| |
| META TOPICPARENT | name="FirstPaper" |
|---|
| |
<
< | READY TO BE READ
Bit Players | >
> | Return to Sender | | | -- By ZachMW - 07 Nov 2011 | |
<
< | Golden silence
The silence is not a dropped call. Rather, it results from AT&T's refusal to discuss the economic forecast for text messaging with a reporter from The New York Times. AT&T has reason to keep quiet: The present is profitable, the future is cloudy, and the numbers are difficult to comprehend.
Professor Srinivasan Keshar at the University of Waterloo estimates that while it costs wireless operators 1/3 of a penny to send a text message, they charge customers 10 to 20 cents for each text message sent and received – a markup of 4,090 percent. With some two-trillion text messages sent in the U.S. each year, representing $20 billion in revenue for the wireless industry, this is a lot of money not to want to talk about. | >
> | Insufficient Postage | | | | |
<
< | Moreover, this is an amount of money that the savvy consumer – perhaps soon to be the modern consumer – need not spend. When the same short messages are sent over data networks and the Internet, as opposed to through the control channel of cellular networks, the cost plummets: “At 20 cents and 160 characters per message, wireless customers are paying roughly $1,500 to send a megabyte of text traffic over the cell network. By comparison, the cost to send that same amount of data using a $25-a-month, two-gigabyte data plan works out to 1.25 cents.” | >
> | The United States Postal Service is facing a dire problem – and so are the American people. The delivery of First Class mail peaked in 2001 at 104 billion pieces. Last year that number dipped to 73.5 billion, and the projection for 2020 is 39 billion, a precipitous decline of 46 percent since 2001. While stamps are cheap, such a dramatic drop off is expensive; USPS is on pace to close out the year with record losses of $14 billion. | | | | |
<
< | Silence is the sound of the status quo, and the status quo is profitable for wireless carriers. However, this silence is being interrupted by the beeps, chimes, and vibrations of applications such as iMessage, TextPlus? , WhatsApp? , Kik, and other services offering wireless customers free texting over data plans. As such, these services present a mortal threat to telecom’s $20 billion text message industry, which is counting on consumer inertia to keep the coffers open. Because in the smartphone era, there is no longer any reason for wireless communicators to indulge in the luxury of buying and sending cellular text messages. Yet instead of immediately canceling their cellular text messaging plans, consumers may be upgrading them. | >
> | So what should be done? The USPS plans to close 252 mail processing plants, shed 28,000 employees, discontinue overnight delivery of first class mail, cease Saturday service, and raise the price of stamps. These changes, it maintains, would save $2.1 billion annually. | | | | |
<
< | This August, AT&T announced the end of its lower-tier text messaging plan, which charged $10 a month for 1,000 text messages. In its place, new consumers will have the choice of spending $20 a month for unlimited texting, or paying 20 cents for each individual text. This business model effectively assumes that, for the time being, all diners at the text message delicatessen will agree to appease all-you-can-eat sized appetites, even if in the near future their hunger for cellular texting will be satiated completely. Until consumers push back from the table, however, they will have no meaningful alternative to over-abundance. Pursuant to the pricing strategies of the wireless carriers, the world of cellular texting will end with a bang, not a whimper. | >
> | Senate Republicans are normally in favor of cutting costs, but Sen. Susan Collins from Maine opposes the plan presented by Postal Service leadership, saying it “could well accelerate [USPS’] death spiral.” Instead, she faults her colleagues in the House and Senate for failing to pass reform bills. | | | | |
<
< | You’ll still need data | >
> | While reform is clearly necessary, Senator Collins fails to get a different message that will be delivered at great cost to U.S. citizens unless Congress shifts its focus to the future. First video killed the radio star, and now it is electronic mail that is suffocating USPS. This result is somewhat inevitable, and it would not be entirely undesirable were it not for the fact that the postal service is run in the public interest, whereas Internet providers seek to serve the corporate kind of citizen – shareholders. Consequently, the American people are in the process of replacing a common carrier-esque institution that dates back to 1775 with telecom companies, which have successfully eluded that designation in their provision of cable and wireless Internet. | | | | |
<
< |
While AT&T declined to discuss the changing paradigm of text messaging, a spokesperson for Verizon Wireless pointed to the silver lining for wireless carriers: If cellular text messaging declines or ultimately disappears, consumers will be rendered more dependent than ever on their data plans. | >
> | Accordingly, if Senator Collins wants to ensure that Americans have access to low cost and efficient means of communication, she should direct her attention to the FCC rather than the USPS. Because as cases like Brand X demonstrate, the agency with the potential power to turn modern Internet providers into common carriers has abdicated its authority to do so. Instead of challenging the telecom companies under Title II, the main source of the FCC’s regulatory authority over common carriers, it has repeatedly resorted to Title I and the shaky, shifting ground of ancillary authority. The upshot is that the formative years of the mass Internet may pass without Verizon, AT&T and Comcast having to bear the burdens of common carrier responsibility in exchange for the benefits oligopolistic opportunity. | | | | |
<
< | “From a business perspective, customers still need a data plan to connect to a device,” said spokesperson Brenda Raney. “They are only making choices on how they are using that data.” | >
> | It did not have to be this way. Even the FCC used to believe that the provision of electronic mail would classify as a common carrier service. Back in 1981, the Postal Service saw the digital writing on the virtual wall and realized the potential for electronic messages to destroy First Class mail, its primary moneymaker. Hoping to forestall this occurrence, USPS offered E-COM, which was essentially an electronic version of First Class mail (i.e., a crude email prototype). But the FCC objected with an argument that today it would disclaim: “in offering ECOM,” the agency said, “the Postal Service is engaging in a common carrier activity.” (In re Request for declaratory ruling and investigation by Graphnet Systems, Inc., concerning the proposed E-COM service, FCC Docket No. 79-6 (Sept 4, 1979)). | | | | |
<
< | Indeed, the choices for data usage are all-encompassing: email, text message, mobile applications, even digital voice communication through VoIP? . It is this arena, then, rather than text messaging, that would seem the obvious choice for wireless carriers to offer unlimited plans. But to the contrary, carriers are getting rid of them. | >
> | If the FCC still stuck to this statement, the timestamp could eventually replace the postage stamp, ushering in a new era of communications but preserving the old common carrier ideal. Instead, by failing to regulate under Title II, the FCC has diminished its own authority and relevance while abandoning consumers to the pricing plans preferred by companies like Verizon and AT&T. | | | | |
<
< | AT&T and Verizon recently replaced their unlimited data plans with tiered plans. AT&T offers a two-gigabyte plan for $25 a month, and Verizon offers two, five, and 10 gigabyte plans that cost as much as $80 per month. Both companies charge an additional $10 for an extra gigabyte of data when customers exceed their tiered limit. | | | | |
<
< | This pricing regime is ironic when juxtaposed against the unlimited plans for text messaging. In the first instance, the wireless companies are saying, as consumers require this service less, we’ll charge them for an unlimited supply. In the second instance, with data allocations more useful than ever, wireless carriers are replacing unlimited plans with measured limits. | >
> | Data Points | | | | |
<
< | The rationale of the wireless companies is that they have to take protective measures to prevent their networks from becoming overburdened. AT&T already expects to carry “more data in the first two months of 2015 than in all of 2010.” This estimate is based on the increasing ubiquity of smartphones, the increasing number of data-consuming applications, and the increasing utilization of 4G networks. Accordingly, the wireless carriers explain that they are factoring the public interest into their price plans. If we don’t compel consumers to put on the breaks, the theory goes, then everyone will drive full-speed into the tech tunnel, causing a massive, multi-million user pile-up. Good luck downloading Angry Birds in that Internet society. | >
> | To see the advantages of common carrier regulation, one need look no further than wireless data plans, which enable consumers to access the full panoply of Internet applications. Indeed, the choices for data usage are all-encompassing: email, text message, mobile applications, even digital voice communication through VoIP? . This arena, then, would seem the obvious choice for the FCC to pursue a policy of consumer protection, thereby guaranteeing that Americans have unlimited access to the unlimited Internet. | | | | |
<
< | Bit players | >
> | Left unimpeded, however, industry is heading in the other direction. AT&T and Verizon recently replaced their unlimited data plans with tiered plans. AT&T offers a two-gigabyte plan for $25 a month, and Verizon offers two, five, and 10 gigabyte plans that cost as much as $80 per month. When customers exceed their tiered limit, both companies charge an additional $10 for an extra gigabyte of data. | | | | |
<
< |
This might be a convincing argument – unless you have it on good authority that there is no money to be made moving bits in the 21st century. Consequently, when moving bits becomes a wholesale business venture, what will happen to wholesalers who currently charge retail prices? | >
> | The rationale of the wireless companies is that they have to take protective measures to prevent their networks from becoming overburdened. AT&T already expects to carry “more data in the first two months of 2015 than in all of 2010.” This estimate is based on the increasing ubiquity of smartphones, the increasing number of data-consuming applications, and the increasing utilization of 4G networks. Accordingly, the wireless companies explain that they, like common carriers, are factoring the public interest into their price plans. The FCC, they maintain, need not concern itself here. | | | | |
<
< | AT&T first foresaw and attempted to forestall this problem by locking the highly-coveted iPhone to its network, thereby creating a profit-rich bottleneck. But in February 2011, a CDMA version of the iPhone 4 launched for Verizon, and even Sprint and C Spire Wireless are now carrying the iPhone 4S. | | | | |
<
< | The upshot, then, is that the bottleneck has been replaced by several straws. Further, AT&T and Verizon may prove susceptible to the lean and hungry wholesaler who finds it in her interest to offer unlimited data to retail customers at wholesale prices. And if you believe what you see on TV, Sprint may be auditioning for this very role. | >
> | Silver Lining | | | | |
<
< | This essay presents some
useful facts, gotten by Googling from the jumping-off point of the
NYT story. It doesn't do much thinking, in the sense that all the
ideas presented are the ideas contained in the material from which it
builds. There's less critical analysis than there's slightly
sarcastic wit. Do customers actually need data plans, for example?
It depends, primarily, on two questions: how we develop our societal
wi-fi etiquette, and how much computing people want to do in their
cars. If people learn to share wi-fi, safely but "promiscuously,"
almost all terrestrial digital communications can be resolved by free
sharing at no cost. If people insist on texting and reading email
while driving, the tax they pay is paid in both blood and
treasure. | >
> | Incredibly, there might be a silver lining, even if Congress fails to legislate and the FCC fails to regulate. This would require – as good authority predicts – that there be no money to be made moving bits in the 21st century. Under such circumstances, fierce market competition, rather than common carrier regulation, could drive down data costs, changing the business model for telecom companies. AT&T and Verizon could prove susceptible to a lean and hungry wholesaler who found it in her interest to offer unlimited data to retail customers at wholesale prices. If you believe what you see on TV, Sprint may be auditioning for this very role. | | | | |
<
< | You might consider the relationship between where the telecomms
oligopolists are now and where the postal services have been. That
might shed some light on a number of political economy questions at
which the present essay casts a knowing wink, but to which it doesn't
add anything to the reader's grasp. | >
> | Of course, this does nothing to save USPS and its employees, whose jobs the government has essentially outsourced to private telecom companies in this Internet era. So it remains to be seen whether laid off mail carriers, and the cause of common carriage in essential communications, will ever be put back to work. | | |
You are entitled to restrict access to your paper if you want to. But we all derive immense benefit from reading one another's work, and I hope you won't feel the need unless the subject matter is personal and its disclosure would be harmful or undesirable. |
|