Techdirt. Stories about "lightsquared"

Techdirt. Stories about "lightsquared" Easily digestible tech news... http://www.techdirt.com/ en-us Techdirt. Stories about "lightsquared"http://www.techdirt.com/images/td-88x31.gifhttp://www.techdirt.com/ Mon, 23 Apr 2012 09:13:00 PDT Mike Masnick http://www.techdirt.com/blog/wireless/articles/20120410/23381218447/is-corruption-responsible-for80-yourmobilephonebill-no-not-really.shtml http://www.techdirt.com/blog/wireless/articles/20120410/23381218447/is-corruption-responsible-for80-yourmobilephonebill-no-not-really.shtml Tech Jay points us to an interesting report by Matt Stoller arguing that, in the US, "corruption" is responsible for 80% of your mobile phone bill. Unfortunately, that's a bit of an exaggeration. However, it does raise some useful points about problems of US competition in the market. The key point Stoller uses is that we pay a hell of a lot more for mobile service in the US than elsewhere:

You see, according to the Organization for Economic Cooperation and Development, people in Sweden, the Netherlands, and Finland pay on average less than $130 a year for cell phone service. Americans pay $635.85 a year. That $500 a year difference, from most consumers with a cell phone, goes straight to AT&T and Verizon (and to a much lesser extent Sprint and T-Mobile). It’s the cost of corruption. It’s also, from the perspective of these companies, the return on their campaign contributions and lobbying expenditures. Every penny they spend in DC and in state capitols ensures that you pay high bills, to them.

There's an unfortunately big leap in logic there, in not exploring any other possible reason for the difference in bills. Some of it likely is due to lobbying, but not necessarily all of it. The real issue that seems to come out in the piece is the significant lack of competition in the market -- some of which is due to lobbying efforts and consolidation by the market, but not all of it.

The Stoller piece keys off of the regulatory fight over Lightsquared, arguing that it was blocked due to massive incumbent lobbying against this potential upstart competitor. That tells part of the story. It's absolutely true that the telcos did not want to see new entrant competition from the likes of Lightsquared, but it also completely ignores the fact that the technological issues around Lightsquared are real and the project was blocked not just because of incumbent lobbying, but because of significant problems in avoiding interference. To not even admit that is pretty bad.

However, as we did note in our discussion over Lightsquared, the real problem in the market is the lack of real competition in the space. For years and years, we've been arguing that the market needs more competition in this space to keep dominant players from charging monopoly rents, while decreasing their investment in innovation. In fact, Stoller does a nice job showing how investment as a percentage of revenue has clearly decreased as consolidation has shrunk the number of competitors:

So, we agree that the real problem here is competition, and there's little doubt that massive lobbying by AT&T and Verizon has been used to try to limit competitors, but that's not the only reason for the lack of competition in the space, and it's certainly not the sole reason for our mobile phone bills being higher in the US than in Scandanavia. There are certainly many other issues including coverage and population density, standards lock-in and other aspects. Certainly, though, there are things like spectrum reform, antitrust enforcement and related issues that are heavily lobbied.

Finally, it's a bit silly to argue that all lobbying is "corruption." As we've noted lobbying can often go in the other direction -- and plenty of "lobbying" is perfectly reasonable. One of the key complaints we have about politicians regulating the internet is that they're regulating something they don't understand. One way that they can and do actually learn about things they don't understand is through lobbyists. The problem is the imbalance in lobbying, where you have some lobbyists with excessive influence, and those who represent the public interest often having much less exposure (public interest lobbying groups, obviously, don't have as much money).

Lack of competition is a huge issue in the mobile world. The crony capitalism of companies getting regulations they want through lobbying is a huge issue. The fact that we pay more for weaker service is a real issue. But to lump all that together and claim that 80% of our mobile phone bills are due to corruption is a huge and exaggerated logical leap.

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]]> well,-a-lack-of-competition http://www.techdirt.com/comment_rss.php?sid=20120410/23381218447 Mon, 20 Feb 2012 20:01:00 PST Why You Should Regret LightSquared's Setbacks Derek Kerton http://www.techdirt.com/blog/wireless/articles/20120220/05554317814/why-you-should-regret-lightsquareds-setbacks.shtml http://www.techdirt.com/blog/wireless/articles/20120220/05554317814/why-you-should-regret-lightsquareds-setbacks.shtml
Note that, while LightSquared DID knock out GPS devices, it was not LightSquared that transmitted on the GPS frequencies, but rather the GPS devices that sloppily "listen" to the adjacent LightSquared frequencies. The GPS chipsets were generally cheaply made with inadequate filtering. That said, who is at fault is irrelevant: it remains LightSquared's problem to solve if they want to launch their network. A long history of spectrum policy states that new entrants must not mess up the existing radio devices.

What we've lost here is the chance to have a truly innovative wireless carrier which would have stimulated competition, energized the vendor community, and provided a white-label network for MVNOs. LightSquared had, in fact, signed up dozens of partners who would offer LTE wireless services as cellular companies, CE makers, and store brands like Best Buy, for example, who could sell connectivity in a bundle with laptops. Maisie Ramsay over at Wireless Week explains how a vast community of over 30 technology vendors have also lost a valuable path to market.

What strikes me, as someone who works with wireless carriers (LightSquared included), is that we may lose one of the scrappiest players out there. And markets thrive when a scrappy player stirs up the pot. Hutchison Whampoa stirred up the UK markets when it launched 3G in 2003, Free is currently doing the same in France. In the USA, we have regional players like Metro PCS, but nothing at the national level. My role at the Telecom Council of Silicon Valley is right where innovators meet with the telcos, and it was gratifying to see the tornado of new ideas, vendors, and possibilities that came about with a new network. Without legacy systems nor legacy thinking, lots of great ideas are free to emerge.

For now, with LightSquared's options dwindling, we may have to have to look elsewhere for new competition and open creativity. The WiFi space is fairly promising, as the spread of hotspots continues to soar, and new versions (802.11ac) promise greater range and throughput. Chipsets are cheap, and billions of WiFi devices have been produced. Republic Wireless exemplifies the possibilities of leveraging WiFi in mobile phones to the limit. Lots of people are hoping that the "white spaces" frequencies in between TV channels will be offered up to a WiFi variant, which will mean low-frequency spectrum that penetrates walls and buildings much better than today's WiFi. I like what the US carriers have done with the (globally) early launch of LTE, but there's no doubt that with increased competition we'd have a more dynamic market.

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