21
March
2010
|
09:46 PM
America/Los_Angeles

NYTimes: How US Telcos And Cable Companies Are Fleecing Consumers

Excellent column in NYTimes by Yochai Benkler, a professor and co-director of the Berkman Center for Internet and Society at Harvard Law School.

Op-Ed Contributor - Ending the Internet's Trench Warfare - NYTimes.com

Imagine that for $33 a month you could buy Internet service twice as fast as what you get from Verizon or Comcast, bundled with digital high-definition television, unlimited long distance and international calling to 70 countries and wireless Internet connectivity for your laptop or smartphone throughout much of the country.

That's what you can buy in France, and similar speeds and prices are available in other countries with competitive markets. But not in the United States. Prices here are three to five times that much for the fastest speeds -- the highest prices among advanced economies.

It's true. I was in Paris in December as part of the Traveling Geeks and we visited with France Telecom, which uses the Orange brand to sell a broad range of wireless, cellular, and wired telecoms and TV services. I couldn't believe how cheap some of the plans were. For about $30 you could get a combined plan that included your cell phone, TV, and landline phone. Plus there were lots of additional services for just a few bucks extra.

I have to spend about double that just to get my daughter a cheap cell phone plan, let alone the rest. Why is this?

The cost of doing business in France is quite high, cost of labor, network equipment, etc. Yet France Telecom, and others can offer such inexpensive plans and still make money.

What's going on here? Why don't we have similarly priced services?

License fees, taxes, and other fees make up nearly 50% of a low-end cell phone bill, also landlines have all sorts for fees and licenses. It pays to be a regulated industry because then the government, and various agencies, are on your side, they get a big cut. And they help keep out the competition.

Yet communications is at the heart of this next economic phase, and mobile comms is at the center of this next phase of the Internet. Mobile apps is where there is a ton of innovation happening. Now there is a focus on TV based apps, too.

Yet sitting in the middle are the Telcos and the cable companies charging four or five times the cost of such services in Europe.

A tax on innovation...

It's also creating a digital divide that keeps a large part of the population unable to afford to take part in the innovation in mobile apps and communications. How long is this going to continue?

The Obama administration has a national goal of providing consumers with affordable universal broadband of 100 Mbit/sec download speeds -- by 2020. South Korea has that today.

How long is this stranglehold on our future going to continue?

The Telcos act like luddites:

- They prevent technologies already present within phones to be turned on.

- They control what apps can and can't be run on mobile phones.

- They control which third party services can be run and how much money they are allowed to make.

The need for open access...

The problem is a lack of competition. Rates are low in other countries because their governments have passed laws that provide open access to the telco infrastructure.

Mr Benkler predicts that "without a strong commitment to open access, things will get worse."

And the Federal Communications Commission seems toothless, "senior commission staff members have essentially conceded in interviews that lobbying pressure from the monopolies is too strong even to begin exploring open access right now."

Mr Benkler points out that the cable companies "aren't keeping their excitement quiet: a recent Time-Warner investor briefing touted the company's ability to set higher prices in markets in which its potential competitors provide only DSL services."

Why keep quiet, it's exciting fleecing customers.

It's time for a change...

Will WiMAX vault over the walled gardens? It doesn't look like WiMAX performance is all that great.

What about Google going direct to the consumer? It's not a service organization, it's not set up to deal with consumers, and their complaints, and their calls (as demonstrated in its attempt to" revolutionize" the cell phone market with it's Nexus One phones).

Why don't we have competition? Why aren't VCs funding a competitor?

Because there is no guarantee of open access, without that we can't have any competition. You'd need to dig new trenches and lay new cable.

Maybe there is a municipal angle?

Could municipalities/communities gain control over their wireless and wired networks? It would seem that this might be an avenue to explore. After all, some communities run their own power and water utilities, why not comms too?