Mobile service in the UK is cheaper than in the US

Minh Uong
New York Times

We've looked at the bad deal US landline Internet users get compared to places like Korea, Sweden, Japan or Latvia. (The list could be longer). How about mobile connectivity?

The New York Times just published a short article comparing the price charged by UK Cellular company UK Three (UK3) to that of Verizon in the US. The article compared prices for a two year contract with a subsidised Apple 5s phone.

UK3's price in this example is over $40 less than Verizon's. Furthermore, UK3 allows unlimited data transfer while Verizon has a 2 GB per month usage cap. Since UK3 is a low-cost carrier, I checked the prices of Vodafone accounts in the UK. A 3G Vodafone account with a 2 GB cap costs $72.31 per month. A 4G plan with a 4 GB cap is $79.60.

The author of the post cites one significant difference in explaining the price differences between the two nations:

Britain has forced companies to lease their networks to competitors at cost. The United States has not, allowing a formidable barrier against competitors.

The US Congress tried to spur competition in a similar manner with the Telecommunication Act of 1996, but the incumbent operators and their lobbyists defeated that attempt in courts and state houses.

William Kennard, who, as chairman of the United States Federal Communication from 1997-2001, was charged with implementing the Telecommunications Act, stated near the end of his term that “all too often companies work to change the regulations, instead of working to change the market,” and spoke of “regulatory capitalism” in which “companies invest in lawyers, lobbyists and politicians, instead of plant, people and customer service.” He went on to remark that regulation is “too often used as a shield, to protect the status quo from new competition -- often in the form of smaller, hungrier competitors -- and too infrequently as a sword -- to cut a pathway for new competitors to compete by creating new networks and services.”

Samsung says they've made a wireless breakthrough

Samsung says they are running high-frequency wireless connections at 1 gbps and suggests that this technology could form the basis of commercial 5G networks by 2020.  That sounds good, but on second thought it raises a lot of questions, like:

• How is power consumption?
• What about our lame data caps? Will you hit your cap in the first hour of the month?
• What about backhaul from those gigabit towers?
• Don't high frequency signals attenuate rapidly as one moves away from the antenna? How many base stations will have to be added?
• Aren't high frequency signals more readily absorbed by obstructions?
• If implemented, how well would this technology compete with WiFi, especially if Google or others were to deploy it widely?

Can you think of other "how-abouts?"

A terrorist could jam an LTE base station for $650

Click to enlarge and read

Virginia Tech professor Jeffrey H. Reed and Marc Lichtman, a graduate student, filed a comment with the National Telecommunications and Information Administration showing that a terrorist could crash an LTE base station serving thousands of people by jamming control signals using a software defined radio and laptop.

They were commenting because there is a plan for a nationwide public safety broadband network that would use LTE wireless technology.

A Technology Review article on the filing estimates the cost of the jamming equipment at $650 and points out that 2G and 3G wireless would continue to work -- but 2 and 3G wireless are relatively will be phased out.

Reed and Lichtman do not offer a solution -- they merely point out the vulnerability.

LTE version 1.0. TeleSonora begins 4G cellular service in Scandinavia using Chinese equipment

We cover cellular networks and generations in discussing mobile and portable connectivity.

Today might be considered the first day of the fourth generation -- TeleSonera began offering commercial LTE (Long Term Evolution) service in central Stockholm and Oslo. This is LTE 1.0. It is not built into phones; it is not offered outside of Oslo and Stockholm; there is no competition; it does not fall back to 3G or WiFi; there are no tethering applications for creating portable WiFi hot spots, but it is here.

The service delivers download speeds in the 20-80 Mbps range and will cost 599 Swedish Kronor ($85) per month. There will be no data cap while the service ramps up, but after July 1 2010, they will impose a 30 GB-per-month cap. It also requires a Samsung plug in modem. The current version of the modem is LTE only, but they will soon have one that can fall back to the 3G network where LTE is unavailable.

When TeleSonera began testing in Oslo last June, they said rollout would begin in 2010, but demand for high speed mobile connectivity convinced them to push the start date up.

The equipment is manufactured by Huawei, a Chinese company. You may think of China as a manufacturer of cheap toys and other consumer goods, but they are becoming world leaders in high tech areas like telecommunication. Huawei European equipment sales were $3 billion in 2008, compared to just $160 million in 2003. Forty of the world's fifty largest telephone companies are now Huawei customers and 75% of their 2008 sales were outside of China. Globally, Huawei is the second largest mobile connectivity manufacturer.

Check this short video tour of the Stockholm base station, which has both 3G and the new LTE 4G equipment.

Verizon's FIOS Internet connectivity is $70 per month for up to 25 mbps download and 15 mbps upload. Would you rather have that or TeleSonera portable service in Stockholm?

What new applications and devices might this service enable?

4G cellular is expected to roll out faster than 3G did

We have discussed three generations of cellular technology, and the fourth is beginning to take shape.



It took nearly six years for 3G cellular to reach 100 million subscribers world wide, but market research firm Pyramid Research estimates that 4G Long Term Evolution (LTE) technology will grow faster. They expect a compound annual growth rate of 404% from 2010 to 2014, with 136 million subscribers by year-end 2014.

Note that Pyramid Research expects LTE to rapidly surpass mobile WiMAX.

At 100 Mbps, LTE will not be limited to cell phone service, but will be used for fixed, portable and mobile Internet access.

If you live in a large city in a developed nation, you might look forward to LTE or Mobile WiMAX by 2011. Others will have to wait. (Some for a very long time).

Is 3G cellular currently available throughout the city you live in? Throughout developing nations? What applications and mobile devices do you foresee for 100 Mbps mobile connectivity? What changes may occur in the cellular companies business and billing models?

AT&T mobile Internet access -- $480 per gigabyte when over the cap

We have seen that the price of sending a cell phone text message far exceeds the cost. What about mobile data plans?

An Oklahoma City woman is suing AT&T because her first month phone bill was over $5,000.00. She had subscribed to a $60 per month AT&T data plan that was capped at 5 gigabytes. She exceeded the cap the first month, and felt she had been deceived when the bill arrived.

The AT&T plan states that if one exceeds the 5 gigabyte cap, they are charged "$.00048 per kilobyte."

Would she have exceeded the cap if the price had been quoted as "$480 per gigabyte" or, better yet, "$350 to download a CD" or "$2,500 to download a DVD?"

Why does AT&T charge $12 for each of the first five gigabytes and $480 for the sixth? Do you think she should have to pay the bill?

Truephone -- mobile Skype (almost)

We have seen that cellular network operators control applications and devices in order to preserve their business model, which centers on selling service like SMS messages and phone call minutes rather than unfettered Internet access.

But, newer phones with both Wi-Fi and cellular radios can run VoIP software when using their Wi-Fi connections to the Internet.

Consider, for example, Truephone.com. Truephone software runs over Wi-Fi connections on the Apple iPhone, iPod Touch and other phones. As with Skype, calls to other Truephone users are free, but they charge for calls to landline and mobile phones. Truephone's rates are much higher than Skype's. For example, the per minute rate from the US to a Chilean mobile phone is $.70 on a Truephone while Skype is only $.243. The difference for landlines calls is much greater -- $.68 versus $.024.

Regardless of their rates, Truephone illustrates two points we have discussed: innovation occurs rapidly on "dumb" end-to-end networks and the Internet is a highly leveraged platform on which to develop businesses.

Truephone CEO Geraldine Wilson recognizes these points in the following quotes from a BBC article:

"There are a slew of new features we're rolling out for the iPod Touch that will let users call landlines, Skype users or send instant messages. We're talking weeks, not months, before these go live."

and

"We've decided to focus on devices that are wi-fi enabled and have an apps-store. For the consumer, there has to be an easy way of downloading an application."

They are innovating rapidly and will "outsource" distribution and sales to the Apple and Google Android stores.

Do you currently use your cell phone as an Internet access device? Would the ability to make Truephone calls convince you to do so?

Senator Kohl questions cellular competition

We discuss the competitive nature of the US cell phone and ISP markets. Generally speaking, ISPs and cell phone companies oppose regulation, arguing in favor of private enterprise and competition. Is there competition in these markets? Let's look at text messaging.

In 2005, each US cell phone company charged 10 cents to send or receive a text message. No doubt they had different cost structures and strategies -- you might have expected one of them to cut their price to try to win new customers. Well they did change their prices -- today they are all charging 20 cents.

Do you find that surprising in this competitive marketplace? Do you suppose their costs rose during those years? Its only fair that they cover their costs, right?

Text messages are transmitted in 140 byte (1,120 bit) packets -- 1,120 bits delivered for 20 cents. How much would it cost to deliver a recorded song at that rate?

Let's be conservative and assume the typical song is 2 minutes long. If it were encoded at 256k bits per second, the rate Apple iTunes uses for premium recordings, that would be roughly 30,720,000 bits -- the equivalent of 27,429 text messages. If a music vendor like Apple charged the same rate per bit as a text message vendor, a song would cost around $5,486 to transmit, yet Apple manages to sell and deliver songs, and make a profit at $1.29 per song.

US Senator Herb Kohl (D-WI), chairman of the Senate Antitrust Subcommittee, recently asked the presidents and chief executive officers of the four largest wireless telephone companies to justify their text message rates. In a letter, Senator Kohl requested an explanation from Verizon Wireless, AT&T, Sprint and T-Mobile, which collectively serve more than 90 percent of the nation's cellular phone users.

Do you think the cellular market is competitive? The Internet access market? What do you think Senator Kohl is planning to do?

-----
Update 3/13/2015

WhatsApp reports that it now has 700 million monthly active users sending 30 billion messages a day. For comparison, the global SMS system sees about 20 billion messages a day.

Here is the decline of SMS in several nations:

Senator Kohl's call for action went nowhere, but he needn't have worried -- no monopoly lasts forever.

Mobile Internet access is looking up

We have discussed mobile device form factors. We still don't know what form factor the public will choose, but we just got an indication. Apple's iPhone is a better Internet access device than any previous cell phone, and, since it was introduced, Google has seen 50 times more searches on the iPhone than any other mobile handset.

Virtually all phone manufacturers are working on touchscreen devices similar to the iPhone, and many of them will use Google's Android operating system and application bundle.

Phone manufacturer Nokia is convinced the public will want mobile Internet access. They recently purchased NAVTEQ, the street mapping company used by Google Maps and others. Olli-Pekka Kallasvuo, Nokia president and CEO, believes GPS chips will be as common in mobile phones as cameras. He says "navigation is one of the foundations of the context-aware mobile phone. We believe it will be as important as voice capability was 20 years ago."

IPhone users like to access the Internet, but that does not prove the billions of simple cell phone users will feel the need to convert. Is mobile Internet access important to you or are you satisfied with your current cell phone? If you had a mobile Internet device, what would stop you from running Skype or another VOIP program instead of using cell call minutes? Check these hypothetical auto navigation videos from NAVTEQ -- would you use these applications?

Real time location tracking

We discuss location-based applications, and the US Federal Communication Commission has mandated that all cell phones be location-aware for emergency 911 service. Carriers are working toward that goal, and eventually, all cell phones will be equipped with a GPS (global positioning system) receiver or use other technology to record their locations, enabling real time monitoring.



Tim Hibbard illustrates real-time monitoring by carrying a GPS-equipped phone in his car. His location is recorded every 15 seconds, and plotted on Google Maps and Google Earth. His travel routes are also stored on a server so one can see where he has been in the past. For example, on August 12, 2006, Tim traveled around his old college town, Lawrence, Kansas:



Real time GPS could be used to monitor fleets of delivery vehicles or taxis, children, pets, criminals under house arrest, etc. Does this capability raise concern over privacy?

Video of a Google Android cell phone prototype

We have seen that a dumb, open network encourages investment and hardware and software innovation. We have contrasted this with the telephone and cellular networks, where application and hardware innovation are controlled by the network operators. We've also followed Google's efforts to open the cellular network by possibly purchasing spectrum and by developing and distributing Android, an open source mobile phone operating system bundled with Google applications like maps and mail.

Google has released some videos demonstrating prototypes of Android phones. For example, the following video shows a touchscreen phone reminiscent of the Apple iPhone.



(You can find other Android-related videos at the Android Web site linked to above or by searching on Youtube).

The most important feature shown in the video is not clever hardware or software -- Apple already did that with the iPhone -- but the open platform. The video begins and ends with Google co-founder Sergey Brin inviting developers to build Android applications. Based on his Internet experience, he feels that openness will be critical to the success of Android, and has kicked things off with a ten million dollar contest for application developers.

If he is right, third party applications will spur Android sales, and each Android phone sale will spread Google applications -- and ads. Not satisfied with being on your desktop, Google also wants to be in your pocket.

After viewing the prototype video, can you think of applications you would like to have on your next cell phone? Would you be willing to watch targeted advertisements in return for free cell phone service?

Politcal pressure yields a tiny step toward an open wireless network

Apple has opened the iPhone to third party developers, but a problem remains. The iPhone is restricted to the AT&T network in the US and O2 in Great Britain. Cell phone manufacturers and network operators offer bundles in which the phone price is reduced in return for a long contract and high monthly bills.

This sort of bundling restricts the marketplace and consumer choice, but it is not inevitable. Some nations, for example, Singapore and France, require manufacturers to offer open versions of their phones.

We are starting to see some political reaction to the heavy handed lobbying of the cell companies in the US. In the face of threatened legislation, Verizon and AT&T have loosened some restrictions in their cell phone contracts. That is a small step in the right direction -- toward open, competitive, end-to-end Internet connectivity over wireless networks.

How would the Internet and market be changed if, for example, Dell PCs could only connect to the Internet through one ISP and Hewlett Packard PCs through another ISP?

The cellular network is broken -- two examples

As we discuss, the Internet was designed to be an end-to-end, dumb network. The large ISPs would like to break that principle in order to give higher priority to certain users and applications, and, as we have seen, the cell phone network is even more restricted.

Developers cannot create and use cell phone applications without permission from cell phone carriers. We had a graphic example of this recently when Verizon would not permit an abortion rights organization to use their text messaging service. They later reversed the decision, but this illustrates how badly broken the cell phone network is.

Along the same lines, a software upgrade to Apple's iPhone renders phones with third party applications installed inoperable. This was not inadvertent. Apple CEO Steve Jobs said it was done to protect carrier networks and to make sure the phone was not damaged.

His first reason -- protecting the network -- was what AT&T claimed before the 1968 Carterphone decision that allowed people to connect equipment to their network as long as it did no harm. His second reason -- protecting the phone from damage -- is exactly what he has done -- turned them into worthless "bricks."

People are working on an open cell phone, and perhaps Wimax will lead to open network access one day.

Google wants the FCC to bring the entire Internet to your cell phone

We have contrasted a "dumb," end-to-end network like the Internet, where services are provided by network users, with a "smart" network, where services are provided by the network operator. In two earlier posts, we saw that Tim Wu and business customers have argued that the cellular networks should move to the open, Internet model.

Google has now joined the fray, saying they would bid on the spectrum that will be made available for auction by the FCC when the US converts to all digital television transmission in 2009 if the following were mandated by the FCC:

• Users should be able to install any software on their phones and PDAs
• Users should be able to connect any technically compatible device to the network
• Auction winners should be able to resell bandwidth to third parties
• The wireless network should connect to other networks

Of course cell phone companies are opposed to this sort of thing. Holy cow -- someone might install Skype on their smart phone and make VOIP calls or download a video from a Web site that was not paying the cell carrier a commission. The cell system is like the early telephone system. Before the 1968 Carterphone decision, we could not connect things to the telephone network -- not modems or computers or even answering machines.

Respected columnist Robert Cringley agrees with Google's goals, but thinks they will fail and have made a serious business mistake. What do you say?

Japanese cell phone service is better than in the US

Someone who moved from the US to Japan compared cell phone service in the two nations in a post on Slashdot. He wrote:

Before I left for Japan about a year ago, I was using a Nokia 3160. It cost me $40 US and I had to sign a one year contract that Cingular later decided was a two-year contract. I was paying about $40 a month for service and had extra fees for SMS messages.

After I got to Kyoto, I quickly ended up at an AU shop and landed a Casio W41CA. It does email, music, pc web browsing, gps, fm radio, tv, phone-wallet, pictures (2megapixel), videos, calculator etc. I walked out of the store for less than ¥5000 (about $41) including activation fees, and I was only paying slightly over ¥4000 (about $33) per month. That included ¥3000 for a voice plan I rarely used and ¥1000 for effectively unlimited data (emails and internet).

Perhaps someone with more knowledge of the costs facing American mobile providers can explain the huge technology and cost gap between the US and Japan. Why are we paying so much for such basic features?

For some answers to his final question, see the discussion below the post on Slashdot. Note that Slashdot has been an excellent source for discussion of networking for many years.

Will business customers force cell network neutrality?

A recent Information Week article criticizes the US cell phone industry for disabling phone features, restricting phones to one network, restricting Internet access, using incompatible communication technologies, and poor quality of service and coverage. For example, the article says that "by some estimates, nine out of ten cell phones in the US are sold by carriers, nearly reverse the ratio in other countries." Compared to the cell companies, wired Internet service providers are good guys and network neutrality advocates.

That is all bad news, but the article maintains that since mobile access is becoming very important in business, the cell companies might be pressured into reform. Consumers take whatever the operators offer, but business will not.

We spoke of this topic in an earlier post on Tim Wu and efforts to obtain wireless net neutrality.

In some nations, cell phones and cell service must be sold separately -- can you find which ones?

Tim Wu on wireless network neutrality

Skype recently petitioned the FCC to open access to cellular networks in the United States. That petition was based on a study by Tim Wu, a law professor at Columbia University. Our class notes cover the Carterfone case which opened the wired telephone network, making the end-to-end Internet possible. Wu feels that a neutral-access cellular network would enable Internet-like innovation and competition on wireless networks.

You can read Wu's paper and see the Skype petition at the New America Foundation. Wu was also interviewed on wireless network neutrality by National Public Radio's On The Media. You can hear the interview (with a rebuttal by an industry representative) or read a transcript at the On The Media Website.