AT&T CEO Says Wireless Networks Aren't Prepared For Data Traffic -- Frankly, He Should Know

from the got-some-knowledge-about-this-stuff dept

AT&T CEO Randall Stephenson said this week that US mobile networks can't keep up with all the data traffic being spawned by smartphone users. This is something Stephenson's got a lot of first-hand knowledge about. Earlier this month, AT&T blocked the SlingPlayer app for the iPhone, saying it didn't have the capacity to support it, while the company annoyed lots of geeks with blogs when its network in Austin couldn't keep up with the influx of iPhone users during the SXSW conference in March. Stephenson says the company is taking steps to address the problem by upgrading its 3G network to HSPA+ technology that will double its throughput. The logic here isn't completely clear, though: the new technology will require new device hardware, and furthermore, the real issue is capacity not speed. And capacity doesn't just apply to the mobile network -- each individual cell site's backhaul connection needs to be beefed up, too. But the real solution AT&T and other operators employ to fix this issue may not be a technological one. Stephenson hints that flat-rate data plans could be on their way out, with variable-use pricing on its way back in. By bringing back per-unit pricing, operators will hope to increase their revenues from data-hungry users, but all they'll really do is end up stifling mobile data use -- just like they did before they went to flat-rate plans.


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  1.  
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    Derek Kerton (profile), May 28th, 2009 @ 11:00pm

    Speed Brings Capacity

    More speed is related to more capacity. If the network is twice as fast, it can carry twice as much traffic. Thus, your average Blackberry Exchange Server traffic transfer gets done twice as fast, and then that user gets off the network.

    The only caveat is that better speed also stimulates more usage, as people enjoy the experience more, and thus use it more frequently.

    Here are the main ways cellular carriers increase capacity:

    - smaller cells, adding tower sectors (incl. pico and femto)
    - offload to WiFi (UMA or just data)
    - add additional frequency channels (hard to gain rights)
    - new modulation schemes, such as OFDM (forklift upgrades)
    - faster versions of the modulation schemes (easier upgrade)
    - in the future, MIMO, spatial aiming

    They're doing all of the above. Caps are a way of addressing the demand side. The above efforts aren't free, so I don't think that unlimited data is the economically efficient price model.

     

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  2.  
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    Freedom, May 28th, 2009 @ 11:23pm

    Competition...

    >> The above efforts aren't free, so I don't think that unlimited data is the economically efficient price model.

    I think competition may tie their hands on that front.

    Bottom line, a cap'd $50 a month data plan is pretty useless to me. I don't want to have to worry if I go over my limit. It might be one thing if they would offer the ability to stop data service once you hit it, but they NEVER do. They just start charging you and then when you get the $400 or more bill you get the joy of complaining and hoping the company does the right thing.

    Combined with more and more Internet based applications on a phone and it will be next to impossible to keep control of how many bytes you've used on their network. As smartphones go the PC route, OS auto-updates, security patches, application patches, application syncing/data retrieval and so on that the user will want to just happen will create an environment where capping the bandwidth will be less than consumer friendly to say the least. Here's this great phone, please just don't use any of the cool features...

    In the end, consumers don't need nor want to worry about managing bandwidth in their lives. AT&T may want to get rid of bandwidth, but hopefully the competition is healthy enough to avoid this from happening. I'll ditch my iPhone in a minute if they take away my unlimited plan.

    Making a service less useful somehow doesn't seem like the best business model, but what do I know.

    Freedom

    P.S. For all the PC users that are frustrated with Apple's Virus Free message that they beat to death. With the iPhone success, it is now the premier target for viruses on this platform. Frankly if I was AT&T and Apple, I'd be extremely concerned that someone would target the phone and could literally watch AT&T's cell network be taken down with DoS style flooding. Would be interesting to see Microsoft doing a reverse commercial on how secure their phones are compared to an iPhone if/when the iPhone ever gets targeted. Sometimes it just isn't good to be King.

     

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  3.  
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    Derek Kerton (profile), May 29th, 2009 @ 12:57am

    Re: Competition...

    I agree with you mostly, but I think competition will also have the OPPOSITE effect of what you propose.

    Competition will result in some carriers offering cheaper data plans, but with more restrictive caps. Competition isn't just about lower prices...it's also about more creative and flexible pricing. Hitting the sweet spot of price/product within a niche.

    I am totally with you regarding how asinine it is for the carriers to allow you to bust through your cap, but not notify you in real time. I have always said that caps and tiers MUST be accompanies by a top quality SMS, email, or other notification system. It should be more than "oops, your out of MB, see you next month", too. One should receive warnings at 75%, 90%, and 100% usage. At 100% you should not be treated like the new guy in prison for subsequent traffic, but should be throttled down in speed. You should also be offered the ability to buy yourself back up to speed for a REASONABLE price.

    I think competition may make some of the above true, as opposed to outright preventing caps. What I propose, however, requires a lot more smarts in the database, billing and customer service departments.

    "Making a service less useful somehow doesn't seem like the best business model, but what do I know." Yeah, but we're talking about a limited resource. Gas stations don't let you take "all the gas you want" for a flat $40. They limit how useful their pumps are to me, but c'est la vie. You pay for what you use of a limited resource.

    I'm the only Techdirt writer who sees it this way, but I think my case is sound.

    If competition keeps caps from appearing, then so be it. I'll keep Slinging to my WinMo.

     

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  4.  
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    Sos, May 29th, 2009 @ 1:21am

    Thus, your average Blackberry Exchange Server traffic transfer gets done twice as fast, and then that user gets off the network
    Thats fine for discrete requests but with streaming you may find the user does twice as much because he can.

     

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  5.  
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    Anonymous Coward, May 29th, 2009 @ 1:25am

    Re: Re: Competition...

    I have always said that caps and tiers MUST be accompanies by a top quality SMS, email, or other notification system. It should be more than "oops, your out of MB, see you next month", too. One should receive warnings at 75%, 90%, and 100% usage. At 100% you should not be treated like the new guy in prison for subsequent traffic, but should be throttled down in speed.
    ...
    I'm the only Techdirt writer who sees it this way, but I think my case is sound.


    Not really, actually there's been some tests to try and offer that functionality. But one of the problems is that many companies still use legacy billing systems that manage, say voice and SMS, and a second billing system to manage data usage.

    Fortunately, with devices such as the iPhone, data usage, as you know Derek, has skyrocketed and feature requests such as the 75/90/100 SMS message can finally be prioritized and allocated capex funding. The best thing you can do is mention it, and be frank about asking your carrier. Most carriers these days are quite receptive to customer needs and will be able to take your suggestion and prioritize it alongside other, less-value-added features.

    Good analysis as usual, Derek.

     

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  6.  
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    cease, May 29th, 2009 @ 1:39am

    @Derek
    you put waaaaaay too much faith in these corporations, you really think they will take there boatloads of money and do the right thing.. like wanting to upgrade there networks. Why the f would they do that when they can give people sh*t service, and still charge crazy prices. When there's only 3 people competing, and able to lock people into 2 year contracts.. nothing is going to change. If people could pick up and leave anytime bringing there devices with them, then its a whole new ball game.

     

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  7.  
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    bob, May 29th, 2009 @ 1:41am

    Of Course This Is Only

    A prelude to we need more money.
    And tax breaks.
    And bailouts.

     

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  8.  
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    Matt, May 29th, 2009 @ 5:16am

    Re: Speed Brings Capacity

    I think the issue is the connectivity from the tower thru the provider's network. Access to the towers tends to be traditional telecom circuits and expanding those sufficiently to accommodate the growth is the biggest challenge. Beyond that is making certain the backbone that supports the towers has sufficient capacity. The wireless connection to the towers is pretty much meaningless if the wireline portion of the network cannot support the data flows.

     

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  9.  
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    0010010 0101001, May 29th, 2009 @ 5:55am

    Re: Of Course This Is Only

    tru.dat

     

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  10.  
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    Anonymous Coward, May 29th, 2009 @ 5:56am

    Re: Speed Brings Capacity

    Speed does not bring capacity. Being able to support 5 users simultaneously does not change if you simply double, triple or increase the speed by a factor of 10. IN THEORY people will get done with their business and stop using the network faster, but far more likely they will be surfing the net more as a person does not sit in a train and go "I'm going to visit this site" no... they are thinking "I'm going to kill time until I reach my destination" so the users are going to be connected to the internet just as much as before.

     

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  11.  
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    Steve, May 29th, 2009 @ 6:22am

    Speed

    It is a shame that a huge company such as AT&T is so small-minded to think we as consumers will stand for losing a service and not go to a compeditor. If the CEO of this corporation is having money issues now. Just wait until controls are put on us users for unlimited data usage. I will go to a track phone or such device that I am fully vested and invested in vs. the contract phone I'm currently using.

     

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  12.  
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    Designerfx (profile), May 29th, 2009 @ 6:24am

    Re: Re: Competition...

    do you really know what you're talking about?

    Competition is really the only thing stopping the carriers from charging more and at the same time its forcing them to build out more capacity. ATT charging more when they can upgrade their towers is supposed to do what, exactly? I find it funny that Tmobile who offers significantly fast 3g seems to be one of the few with no capacity problems. Damn near ironic, considering the heavy data usage of the G1.

    Speed throttling only offers new problems. Remember the thread the other day: if you keep lowering that throttling threshold eventually everyone hits the "throttle point". Trying to throttle just enough that you can ignore some of your users is outright ridiculous. In this day and age we should be expanding capacity, not restricting usage. There is no excuse not to. Year in year out att has been raising costs, but where's that magic capacity buildout?

     

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  13.  
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    hegemon13, May 29th, 2009 @ 7:27am

    Re: Speed

    "Just wait until controls are put on us users for unlimited data usage."

    What, like most of the competition? Verizon's "unlimited" plan had a 1GB cap per month. 1GB! They did not warn or notify you. They just cut off your data service for "abuse." Two cut-offs and your account became ineligible for an unlimited data plan. I don't know if that is still the case, but I will never go back to find out.

     

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  14.  
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    mobiGeek, May 29th, 2009 @ 8:22am

    Re: Speed Brings Capacity

    You confuse the "background trickle" type synchronization of email (that the BlackBerry infrastructure leverages) with real-time use of interactive apps (browsers, pull-based email, etc) that most "smartphones" use.

    In the case of real-time data fetches, if 20 people are trying to use 5 lines, faster lines don't help. When I click "go", I get an error if there are 5 users currently streaming video or whatever.

     

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  15.  
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    Freedom, May 29th, 2009 @ 10:10am

    Re: Re: Competition...

    >> "Making a service less useful somehow doesn't seem like the best business model, but what do I know." Yeah, but we're talking about a limited resource. Gas stations don't let you take "all the gas you want" for a flat $40. They limit how useful their pumps are to me, but c'est la vie. You pay for what you use of a limited resource.

    Agreed with the assumption of the current infrastructure and technology being used that the bandwidth is a limited resource and the current cost for a exponential bandwidth increase is significant for the cell carriers.

    However, when the price of a limited resource goes beyond the consumer's "pain" threshold, an alternative typically develops. The whole problem with oil is keeping it priced right despite being a limited resource - above $3/gallon for gas and alternative energy starts to become a real option. Below $1.50/gallon and it is like giving it away. For the oil companies it is about maximizing the revenue stream and profits. I think the cell phone carriers face the same sort of issue - usage of the limited resource is rising, their costs to support/upgrade are extremely high, but if they can't find a way to do it a price point and plan that the consumers will accept, someone else will come up with a better solution (either inside or outside of their industry).

    I would also say that most consumers are getting frustrated with the perceived high cost of data plans. Initially smart phones were sold to folks like you and me where the coolness of having connection to the Internet on the phone was worth almost any price. The average Joe doesn't think that way and ~$50 per month to add data service is significant. Add in anti-tethering restrictions that force another $50 to $80 if you want your laptop online and I think you are already at the inflection point for consumers. Reducing service and/or increasing cost while justified from a carrier standpoint, doesn't seem to be the case from a marketing/sales standpoint.

    Freedom

     

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  16.  
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    JohnRaven,CHT,CSH (profile), May 29th, 2009 @ 10:33am

    Is it true?

    It seems that AT&T and other networks have been milking the data fees for users for some time now without really upgrading their network.

    The profits were filling the coffers of the executives instead of being used to expand their network to be ready for the explosive growth that any tech-head in their IS department could have predicted with one pocket protector tied behind his back.

    They're more than happy to offer you the world and then charge you for it... but God forbid you ask them to deliver.

    I would hope competition would spur them to upgrade networks and offer better plans. In the end, the network that delivers is going to be the network that people move to in order to support their mobile data habit.

    Unlike cable companies, most areas have 5+ cell companies in serving them, so people really do have choice.

     

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  17.  
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    Anonymous Coward, May 29th, 2009 @ 11:42am

    AT&T CEO Says Wireless Networks Aren't Prepared For Data Traffic

    Oddly, AT&T Wireless used to operate under a company-wide mantra of "If You Fail To Plan, You Plan To Fail"

    However, mindset was set back in the 1990s, before the merger with Texas-Based SBC.

     

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  18.  
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    Carlo, May 29th, 2009 @ 1:51pm

    Re: Re: Competition...

    I don't completely disagree with you, Derek, but a couple of things...

    Using your gas analogy, there's no gauge at all for users. It's not just knowing when there's 25% of the monthly quota left, it's not knowing how much data each activity chews up. That creates a huge mental transaction cost that discourages use. And as Freedom points out, there's an increasing amount of data being sent around in the background of devices, making things even less clear for users. Not to mention things like push email, in which users don't have much control over the amount of data transferred to their device.

    Sure, operators could try to reintroduce usage-based pricing as a means of increasing data revenue, but it'll backfire as people simply back off their use of data services on the mobile network instead. They seem to think that they've gotten enough people hooked on mobile data that they'll just swallow a switch back to usage-based pricing, but that's very unlikely.

     

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  19.  
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    Clueby4, May 29th, 2009 @ 5:48pm

    What competition?

    Seriously, what are you guys smoking? There's is effectively zero competition is the mobile phone market. Prices are synchronized and they all provide no consideration "contracts" with scummy arbitration clauses. The only differences are in what exclusive product they may offer and the "TOS" scams they try to pull.

     

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  20.  
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    sonicmerlin, May 30th, 2009 @ 12:28am

    Re: What competition?

    Seriously. Do you realize how idiotically overpriced wireless plans in the US are? Compare to Europe where you can get a 15 GB cap for $20/month, or a completely unlimited usage plan for $70/month. There is no competition here. Licensing out the spectrum to these overbloated scoundrels is the government's way of preventing competition from entering the market while feeding their own coffers. It's deplorable how price-gouged we are, and how foolish Americans are for not realizing it.

     

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  21.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:15pm

    Re: Re: Speed Brings Capacity

    Yeah. Thanks for disagreeing with me by repeating what I said:

    "transfer gets done twice as fast, and then that user gets off the network...caveat is that better speed also stimulates more usage"

     

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  22.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:21pm

    Re: Re: Speed Brings Capacity

    Agreed. I did not address that at all in my comment.

    Carriers historically just used expensive T1 lines from the local fixed carrier to serve their towers, but with increased data traffic they need to add up to 5x T1s, which simply multiplies the costs 5x. They are deploying better solutions.

    Carriers are looking at the increasingly important problem of backhaul, and looking to solve it primarily in these ways:
    - microwave backhaul between their towers (dish antennas)
    - millimeter-wave backhaul (more capacity, less distance)
    - fiber drops to collector antenna sites
    - metro ethernet

     

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  23.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:31pm

    Re: Re: Speed Brings Capacity

    ?? What?

    Lines? Are you dialing in your mobile phone data calls over a 2400 baud modem? Or are you using packet data services like the rest of us?

    Did I confuse Background Trickle, or just use it as an example? If your browser or pull-based email is served faster, then the network is ready for the next user to share the resource. Faster = more capacity. Cell sector capacity is measured by how many bits a sector can handle per second at full load. Double the speed, double the sector capacity. Not really rocket science. Admittedly, in practice you may not get the full doubling because of header data, etc.

    Are we really arguing about whether doubling speed also doubles capacity? Can you win this argument?

    And, yeah, 5 people streaming video sucks up a lot of capacity. Which is why I said I don't disagree with data caps (traffic management) as a way of managing the demand side of network traffic.

     

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  24.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:45pm

    Re: Re: Re: Competition...

    "do you really know what you're talking about?"

    Yes.

    Lookit. Competition, in your opinion, is just offering more capacity for the same or less price. If you're ATT and you do that, good for you, you'll keep the actice Smartphone data users happy. Meanwhile, I'll launch a carrier that offers 2GB capped data for a much lower price.

    Now, which of us is "competing" harder to win the market segment that wants 0

     

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  25.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:48pm

    Re: Re: Re: Competition...

    Yeah, you're right. But when you say:

    "Reducing service and/or increasing cost while justified from a carrier standpoint, doesn't seem to be the case from a marketing/sales standpoint."

    I think that offering a smaller capped plan to consumers with lower demand might reduce the frustration, and reduce the price they pay. That's a good thing.

     

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  26.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:57pm

    Re: Re: Re: Competition...

    "it's not knowing how much data each activity chews up. That creates a huge mental transaction cost that discourages use."

    You're right. The gas meter is the key difference between the gas pump example and the mobile phone data pump. The meter used there keeps people informed, and the carriers currently fail at this task.

    But users being lazy and uninformed isn't an argument that defeats the economics. It does, however, drive up the frustration levels, which aren't exactly good for business.

    Which is why the notification part of any kind of limited plan is should ALWAYS be integral before the caps are in place. You need to send people alerts before they run out of data, and you need to offer them a real-time gauge to track their usage. Carriers are currently very poor at this important task.

    People always argue that "customers don't know a MB or a page download" which is true. But they are not unable to learn, just a little. My experience in 2001-2003 working for SK Telecom in Korea showed me that those consumers learned very quickly how much mobile data traffic they incurred, when given the right tools. You don't hear about how it's unfair for the butcher to charge for meat by the pound because "how do I know what a pound or an ounce of meat is". People learn pretty easily, and the problem is a paper tiger. NOW, the carriers need to

     

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  27.  
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    Derek Kerton (profile), May 30th, 2009 @ 12:58pm

    Re:

    dealt with that issue in my comment by mentioning that caps address the demand side.

     

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  28.  
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    Derek Kerton (profile), May 30th, 2009 @ 1:01pm

    Re:

    "you put waaaaaay too much faith in these corporations"

    No, I think they'll hose you every chance they get. We need competition and informed customers to push back on them.

    However, I don't think arguing against a decent idea like tiered services makes sense, just because the provider is singularly profit driven. Good pricing models are good pricing models.

    You talk aobout leaving anytime and taking your device with you (and phone number, I would add). That's an entirely different topic, and pro-competition. Fine by me (so long as you paid for your device).

     

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  29.  
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    Derek Kerton (profile), May 30th, 2009 @ 1:04pm

    Re: Re: What competition?

    Clueby4 and Sonicmerlin

    Where is the competition worst, again? In the US, where we pay about 8cents per minute of cellular phone time, or in the EU, where they pay over 20..or Japan, where they pay about 30?

    The market for voice minutes in the US is very competitive, for data less so, for broadband pathetic. Get it right before you bark up the wrong tree.

     

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  30.  
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    Derek Kerton (profile), May 30th, 2009 @ 7:51pm

    Re: Re: Re: Re: Competition...

    damned HTML codes ruined my post.

    continued...
    Now, which of us is "competing" harder to win the market segment that wants somewhere above zero, but below 2GB of mobile data a month? I am.

    I offer them a pricing plan more precisely meets their needs, at a lower price. Many will prefer my cheaper, capped service. Meanwhile, I manage the amount of traffic on my network. Like I wrote, "Competition isn't just about lower prices...it's also about more creative and flexible pricing."

     

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  31.  
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    s nayyar, Jun 1st, 2009 @ 1:39am

    mobi friendship

    very Nice informative stuff to read here.

     

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  32.  
    identicon
    voiceengineer, Jun 3rd, 2009 @ 10:13pm

    Competition

    The recent wireless spectrum auction was pretty open as long as you had the cash or credit to pay for the spectrum. Google made a token bid just to force the spectrum open to all handsets, but had no intentions of building a mobile network. It is not the fault of the carrier community if no other companies want to enter the fray. Mobile networks are expense to own and operate and carriers have build their business models to address such challenges. Essentially any lack of competition is a result of an unwillingness of capable new market entrants.

     

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