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April 22, 2007

Notes from Tortola – Who Owns the Network?

In a few hours we’ll pick up our charter boat and begin sailing the usually benign waters of Sir Francis Drake Channel. To be here in time, I had to come yesterday.    Daughter Kelly and I have already made some $1.29/minute Verizon mobile calls (both sides paying the fee because we were roaming!) back and forth to each other so that we could rendezvous.

Today and for the rest of the trip, we’ll use walkie-talkies for inter-crew communication. It’s our “network”; it’s free. But I did buy the equipment, which was very cheap in this case.

I called Mary once on my Verizon phone to say I was safely here but we didn’t really talk until I had a WiFi connection and could use Skype to call her on our home line which happens to be Vonage. That call cost $.021/minute so we could afford to catch up on a whole day apart.

Getting a WiFi connection was only possible because I made an initial investment in network “infrastructure”. Of course I already have a PC which is also my GPS, my writing tool, and lots of other things; it’s a key part of my network infrastructure even though I wouldn’t have bought it just to make phone calls. The PC has a WiFi card but I couldn’t log on to the free WiFi here or at the hotel even though I could see the network. Neither the bartender nor the desk clerk knew why and I couldn’t figure it out.

But, as posted previously, I’d taken the precaution of enhancing my network with a long-range WiFi card plus antenna from Ubiquiti. It can see dozens of hotspots from my hotel room, many of them free and open.  This network extension was the key to my being able to make cheap calls.

It’s tempting to claim that rational economics are at work and these are examples of trading higher capital expense for lower operating expense. In the case of the walkie-talkies, that’s certainly true (and a very interesting early example of the value of open radio spectrum). In the case of Skype, however, most of the savings comes because use of our own local access networks lets us bypass tollbooths set up by the owners of the traditional access networks.

The photons carrying Mary and my gossip back and forth have to travel just as far when I use Skype as when I use Cable & Wireless (the incumbent here which charges its residential customers $.55/minute to call the US) or when I use Verizon Wireless, which uses C&W towers. Even a few years ago when I was last in the wholesale phone business, the cost to complete a call in most of the US – another last mile toll – was less than $.01/minute.

The simple reason why Verizon and C&W charge so much is that they can; they have last mile monopolies on which they’ve erected toll booths.  Owning edge network equipment – PCs and WiFi radios – lets us bypass the toll booths and pay Skype “only” a 100% markup on these calls.

These toll booths are, to say the least, lucrative. That’s why cellular carriers want to provide you with a cellphone – one they can lock so you can’t avoid their access toll by avoiding their access network. That’s why it is so important to Verizon to win its patent fight against Vonage. That’s why most cell phones with WiFi don’t allow you to use the WiFi in voice mode (you might Skype!). That’s why governments around the world have been convinced, bribed, or otherwise cajoled into passing laws which protect these monopolies against the technical bypass which is now easy.

Ironically, the huge markups the incumbent charge make it and easier and easier decision to build your own access network and use your own equipment.

Other posts in this series:

Dollars or Cents – WiFi to the Rescue

SIMitry

Calling Home for American Dummies

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