Internet competition

My friend Adam Holland pointed me over to Galen Gruman’s article at InfoWorld, which points to the problems that arise when carriers have considerable pricing power:

Users are being forced to sign up for separate data plans for each device. The cellular carriers advertise their data plans in data buckets, such as $25 for 2GB of iPad usage at AT&T and $20 for 1GB of iPad usage at Verizon Wireless. But you also pay separately for access on your iPhone or other smartphone. That means multiple-device users are asked to pay a lot more, forcing most to make a choice between the two.In both cases, the pricing is illogical and punitive. For their DSL and TV services, neither AT&T nor Verizon (half-owner of Verizon Wireless) charges per computer or per TV, but that’s what they’re doing for mobile devices.

Of course, I’m sure that both AT&T and Verizon would love to charge per computer/TV for home Internet use as well (and AT&T is currently in the process of instituting data caps on home users).  As with so many mobile and broadband ISP policy issues, the fundamental problem is that many ISP operate as monopolies or oligopolies.  Accordingly, there are only two major impediments to their pricing structure:

  1. Government regulation
  2. More competition

Government regulation is, of course, is notoriously tricky.  Indeed, it is often counter-productive as established ISPs use vast lobbying budgets in an attempt to regulate any new competitors out of existence.

But more competition is great when it’s possible, and, fortunately, sometimes new market entrants do appear with offerings that put pressure on established providers.  To use a personal example, my wife and I use a Clear Spot for our only Internet service here in the Boston area.  It’s not perfect (ping times are high), but it’s only about $50/month and is fast enough for high quality Netflix streaming.  Moreover, the Spot’s 4G interface/Wi-Fi router allows us to use the Internet within our apartment or anywhere within Clear’s 4G network.  Among other things, this means we can use an iPod Touch “on the go” (just like an iPhone) and “tether” both of our laptops (no additional fee) and connect up to five more Wi-Fi devices (eight total).

Best of all, because Clear’s service is wireless, we don’t have to subscribe to Comcast even though they are the only ISP providing service to our building.  Maybe that’s why they sent us a letter this past week offering cable+Internet for less than $60 a month indefinitely (not as a temporary promotional price).  I guess the market really does work when the market really does work.

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