ISP competition -- testing a Time Warner Cable public WiFi access site

As mentioned earlier, a welcome bit of infrastructure deployment competition seems to brewing between the telephone and cable companies. At the Mobile World Congress last week, Philips and Ericsson announced WiFi-ready streetlights and a coalition of five cable companies has formed to roll out open WiFi hotspots.

I am a Time Warner Cable (TWC) customer, so I decided to try it out. I checked in my neighborhood and found a WiFi hotspot at a school two blocks from my house. I drove over, parked on the street in front of the school and logged in using my TWC account credentials. I had a solid, five-bar connection (whatever that means).

I ran Speedtest, which showed 16 ms ping time, 40.6 mbps download and 5.06 mbps upload -- considerably faster than the service at my home.

Our phones are able to switch seamlessly between WiFi and the cellular network (see, for example, Republic Wireless). I do not want to be bothered knowing which I am using at any time -- I just want my phone to pick the best connection available given my ISP terms and the application I am running.

I've beaten up on TWC and the other ISPs for exploiting their non-competitive markets in many blog posts, so it is only fair that this post congratulate them on providing a meaningful, competitive service.

Today the five-ISP coalition lists 200,000 hotspots in their database. How many will they have in five years? Might the cable companies have outsmarted the phone companies in splitting up mobile and landline access?
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Update 4/12/2014

Comcast has revealed that they have a million public access points, with at least 800,00 of them in the homes of their broadband subscribers and, if they succeed in acquiring Time Warner, that footprint will expand significantly.

We may be witnessing a race between cable companies deploying WiFi and phone companies deploying 4G (and later 5G) infrastructure. That might lead to increased competition or, more likely, they will gerrymander access so as to limit competition (following the example of the U. S. House of Representatives).

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Update 5/29/2014

FON's public WiFi routers are gaining steam. I've had one of their dual-SSID routers for years, but never used it because there are so few in my neighborhood, but they are catching on with ISPs in other nations.

Cable versus telcos: the race between cellular and WiFi

We can think roughly of mobile, portable and fixed Internet access. It seems the cable and incumbent telephone companies have declared a, perhaps uneasy, truce with Verizon and AT&T focusing on mobile access, the cable companies focusing on fixed access, leaving portable access to go either way.

Do the cable folks hope to move in on portable and mobile users by rolling out WiFi hotspots while the phone companies put their radios on telephone poles and anywhere else they can? (Readers over a certain age will recall the short-lived Ricochet wireless network, which also used light poles).

It seems we have a bit of actual competition in this race to install wireless infrastructure.

Is the wireless cartel showing signs of cracking?

For some time, we have seen the rise of MVNOs (mobile virtual network operators) -- companies that resell mobile access on nationwide networks. (I personally use an MVNO, Ting.com).

I have been parochial, watching only US MVNOs, but the same thing is happening elsewhere. For example, Phones4U will launch an MVNO, LIFE Mobile, in March, using EE's network in the United Kingdom.

In the US, super retailer Walmart is offering mobile connectivity through Straight Talk for $45 per month. They are advertising unlimited service, but will evidently slow data transmission when a yet-unspecified limit is reached during a month. While the terms are still unclear, the presence of Walmart in a market will lead to very aggressive pricing.

Today, MVNOs are living off the fat, the oligopoly profits, of their wholesale providers, but their aggressive pricing and plans may end up forcing all prices down.

Dish TV wants to become Dish TV and Mobile

The Financial Times reports that Dish has won FCC approval to use spectrum they already own for LTE cellular communication rather than TV broadcast.

The approval came with a caveat regarding power limitations so as to avoid interference with adjacent spectrum that the FCC plans to auction next year. (That spectrum will also be used for LTE).

Dish said it was not all good news since the power restrictions could "cripple our ability to enter the business." Perhaps they are hoping to negotiate with the FCC over those restrictions.

The Wall Street Journal has speculated that Dish might partner with Google in forming a mobile communication company. Or perhaps Dish will sell the spectrum, which is now worth more than it was before the FCC approval.

Dish's move is reminiscent of the recent case in which the FCC turned down LightSquared, a startup seeking to offer LTE service using spectrum adjacent to GPS frequencies. LightSquared has a new proposal before the FCC, asking permission to share frequencies that are used by weather balloons.

Dish might provide some competition for the mobile cartel, but, then again, they have not exactly driven the price of broadcast TV down. But there are others as well. Google may join in with or without Dish, LightSquared may get a second chance, T-Mobile and Metro PCS want to compete and virtual mobile operators like Virgin and Ting are offering cut-rate prices. The cartel may be weakened.

Ting is looking better -- will allow customers to bring Sprint phones

In a previous post, we described Ting.com, an MVNO (mobile virtual network operator), that resells access to the Sprint cellular network at dramatically reduced prices with no contract. My one complaint was that you could not bring your own phone to Ting. You had to buy a new phone from them, and they offered a limited selection.

Well, that restriction is starting to fade away. Ting announced that during the next quarter, they will begin allowing customers to use their own Sprint phones. That means the selection of new phones will increase dramatically and old Sprint phones will be welcome as well. They point out that, "at first", there will be restrictions -- the iPhone, BlackBerry push to talk and a small list of specific handsets won’t be included.

If you check Ting's prices, you will find significant savings over the major cellular companies. Now that you can bring your old Sprint phone or choose from a wide selection of new phones, Ting (and other MVNOs) seems like a terrific deal for those in areas with good Sprint coverage. The deal is even sweeter if you live in an area which is or will soon be covered by Sprint LTE.

I don’t know how Ting does it. Perhaps Sprint’s wholesale price is very low or perhaps Ting is less greedy and more efficient than the major carriers. Somehow, it offers a better retail deal than Sprint or any of the others. Maybe it is just that it charges more rationally than its competitors. Since 2009, U.S. data traffic has exceeded voice traffic and the gap is growing rapidly, but the cell phone companies still gain most of their revenue from voice.

The cellular and cable companies seem to have arrived at a "gentleman's agreement" to reduce what little is left of Internet service competition. The cellular companies are getting out of the land line business and the cable companies are getting out of the mobile business.

Will the MVNO's like Ting succeed in disrupting the mobile market?

Virgin Mobile gets the iPhone -- is the wireless oligopoly starting to fade?

AT&T has articulated its vision of a concentrated wireless market with few carriers that control a lot of spectrum. They foresee a gradual, controlled shift from voice minutes to all-data during the next few years, and hope to charge enough for that data to maintain carrier revenue and profit.

But one of those carriers, Sprint, seems to be doing something radical -- competing.

Sprint is competing by partnering with mobile virtual network operators (MVNOs) that sell access to the Sprint network. Users have to buy their phones up front, without subsidy, but they get flexible, cheap voice and data plans in return. The MVNO gets less revenue per user than AT&T or Verizon charge, but I assmue they and Sprint are profiting or they would not do it.

The net result is that wireless is cheaper and customer bills more accurately reflect the fact that voice calls, text messages and data are all bits.

Since the user pays full price for a phone, the MVNOs do not require two year contracts, but they lock you in by insisting that you buy your phone from them -- you cannot bring your own. Phone portability should improve with market pressure and the widespread adoption of fourth generation cellular technology.

MVNO phone selection is limited, but that may be breaking down. Sprint recently picked up the iPhone and today they announced that Virgin Mobile, one of their MVNOs, would also get the iPhone. I suspect that eventually Sprint MVNOs will offer all Sprint phones.

Virgin is not Sprint's only MVNO. One, Ting, has effectively done away with the concept of tiered service -- you pay for what you use. Virgin and Ting are early, but there will be others. One that is in beta, Republic Wireless, hopes to charge even less by automatically substituting WiFi for cellular connectivity whenever possible.

AT&T has their ideal vision of the future, and I have mine -- the ability to own my own phone, use it on anyone's network and only pay for the bits I send and receive.

Wishful thinking -- might Ting, Virgin America and T-mobile trigger wireless competition?

Ting pricing example, click to read

Speaking on a panel at the Geek Wire Summit in Seattle, T-Mobile Chief Marketing Officer Cole Brodman said that bundling subsidized mobile phones “distorts what devices actually cost and it causes OEMs, carriers — everybody to compete on different playing fields.” He went on to say that if he were "king for a day," he would do away with subsidized phones.

When asked why T-Mobile did not do it, he said that consumers are used to low phone prices and would not switch even if the long run cost, including usage contact rates, were less.

Well, he may be right, but ting.com is betting that if an unbundled plan is cheap and flexible enough, people will be willing to pay big bucks up front for a phone. How does, say, $62 per month for 2 phones, 500 voice minutes, 1,000 text messages and a 2 gigs of data sound to you? That is a tentative plan I priced out using Ting's rate calculator (see the image above).

But wait, it gets better. There is no contract -- service is month to month. How about their rate plans? There are 216 possibilities. Want more? Ting doesn't roll unused minutes and data over, it gives you cash credit on next month's bill if your actual use is below your plan. What if you exceed the limits of your rate plan? The rate plan is tentative, not hard and fast -- you are bumped up to the next level with not penalty charges. In other words, your bill is a function of your actual usage, not your plan.

It's not all rosy. The phones aren't cheap. For example, a Samsung Galaxy SII 4G is $465, but Ting's billing plans and rates can make up for a lost phone subsidy pretty quickly and you won't be tempted to throw away your phone every two years. For the time being, Ting offers only a few phones and you can't bring your own -- you must buy one of theirs. Another possible glitch -- Ting's carrier is Sprint, and they might have poor coverage in your area.

Virgin Mobile has launched an ad campaign for their unlimited data service. For $35 a month you get 300 minutes of voice and unlimited 3G data and messaging with no contract. Like Ting, they are on the Sprint network in the US, but their 3G phone selection is less impressive.

Might Ting and Virgin Mobile disrupt the mobile phone market? Maybe T-Mobile will jump on the bandwagon. Might we eventually see competition in the mobile market? Stay tuned.

Irony: Perhaps the Chinese can bring competition to the US wireless market

The US Congress tried unsuccessfully to introduce competition into our telecommunication industry with the passage of the 1996 Telecommunication Act. Congress and the FCC were no match for the incumbent telephone companies with their lobbyists and legal staffs, and their efforts were defeated.

Might the Chinese have a better chance than the US Congress and FCC?

China Telecom intends to enter the US market as a "virtual" mobile network operator. They will partner with a US carrier and plan to sell handsets and services to Chinese Americans and to students and tourists who travel regularly between the US and China.

Donald Tan, president of China Telecom Americas, said they may even consider building or buying their own wireless network in the US -- "If the service is growing fast, maybe we can set up our own infrastructure. The money is no big problem for us."

Of course bastions of capitalism like AT&T and Verizon will do their best to stop Chinese competition. This was foreshadowed last month, when the US Department of Commerce excluded Huawei from bidding on a national emergency network project.

Senators call for investigation of cellular company practices

Several US Senators, including John Kerry and Herb Kohl, are calling for investigation of anti-competitive practices by cell phone companies. The Senators are bothered by restrictions like limiting the Apple iPhone to one carrier, AT&T, and the lockstep price increases we noted earlier.

It is encouraging to see these issues raised, but anti-competitive behavior by the telephone and cable companies goes far beyond cell phone restrictions.

We need to question fundamental assumptions about the role of the Internet as basic economic and social infrastructure, the appropriate role for government ownership of infrastructure, and the service-oriented business model of the incumbent ISPs .

This call for investigation is limited in scope and far from action and results -- let's hope it is just the first step.

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?

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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.