solution is not to ban exclusivity arrangements, it is to make it relatively straightforward for third parties to be able to offer a phone that works on a network.

        I don't think this is a real hurdle.

        For the GSM-based carriers, you just buy phone that's not carrier-locked and insert your card.

        Looking around on Google, it turns out that you can get unlocked CDMA phones too, just buy the phone and tie your account to that phone based on its ESN.

        But the other problem you point out is a valid one: the subsidy the US carriers offer for buying their chosen phones with their contract makes buying an unlocked phone unpalatable. They don't even offer a way to buy a cheaper mo

    • Re: (Score:3, Informative)

      by fermion (181285)
      The phones are expensive. I think we have seen a drop in prices. I have seen smart phones advertised for $30 with two year contract. That puts the entire two year cost well under $1000, much less that the average two year of landline would costs, assuming that you started with a decent cordless phone.

      I can tell you the first phones that appeared after the ATT breakup were pieces of crap. They were cool novelties, but the quality sucked. About the only benefit to the average person was that geeks could

    • Re: (Score:1, Informative)

      by Anonymous Coward

      Where is all this crazy coming from.

      The issue with analogue services was the requirement of renting a phone. The next huge issue was removing the long distance carrier lock in and then phone number portability. The latter didn't seem much like a necessity.

      In no way does any of this translate to "I want to use an iPhone on X network." Let us be rather clear in that this is precisely the issue that everyone is complaining about. It is no way the same involuntary lock in that my parents had to fight with. I ca

    • Well then, how about we require Verizon and Sprint to convert to GSM. You know, like the REST OF THE WORLD. But that would be a bit unfair as well. Frankly Verizon has a better network in the US. But I do just enough traveling to the rest of the world that we AT&T at work. (And I have an iPhone).

      Now 4G is pretty much supposed to be the same everywhere. So some of that will go away.

      But personally I don't see what the big deal is. I know people who prefer verizon and got a blackberry storm. They s

      • Well then, how about we require Verizon and Sprint to convert to GSM. You know, like the REST OF THE WORLD

        That would be un-American. Seriously, that was the argument given. When the frequencies for digital mobile telephony were sold in the EU and most of the rest of the world, it was with the requirement that they were used to implement a given family of protocols (GSM, later evolutions of the GSM standard). In the USA, that was regarded as government interference in the free market; the correct, red-blooded American capitalist, solution was to let the companies compete with whatever standard they want and l

    • The trouble all started when you american morons invented CDMA as a NIH syndrome response to the GSM.
      That is why you have stupid contracts, tie-ins, no advanced phones (come on Nokia N97 is far better than iPhone), and stupid fees.
      Someone will mod me down as flamebait, but i can afford to lose points.
      Why couldn't you guys stick the GSM. It was flexible, allowed NO tie-ins, was easy to administer.
      But Nooooo, you morons had to go and invent a whole new standard because you were too pissed to use the frogs' st

      • by maxume (22995)

        UMTS is usually implemented as a GSM type service over a CDMA carrier. So apparently it wasn't that moronic.

        The relative lack of difference in prices between the U.S. GSM and CDMA carriers suggests that it doesn't matter very much.

        • Its the lockin that matters.
          CDMA is used only in USA. (Ya, other countries have it, but not as extensive).
          So makers make them only for USA markets which consume far lesser volumes.
          Lesser volumes mean more price per unit.
          Buyers will not pay $450/- per mobile. They would pay $50/-
          So carriers subsidize these upfront with contracts.
          So you end up paying $3500 over 2 years for a $450 mobile phone because you want to pay only $50 upfront.
          In GSM, the sheer volume is HUGE. Worldwide, more makers, more units and less

          • by maxume (22995)

            I don't know the specifics of it, but I suspect that the U.S. market for CDMA phones is large enough to get pretty good economies of scale, I doubt that there is a huge difference in price between producing 500,000 units and 5 million units.

  • Worst idea ever ? (Score:2, Interesting)

    by wimg (300673)

    So what happens if that small carrier gets 500.001 customers ? You can't use your iPhone on their network anymore ?
    So small carriers will need to stay small... ofcourse Verizon loves that idea, because then they can keep the status quo in the market !

  • "exclusivity agreements promote competition"

    how can anyone ANYWHERE not see the blatant intellectual dishonesty.

  • The arugment (Score:5, Insightful)

    by FlyingGuy (989135) <<flyingguy> <at> <gmail.com>> on Saturday July 18, 2009 @11:22AM (#28741007)

    All of the wireless carriers, when you boil it down, offer the same thing, dial tone over a radio.

    At some point, in any competitive environment you have to be able to differentiate yourself from the other carrier, so really what are the options?

    • Coverage? Well that one is a pretty level playing field. Yes any one carrier can expand their coverage by putting up more cell towers, but most of the metro area's have pretty decent coverage and trying to improve that can be daunting. I live in the San Francisco Bay Area and I can tell that trying to put up a cell tower in the City of San Francisco is a at best a 3 year process from birth of the idea to taking the cell live.
    • Price, at some point that becomes a non-issue. In the SF Bay Area you can can get a cell phone with unlimited calling in the SF Bay Area for $35.00 a month with Metro-PCS
    • Features, well thats a horse of a different color since features basically come down to bandwidth capacity.
    • Cool Factor. This is where the handset makes the difference, and the central point of carrier lock-in

    With all of those factors except the cool factor being pretty much equal this is how they differentiate themselves from the next carrier. They go to the handset manufacturers and ask, "Hey what do you have that is really cool?", the look at whats out their and evaluate it and then pick the best platform that will allow them to create the best combination of experiences that add up to the all important cool factor.

    Lest anyone be confused, the carriers invest a LOT of money in brining this handset to market and its is not like they make a lot of money on the handsent. They make the money on the service they provide be it providing higher bandwidth, storage services, fancy voice mail or whatever.

    It is their money they are spending to do all of this, and the notion of creating a network that lets all this cool factor happen just to have someone else duplicate it, or worse duplicate it badly and sell at a lower price point is NOT a winning business model, in fact it is a model for going out of business.

    • by rohan972 (880586)
      How about service? Better contract terms?
    • You and and the guy who replied to you are exactly right. If you let them, they will of course compete on the "cool factor". But why should you let them. If they want to compete for cool-factor, they should become a cell-phone manufacturer.

      Once they can't compete for cool-factor, they'll have to compete for price, coverage, service. Well, or getting monopolies...

    • by GWBasic (900357)

      It is their money they are spending to do all of this, and the notion of creating a network that lets all this cool factor happen just to have someone else duplicate it, or worse duplicate it badly and sell at a lower price point is NOT a winning business model, in fact it is a model for going out of business.

      I see two solutions: Either carriers are forced to sell all their phones at fair market value and unlocked so they can be taken to other networks; OR, carriers are legally barred from selling and investing in phones.

      Either way, everything that the carriers are saying is complete BS when compared to how the cell phone industry in Europe works.

  • ....when has Verizon actually offered a phone that anybody actually wants?

    So, they are shortening their exclusivity on the Samsung 4589? The what? Who cares?

    Verizon may have a good network, but they have absolutely no phone selection whatsoever... No one is waiting in line to buy a phone from Verizon....

  • Dog-saves-owner's-family-by-chewing-apart-phone; owner then buys groceries for hungry family of 3.14. Dog found still chasing tail with owner.
  • Isn't Verizon kind of shooting itself in the foot with a "compromise" like this? After all. it's been trying to get Apple to make a CDMA iPhone for ages, once it's deal with AT&T is up. Under it's own plan, it still wouldn't get to have an iPhone. I don't really have a problem with exclusivity agreements in principle. In the case of the iPhone (and really that's what it's all about--nobody was complaining about exclusivity before it came along) the deal with AT&T has just forced every other comp
  • At some point government has to stop interfering in the markets. You can buy a very cheap phone that does what you want on just about any network. Without iPhone exclusivity, perhaps Sprint may not have invested in the Palm pre, and perhaps AT&T would not have invested in the iPhone either. The promise of exclusivity probably allowed Apple to demand pretty favourable terms which benefit consumers (such as unlimited data) as standard. That, for me, was one of the attractions of the iPhone. In situations

  • by Todd Knarr (15451) on Saturday July 18, 2009 @10:03PM (#28744921) Homepage

    When the carriers trot out arguments in favor of exclusivity, or ideas like this, I have just one question for them: if exclusivity is such a great incentive for innovation, when are we going to see all the neat phones with the great features that're already on the market in Asia? There and in Europe they not only don't usually have exclusivity, they don't even have the SIM-locking that US carriers make standard. Yet, in both Europe and Asia you can buy better phones with more features enabled than is typical in the US.

  • Nice arrangement for the large carriers. Basically they get to tell the small carriers, "sure you can offer this phone after 6 months, but don't you dare get more than 500,000 customers, or we'll jump in and stop the practice." This will force small carriers to not grow large enough to give Verizon or AT&T any real competition.

    This sounds like a nice compromise on the face of it, but it stinks.

  • Does that mean if we chip in to buy them some PS3s or some 360s we might get rid of these ridiculous console-exclusivity deals?
  • See I sell oranges my competitor sells Apples. If I don't let him sell Oranges ever but can let some lower guys that I can control through strict agreements sell oranges then that isn't a monopoly right. right!?

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