Tomi Ahonen versus Steve Largent: Who’s Right?
At least on my twitter stream, this Tomi Ahonen piece got a lot of play. So did the CTIA response from CEO Steve Largent. While they both raise excellent points, I think there’s a middle ground between Tomi’s “treating your customers as prisoners, and punishing them all the time” opinion and Steve’s “the U.S. consumer pays less yet uses more of their wireless products and services than any other in the world.” Let me, a better-than-average educated consumer, take a stab at this.
Paying for Incoming Calls
One of the reasons we pay for incoming calls to our mobile phones in the US is because of how our landline service evolved in the US. In most other countries, local calls are metered (i.e. charged per minute). The rate is relatively low, but it’s there. In the US, most everyone has flat rate local service. This means they can call anyone within approximately 12-15 miles as part of their line rental charge.
Because of this, when mobile phones came out in the US, the operators implemented a “mobile party pays” system. This means the person who was the mobile phone would pay to receive the call. For better or worse, this system has persisted ever since, though the FCC did investigate implementing a calling party pays system in the US at least for mobile phones, but ultimately decided against it for a variety of reasons.
Due to that reality, the US mobile operators added more minutes to their pricing plans, and even included some “free” minutes, such as night/weekend minutes and mobile-to-mobile. The end result? Yes, it costs money to receive a call on your mobile in the US, but people generally don’t worry about it.
Mobile Phones and Service Providers
Tomi and Steve are comparing apples to oranges when it comes to the number of handsets available. Tomi lists the number of phones actually in operator stores–43. I know from talking with people at CTIA that their “over 630 handsets” number includes handsets you can purchase outside of the operator channel. They are both right, in a sense, but what matters to consumers is what they can purchase in stores–not what they can order online.
Again, we have a different dynamic in the US. Whereas in most other places, there is the one true GSM standard with a common set of frequencies, we have at least 3 standards (GSM, CDMA, and iDEN) with “unique” frequencies not in use elsewhere in the world. Only one manufacturer makes iDEN phones (Motorola) and the CDMA carriers are generally not open to allowing non-operator devices on their network.
GSM operates more or less like it does elsewhere in the world, but it’s a much smaller market (the last number I heard when I was at Nokia was 45% of the US market), and you have the difficulty of both T-Mobile and AT&T using different frequencies for 3G. Until the chipsets used by mobile phones can support both sets of US 3G frequencies, even if you can unlock a phone, you can’t fully use it on the other network, so what’s the point?
Long term, all the major US operators are moving to LTE–and yes, I believe Sprint will ultimately change their WiMax stuff over to LTE. The chipset manufacturers should be able to support all the different US frequencies (including the 700mhz spectrum not being used yet). Whether or not we’ll see unlocked handsets being openly sold like in other countries remains an open question, of course.
In short: the market appears to be–on it’s own–evolving towards a point where we can buy our handsets separate from service and actually be able to move between service plans without a mandatory handset upgrade as is the case today. That’s my prediction and, quite honestly, it can’t happen soon enough.
Roaming
Sorry, Tomi, I’m not sure where you got your info, but most Americans don’t pay roaming inside the US. I haven’t since I had my AT&T Digital One Rate plan back in 1999 (and yes, back then it was a revolutionary plan). You have to work pretty hard these days to find a plan where you are charged for roaming inside the US. Outside the US, of course, it’s a different story.
Text Messaging
This is one area where I agree wholeheartedly with Tomi on. There is absolutely no reason anyone should have to pay to receive an inbound SMS message. EVER. At least with a phone call, I can see who is calling and I can make the choice not to answer. With a text message, I have absolutely no control over who can send me a text message–and affect my bill.
Granted, US operators have provided buckets of text messages, and even provide unlimited text messaging as an option. However, the usurious per-message rates of $0.20–which I’ll point out once one operator decided to do, they all did–simply encourage customers to buy a bundle they may not want. It definitely drives up the bottom line of the operators.
And yes, given the obscene revenues on SMS, I should never EVER have an SMS outage.
Universal Coverage
While Steve did say that 92% of customers are satisfied with their wireless service, most everyone can name a deadspot (or two) in their daily travels–that one spot where no matter what time of day it is, you drop a call. I certainly had my share of those on Interstate 5 when I was driving to and from Northern California to see my dad.
The challenge with fixing that problem is not so simple. I don’t know what the regulations are in other countries, but in the US, every tower that goes up requires (almost) an act of congress to get put up. Local communities can and often do get in the way of bettering the wireless networks because they don’t want to look at ugly towers. Applications for new towers with city or county governments would often take months or even years to get approved.
The FCC, to their credit. finally put in a “shot clock” on these applications at the end of 2009. Even with the shot clock, we’re look at either 90 or 150 days to get a ruling on whether or not an operator is allowed to put a tower up. That doesn’t include actually getting the tower up and online. And no, that’s not the operators “incompetence,” Tomi, that’s just the government bureaucracy for you.
Phone Subsidies
Steve doesn’t even attempt to address this issue in his response to Tomi’s posting, which is that people who take a free/cheaper phone in exchange for a two year service agreement pay the same monthly rate as those who don’t. This is ridiculous.
T-Mobile actually gives you a discount for not taking a phone subsidy: up to $20/mo depending on the plan! They also allow you to finance your phone purchase separately over the course of 4 or 20 months. This way, you know exactly what you’re paying for your phone and you stop paying extra once your phone is paid off in full.
Largest Mobile Data Market
Steve mentions in his posting that “the U.S. also has the largest mobile data market and according to Nielsen Mobile, we have more mobile Internet users than any other country.” We certainly have a lot of users, but the reason for that is the prevalence of Unlimited Data plans–something AT&T has discontinued. Given their history with SMS, I expect the other operators will fall in lockstep within 6 months. Unlimited data will be a thing of the past and consumers will simply be paying more for less, or opting not to use it because now they need to watch and see how much data they use.
Conclusions
Things are not quite as bad at Tomi makes them out, but they certainly aren’t as rosy as the CTIA points out either. There is plenty of room for improvement. More towers, more quickly, and better prepaid data plans. That’s what I want to see different in the US mobile operator market. What about you?
