Panelists Ask Why U.S. Wireless Market Isn’t Better

Government intervention is a potential answer and not impediment to the U.S. effort to create a more vibrant wireless market with faster speeds, Sascha Meinrath, director of the New America Foundation’s Open Technology Initiative, said on a Friday panel sponsored by his group and Slate magazine. Tim Wu, professor of law at Columbia University and chairman of Free Press, said carriers have a natural interest in being a monopoly, and history suggests there’s a move back to a period of consolidation and monopoly control in wireless markets. The event was about “Why Your Cellphone is So Terrible."

"In my mind we can look to what works best in other places around the globe and realize that they have much better, more thriving markets than we have in the United States for cellular coverage,” Meinrath said. “They have lower prices, they have faster speeds.” Consumers have fared better in countries where there’s an “active interplay” between government mandates and the free market, he said. “This is actually in the National Broadband Plan here, in the United States: There’s a tiny little footnote that just happens to mention that in Japan they're going for mobile 100 Mbps speeds by 2015,” he said. “It just shows how far behind we are and how much further behind we're going to fall.”

The government should require carriers to unbundle services, Meinrath said. “It pains me that I can buy a data-only plan for this laptop, but I can’t buy a data-only plan in the form factor of my cellphone,” he said. “It makes no sense. If they're going to sell me a data-only plan for $30 a month [for my laptop], why do I have to buy a voice plan and a text plan and a data plan for my cellphone?” Meinrath said he uses 3 gigabytes of data a month on his cellphone. “I would be happy to pay $50 a month for a damn data plan, but the problem is I can’t,” he said. “I'm forced to pay quite a bit more than $50 a month for services and applications that I don’t want or necessarily even need anymore.”

The FCC also should impose Carterfone rules on wireless, Meinrath said. “This is literally what made the computer modem legal and what led in many ways to the development of the Internet that we know today,” he said. “This same battle may have to be fought in the wireless realm.” The U.S. needs more carriers that offer more business plans than are available today, he said. “What we don’t need is more spectrum for the exact same companies that have already been warehousing spectrum across the country,” Meinrath said. “The AT&Ts of the world don’t serve Indian country in the United States and they don’t provide cheap services for low income folks and that needs to change.”

Tiered pricing for wireless without greater transparency would be “useless,” Meinrath said. “It would actually be a disaster. Today what you get is an up-to speed, for example. You get up-to speeds on your home bandwidth. You get up-to X amount of text messages or minutes per month on your plan. You're never fully in control of what’s being used on that and how much you actually are using."

Monopoly control has been the rule in communications, Wu said. “The carriers will say very often that we like competition, competition is American,” he said. “But the truth is that for most of phone history it has been a monopoly and there’s a lot of reasons it has been a monopoly because the economics all tend to point in that direction … The gravitation pull in the world of [wireless] is toward greater consolidation and toward monopoly."

Americans would have better service and coverage under a regulated monopoly, Wu said. “The only problem is we'd have no real way to complain about prices and we'd have a lot of innovation squashed.” The Bell system worked well on some levels for decades, Wu said. “The problem … was that innovation only happened if Bell wanted it to happen,” he said. “I think we are approaching that danger in the cellphone world if there’s too much carrier power.”

Wu said he has a book coming out in November, The Master Switch, which makes the case that in the U.S. there are long periods of monopolies broken up by periods of disruption. “We may be headed towards another period of consolidation,” he said. “All of the economic forces point in that direction. We talk about how great competition was. The truth is most of American communications policy is a story of monopoly and it has been that way for hundreds of years. We are living in an exception. We can keep it that way, but the truth is we may be going back to the ways that things have always been. … The open age of the Internet, the last 20 years or so, I think is starting to come to a close. A lot of signs suggest that.”

Wu said he supports net neutrality but doesn’t oppose tiered pricing. “The iPhone and the iPad, many of these devices, the rise and the power of the phone against the computer, I see as the sort of long-running, 100-year battle between more open and more closed devices, almost like a battle between two Hindu deities or something that keeps recurring,” he said. “We had the same battles in the ‘20s between different types of radio structures, more open radio than anyone can do versus a few networks. We had the same kind of disputes as to what television should be in the 1930s.”

Meinrath and Wu disagreed about how the U.S. should be viewed with respect to other developed countries. Meinrath said: “I would argue that we sort of have this ignorance-is-bliss policy in the United States. … Cellphones do a lot of neat stuff, but we have no idea how much we're missing out on. We declare victory” and have no idea how better technology is in Japan and other places in the rest of the world. But Wu said: “I don’t think America is behind in every aspect. … America is the world leader in applications. There’s no other country that can compare,” though he conceded U.S. networks are not the best in the world.