I would love to hear the HN community thoughts on my article. My new blog is a work in progress and I am always open to suggestions how to make it better.
I think your article hits several issues on the head, and I'd like to drop my thoughts on what might actually happen...
I have some history in the telco world and while at a gig with one particular legacy carrier, noticed that when this topic came up in strategy sessions, there was zero sense of urgency. None. What. So. Ever.
My suspicions are that the rivers-of-gold experience of first vast voice revenue (tied to big investments that could be written down over a number of years) and then messaging revenue (which was just money for jam with very low overheads) has permanently damaged their business culture.
There are a couple of ways out of the bind that they're unable to face:
1. Innovate out of their situation by offering some value add that can be priced at value level, and not at cost-plus. Your suggestion of micropayments is a good one, and could be enhanced by their potential local knowledge of their market and user behavior to do commercially driven location aware services like advertising, offers and all those other things. Benefit would be to keep existing business customers on-board. Chances? Zero to none. Innovation is a big word in the telecomms world, but it really is just a way to flush billions down the toilet with not much more than deployed hardware to show for it.
2. Try to use their oligopoly situation (like the DSL and cable biz did) to stifle any new entrants at a regulatory level. This won't work too well because their new competitors aren't having to do buildouts - they're bypassing the carrier-customer relationship entirely. Therefore they'll need to be blocked or starved of bandwidth by the carriers. Chances? In some markets, like the US, probably 50/50 at this point looking at how successful industrial lobbying is right now. Net neutrality is their bête noir, and they'll do whatever they can to destroy any institution that tries to introduce it, like the FCC.
3. Avoid this whole shenanigans with innovation and regulators and do what oligopolies do best: price fix so that their customers do the dirty business bandwidth starve the innovative services out of the market because they only have 30Mb per month on the basic plan and it's USD100 for another couple of hundred Mb. Chances? If all the national providers move in lockstep and avoid any successful anti-trust investigations, it's easy and cheap. They'll never recover messaging revenue, but they could avoid other revenue erosion.
My bet's on parallel attempts at strategy 2 and 3.
One metaquestion: is your blog really uncopyrighted? Pretty cool if so.
I am not unhappy with my carrier, China Unicom. I have a good 3G for 15$/month, no contracts. I go to the nearest cigarette seller and buy cards to pay them, and it stops when i stop paying, that's all.
When I see my relative in France talking about their locked contracts, I cry with them.
I have only limited experience with wireless carriers is Asia from a week visit to Singapore and Malaysia. So I do not know what the actual situation there.
My experience is mainly with Europe and the US, having lived and worked in different places in these two regions.
15$/month sounds excellent but is it for unlimited data? Right now my plan in Bulgaria(Europe) is coupled with my other monthly services. It all comes down to about 25$/month but it is 2GB with max speed and anything after that is capped at 128kb.
In the states wireless carriers realized that giving users unlimited data leaves a lot of money on the table and they decided against it. Only Sprint is holding up right now but I wonder for how long. Sprint's only competitive advantage right now is the unlimited data.
Why change when you are hauling in billions of dollars per year, and there's nowhere to go but down? The mobile carriers are going to extract as many dollars as possible while they still can.
The fundamental problem is lack of competition. When there are only a small number of providers, none of them have an incentive to slash the price of texts to a more reasonable level.
I don't think this follows. In the US, for example, virtually every metro area has four national providers. They race against each other to roll out new devices and new network technologies.
The text charges are more of a historical addiction. Outside the US, voice charges were historically much higher (because they were priced to compete with the higher land line rates). So users flocked to SMS as a way to communicate more cheaply. In the US, voice charges on cell networks were comparatively cheap. Text was an "extra" that could be sold at a huge markup. And that revenue is hard to give up.
I guess my issue with all of this is why competition has to be the only force to drive inovation and business development. But I guess the problem is much more deeper and in every industry, not just wireless.
What is so wrong with still making a profit but actually creating a good service at affordable prices.
I think I understand pretty good all the fundamentals behind their business decisions but still it leaves me wanting better services.
The fundamental problem with most commercial infrastructure providers (which is pretty much all wired and wireless ISP) is that competition can never be perfect because of the laws of physics.
There is only so much room to put cables in the ground, or wireless spectrum to use. Thus, the governemnt auctions these roles off (often at far far below their actual worth), and companies use their physical monopoly to extract maximal profit with as minimal infrastructure as possible.
The obvious solution is pro-consumer regulation. Eliminate long term contracts and make unlocking of phones mandatory after contract expiration. Force all carriers to have common carrier status, so the physical infrastructure is a dumb pipe. This list could go on and on...
The problem with this is that anyone in the industry will lobby against this and they already have the political will against any change, as they're making a ton of profit via their monopoly status.
You have listed good points here but no matter how much money big companies(in this case wireless carriers) put behind lobbyists all it takes is just one company to stray from the pack.
Why aren't in the US for example T-Mobile and Sprint trying to change their standing(# of customers) by actually providing something users want and need?
There's still room for disruption in the U.S. wireless space. Check out our latest project, http://ting.com, which went into private beta last week. Hopefully its a boat-rocker.
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[ 2.5 ms ] story [ 39.8 ms ] threadCheers
I have some history in the telco world and while at a gig with one particular legacy carrier, noticed that when this topic came up in strategy sessions, there was zero sense of urgency. None. What. So. Ever.
My suspicions are that the rivers-of-gold experience of first vast voice revenue (tied to big investments that could be written down over a number of years) and then messaging revenue (which was just money for jam with very low overheads) has permanently damaged their business culture.
There are a couple of ways out of the bind that they're unable to face:
1. Innovate out of their situation by offering some value add that can be priced at value level, and not at cost-plus. Your suggestion of micropayments is a good one, and could be enhanced by their potential local knowledge of their market and user behavior to do commercially driven location aware services like advertising, offers and all those other things. Benefit would be to keep existing business customers on-board. Chances? Zero to none. Innovation is a big word in the telecomms world, but it really is just a way to flush billions down the toilet with not much more than deployed hardware to show for it.
2. Try to use their oligopoly situation (like the DSL and cable biz did) to stifle any new entrants at a regulatory level. This won't work too well because their new competitors aren't having to do buildouts - they're bypassing the carrier-customer relationship entirely. Therefore they'll need to be blocked or starved of bandwidth by the carriers. Chances? In some markets, like the US, probably 50/50 at this point looking at how successful industrial lobbying is right now. Net neutrality is their bête noir, and they'll do whatever they can to destroy any institution that tries to introduce it, like the FCC.
3. Avoid this whole shenanigans with innovation and regulators and do what oligopolies do best: price fix so that their customers do the dirty business bandwidth starve the innovative services out of the market because they only have 30Mb per month on the basic plan and it's USD100 for another couple of hundred Mb. Chances? If all the national providers move in lockstep and avoid any successful anti-trust investigations, it's easy and cheap. They'll never recover messaging revenue, but they could avoid other revenue erosion.
My bet's on parallel attempts at strategy 2 and 3.
One metaquestion: is your blog really uncopyrighted? Pretty cool if so.
When I see my relative in France talking about their locked contracts, I cry with them.
The fundamental problem is lack of competition. When there are only a small number of providers, none of them have an incentive to slash the price of texts to a more reasonable level.
The text charges are more of a historical addiction. Outside the US, voice charges were historically much higher (because they were priced to compete with the higher land line rates). So users flocked to SMS as a way to communicate more cheaply. In the US, voice charges on cell networks were comparatively cheap. Text was an "extra" that could be sold at a huge markup. And that revenue is hard to give up.
There is only so much room to put cables in the ground, or wireless spectrum to use. Thus, the governemnt auctions these roles off (often at far far below their actual worth), and companies use their physical monopoly to extract maximal profit with as minimal infrastructure as possible.
The obvious solution is pro-consumer regulation. Eliminate long term contracts and make unlocking of phones mandatory after contract expiration. Force all carriers to have common carrier status, so the physical infrastructure is a dumb pipe. This list could go on and on...
The problem with this is that anyone in the industry will lobby against this and they already have the political will against any change, as they're making a ton of profit via their monopoly status.
This is exactly the kind of disruption big companies(wireless carriers) need to get a kick in the ... and realize some things need to change.