The PhoneBoy Blog

CTIA: Apples and Oranges Revisited

25 Aug 2009

I got the opportunity to talk with Chris Guttman-McCabe, Amy Storey, and David Redl of CTIA on Monday. After giving them a bad time on my blog over the years, it was nice to have an actual conversation with the CTIA. I give them credit for engaging me in conversation.

Having had this conversation, I understand where they are coming from. I appreciate that they are trying to bring some facts to an otherwise emotionally charged debate about the state of the mobile telephony industry in the US.

With that in mind, here are the areas we talked about:

Carrier Choice

While not universally true, most people in the United States have a choice from at least four different wireless operators–more if you count the various MVNOs like Tracfone. In fact, when you factor in all the various plans, the number of choices can be downright overwhelming.

The main issue here is education: consumers don’t realize all the options that are available to them. Reps inside carrier stores tend to push 2-year contracts because they make money when they do. Of course, even when you do know, the problem is that you can’t always use the handset with the service you want. That leads us to…

Handset Exclusivity

I actually agree with CTIA on this one, believe it or not. I have no problem with one carrier being the exclusive vendor for any handset–subsidized or not. It is one way carriers have to differentiate themselves.

That being said, I have a problem with how handsets are shackled to carriers. It comes back to one of my fundamental issues with how the wireless industry has evolved in the US: the tight linking between handsets and service. See some of my earlier postings on Carterfone.

It should be possible to walk into the carrier store, purchase any handset at full retail, and take it to an alternate carrier. Beyond technical differences in frequencies or technologies, handset makers or operators should not impede this process in any way. It also means either that all phones should ship factory unlocked or all operators should provide unlock codes for ALL of their handsets.

The CTIA assures me that most of their member operators unlock their handsets and allow people to use unlocked, but technically compatible handsets with their network. The obvious exception to that is the iPhone, which AT&T will not unlock for ANY reason.

Handset Subsidies

The CTIA advocates handset subsidies for a number of reasons. I have never had a problem with the concept of handset subsidies in the sense that you pay a lower up-front cost for the handset in exchange for an agreement for service with a carrier for a period of time.

Perhaps this makes sense as part of a subsidy model. But what if I bought the handset outright and only want to use WiFi for data, not the operator’s network? Why should have to pay my carrier $30 (or more) a month for the privilege of data service on my phone if I don’t really want it? Maybe all I want to use is the QWERTY keyboard and not necessarily the other functions?

Subsidies should continue to exist, but should not be the only way to buy a phone. T-Mobile, for instance, will not sell you the majority of their phones unless you also sign up for a new service contract. One cannot buy an iPhone from AT&T without also signing up for a voice AND data plan, the minimum monthly service charge being $80/mo. In fact, according to published reports, it soon won’t be possible to buy any smartphone from AT&T without having to sign up for an unlimited data plan.

It should be noted that AT&T and Verizon will sell you any phone unsubsidized, though again the iPhone has a unique limit: 1 per customer per lifetime. Seems crazy to me.

All handsets should be available to all consumers at full, unsubsidized price. The handsets should not be locked in any way so it can easily be used with a different carrier using compatible technology. Furthermore, consumers should not be required to have a particular service plan to use a phone if they either paid full price for the phone or are off-contract (i.e. they have fulfilled their handset subsidy).

How Much We Pay

In the OECD report showing the costs of wireless service across all the member countries, they used the following classifications for classes of users.

• Low use (529 minutes of voice calling a year; 396 SMS; eight MMS):
http://dx.doi.org/10.1787/622303805401
• Medium use (1368 minutes of voice calling a year; 600 SMS; 8 MMS) :   http://dx.doi.org/10.1787/622318882036
• High use (2952 calls per year of voice calls: 660 SMS; 12 MMS):
http://dx.doi.org/10.1787/622320081807

When I talked with the CTIA folks about this report, they were quoting me lower minute totals. After checking on the OECD website and digging a bit deeper, I found the actual minute per-year estimates, which I added.

Based on these numbers, my wife would be considered a “medium user.” However, our spend with T-Mobile is less than a third what is quoted as the average spend for a “medium user” in the US, which the OECD says is $635.85. I’m sure others who shop around for the best deal can find a similar deal.

There’s also an important disclaimer in the OECD charts–the only part of the report folks like me have access to:

Note: The existing mobile basket methodology does not include discounted or free calls to pre-selected phone numbers as part of “friends and family” or “preferred numbers” plans.  The inclusion of these calls will be considered as part of a future update of the mobile basket methodology. Pre-paid plans are excluded.

That makes it difficult to really do a proper assessment between countries. In order to get a sense of the actual number of minutes used and the value one gets for a typical contract in the US, we would have to add free minutes, also. This would also include inbound minutes in other countries as those minutes are effectively free. The comparison needs to be more Apples to Apples for it to be really meaningful.

The report completely leaves out a critical part of the overall service price: data plans. This, too, would also have to be added to get a sense of the total overall cost.

Text Messaging Prices

We did briefly touch on this when we were going over the OECD numbers in the sense that text message packages do bring the cost of text messaging down. However, I wish I had gotten to ask them how all the member carriers arrived at the cost of $0.20 a text message for the folks that don’t have a text messaging plan. On the surface, it does seem like collusion.

Lack of Prepaid Data

One of the things I brought up with the CTIA folks was the fact that while prepaid minutes are nice and low, prepaid data is an entirely different story. It can be had, but the pricing is still far too high–particularly when compared to the EU, where in some countries, it’s downright reasonable.

One reason I really want to see reasonable prepaid data prices–especially on AT&T–is that I would prefer to buy a phone and use it almost exclusively for data. The younger generation is going to demand it, as they rarely make voice calls and use SMS.

The CTIA feels that will come in-time. The prepaid market is growing rapidly, thanks in large part to the tanking economy. Carriers like Cricket, MetroPCS, Virgin Mobile, Tracfone, Boost Mobile, and Page Plus are putting downward pressure on prices to get them low.

CDMA versus GSM versus iDEN

Yet another issue we touched on, mostly in the context of handset mobility between carriers. While the CTIA folks pointed out that there’s nothing wrong with having these competing standards, I pointed out to them that the industry is consolidating around one standard on their own. That standard is Long Term Evolution (LTE).

Verizon and AT&T both have committed to using LTE, which is the heir-apparent in the GSM line of wireless technologies. This includes includes GPRS, EDGE, HSDPA, and HSPA. Several of the smaller operators have also committed to LTE, making Sprint the lone carrier going a different path with WiMAX.

It will be interesting to see how the wireless industry changes when the vast majority of US operators are on one, single, worldwide standard.

Final Thoughts

In general, I am surprised at the amount of common ground I found with the folks from CTIA. There are clearly some areas where we have differing opinions or at least a different interpretation of the facts, but common ground is a good place to start any discussion. I applaud their efforts to engage the folks in Washington DC and those of us whiners in the blogosphere and look forward to future conversations.

Related articles by Zemanta

• Americans pay 5 times more than Netherlanders for wireless (arstechnica.com)
• Two Class Actions Filed Against Apple, AT&T Over Lack of MMS (shoppingblog.com)
• Cut your phone bill (macworld.com)
• What Will Carriers Do When the Data Gravy Train Derails? (gigaom.com)
• Wireless service costs too much, and all but the carriers agree (computerworld.com)