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Wireless in the USA: Worst of Both Worlds

Jonestown Dan Jones, Mobile Editor 6/28/2011

5:45 PM -- Are we getting the worst of both possible worlds when it comes to cellular service in the U.S.?

The thought crossed my mind as I was yapping away on the message boards this Tuesday afternoon: Consider that capped, tiered or metered data plans -- the norm in Europe -- are now becoming the standard here too. Yet, unlike Europe, those capped plans still lock the consumer into a two-year contract.

So, basically, you lose the cheap unlimited plan in favor of a more European-style capped plan but without the -- admittedly more expensive -- freedom of choice to switch plans and jump to new devices.

I'm originally a native of the U.K., but it's been a long time since I had to go shopping for a phone there. I'd be interested in opinions on this topic from either side of the pond.

Could we eventually see U.S. carriers moving to a more European-style model were you pay more upfront for a device? Seems like Google (Nasdaq: GOOG) tried to push it without much luck. Maybe the major U.S. carriers standardizing on Long Term Evolution (LTE) could give the concept new life?

— Dan Jones, Site Editor, Light Reading Mobile

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tankbert 12/5/2012 | 5:00:49 PM

re: Wireless in the USA: Worst of Both Worlds

I don't think consumers in the US can stomach a lack of subsidization in their devices at this point. As smartphones come closer and closer in functionality to full-blown computers and use the latest processors, screen technologies, etc, the 200 dollar price point will dictate what is able to sell in large quantities.

I would be less upset about the move of US carriers to a "cap plus pay extra" model if it were primarily designed to curb the harmful effects of unlimited usage on the network (kids bittorrenting on their teathered smartphones because they get better speeds on their cell phone than their rural telco can provide via DSL) instead of a complete and obvious money grab. A 2 GB cap on smartphone usage in 2011 is abismally low based on what is becoming almost commonplace usage today. If the carriers made the default cap say 5 GB (as it had been on 2G/3G data cards for years), and charged something less insulting than $10 per GB extra, I think they could still get users to be conscious of their usage habits, make additional revenue, without completely screwing the consumer.

 

 

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joset01 12/5/2012 | 5:00:47 PM

re: Wireless in the USA: Worst of Both Worlds

Re: "If the carriers made the default cap say 5 GB (as it had been on 2G/3G data cards for years), and charged something less insulting than $10 per GB extra, I think they could still get users to be conscious of their usage habits, make additional revenue, without completely screwing the consumer."

 

I suppose I wonder how we can make this change? Doesn't seem to me like there is either regulatory or competitive incentives for US carriers to alter their models right now. Maybe if Sprint can continue to offer unlimited?

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krishanguru143 12/5/2012 | 5:00:46 PM

re: Wireless in the USA: Worst of Both Worlds

The worst part, there were data caps but not if you were on a corporate account.  If you were on a personal account and you went over, they would eventually cancel your account.  If you were on a corporate account, they would for the most part look away.  They didn’t care about one person using more if for the most part, the rest of the corporate users were at or below that cap.  They never knew who that user was and if they tried to turn that user off, the whole account could be gone.  Take for example, it was the director of IT, a high level executive or even the CTO or the CEO.  What would happen if that was their data card and the carrier turned it off?  IT would be in talks with another carrier in an instant and be moving the entire account over.  There were caps and there were no caps; just depends on what account you were on.

 

Sprint will continue to offer the unlimited as long as they can and they draw customers in.  If they went the capped method right now, would anyone really pick Sprint?  What is their 4G path?  ClearWire is in doubt right now, they couldn’t make a go of it selling their own services and the cable companies are not really promoting the ClearWire service either.  So that leaves Sprint and they have been taking less and less of a role at ClearWire.  They have been eying LightSquared for their 4G service as well.  Probably so they can have the two compete with one another on pricing.  Sprint couldn’t just move customers around though; currently two different technologies (which could change) and spectrum.  As Sprint relies more and more on 4G and less and less on 2G and 3G, what becomes of Sprint?  They don’t even manage their own network anymore; that has been outsourced.  Sprint is more or less becoming their own MVNO.  LightSquared may never get off of the ground either.  Two US Representatives have tabled an amendment that would have forced LightSquared from showing that their network will not impact GPS at all before they can even think about building a network.  LightSquared has changed their plans many times over the years of what they were going to do and they are not even done yet.  So LightSquared might be out of the game before then even entered it, which would make Sprint 100% reliant on ClearWire.  They could try to take some of the spectrum and build their own 4G network down the line, but they might be paying big bucks to Ericsson to make the changes and then have to pay them again to build it, or would they try to get back into the network side and run it themselves?  They would need to hire engineers and technicians though and that could be a lot of money to get back to where they started and still have to pay for the network.

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krishanguru143 12/5/2012 | 5:00:46 PM

re: Wireless in the USA: Worst of Both Worlds

They wouldn't have to drop a subsidy, but give the consumer an option.  Here is how it could work.  The plan is X amount per month without a phone.  if you want a phone, then add Y to that price.  In reality, the subsidy is a loan; you are paying the phone over the course of two years.  The carriers would never go for it because after the phone is paid off, if you don't go and get a new phone (and sign a contract) you are currently continuing to pay for that subsidized phone that has since been paid off; extra money lining their pockets.

 

Will VZW moving to LTE help?  No, but it will help in the phone choices.  As much as I hate what Apple has done to the wireless industry (shown that manufacturers can get a piece of the monthly bill and having the consumer foot the bill) they might now be steering the wireless industry to a different model in the US.  Will it be the same as in Europe, no, will it be better, not sure.  Apple is trying to be an MVNO.  When AT&T and VZW are both LTE, they could move their customers between the carriers depending on who has the best price.  They wouldn’t even have to wait until the contract is up to move them.  The downside here is that you will have Apple forcing VZW and AT&T compete against each other based upon price and price alone.  AT&T has a better network than VZW does in certain areas, and VZW has a better network than AT&T in other areas.  Then Sprint is better in some areas just like T-Mobile is better in others as well.  There is no one carrier that has the best network and the network results prove it.  In the past I traveled quite extensively and had a person phone on AT&T, a company phone on T-Mobile (BlackBerry) and a broadband card on VZW; so Sprint was the only one not represented.  There were times where the broadband card had hardly any service at all and the AT&T phone would work just fine and then other times the opposite was true.  The T-Mobile phone was the worst; in NY (Manhattan) the phone was pretty much useless indoors.  There were many many times where the T-Mobile phone was just plain useless, constant dropped calls, barely any service, etc.  AT&T and VZW were far better.  So the AT&T acquisition of T-Mobile could be good for the T-Mobile customers.  Back to Apple; if they can switch their customers on a whim and they are getting a piece of the pie, then the customer will not be saving any money by Apple partaking in the mobile sector.  They will essentially pay the same price (maybe a bit more as Apple does like to be more upscale in their pricing) and they could have great service one day and lousy service the next.  Would Apple have the customers that complain stay on the better of the two providers in that area regardless of price, or would they do nothing?  The downside is on the carrier front, the margins would be getting less and less and if you use anything other than an Apple product, you will be paying more than your fair share to offset the low margins for Apple.  We know that one of the two carriers will try to undercut the other, but will they actually get into a bidding war or will they stick to their wholesale pricing and try to make Apple be the one with the slim margins?

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Charles_C 12/5/2012 | 5:00:45 PM

re: Wireless in the USA: Worst of Both Worlds

I don't mind paying if I get quality. I travel a lot and learned that US mobile infrastructure ranks amongst the worst in the world: poor connectivity, dropped calls, lost internet connectivity. extremely low data rates ...

I don't know why nobody revolts, maybe because the majority of consumers doesn't know how well the 3G networks work outside the US.

Talk to any foreigner visiting our great nation and they'll tell you the same: "pathetic mobile network you guys have; don't know why you guys keep up with this ..."

C

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