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AT&T Bids to Shut Down Mobile Competition

AT&T's bid to absorb T-Mobile USA is a blatant attempt to reduce cell and mobile data service in the US to a duopoly. The US Justice Department should block the proposed deal under existing antitrust law; the FCC should refuse to approve the transfer of T-Mobile's wireless spectrum to AT&T. The deal, if approved, would create the country's largest wireless carrier by combining #2 and #4. In this case, as Dan Frommer speculates on Business Insider, fiesty #3 Sprint might be forced to combine with Verizon Wireless. Then we have a wireless duopoly; good for duopolists, bad for innovation and consumers.

Just this morning, before I saw the announcement, I heard an ad for Walmart Family Mobile: $45/month for unlimited talk and text on a single line, $70 for two unlimited lines; all hosted on T-Mobile's network. "Wow," I said; "that's real competition to at&t and Verizon. Wal-Mart is going to take the fat out of wireless margins." Looks like someone at at&t might have also seen the threat in this service, which was first announced last September. No word in AT&T's press release on the proposed acquisition about the future of this service.

In the press release AT&T first trumpets the fact that its network and that of T-Mobile both use the same technology, then says it's going to convert both networks to LTE, the next generation of wireless technology. Not quite clear why it matters if their technology is the same today if it's going to be swapped out tomorrow. But the press release is obviously the first salvo in an attempt to get regulatory approval and the sales pitch gets more confusing:

"AT&T commits to expand 4G LTE deployment to an additional 46.5 million Americans, including in rural, smaller communities, for a total of 294 million or 95% of the U.S. population."

That's strange; I just passed a billboard where AT&T says it covers 98% of the US population. Does this mean they don't even plan to roll LTE out in all of their existing coverage areas? Sounds like adding the T-Mobile network means they're going backwards. I'm sure they didn't mean that but maybe their marketing and PR folks need to agree on one set of numbers.

Despite the FCC declining to call the wireless market in the US competitive this year, AT&T claims that a GAO report showing wireless prices falling 50% inflation adjusted in the least ten years is evidence of competitiveness. However the prices of the technology necessary to provide wireless services fall 50% every 18 months (Moore's Law), so this statistic, if anything, is evidence of a less-than-competitive market.

The Brave New World tone of the release continues:

"[The acquisition] provides fast, efficient and certain solution[sic] to impending spectrum exhaust challenges facing AT&T and T-Mobile USA in key markets due to explosive demand for mobile broadband"

In other words, there is a spectrum shortage so it is better for consumers that spectrum ownership be concentrated in fewer providers. Stacey Higginbotham writing on GigaOM nails the doublespeak:

"This is a deal that will ultimately be worse for consumers by reducing the number of nationwide wireless providers and consolidating much of the high-quality spectrum in the hands of the nation's two largest carriers."

Many in the US are concerned both at the relatively slow growth of high-speed broadband in the US and the potential for carriers in a duopoly situation to erect tollbooths which slow down innovation in communication-dependent industries. Net neutrality regulation and legislation have been proposed as a cure; but increased regulation is likely to be as dangerous as the disease and to become captive to the lobbyists of the telecommunications companies. What we need is enforcement of existing antitrust law. Absent monopoly power, experience in other countries shows that competition in telecommunication prevents most abuse. Allowing AT&T to scoop up T-Mobile USA would be a step in exactly the wrong direction.

Related post:

Verizon iPhone, at&t Androids – Mobile Data is the Winner

 

 

 

Good and Not So Good News

Julius Genachowski, Obama's nominee to head the FCC, is a friend of Fred Wilson. Fred gives ten reasons why he likes the nominee on his blog. Genachowski was a top technology advisor to Obama during his campaign and reportedly advised the campaign on its superb use of the Internet. He is also a supporter of "net neutrality" although the devil is in the details on that issue. Even though the nominee is a lawyer, he has business experience as a VC, as an Internet executive, and as a board member of various Internet companies – all good reasons to be hopeful about this very important policy post.

That's the good news.

The bad news from several days ago is that the Obama transition team has recommended that the cutover to all digital TV be postponed. That also delays the time that spectrum purchased in the recent 700Mhz auction and spectrum in the socalled "TV whitespaces" can be put to productive uses such as more Internet access and increased mobile access – especially for mobile data. This cutover has been scheduled for February 17th of 2009 since 2005. The cutover date – which affects only those receiving over-the-air television – has been widely publicized and $40 coupons have been available from the government to subsidize the purchase of converter boxes by those who would otherwise lose signal.

The fear – supported by exFCC Chairmen Powell and Kennard – is that some people are not ready for the transition. There has been the kind of government screwup that we've become accustomed to: not enough coupons are available because the legislated funds for coupons are exhausted and, apparently, no one thought to ask Congress for more. Some people have had to wait and are still waiting for coupons. However, since it would take legislative action to extend the deadline, it would seem more constructive to just take legislative action to put a little more money in the pool – the coupons won't cost anything if they aren't redeemed. We're not talking about bailout type sums here.

Anyone who is unaware of the transition hasn't been watching television. How many times have you seen ads about it even though you watch through cable or satellite TV and aren't affected? If people aren't watching TV, they won't be affected.

The truth is that small delay won't matter a lot to the world if it remains a small delay. But uncertainty will slow the flow of investment dollars into the technologies to use the whitespaces; these days it doesn't take much to chill investment. Moreover, this is an areas where the interests of the broadcasters are directly opposed to the public interest: the longer we wait for better broadband access, the longer the broadcasters can postpone the day when we get most if not all of our news and entertainment over the Internet. Prolonging the use of an old technology –analog TV – at the expense of a new technology – availability of the whitespaces as open spectrum – is counter to all that we need to do to make the United States as competitive as it needs to be.

But a friend of Fred's is a friend of mine. If the new FCC Chair acts vigorously to promote the whitespace/free spectrum experiment, if he leads the Commission to moves quickly to retarget the Universal Service Fund to communication broadly writ instead of to obsolete landline phone service, if he helps bring about a competitive communications industry in the US where the need to regulate might even disappear, then whether we delayed the digital transition a few months won't be worth remembering.

Good luck, Julius Genachowski.

Please see here for why the white spaces are so important.

Blocking BitTorrent in Britain

Virgin Media announced its intention of restricting BitTorrent traffic on its new 50Mbps service according to an article by Chris Williams in The Register. Does this mean that net neutrality is endangered in the UK? The question is important because advocates of an open Internet like me hold the UK up as a positive example of net neutrality achieved through competition rather than through regulation.

One of the major benefits of a competitive rather than a regulatory approach to net neutrality is that users get to decide what sort of network they would like to be on. With a regulated approach, the regulators decide. In the US the FCC has reproved Comcast for blocking BitTorrent traffic. On the other hand, we net neutrality advocates think that it is acceptable to throttle heavy users in times of network overload because this is non-discriminatory as far as applications are concerned. Heavy users who don't use BitTorrent would probably rather be on a BitTorrent-blocking network than one which blocks them. In a free and competitive market they would get a choice; BitTorrent users, obviously, would prefer a network which doesn't block BitTorrent explicitly; they would have a choice as well.

The market might satisfy both sets of users by offering them a choice of services or one or the other type of service might prove uneconomic because not enough users like it. Nothing wrong with that. Moreover, a network which blocks BitTorrent, as Comcast was suspected of doing, to favor its own entertainment content, might find itself with no users. All sounds like competitive utopia.

Reality might not be so simple, however. If there are only a small minority of users who care about BitTorrent and Virgin Media can cut costs and/or improve service for most users by restricting BitTorrent, it may gain enough competitive advantage so that other providers emulate it and BitTorrent ends up being restricted everywhere in the UK. Would that mean that a competitive market is not enough to protect net neutrality? Some net neutrality advocates would say "Yes. Any system which results in a particular legal application being banned is bad and needs to fixed."

I'm not ready to go there. I think that if we have a competitive market (which we don't in the US) and if there is no market-fixing or other arrangements between competitors to restrict competition and there is full disclosure of the rules of each network, we have to accept that the result is a neutral Internet – which might not be exactly the kind of network we Net Neutrality advocates think the world should have. We're not the fabled Internet czar either.

Net Neutrality and The Obama Stimulus Package - Discussion

Good challenging questions from reader brooke oberwetter showed up on CircleID where Fractals of Change is sometimes cross-posted in reponse to yesterday's post on net neutrality. Since those don't show up in the comment stream for the original post so I'm reposting his questions and my responses here. I'm also urging CircleID and other places which cross-post FOC to support DISQUS for comments along with it so that commenters in one place can see comments and responses on the other and we can have one discussion instead of fragmenting the discussion across sites.

If it ain't broke...

Tom,

You say that "with a few exceptions" we've had a neutral Internet (and all of those exceptions fell within the FCC's already-existing statutory authority). So why the need for regulation? Why the need for nationalized infrastructure? You seem very familiar with the dangers of regulation--the rent seeking of the incumbents, the possibility of unintended consequences--but still call for more far-reaching regulation to respond to a problem that you admit doesn't really exist?

And most disturbingly, you think nationalization of the infrastructure will be BETTER? Have you seen a lot of efficient or effective repairs made to interstate highways? Is there a lot of investment going into making the highway system better or more efficient? Does anyone have an incentive to make sure the highways operate as smoothly and effectively as possible? And most important, is traffic well managed on the interstate highway system? Try I-95 my friend.  The answer to all of this questions is a resounding "NO!"

My responses:

Brooke:

You're correct that my concerns are proactive and not reactive. The reason I think that danger is growing is that the concentration of Internet access provision in the US is growing. There were many dialup ISPs; in most locations there are just two broadband choices (in rural areas one or none). Moreover, at various times the telcos have announced their intent of using this monopoly power to double-dip by charging providers both for their own access (which is fair) and for the access to the subscribers who have already paid (which is double dipping but is the way telephony works).

Further evidence of monopoly behavior is the failure to improve quality evidenced by the US' slipping rank as a country with broadband access and the slow trend towards capping "unlimited" monthly access. So I think the danger is real.

I'd prefer to see more competition without the need for the government to provide any infrastructure or regulate further. Perhaps this will happen with the enlightened policy of making the TV white spaces available for unlicensed use.

I think the Obama economic stimulus will and should include a broadband component. That money can either make the problem worse in my view by subsidizing the incumbent duopoly OR it can provide a basis for expanded competition.

As former transportation secretary in Vermont, I do agree that the states and the feds have done a less than ideal job of maintaining the transportation infrastructure. Hopefully that'll change. You are right that a broadband backbone as bad as the I-95 corridor would be a disaster. But the Interstate system in general provided the US with a splendid transportation infrastructure despite some of the unintended consequences of having such excellent transportation.

 

 

Net Neutrality and the Obama Stimulus Package

As long as US telecom is duopoly dominated, a neutral Internet is endangered if not impossible; regulation of this kind of concentrated power is necessary but is unlikely to be sufficient. The solution, IMHO, is to dilute the power of the duopoly so that consumers can buy whatever kind of Internet access they want. Countries like the UK with a competitive ISP market do not seem to have net neutrality problems nor require net neutrality regulation and have better Internet access than we do at lower prices.

Whatever portion of the Obama stimulus package is devoted to telecommunication should be directed away from the incumbent telcos and cablecos  – whose lobbyists are indubitably doing their job and already lining up for the lion's share of federal funds – and used to create infrastructure on which competition can flourish (ideas to follow). It will be a huge squandered opportunity and a misuse of public funds if the telecom infrastructure project ends up reinforcing the telco-cableco duopoly which now controls most of our Internet access

A Wall Street Journal article on Google's hopes to locate servers within carrier networks alleges that this plan is evidence that Google has abandoned its fervent support for net neutrality. Such a change of heart is denied by Google's Rick Witt, who points out, correctly, that what Google seeks to do for its own content is no different than what Akamai and other commercial caching providers already do for content providers. The story aroused extra passion because it also says that advisors close to President-elect Obama are "softening" their positions on net neutrality. At least one such advisor, Larry Lessig, who is justly famed for inventing creative commons licensing, denies on his blog that he has changed his mind, although he does say "Some friends in the network neutrality movement as well as some scholars believe it [his own long-held position on net neutrality] is wrong -- that it doesn't go far enough."

Larry's last sentence points out part of the problem with net neutrality regulation; it's almost impossible to write workable definitions. Fervent supporters of the concept of net neutrality disagree on what is or isn't a violation of such neutrality. There is a huge danger that any regulation would result in further advantage to the incumbents who are accustomed to using regulation to their advantage. Would you want to wait for the FCC to certify your new service neutral before you could introduce it?

On the other hand, it's easy to recognize the virtues of a neutral Internet. With a few exceptions, we've had that so far. The backbone itself delivers packets to anywhere from anywhere without trying to figure out who sent them or what they might contain.  It is wide open to innovation. It allows innovative business models whether they're disruptive or not – and whether they will ultimately succeed or not. Friend Om Malik warns "Many startups might skip over this issue, which I constantly bring up, but they need to wake up and realize that in the end they are all going to be impacted if network neutrality is backstabbed to death." He's right.

If we are stuck with the current duopoly, we will need regulation– and face the very real prospect that regulation may be ineffectual or even counterproductive. On the other hand, if we build a national telecom infrastructure upon which competition can flourish – as it does on the highways, for example – we won't need FCC regulation against discrimination any more than we need the ICC (Interstate Commerce Commission – founded to regulate Railroad transportation monopolies in 1887, RIP 1995) to regulate trucking.

Free, Slow, Censored Internet – A Bad Idea

The FCC is looking for an organization to provide free, slow, and censored Internet access. The censorship apparently would include email as well as websites.  According to an article in today's Wall Street Journal:  "Outgoing Federal Communications Commission Chairman Kevin Martin is pushing for action in December on a plan to offer free, pornography-free wireless Internet service to all Americans, despite objections from the wireless industry and some consumer groups [nb. and from me]… The winning bidder would be required to set aside a quarter of the airwaves for a free Internet service[ nb. the WSJ hasn't got that part quite right. More below]."

Here's what the FCC's NPRM (Notice of Proposed Rule Making) says:

"(a)  The licensee of the 2155-2188 MH band (AWS-3 licensee) must provide as part of its free broadband service a network-based mechanism:

"(1) That filters or blocks images and text that constitute obscenity or pornography and, in context, as measured by contemporary community standards and existing law,  any images or text that otherwise would be harmful to teens and adolescents.  For purposes of this rule, teens and adolescents are children 5 through 17 years of age;

"(2) That must be active at all times on any type [emphasis added] of free broadband service offered to customers or consumers through an AWS-3 network."

The NPRM is silent on which community's standards should be used to determine what is harmful to "teens and adolescents"   (I'm glad my children weren't adolescents at five). But note that all services must be filtered for whatever it is that "otherwise[?] would be harmful". The FCC will be the ultimate judge, however, since they enforce the terms of a license and can determine whether or not to renew. They may think my blog is harmful; I think junk science is really dangerous; you may have still some other pet peeve.

This NPRM is a reworking of a proposal by venture-backed and politically-connected M2Z networks, which was setup to provide this free (actually ad-supported) service in return for the right to also use the spectrum for subscription service and may well be the only bidder if the auction goes forward on these terms.

Let's forget for a minute what an absolutely terrible idea it is for the government or its agent to determine what the content of our communication is allowed to be although this whole proposal SHOULD be junked just because of this. The principle DOES matter a lot but, in practice, no one is going to use the free Internet service.

The requirement is that the free service have a download speed of at least 768kilobits/second; this is the speed of the slowest DSL. This is not a mobile service where we might accept a slightly slow speed in return for mobility; it is meant to be primary residential access to bridge the digital divide. But, by the time this service actually exists, the web will not be usable at such a slow speed. Websites get designed for the capabilities of the top 50% of users; that's why dialup is now useless for surfing even though it used to work fine.

By contrast, the Vermont legislature specified that a service won't count as broadband at the end of 2010 unless it is at least 1.5Megabits/second AND realizing that this requirement must escalate, charged the Public Service Board with appropriate and timely upper revision. Nevertheless, this requirement stays the same in the NPRM for the full ten years of the license. 768Kbs will be as obsolete as your old 300 baud modem ten years from now; but it will be the only free service the licensee is required to offer.

The licensee has no incentive to offer better free service because it will also sell a higher-powered service. The NPRM does NOT specify that a quarter of the network capacity be used for the free service; it says "up to" an "as needed". If no one uses the free service, then no network capacity need be devoted to it.

It's nice to think that people who have no service will get it from M2Z; don't hold your breath. The licensee is required to build out to 50% of the population within four years and 95% within ten. The licensee will, of course, build first where the people are and where there are plenty of other service options. The areas without adequate Internet access now might get it in ten years – and might not. Even the poor in the urban service areas won't be helped much. They can't use the service without a computer and a modem which M2Z estimates will initially cost $200. In urban areas DSL at this pathetically low speed is usually available for $12.95/month or less and without a requirement to purchase equipment.

There's another interesting gotcha in the proposed regs: the paid service must be open to all devices and applications which is good. The free service, however, has no requirement that it be open to all applications. In theory the provider could charge Google, for example, to be accessible to the free users – assuming there are some which I don't think'll be the case.

It's good that the FCC recognizes that previous spectrum auctions haven't gotten the US to the point where it has the connectivity it needs. There's nothing wrong with the concept of a "free" Internet service paid for by advertisers; in fact, I'm confident that such a service will be one of the offers that surface in the newly deregulated white spaces. The  spectrum at issue is unused and that's a waste. This proposal, however, should be rejected once on civil liberties grounds and again because the promise of free Internet access is meaningless and unhelpful.

Net Neutrality and Metered Broadband

Yesterday Chris Albrecht writing on GigaOM pointed out that NBC is warning users that it's Olympic download service is "not recommended for people with dialup or metered broadband Internet access (emphasis mine)."  Chris predicts "That is just a taste of things to come — especially if you're a fan of video services like Hulu."

Last Friday the FCC voted to uphold a complaint against Comcast for blocking BitTorrent (software for file sharing) traffic and ordered the cable company to cut it out. The two stories are actually strongly related. From a New York Times article on the decision:

"Curiously, representatives from other telecommunications companies praised the decision, even though they objected to the commission meddling in how they manage their networks. They said they would prefer such rulings to legislation from Congress, which has discussed enshrining net neutrality principles in the law."

There could well be another reason why at&t and its brethren were less than unhappy with this FCC decision: it helps pave the way for the widespread introduction of metered Internet access – something the carriers have already imposed on cellular broadband access services.

The PR argument'll go like this: "A few people are using the lion's share of our bandwidth. We're not allowed to block software like BitTorrent  used by these bandwidth hogs; we're not allowed to discriminate in any way. So we'll have to charge by the megabyte instead so that costs will be 'fairly' allocated and a few users don't spoil things for the rest of us. It would be bad for our users to allow them to actually have unlimited Internet access. This plan doesn't discriminate against anyone."

Andy Kessler blogged against the FCC talking the position it did on net neutrality:

"We need policy to help cut a path for more competition, rather than protecting incumbents -- a Bandwidth Competition Act of 2008, not bogus net neutrality. All takers should be allowed access to poles or underground conduits. This is where neutrality should be enforced, instead of being a choke point.

"Municipal or privately run wireless data services using Wi-Fi or WiMax should be sprouting like weeds. But they aren't being built because of lack of access to street lights, of all things, to set up access points. Verizon is busy rolling out a fiber optic service, FIOS, that will provide much higher speeds and real competition to Comcast. But it is slow going, as state by state video franchise rules still favor cable over any newcomers.

"A stroke of a pen can cure these ills, incumbents be damned. They will adjust. I personally would climb telephone poles on my street to run fiber if I could get 100 megabit Internet service. Any takers? Talk about an economic stimulus; this is the type of infrastructure we need. The stock market will fund it all as well as resolve overbuild problems."

The problem, as Andy points out with his usual eloquence, is lack of competition. Adding more regulation into the mix won't get us broadband in the US which is comparable with what already exists in the much of the rest of the world. Put another way, regulation usually favors incumbents and discourages innovation. There are no companies more skilled at playing the regulatory game than the existing telcos.

Here's some evidence from NewTeeVee of what has happened in the more competitive Internet market of Western Europe where utilization limits used to be the rule. A couple of years ago, metered pricing meant it could cost about $30 in charges to download a movie. But YouTube and other online video services are very popular in Europe.

"And guess what? The online video boom has taken its toll on the ISP market as well, with customers voting with their feet for better plans. And as for all the metered packages that were all the rage just two or three years ago, none of the big German ISPs are even advertising them anymore. Instead, they're trying to sell premium packages bundled with fast, unmetered broadband access.

"Take 1&1 for example, one of Germany's biggest ISPs: The company is now offering its customers a DSL package with 16MBit, unlimited bandwidth and 100 movies on demand, streamed to your PC, for just 40 euros per month. Beats paying $30 per movie download, doesn't it?"

Don't make a mistake: it's all about the video! Comcast doesn't want "free" Internet content displacing packaged entertainment plans; Verizon counts on charging for content to justify the huge capital investment its making in FiOS; at&t wants to be your content company. They each have a right to try to make money by selling packaged content. They don't have a right to use the power of what Andy calls "faux competition, cable monopolies versus phone monopolies" to assure their business plans.

But, defenders of the cablecos and telcos will say, they won't invest in their networks if they can't make more profit from them. Well, we do have the example of Europe to say that isn't so. If the present incumbents won't invest, their successors will. If you are purely in the network business, cheap content makes your network more valuable because you get more usage and can compete for a greater share of the total entertainment dollar by providing superior access.

BTW, though, I do think that Comcast should have been prohibited from blocking BitTorrent – one, because it IS a monopoly (or part of a duopoly) in its service areas and two, because it wasn't disclosing the practice. Users had a right to assume that they could use their unlimited bandwidth absent any warning to the contrary.

 

 

 

Metered Pricing – Is Sauce for the Goose Sauce for the Gander?

Reader and friend Aswath is a supporter of metered pricing by ISPs. We disagree on this and he commented, fairly enough, that I’m apparently contradicting myself when I praise the metered pricing at Amazon S3:

“I share your enthusiasm for S3. Indeed I have been using it for my application as well. I have been hoping that you will touch upon the metered pricing, since in other contexts you have expressed a preference for fixed pricing model. There are other storage providers who charge for only storage and nothing for bandwidth consumption. I surmise that these providers have modeled usage pattern and have included it in the storage price. But I understand S3 pricing model and feel it is more transparent than the bundled model. I am curious to know your thoughts.

“On a related point that ISPs, especially WISPs should use Amazon's pricing model. Then they do not have to worry about P2P and they do not have to place restrictions on which applications are permissible and which are not.”

Good question.

I do agree that it’s far better for ISPs to charge explicitly for usage than that to surreptitiously, or even openly, disadvantage or restrict certain services in their network. ISPs do have the right to make this kind of pricing decision (and some do); I just think that ISPs will both make their customers happier and make more money if they offer flat-rate all-you-can eat plans, perhaps in addition to metered plans which charge by the byte transferred.

My experience, which I’ve written about before, comes from my time as head of AT&T WorldNet Service where we popularized (but certainly didn’t invent) flat-rate pricing for dialup Internet access. Our experience was both that the flat rate attracted customers who may have been afraid to sign up for a metered plan AND that customers, on the average, paid MORE for flat-rate service than they would have paid if the meter had been running (we also offered a metered plan). Our conclusion was that they were willing to pay us a premium for taking the risk of “excess” usage and for the simplicity of a predictable bill whose detail they would never have to check.

Interestingly, when we introduced this plan, Dan Hesse, who is now head of Sprint, was my boss at AT&T. Without his support I never would have been allowed to do this sort of radical pricing even though I argued that local phone service had been priced at a flat rate for years.

Dan is apparently also still an advocate of flat consumer rates. I was overjoyed to see him, himself, in a TV commercial explaining that Sprint offers one flat rate for all voice, web-surfing, and data transfer on its mobile phones. He needs to change the game to succeed in a tough turn-around of Sprint. Flat rate is a game changer.

The argument against flat rate pricing is that there will be “abusers” meaning those who really do find a way to use scads of service. I would certainly agree that resale of a consumer service is an abuse. But what about becoming a volunteer hub for P2P file sharing?

Most of the time (because capacity is only limited during peak hours) it doesn’t matter whether there’s a lot of file sharing going on. In fact, moving files around off-peak can be considered a service to the network because it puts content closer to where people consume it and makes the network more valuable. At peak times networks may experience congestion. Networks certainly should force equal sharing when capacity is over-subscribed rather than targeting certain applications; especially when we don’t have a competitive broadband industry in the United States and have to worry about providers using traffic management as an excuse to handicap apps (like VoIP or video) which come from their competitors.

Networks may choose to do what Verizon Wireless has recently done, put a high upper limit which most users won’t come near on what was formerly an unlimited service and turn the meter on when you go over the threshold. Other networks slow down the data rate of those who exceed a certain usage. These aren’t evil strategies if they’re properly explained and advertised. But they might not make good marketing sense. Competition will help sort that out (I hope) but the movement of the wireless carriers to unlimited voice (and data for Sprint) is some indication of what the market wants.

So back to Aswath’s question: why do I like Amazon’s very metered pricing for S3 if I’m such a fan of flat rate pricing? It’s because S3 is NOT a consumer service; it’s a service which is designed for resale; a service which is built to be baked into other people’s services. I’m sure some users of S3 are tens of thousands of times bigger than other users. It’s a real advantage to us small users to buy exactly what we use – not what we think we’ll use but what we actually use – and not a bit more.

Those of us who use S3 as a backend resource for services that we sell to consumers benefit from paying for just what we use. We benefit again if we sell to consumers on a flat rate basis and both have an easier time signing them up and receive a premium for predictability and simplicity. 

Verizon OPEN Wireless

Very surprising and welcome announcement from Verizon Wireless yesterday:

“Verizon Wireless today announced that it will provide customers the option to use, on its nationwide wireless network, wireless devices, software and applications not offered by the company. Verizon Wireless plans to have this new choice available to customers throughout the country by the end of 2008…

“ ‘This is a transformation point in the 20-year history of mass market wireless devices – one which we believe will set the table for the next level of innovation and growth,’ said Lowell McAdam, Verizon Wireless president and chief executive officer.”

Lowell’s right. And Verizon Wireless is right to open up. There’s plenty of room to be cynical about this; after all, Verizon Wireless is trying to STOP the FCC from putting an openness requirement on the 700Mhz spectrum to be auctioned. Very well-informed Om Malik posts: “Do we really believe that Verizon is going to be happy being Pipes-R-Us?” He point out many ways this there may be less to this announcement than meets the eye.

As an optimist, I think Verizon’s acting in enlightened self-interest which is just great. Here are some of the factors which may have influenced their decision:

  1. They DO have the best network coverage in the US – especially for data coverage. Best way to capitalize on that is to have developers build appliances and apps which run on their service.
  2. Because they are CDMA (a protocol NOT used in most of the rest of the world), they run the risk that no new stuff will be developed for their network, especially if it remains a walled garden. The US is a big market but the rest of the world is even bigger.
  3. The next time somebody develops an iPhone-like breakthrough – and somebody will – they want it run on their network, not be locked to AT&T.
  4. Amazon’s Kindle, which could but doesn’t run on Verizon’s network, is a clear example of how usage may be sold bundled with a device. They’re not going to be a better bookstore than Amazon. They need these innovations to be on their network.
  5. They know that the next year or so will bring huge device innovation including (I think) wireless connectivity in almost every GPS and associated services. They know that their network and their data service – EVDO – which can do handoffs at 80mph is well positioned to benefit greatly from this
  6. As voice minutes turn to VoIP minutes and WiFi minutes, they’re better off keeping some of that traffic onnet even as simple bits rather than losing it all. Note that, to their credit, they DID change their terms of service to allow VoIP over their data service.
  7. The FCC has said that the huge chunks of 700Mhz spectrum going up for auction have to be used “openly” by the winner. It would be hard for Verizon to operate a network which is half open and half closed. Maybe they DO want that spectrum, don’t think they can change the rules, and want to be ready for it.

If you’re torn between my optimism and Om’s pessimism, Galeal Zino suggests a test:

“Let's see which comes first:

“1. Articles about the millions of dollars of deep packet inspection and payload-based billing systems that Verizon is going to incorporate in order to "manage" their soon to be "open" network.

“2. Articles about third-party mobile devices that interop with Verizon's network, using CDMA for voice when necessary, and using unrestricted IP to place VoIP calls using third-party solutions when more appropriate.” 

Kindle – Reader Questions and Comments

In a recent post, I opined that Kindle may be more important as a crude opening wedge for free (sponsored) Internet access than as a change-agent for the way people read books.

Reader ellen has a good question:

“The free internet service after the $400 buy price sounds too good to be true. I would certainly buy one for that reason alone.


“I am going to ask a really dumb question. Does getting wireless access to the internet mean every time you are near any wireless you will be able to log on or does it mean you have to go through the same towers as cell phone access? Having had so much trouble with at and t cellular for my phone would sprint have to be well covered in my state? No one around here uses sprint for cell access. Everyone uses verizon, because for some reason it is best in my area of massachusetts. After many years and 4000 leftover rollover minutes I a dumping at and t for verizon.”

Ellen, that’s a good question. You shouldn’t buy a Kindle if you aren’t usually in a place where there is a good signal from Sprint. EVDO uses the same towers as voice service; so, if Sprint voice isn’t good where you are, EVDO won’t be either. Verizon also supports EVDO but that won’t do you any good with Kindle because it’s tied to Sprint’s network. Moreover, it is possible to be in a place where voice service is good and data not. If you know someone with a reasonably modern cellphone who has Sprint service, ask him or her to look at it near your house and see whether it says “EV” or “1X” where it shows the data connection (different phones display this differently). 1X is a slow data network and Kindle won’t work on that; it is rapidly being replaced by EVDO by both Sprint and Verizon.

Reader Aswath, who is a smart guy, is confused:

“I am a bit confused about the "free" access to the Internet. If I am right in interpreting this, then why do I have to pay a monthly fee to read FOC? That is why I thought that I could access only those sites to which I have subscribed (signified by a bookmark in the browser?). But then both you and Pogue [nb. NY Times writer David Pogue in this article] say it differently. Hence the confusion.”

Internet access IS free through the builtin browser on Kindle. You can, for example, read Fractals of Change in the browser – free – just as you do in the browser on your PC or Mac. However, you can also elect to pay 99 cents/month to subscribe to FOC. That is confusing; why would you pay for something you can have free?

Well, two possible reasons. One, the version you pay for is presumably (I don’t have a Kindle yet) better formatted for the Kindle screen. It has no ads and doesn’t have the sidebars that the browser version does. The Kindle browser is described by Amazon as “basic” so that may make FOC pretty ugly when viewed that way.

More important in the case of a blog or other periodicals which you can subscribe to is that they are downloaded to the Kindle automagically rather than being fetched from the web. That makes a difference if you are going to want to read this content when you’re offline – on a plane, for example, or traveling through country where Sprint EVDO (and therefore Amazon Whispernet) is not available – assuming you were online at some time so that the download could take place.

Both of these reasons for buying content rather than consuming it free are even more important for books. You can read my novel hackoff.com: an historic murder mystery set in the Internet bubble and rubble free at www.hackoff.com. Many people, however, don’t want to read a whole book online. You can also download and print PDFs free.(but not on Kindle). Or you can get it nicely formatted so that you turn pages as in a book rather than scrolling and read it on Kindle offline – but that costs $4.76. If you do that, BTW, Amazon stores it on your virtual bookshelf forever even if you delete it from Kindle to make room for more books. Probably the real comparison here is with the hardcover edition available from Amazon for $18.96.

Reader Marc Orchant did try hackoff.com on Kindle: “hackoff.com looks great on the Kindle. The formatting is clean (e.g. Q&A in the first chapter) and I'm looking forward to reading it as I count myself among the survivors of those perilous bubble days.” Nice to hear. Thanks, Marc.

Reader Terry Gold also likes Kindle (wish I had mine): “I've had a Kindle all weekend, and I'm already planning on how I can get rid of most of my paper books. I'll keep the ones that mean the most to me, but for everything else, this is the way to read. I just had Amazon send me a sample of your book even though I have the hard copy and I can read it on the web. The Kindle changes reading for me.”

On a somber note, reader Dylan Salisbury asks: “What happens after someone hacks into a Kindle and tethers their PC to the internet connection? If they had really "bought" that internet connection, it wouldn't be a problem (you can run any traffic you want over your own connection, right?) -- but I have a feeling such uses will be shut down or denied.”

I think Dylan’s right. If such hacking becomes noticeable, it probably would be shut down in some way. And that raises an interesting question: is it a violation of Net Neutrality to shut down some uses of “free” Internet access? I’d say no in this case since Amazon hasn’t been using the free access to the web as a selling point and it’s pretty clear what it’s for; but certainly there may be plenty of argument over this.

Now on Kindle!

hackoff.com: An historic murder mystery set in the Internet bubble and rubble

CEO Tom Evslin's insider account of the Internet bubble and its aftermath. "This novel is a surveillance video of the seeds of the current economic collapse."

The Interpreter's Tale

Hacker Dom Montain is in Barcelona in Evslin's Kindle-edition long short story. Why? and why are the pickpockets stealing mobile phones?

Need A Kindle?

Kindle: Amazon's Wireless Reading Device

Not quite as good as a real book IMHO but a lot lighter than a trip worth of books. Also better than a cell phone for mobile web access - and that's free!

Recent Reads - Click title to order from Amazon


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