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Mobile Operators: Creating Artificial Demand For Capacity?

Unknown Lamer posted more than 2 years ago | from the so-that's-why-i-keep-paying-more-for-less dept.

Communications 268

An anonymous reader writes with an excerpt from Broadband Convergent: "We all have been taught the basics of supply and demand since high school. If demand is high, prices rise. If demand is low, prices fall. Simple, but true; yet this concept can be manipulated artificially if, as seen with the latest projections of mobile operators, that higher demand means higher prices. Are the dire predictions being promoted by operator's a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the mobile industry?" The gist seems to be: operators have no incentive to maintain good infrastructure because it costs money and the artificial scarcity of capacity allows them to charge more.

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Similar. (-1, Offtopic)

GmExtremacy (2579091) | more than 2 years ago | (#39552135)

Just like Hillbilly Mutt 20, I'm on the road to becoming a existentialist Armageddon.

It's time to make the switch to Gamemaker!

Doesn't the iPhone and AT&T prove this wrong? (4, Insightful)

Troyusrex (2446430) | more than 2 years ago | (#39552157)

After all, AT&T's shoddy network encouraged huge numbers to switch to other carriers the moment Apple allowed them to. In business having a poor product might allow you to gain in the short term but is a huge detriment in the long term.

Re:Doesn't the iPhone and AT&T prove this wron (4, Insightful)

CanHasDIY (1672858) | more than 2 years ago | (#39552213)

In business having a poor product might allow you to gain in the short term but is a huge detriment in the long term.

That is, of course, until you and your competitors collude to keep prices high; then everybody (who isn't a customer) wins!

Re:Doesn't the iPhone and AT&T prove this wron (1, Offtopic)

cpu6502 (1960974) | more than 2 years ago | (#39552365)

Collusion is illegal. It's called a cartel, and it's how the record companies ended-up getting prosecuted by the U.S. DOJ.

Re:Doesn't the iPhone and AT&T prove this wron (4, Insightful)

CanHasDIY (1672858) | more than 2 years ago | (#39552461)

Collusion is illegal.

Well, thanks there, Capt. Obvious... hard to recognize you without the cape, lol.

In all seriousness, collusion is only illegal if A) someone notices, and B) the government decides to prosecute. For example, prior to the repeal of Glass-Steagall, it was illegal for a holdings bank to operate as an investment bank (and vice versa); yet that did not prevent Goldman Sachs from requesting (and receiving) a pass from the SEC to do just that.

Another example: the oil industry. In fact, I don't even really have to go into detail on that one; I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.

In short, while you are 100% correct in principle, the reality of our economic situation is that those who can afford to circumvent the law, do.

Re:Doesn't the iPhone and AT&T prove this wron (4, Insightful)

Jane Q. Public (1010737) | more than 2 years ago | (#39552597)

"In all seriousness, collusion is only illegal if A) someone notices, and B) the government decides to prosecute."

Nonsense. That's like saying murder is only illegal if you get caught.

Collusion might not get prosecuted, but it's still illegal.

And the oil cartels are not U.S. entities, so that argument is 100% straw-man.

Re:Doesn't the iPhone and AT&T prove this wron (0)

Anonymous Coward | more than 2 years ago | (#39552777)

Welcome to a corrupt judicial system. All we are missing is the stars pained on the ceiling of the star chamber court :-)

Re:Doesn't the iPhone and AT&T prove this wron (1)

Anonymous Coward | more than 2 years ago | (#39552851)

And the oil cartels are not U.S. entities...

Neither is the pirate bay, wikileaks, Canadian drug companies, gambling websites, etc. etc. etc.

Re:Doesn't the iPhone and AT&T prove this wron (3, Insightful)

tlhIngan (30335) | more than 2 years ago | (#39552815)

Another example: the oil industry. In fact, I don't even really have to go into detail on that one; I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.

ARE they colluding, though? Or just responding to price rises/drops very quickly and economically efficiently?

I mean, take a common situation of two gas stations at opposite corners at an intersection. For simplicity, we'll call them A and B. Doing this we eliminate disparty in local taxation (assuming a road isn't the dividing line between two towns/cities/etc), and assume for the most part, everything is equal. We'll also make the assumption that consumers don't have brand loyalty.

Now say gas station A drops their price 10 cents. Gas station B can decide to drop their price, or leave it be, or raise it. Gas station B observes - if A's traffic increases, B's drops, the obvious reaction is to drop the price 10 cents to match A's.

However, it's also possible that A's traffic increases, B's remains constant, which means the disparity isn't hurting business. In the case, maybe B might decide to RAISE prices a little bit, say, 2 cents. Or if A only dropped 5 cents, to riase by 5 cents (increasing the difference to 10 cents between the two).

Now look at it from A's perspective - B drops the price, picks up extra customers. A needs to decide if the loss in profit from selling cheaper is outweighed by the extra traffic. Perhaps the required extra traffic hasn't materialized, so A is making a loss (sell for less profit, make it up in volume) - making A consider raising prices or holding steady.

However, if B decided to not join in the price war, and customers still go to B such that B can raise the price, A would be leaving money on the table since B's making more per unit of gas. A rational business will then raise prices - perhaps still under B , but not much so. Or match prices.

The neat thing with gas stations is - the change in traffic is practically instantaneous - you'll know within minutes of changing the gas price if it was a good idea.

And the reason traffic to B, even though its more expensive, might not drop is easy - if A has more customers they can service, then people may see B as a more expensive alternative, but avoid waiting in long gas queues. Or maybe the difference isn't large enough to justify potential inconvenience of having to turn around.

Competition doesn't necessarily lower prices - it can lead to prices stabilizing to some arbitrary level. Depending on how easy it is for customers to switch between compeitors, it determines how closely prices track one another. If it's really easy (like gas), prices rise and fall pretty much simultaneously (the geographical are of which is determined by customers' willingness to go farther in search of cheaper gas). This applies too to TV and internet, and cellphones to some extent. But take something like food staples where customers might wish to stick with brand names rather than the considerably cheaper store brands.

Remember, in a perfectly functioning market, the prices will be the same amongst competitors to equalize supply and demand. New competitors might come in and increase supply, lowering prices, but that depends on how much capital investment is required - cellphones and gas stations being particularly heavy (equipment is expensive/haz-mat concerns).

And yes, prices rise faster than they fall, because a business that sees someone making greater profit by selling product more expensive will tend to have others selling at the higher price. Case in point - netbooks. They started at $200, then rapidly jumped to $300, then "premium" netbooks starts showing up costing $400, $500 or more (barging into low-end laptop territory), until the whole market collapsed with the tablet craze.

Heck, tablets are the same - they were released at $500, and everyone questioned why get one when you can buy an iPad. So they dropped to $400 and hovered there ever since (with the iPad being Apple able to command a premium).

Re:Doesn't the iPhone and AT&T prove this wron (5, Funny)

nitehawk214 (222219) | more than 2 years ago | (#39553017)

Collusion is illegal.

Well, thanks there, Capt. Obvious... hard to recognize you without the cape, lol.

One would think Captain Obvious would always be easy to recognize.

Re:Doesn't the iPhone and AT&T prove this wron (3, Insightful)

Hatta (162192) | more than 2 years ago | (#39553189)

I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.

Boy, are you naive. Republicans apparently believe that there is a free market in oil, and that the free market is not a global market. Otherwise, they would be laughed off stage when it's suggested that increasing domestic production of oil would affect gas prices in the US.

Re:Doesn't the iPhone and AT&T prove this wron (3, Informative)

AngryDeuce (2205124) | more than 2 years ago | (#39552479)

Collusion is illegal.

That's true, but it still must be investigated and prosecuted to prove it, and it sure doesn't seem like it's a high priority to the DOJ right now.

I mean, would you trust this Supreme Court with a case like this? They've gone full retard with their adulation of any major corporation these days, and for all we know, we could end up with another travesty like the AT&T Mobility v. Concepcion [wikipedia.org] ruling.

Re:Doesn't the iPhone and AT&T prove this wron (1)

sjames (1099) | more than 2 years ago | (#39552833)

If, perhaps due to insanely high barriers to entry, there is very little competition, it is possible to tacitly collude without the actually illegal deal in the smoke filled room. They all have the same agenda and the same incentives. They all make more if nobody breaks ranks. They need not worry about a newcomer upsetting the applecart in order to get into the market.

Re:Doesn't the iPhone and AT&T prove this wron (5, Insightful)

Anonymous Coward | more than 2 years ago | (#39552225)

This works as long as there are competitors that are providing sufficiently better service. If there's a market containing, only, say, three companies, and barriers to entry are sufficiently high to block any new firms from forming, it's entirely possible that all three would, individually, seek to keep capacity as low as possible and just assume that the others will do the same. It's a prisoners' dilemma, sure, but those don't always preclude unspoken collusion when the number of participants is sufficiently small.

Re:Doesn't the iPhone and AT&T prove this wron (2)

postbigbang (761081) | more than 2 years ago | (#39552607)

The barrier to entry in the market is the reversal of the work that Judge Greene did to break up AT&T (the real one, not Southwestern Bell with lipstick). T-Mobile tried to get, via various acquistion and investment, a toehold. It's not working very well.

There is no old "Bell Standard" for quality of connection across the turf and geography of the US. No one can tell the telcos what to do to have minimum service qualities in any location for cellular data. The TCA helped remove a lot of jurisdiction by the various state public utility authorities to push it to Washington, where lobbying moneys could be more focused.

The hoarding effect is a great analogy. It's all about stockholder return and immunity from acquisition. It's not about service as the telcos are universally loated (in the US, anyway). The concept of free WiFi is being killed so as to provide further nails in the coffin. In the EU, free WiFi is mostly gone; in the US, it's tougher and tougher to find. Somehow, dammit, you're going to pay is the boardroom mantra.

Re:Doesn't the iPhone and AT&T prove this wron (0)

Anonymous Coward | more than 2 years ago | (#39552283)

You mean so I can go from a grandfathered unlimited data plan that gets throttled the moment I really use it, to a LIMITED data plan that STILL gets throttled the moment I really use it? Yup a WIN-WIN for the carriers and what ever I do I lose.

Re:Doesn't the iPhone and AT&T prove this wron (2, Funny)

MrKettlePot (2590587) | more than 2 years ago | (#39552441)

A traveler from the future:

This is not some crazy conspiracy. Normally as technology becomes cheaper, more efficient and more robust capability of that technology goes down. It's just a fact of life. Just look at the internet, we started with 56k dial up modems and then that was slowed down to 32k, then 16k, and as you all know most users now rely on the futuristic 8k modem. The same is true of hard drives, where we once enjoyed 30 terabytes drives those sizes have been going down ever since due to cheaper and more effective technology. I miss the days when I could store all 10 of those mp3 on my hard drive but you can't stand in the way of progress!

Re:Doesn't the iPhone and AT&T prove this wron (4, Informative)

icebike (68054) | more than 2 years ago | (#39552619)

After all, AT&T's shoddy network encouraged huge numbers to switch to other carriers the moment Apple allowed them to. In business having a poor product might allow you to gain in the short term but is a huge detriment in the long term.

That can't possibly prove anything wrong, because it itself is wrong.

The secret has been out for over a year [reuters.com] that AT&T did not lose any significant number of users to other iPhone carriers when exclusivity ended. They actually GAINED customers [appleinsider.com] , and they GAINED more iPhone 4S customers [digitaltrends.com] than did Verizon or any of the other iPhone carriers.

So your premise is totally wrong.

The huge detriment you speak of, on the other hand is accruing to the carriers that gain the iPhone, but not for the reason you expect. Selling the iPhone is huge drain on a carriers bottom line [latimes.com] .

According to CNN-Money: [cnn.com] all carriers that carry the iPhone lose money on it over what they were making previously. If AT&T has a network problem it has been caused directly by the iPhone and iPhone users. From lame Infinion chipsets that brought the towers to their knees early, to the data sucking ways of the typical iphone user.

Between 2009 and 2010, Verizon averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%.

This is not to say I have any argument with the subject of this story, namely the suspicion that carriers are hording bandwidth and creating artificial shortage.

Competition (5, Insightful)

Anonymous Coward | more than 2 years ago | (#39552169)

Which is where competition is supposed to come in. If there is that much profit sitting out there, then there is an incentive for other players to enter the game, or for existing players to differentiate with high quality. Unfortunately, it often doesn't happen quickly, and sometimes needs some governmental encouragement. This is especially true with services that have such a high barrier to entry, like mobile.

Re:Competition (4, Interesting)

AngryDeuce (2205124) | more than 2 years ago | (#39552581)

This is especially true with services that have such a high barrier to entry, like mobile.

How long is it going to be before everything has a high barrier to entry? That's what I'm wondering. I mean, we're already at the point now where companies like Apple are able to severely weaken, if not outright kill off, their competition just because they can basically use the insane amount of capital they have to corner the market on necessary raw materials and force out competitors at the manufacturing stage.

As these companies get larger and larger and larger [wikipedia.org] , it seems like no matter what market we're talking about, eventually it's just going to be impossible for anyone to compete unless they're sitting on the enormous capital that the established players are, and how will they ever get that enormous amount of capital in the first place if they can't even enter the market?

Re:Competition (0)

Caerdwyn (829058) | more than 2 years ago | (#39552867)

On the other hand, nobody is entitled to enter a given market without the capital to operate in it. I'm not entitled to be a wireless operator just because I feel like it.

As loathe as I am to give even an inch to the entitlement crowd (nobody on Earth is ENTITLED to Internet access, cable TV, make-my-weenie-hard pills or a smartphone), this is an area in which there is at least some argument in favor of some degree of regulation. There is a finite amount of spectrum available, you can't make more (you hear me, Lightspeed bribemasters?), and once that spectrum is allocated you're done. Sounds like a public utility to me! That being said, increased regulation of access and sale will inevitably come with increased regulation of content and control; a major telco bill is the perfect platform to sneak in yet another layer of warrantless monitoring of every American citizen while searching for political opponents (excuse me, should I have said "terrorists"?), "subversives", climate-change skeptics and/or gay rights activists by the Department of Homeland Brownshirts and the racketeers at the RIAA. Once the monitoring is in place, it will be used against whoever is playing the role of 1933-era Jew to whatever bread-and-circuses Democratic Socialist or goose-stepping Christian Reich is in power at the moment.

Would you accept a truly unlimited data plan at 20 a month if that rate came with a mandatory monitoring clause, and the law explicitly forbade a more expensive but unmonitored alternative? Price controls and government intrusion are be inseparable, at least in the real world.

Regulation (2, Interesting)

Anonymous Coward | more than 2 years ago | (#39552183)

This is why competition must not be hindered by regulators. If it's allowed then other entries into the market will drive down the price, seeing the potential to take marketshare away from the higher margin telcos.

Canada is a great example of this. Prices were stupid for years, then entrants like Wind and Mobilicity got in, often despite the best efforts of the regulatory-captured cftc, and have cut prices so you can now get unlimited everything (really unlimited) for $25.

Re:Regulation (4, Insightful)

game kid (805301) | more than 2 years ago | (#39552287)

You're right. Competition must not be hindered by regulators.

It must be encouraged by giving the regulators teeth to fight stagnation and collusion.

Re:Regulation (1, Insightful)

Attila Dimedici (1036002) | more than 2 years ago | (#39552485)

Can you name a time when regulators actually encouraged competition?

Re:Regulation (1)

jhoegl (638955) | more than 2 years ago | (#39552545)

AT&T breakup in 1984.

Re:Regulation (4, Insightful)

i kan reed (749298) | more than 2 years ago | (#39552553)

Does MaBell sound familiar? Standard oil? Microsoft? It's not unprecedented that people in the United States have been royally screwed by trusts, and the feds breaking them up improved the situation for everyone.

Re:Regulation (1)

Ken D (100098) | more than 2 years ago | (#39552659)

The dismantling of AT&T in the 80s.

Re:Regulation (1)

oxdas (2447598) | more than 2 years ago | (#39552759)

The U.S. Department of Justice successfully sued Standard Oil, which led to its dissolution in 1911 (when it lost its case at the Supreme Court). The Oil companies to emerge out of the dissolution included Exxon, Mobil, and Chevron. The DOJ also sued to break up AT&T in 1974, from which Verizon, the current AT&T, and CenturyLink emerged. While in both cases their has been rampant reintegration, it was regulators who forced them apart.

Re:Regulation (0)

Anonymous Coward | more than 2 years ago | (#39552649)

The other AC already mentioned the terminus technicus for the problem with your argument: Regulatory Capture. A regulatory body which is meant to regulate an industry for the benefit of the consumers ends up effectively benefiting the industry. One frequent way this happens is when onerous regulation raises the barrier to entry and keeps competition out. Regulation against collusion is usually ineffective, but it creates a burden to new entrants into the market. A better approach is requiring licensees of limited resources (like mobile frequencies) to indiscriminatorily offer their services wholesale.

Re:Regulation (4, Insightful)

icebike (68054) | more than 2 years ago | (#39552813)

You're right. Competition must not be hindered by regulators.

It must be encouraged by giving the regulators teeth to fight stagnation and collusion.

Exactly.

Sitting on bandwidth licenses without using them is simply sequestering public airwaves for private use, by paying a license, but then failing to develop the resource entrusted to you. The FCC should perform a survey of idle licenses, and demand they be developed and marketed.

Hording or Failing to deploy should be (and probably is) a violation of the bandwidth license. (As precedent, Alaska canceled several North Slope Oil/Gas leases [adn.com] when the oil companies failed to develop the fields.) After all, a public resource was entrusted to these carriers to use for all of our benefit. Sitting on them while raising prices is not an acceptable outcome.

Re:Regulation (0)

Anonymous Coward | more than 2 years ago | (#39552753)

You've got to be joking. Wind? Mobilicity? Their coverage is awful.

I see no future in Wireless internet (0)

cpu6502 (1960974) | more than 2 years ago | (#39552197)

It has a fixed amount of room (per tower), and has to share that fixed amount with other services like TV, radio, emergency/police services, military, and so on.

It's like the difference between wireless TV and cable TV. You can get wireless TV using a rooftop antenna but it only gives you 30-40 channels. Or cable TV wired direct to your home, and get 300-400 channels.

I think wired internet, just like wired TV, is the way to get the most throughput as lowest cost. Wireless internet is for convenience, but will always be more expensive.

Re:I see no future in Wireless internet (0)

Anonymous Coward | more than 2 years ago | (#39552245)

It's great to see you're still with us, Captain Obvious!

Cheerio!

Re:I see no future in Wireless internet (3, Insightful)

TarMil (1623915) | more than 2 years ago | (#39552269)

This might have come as a sincere argument if not for the ad in your signature...

The theory: (4, Insightful)

Qzukk (229616) | more than 2 years ago | (#39552215)

In theory, companies that produce shitty service and charge too much for it go out of business.

In reality, the government metes out frequencies in a bidding process that generally shuts out competition.

The alternative would be to close down the FCC and let people broadcast whatever they want wherever they want at whatever power pleases them. There are probably people who think this is a good idea, and won't believe otherwise until Anonymous gets a hold of a transmitter.

Re:The theory: (-1, Offtopic)

GmExtremacy (2579091) | more than 2 years ago | (#39552243)

What are you even referring to? For your sake, I hope it's Gamemaker.

Re:The theory: (1)

CanHasDIY (1672858) | more than 2 years ago | (#39552311)

The alternative would be to close down the FCC and let people broadcast whatever they want wherever they want at whatever power pleases them. There are probably people who think this is a good idea, and won't believe otherwise until Anonymous gets a hold of a transmitter.

Correction: it would be a good idea, if humanity wasn't primarily comprised of greedy, narcissistic assholes.

Re:The theory: (3, Insightful)

ColdWetDog (752185) | more than 2 years ago | (#39552465)

The alternative would be to close down the FCC and let people broadcast whatever they want wherever they want at whatever power pleases them. There are probably people who think this is a good idea, and won't believe otherwise until Anonymous gets a hold of a transmitter.

Correction: it would be a good idea, if humanity wasn't primarily comprised of greedy, narcissistic assholes.

If the laws of thermodynamics didn't apply to everything, perpetual motion machines would also be a good idea. But it does, so they aren't.

Same with humans. We ARE primarily composed of greedy, narcissistic, psychopathic assholes, so letting anyone broadcast anything anywhere is really a bad idea.

Re:The theory: (1)

CanHasDIY (1672858) | more than 2 years ago | (#39552499)

We ARE primarily composed of greedy, narcissistic, psychopathic assholes, so letting anyone broadcast anything anywhere is really a bad idea.

Agreed, although I do admit it's interesting to ponder what communications would be like without regulation... Sounds like a sci-fi novella is in order!

Re:The theory: (1)

SandFrog (1238038) | more than 2 years ago | (#39552699)

This gets my nomination for most universally applicable comment.

Re:The theory: (1)

sjames (1099) | more than 2 years ago | (#39553001)

It's not a matter of primarily so much as it only takes one greedy, narcissistic asshole to mess things up for many others and we're no longer allowed to spit on them until they stop.

Re:The theory: (3, Interesting)

vlm (69642) | more than 2 years ago | (#39552397)

In theory, companies that produce shitty service and charge too much for it go out of business.

In reality, the government metes out frequencies in a bidding process that generally shuts out competition.

The alternative would be to close down the FCC and let people broadcast whatever they want wherever they want at whatever power pleases them. There are probably people who think this is a good idea, and won't believe otherwise until Anonymous gets a hold of a transmitter.

A more realistic libertarian alternative would be to create an actual free market, not allow a handful of nationwide corporation to own the infrastructure.

1) Your corporation may only own towers and provide service to one metropolitan service area.
2) The government will only grant licenses to X-number providers per MSA. In return for this grant of public space and slightly limited competition, you are legally required by law to sign service contracts with anyone who asks for a contract.
3) The govt will regulate and F around with your tax rates to socially engineer it such that your service contracts will be standardized across the industry (different rates per location, of course, but identical format) and you'll get paid a fixed amount per month minus tower outright downtime, minus any time the backhaul network runs above 85% utilization, minus any time the RF side doesn't meet specs. The summary being you don't make any money unless you provide good service

This seems like a well regulated fair free market, genuine competition, etc. Needless to say it'll never happen because its not corrupt enough. It is vaguely based on pre-clearchannel broadcast radio regulation, which worked pretty well but was not corrupt enough, which led to our current previously-profitable wasteland.

Re:The theory: (1, Insightful)

rossjudson (97786) | more than 2 years ago | (#39552727)

It's mildly hilarious that your "libertarian" posting starts with a stack of regulations and rules. What happened to laissez faire?

Re:The theory: (1)

ScooterComputer (10306) | more than 2 years ago | (#39553025)

It is mildly hilarious that you attempt to ridicule "libertarian" by espousing a completely incorrect stereotype of it.

Re:The theory: (1)

cpu6502 (1960974) | more than 2 years ago | (#39552425)

I've seen this proposal before.

It works on the theory that the EM spectrum can support many different broadcasts on the same frequency, and the receiver will filter out the One broadcast desired (code-division), therefore we no longer need a central authority to assign specific frequencies. The proponents point to cellphones as demonstration of how it would work, and why we no longer need 1/2 million watt centralized TV or radio broadcasters.

Re:The theory: (1)

Obfuscant (592200) | more than 2 years ago | (#39552655)

It works on the theory that the EM spectrum can support many different broadcasts on the same frequency, and the receiver will filter out the One broadcast desired (code-division), therefore we no longer need a central authority to assign specific frequencies.

Yes, this works just fine, until someone sets up a transmitter on the same frequency you're using with a signal that is within -12dB of yours at the intended receiver. Then, not so good it works. And good luck to the normal user figuring out why.

Example: WiFi providers. Coffeeshops, restuarants, universities, cities... I could use channel collisions as the example, but instead I'll say that all of these make using bluetooth headsets extremely difficult if not impossible. There are two locations on my drive to work where my bluetooth headset loses pairing always. God forbid I'm trying to make a 911 call to report a serious accident when I'm near one of those locations. A couple of places in my building at work, too. And as I walk around campus, more locations. That's with the bluetooth radios about 6 inches apart. Six inches, and they cannot communicate.

Re:The theory: (0)

Anonymous Coward | more than 2 years ago | (#39552703)

With sufficient power I can jam your fancy CDMA system right beneath the noise floor. As a demonstration of how it would work, buy a $50 cellphone jammer off of eBay.

Re:The theory: (1)

Githaron (2462596) | more than 2 years ago | (#39552547)

The alternative would be to close down the FCC and let people broadcast whatever they want wherever they want at whatever power pleases them.

Normally, I am against government regulation but that would lead to no good communication services using wireless technology. Everyone would be tripping over each other because businesses would have no way to prevent another business from broadcasting over each other. That said, I am sure the FCC could make it easier for new players to come into the market.

Re:The theory: (3, Insightful)

GIL_Dude (850471) | more than 2 years ago | (#39552561)

It turns out that a certain amount of regulation can help correct for that government granted monopoly on frequencies. We probably need more regulation in the mobile market since we aren't going to have a true free market there in the foreseeable future. For example, if we required phones to work on all of the available networks, required contract (subsidized) plans to clearly separate the subsidy from the price of service and sell plans to "bring your own phone" folks at that price of service so that people could jump to whatever carrier they wanted in the US - we would see competition start to actually work as it should.

Slippin' the willie... (2)

KrazyDave (2559307) | more than 2 years ago | (#39552261)

Big business is only one step above big government in that at least big business has to give you something they created with capital, albeit a rip-off, sometimes, while big government gives you (or whoever they choose) some of the money that they confiscated from you (after bloat, largess and bureaucratic handling fees, of course.) Then, you go up the hierarchy with child molesters, lawyers, etc.

QOTD (5, Insightful)

girlintraining (1395911) | more than 2 years ago | (#39552273)

operators have no incentive to maintain good infrastructure because it costs money and the artificial scarcity of capacity allows them to charge more.

Which wouldn't be a problem except the government created the teleco monopoly by creating a resource scarcity, namely exclusive contracts, tower permits, etc. The cost of entry into the market is so high that there can be no new players except from related businesses who feel like blowing a few billion cutting the red tape will go over well with their shareholders.

Re:QOTD (1)

leftbrainstrain (1641105) | more than 2 years ago | (#39552615)

Shareholders ... good point. I just checked dividend yield for some of these companies. Holy crap! I'm sticking with my prepaid phone w/o data plan, might be buying some stocks to profit off everyone else now. Mua ha ha!

Re:QOTD (2)

Hatta (162192) | more than 2 years ago | (#39553203)

Am I the only one that noticed that the author got supply and demand mixed up? Restricting supply is not the same thing as creating artificial demand. Both increase the actual price point, but that's the only similarity.

Pitfall of capitalism (0)

jhoegl (638955) | more than 2 years ago | (#39552281)

This is one of the pitfalls of capitalism that benefits only one side.
Much like "futures", there is only benefit to causing trouble and turmoil in the market.

Re:Pitfall of capitalism (1)

Anonymous Coward | more than 2 years ago | (#39552359)

Where there are monopolies or market manipulation then you dont have capitalism ....

"There is general agreement that capitalism is an economic system that includes private ownership of the means of production, creation of goods or services for profit or income, the accumulation of capital, competitive markets, voluntary exchange, and wage labor"

See http://en.wikipedia.org/wiki/Capitalism [wikipedia.org]

Re:Pitfall of capitalism (1)

vlm (69642) | more than 2 years ago | (#39552463)

Much like "futures", there is only benefit to causing trouble and turmoil in the market.

Sounds like you don't even know what futures are, other than "they're bad", since they pretty much cause the opposite of what you're claiming. How about options?

Re:Pitfall of capitalism (1)

cpu6502 (1960974) | more than 2 years ago | (#39552481)

You could stop buying their shit.

Nobody "needs" a cellphone or wireless internet. If everybody made-up their mind to cut the cord, all of these businesses would cease to exist. Or if everybody made-up their mind to downsize to a cheaper plan, say $5/month like mine, then these businesses would be forced to downsize too. We hold the power, not them.

Lets do Mad Libs (0)

Anonymous Coward | more than 2 years ago | (#39552289)

"We all have been taught the basics of supply and demand since high school. If demand is high, prices rise. If demand is low, prices fall. Simple, but true; yet this concept can be manipulated artificially if, as seen with the latest projections of mobile operators, that higher demand means higher prices. Are the dire predictions being promoted by operator's a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the mobile industry?" ...as seen with the latest projections of [Industry Noun], that higher demand means higher prices. Are the dire predictions being promoted by [Industry Person] a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the [Industry Name] industry?" ...as seen with the latest projections of Oil companies, that higher demand means higher prices. Are the dire predictions being promoted by Oil barons a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the Oil and Gas industry?"

Fundamental flaw (4, Insightful)

frisket (149522) | more than 2 years ago | (#39552301)

"We all have been taught the basics of supply and demand since high school. If demand is high, prices rise. If demand is low, prices fall."

In that case, the author was poorly educated. The caveat "...in the perfect market" is missing; that is, where all players have perfect knowledge.

The so-called "law" of supply and demand can also be operated in reverse: keep prices artificially low and demand will rise; keep prices artificially high and demand will fall. Anyone who doesn't know this will not last long in business.

Re:Fundamental flaw (1)

Anonymous Coward | more than 2 years ago | (#39552417)

In addition to perfect knowledge players need to be price sensitive for demand to drop when price increases.

Re:Fundamental flaw (2)

vlm (69642) | more than 2 years ago | (#39552557)

Correction after correction and still wrong. You also need free choice which usually translates to free time.

For example, this is why health care is not even remotely a free market... after the car accident while unconscious... etc etc.

Look here is the full list for a free market:

1) Perfect knowledge. The opposite of the dr patient relationship where one side is a moron and the other is a magic wizard.
2) A demand curve exists and has a usable slope
3) Govt is not paid by the future winners to regulate the game such that the govt selects winners and losers before the market even tries to play it out. (This seems obvious, but so few people get it, especially in the USA)
4) Free will / free choice. Not the govt says you will buy this or go to jail, or while you're unconscious and/or in critical condition the doc will decide what to do.

Reasonably similar sized actors on both sites; closely tied to #4 above; no freedom of choice if its you as an individual vs a multinational government owning corporation.

Closely tied to #1 and #2 and #3 above, there's some control theory stuff that only another EE would understand but basically it boils down to try to critically damp, but whatever you do don't make a freaking oscillator or it'll all fly apart.

More fundamental flaws (4, Informative)

ODBOL (197239) | more than 2 years ago | (#39552747)

If demand is high, prices rise. If demand is low, prices fall. Simple, but true;

Well known, and simple, and often false.

The textbook model of supply and demand curves works under a set of very stringent assumptions that are often false. It requires rational agents, fine granularity of transactions, fine granularity of agents on both the supply and demand sides, isolation of the market in question from other markets, durable goods that can be withheld from the market, ...

The model ignores marginal costs, opportunity costs, asymmetrical knowledge, asymmetrical market power, ...

E.g., in markets for commodities with large fixed costs and small marginal costs, a reduction in demand often yields an increase in price. The suppliers divide fixed costs over a smaller number of transactions. If the remaining demand is sufficiently rigid, they can get the higher price, at least for a while. This phenomenon can lead to a further reduction in demand, further price increase, and a market failure at the end of the spiral.

E.g., if there is a sufficiently flat segment in the supply curve, and a large buyer knows about it, the large buyer will pay a price at the low end of the flat segment, even though the a priori demand curve intersects at a much higher price. The large buyer will not consider the isolated value of the commodity, but the marginal value of paying more, vs. other uses for that money.

These are just two of myriad examples where the simple "law of supply and demand" that everybody knows is false.

screaming for more spectrum allocation? (1)

cpu6502 (1960974) | more than 2 years ago | (#39552313)

Ironically this will mean the end of free services like TV and radio (over the air).

Not that Microsoft, Google, Apple, ATT, Sprint, et cetera care. Less competition from free services means more customers that have to take-down their antennas & buy ~$70/month or $30/month just to see TV (via cable) or hear the radio (through cellphone).

It must be said ... (4, Insightful)

PCM2 (4486) | more than 2 years ago | (#39552325)

The basics of supply and demand that you've been taught since high school aren't really a complete theory of economics.

Re:It must be said ... (1)

Anonymous Coward | more than 2 years ago | (#39552475)

Heck, these basics of supply and demand aren't even followed that closely from personal experience.

In a grocery store for example... when demand for something is high, price goes up. When they have an abundance of stock, or demand goes down... the price stays the same. This then becomes the new "normal". When demand goes up, the price soars even higher. when it goes down, the price sits at it's new, higher "normal". Rinse and repeat.

Re:It must be said ... (2)

SillyHamster (538384) | more than 2 years ago | (#39552719)

Do your grocery stores never offer items on sale? Clearance?

Groceries don't last forever, after all, and if the price is too high, the items don't sell - and then they spoil or go past their "sell by" date. No profit in throwing away items.

Or perhaps you're talking about inflation ... that's still explainable by supply and demand - it's just that you have to make a calculation with a million variables instead of just 2. (supply vs. demand for all products instead of supply vs. demand for a single product.

Re:It must be said ... (1)

s.petry (762400) | more than 2 years ago | (#39552513)

You stated this in a much nicer way than i was going to.

Maybe the Author should have spend a few minutes on Wiki. pre-capitalism [wikipedia.org] and capitalism [wikipedia.org] would be a good start. But also John Smith [wikipedia.org] and probably the most interesting would be Carl Marxx's commentary and viewpoints on Capitalism (and why it would fail).

I for one don't really mind (1)

AdrianKemp (1988748) | more than 2 years ago | (#39552355)

Okay so any sort of price fixing is bad and it sucks for consumers that it's more profitable not to expand infrastructure as fast as possible.

BUT

I get more minutes/data/messaging than I ever use for $90 a month. I don't have any problem with that, because I'm a heavy user.

Things getting cheaper is always nice but a little perspective is good too... I've got a phone that I tether anytime I like without worrying about data usage for what I can only describe as a very reasonable monthly cost.

Re:I for one don't really mind (1)

cpu6502 (1960974) | more than 2 years ago | (#39552563)

$1100 a year is hardly reasonable. I don't know how much you get paid (after taxes), but assuming an engineer's salary, that's almost a full week of your life being tossed away.

For contrast my cellphone costs $60 a year. True it doesn't have data to access the net, but what do I need it for? I sit in front of a computer all day long (both at work and home). By not spending $1100 I'm getting back that week of my life for myself.

Oligopoly (0)

Anonymous Coward | more than 2 years ago | (#39552369)

This would only work in industries/markets that have only a handful of players. They essentially can do whatever can legally be done.

In this industry barrier for entry is very high and hence requires a closer attention from the regulators over predatory practices.

They can get away with charging a quarter to send a text and another quarter to receive it. If there were 10 competing players, it would have been a totally different scenario.

Re:Oligopoly (1)

viperidaenz (2515578) | more than 2 years ago | (#39553205)

Isn't USA the only place in the world where you pay to receive phone calls and sms? I can put $10 on a pre paid phone and the credit will last 2 years, receving an unlimited amount of phone calls, sms and mms.

end subsidized phones, mandate common protocols (0)

Anonymous Coward | more than 2 years ago | (#39552379)

The real solution is mandate common protocols and frequency ranges among all the wireless carriers, ban wireless carriers from subsidizing phones, and mandate month-to-month contracts for consumers.
Furthermore, carriers should not be allowed to install crapware or spyware on any phones, and all phones should be vendor unlocked.

Re:end subsidized phones, mandate common protocols (1)

viperidaenz (2515578) | more than 2 years ago | (#39553173)

They do all that in most countries. Sure I could have bought a phone on a 2 year contract for $1 up front, but I decided to buy my phone from a department store when they were having a huge sale and the only crapware that came on it was motoblur. I pay $nz20/month on a pre-pay basis for 200mb/1000sms/20mins. The phone I picked supports all the frequencies that the carriers in my country use as well, so I'm free to switch when ever I want.

All countries regulate the frequencies mobile operators use.

All mobile companies use common protocols. Sure there is more than one but they're all rather common and all converging on wcdma with this lte fad on the horizon.

I don't see the merit in forcing business models on companies

Locking phones to carriers is a bad practise and used to happen in my country, at one point around 10 years ago one of the carriers even locked their phones to different segments of their own network. It has completely disappeared now though. I'd say the threat of parallel imports undercutting the operators retails channels did it. They also went through a phase of "no technical support if your phone isn't branded". That's sort of gone now too - I doubt they'll support my CM7 phone if I have problems.

They have to do something... (2)

doston (2372830) | more than 2 years ago | (#39552387)

That's an extremely high cost business, unlike say Software, so they have to do something. Their profit margins are seriously razor thin and the Iphone made things worse, not better, from a profitability perspective. It's very complicated, but if you want companies to trash for gouging, the cell phone companies are barely getting by. You'd be better of posting stories on BANKING or HEALTH...industries that are *really* turning the screws on working people.

Well... duh. (1)

Jawnn (445279) | more than 2 years ago | (#39552393)

This is the same bunch of "competitors" that drug their collective feet as long as possible when it came to selling DSL in the 90's, preferring instead to artificially prop up the revenue from their legacy data offerings, until Covad et al actually presented them with some real competition.

Taught != Understand (1)

Anonymous Coward | more than 2 years ago | (#39552409)

We all have been taught the basics of supply and demand since high school.

Yeah, just like we were all taught the difference between the mean and median of a distribution.

I guarantee you most /.'ers couldn't explain opportunity cost without hitting Wikipedia, let alone a market equilibrium.

An old, old story (4, Interesting)

binkless (131541) | more than 2 years ago | (#39552437)

In ancient Rome, they would always say that food prices were too high, and there were ships full of Egyptian corn offshore, just waiting for the price in the marketplace to rise.

During the seventies the rumor was that Sixty Minutes had film of tank trucks of gasoline being dumped in the desert to keep prices high.

Now mobile providers are holding back on capacity in order to raise prices.

Sound familiar?

Re:An old, old story (1)

rossjudson (97786) | more than 2 years ago | (#39552797)

If that analogy were accurate, it might be. It isn't.

Mobile carriers know how price sensitive their customers are. So what they're doing is changing the product itself. They're still calling it a data plan, but they're putting arbitrary limits on data transfers, in the name of network stability. What they're really after is the ability to wedge themselves into the value chain, between (say) you and Netflix.

It's like you buy gas at $3.00 a gallon. Just as you're signing the bill, the attendant says -- hey, hey, wait...where are you GOING with that gas? you reply you're heading across town. the attendant then tells you that you owe an extra $3 if you're driving there.

Re:An old, old story (1)

viperidaenz (2515578) | more than 2 years ago | (#39553031)

No, its like the gas price going up 10 fold after you've filled your tank once during the month and they always charge for a full tank, no matter how much was left in there and they force you to fill up at the start of each month.

Re:An old, old story (0)

Anonymous Coward | more than 2 years ago | (#39552829)

The gas thing in the 70's was true.

Re:An old, old story (0)

Anonymous Coward | more than 2 years ago | (#39552995)

Sounds familiar

Artificially high demand for oil and food stuffs due to trading in "futures".

Artificially high demand for houses due to trading in CDOs. (most obvious in China where entire newly built cities are mostly empty)

Love this: Carriers: Buy our service but use WiFi! (1)

neurocutie (677249) | more than 2 years ago | (#39552449)

I love this current approach, taken by at least AT&T and Sprint, where they show you and sell you on how wonderful having wireless (3G/4G) data is... but then ACTIVELY promote using WiFi whenever possible. Sprint even has a specific "educational" program designed to show you how to make using WiFi on your smartphone as easy as possible, all the while they try to sell you their wireless 3G/4G service.

Re:Love this: Carriers: Buy our service but use Wi (1)

foradoxium (2446368) | more than 2 years ago | (#39552605)

Kind of like Volkswagon giving free Mountain Bikes with their Jetta's?

Re:Love this: Carriers: Buy our service but use Wi (1)

neurocutie (677249) | more than 2 years ago | (#39552817)

"Kind of like Volkswagon giving free Mountain Bikes with their Jetta's?"

More like Volkswagon encouraging you to use public transportation in order to cut down on the wear and tear on your VW during the warrantee period where VW would have to pay for the maintenance and service costs...

Or even more like VW requiring you to buy an extended warrantee service package but then encouraging you to use public transportation during the extended warrantee period...

and w.r.t. to the carriers, given their WiFi Encouragement programs, you learn that its true, you CAN replace 80-90% of your 3G/4G data usage with Wifi and it chews up less battery and is faster too...(if you didn't know this already). So you find out that most people actually DON'T really need 3G/4G enough to make it worth the money... yet you are still forced to buy the data service.

Re:Love this: Carriers: Buy our service but use Wi (1)

viperidaenz (2515578) | more than 2 years ago | (#39552957)

WiFi on a phone is like an electric car. Its cheap to run, its great within a short distance to your home, but if you go any further you can be SOL if you can't find a place to charge it.

Bad planning, not bandwidth constraints. (0)

Anonymous Coward | more than 2 years ago | (#39552503)

I was in Seattle at a convention this last weekend, and AT&T's "4G" didn't work on the 4th floor, where the main convention area was. Full signal, 4G indicator, but perpetually timing out.

Seattle doesn't apparently have AT&T LTE, and the speeds I was getting at "4G" were in the low 7Mbps, with 400ms latency. This is pretty awful. In Vancouver BC, I get at least 20Mbps with 180ms latency on HSPA+ and 60down/30up on LTE on the Rogers network.

The Strange Thing... (2, Insightful)

fuzzyfuzzyfungus (1223518) | more than 2 years ago | (#39552507)

What I don't understand about telco behavior is their simultaneous enthusiasm for dragging their feet as hard as possible on infrastructure buildouts/enhancements and service pricing and for pushing dubiously mature 4GLTE!!!zOMG 433453Gigabits! based handsets that get approximately 45 seconds of battery life, which would be just enough time to run through an 'unlimited' data plan were it not horribly throttled by congested backhaul...

Given the, um, impressive state of competition, sandbagging on service upgrades, sometimes even going backward on pricing, is pragmatic enough; but why are they accompanying that with a push toward devices that are vastly overqualified for the infrastructure, cost more, and deliver lousier user experience?

Re:The Strange Thing... (0)

Anonymous Coward | more than 2 years ago | (#39553121)

Answer: Engineers Vs Accounting Vs Marketing.

artificial scarcity of capacity? (0)

Anonymous Coward | more than 2 years ago | (#39552523)

there's nothing artifical about the capacity limits, one tower can only support so much bandwidth. Need more bandwidth you need more towers and half the time building more towers is impossible because someone read on the internet that someone things it might be dangerous so they don't want it anywhere near where they live

It doesn't help... (1)

Krokus (88121) | more than 2 years ago | (#39552599)

...that they are constantly trying to convince us that watching movies and sports on a 4-inch display with horrible, tinny speakers, is somehow a desirable thing.

Never mind that a lot of batteries won't survive an entire movie or sports game unless they were fully charged in advance.

As supply is artifically constricted... (0)

Anonymous Coward | more than 2 years ago | (#39552657)

... the pressure on entrepreneurs to join the market increases.

Making your own network obsolete is a self-defeating business model.

Re:As supply is artifically constricted... (0)

Anonymous Coward | more than 2 years ago | (#39552785)

It should be noted that this only works if all other things remain equal.

For example, the radio spectrum is highly regulated, and as regulation increases, the incumbent carriers have more freedom to artificially increase prices, because regulation increases the initial cost and break-even equation of all businesses within its scope, making entrepreneurs (even extremely wealthy ones) more reluctant to start a venture in that market segment.

Nothing strange here. (2)

Jane Q. Public (1010737) | more than 2 years ago | (#39552683)

Artificial scarcity is nothing new, nor is it a "violation" of the principles of supply and demand. Rather, it is a well-known exception, called monopolistic (or in this case oligopolistic) business practices, which are made possible by lack of competition.

In a situation like this, where prices are kept artificially high, there is little or no competition to jump in and undercut the other players. So regular market forces to not come to bear. There is nothing at all strange about this.

AT&T are jerks for many reasons. Here's one. (2)

sootman (158191) | more than 2 years ago | (#39552689)

They whine about how much bandwidth users are using... yet they REQUIRE that you have a data plan if you have an iPhone (or other suitably "smart" phone, AFAIK.) Even if it's a used/not in contract one! If you get an old iPhone 3GS from a friend and stick a SIM card in it, AT&T says you MUST have a data plan. ($20/month minimum.)

Though I guess they're just using the low end to subsidize the high end, since you can get 10x as much data (3GB instead of 300MB) for 50% more ($30 vs. $20).

Maybe, just maybe, if they charged something vaguely resembling reasonable rates for data, their network capacity issues would go away.

last hop bottleneck (0)

Anonymous Coward | more than 2 years ago | (#39552693)

The bottleneck generally is the last hop. Tower to customer.
As much spectrum as these carriers have they could increase bandwidth to any arbitrary location but that requires upgrading/augmenting equipment at the tower sites. So are we suggesting they should just simply replace the most expensive part of all their infrastructure? Well they are constantly doing this.

It would be nice if a voice network would not upgrade but rather keep prices for voice only extremely low. See were still in a race to just trying to provide enough bandwidth for consumer demand.

I suppose I shouldn't defend them as my cellphone bill of $110 for 2 phones/text seams ridiculous. But I'm glad they charge high fees because it lets my company undercut them. At any time they could lower prices and snuff us out. But we have some loyalty as well.

Antitrust (0)

Anonymous Coward | more than 2 years ago | (#39552717)

SPLIT THEM UP!!

One company for the link, another for the service (NO EQUIPMENT), and then let the customer pick the phone that cover the needs from whoever sells it, Samsung, Apple or Kitchen-Sink terminal services.

Here we have Att/T-Mobile competing with trakphone, and who ever - It's a JOKE

Wrong (1)

Galestar (1473827) | more than 2 years ago | (#39552761)

Even if it is true that they withholding network upgrades for this reason, they would not be "artificially creating demand". They would be "artificially limiting supply".

ISPs do that already... (0)

Anonymous Coward | more than 2 years ago | (#39552771)

This isn't a surprise. Comcast, Time Warner, and all dem other ISPs do the same thing. They don't have a significant interest in improving capacity, and find that the "new tiered" method of charging for access is a treasure trove akin to the rush of Free-to-Play games in the video game market.

Its expensive (1)

viperidaenz (2515578) | more than 2 years ago | (#39552843)

for some proper competition in the mobile operator space you need three or more separate nation-wide networks

Monopolies can do this... (0)

Anonymous Coward | more than 2 years ago | (#39552883)

If I had 5 carries to choose from and none of them required a contract, the service provided would be reflected by an appropriate price point, plain and simple.

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