Posts Tagged ‘Verizon Wireless’

Why Randall Stross and the New York Times Don’t Get Wireless

December 31, 2008

Here’s the beginning of a post I just published on BusinessWeek’s Tech Beat blog:

This Sunday, New York Times business columnist Randall Stross devoted his column to dissing the U.S wireless industry for doubling the cost of text messages to consumers to 20 cents from 10 cents. But what really got Stross lathered was his claim that the cost of transmitting text messages is far less than the public supposedly assumes.

Stross backed up his argument by quoting Srinivasan Keshav, a computer science professor at the University of Waterloo, who said that “it doesn’t cost the carrier much more to transmit a hundred million messages than a million.” Stross also noted that 20 class action lawsuits have been filed around the the country against AT&T and other carriers, alleging price-fixing for text messaging services.

Stross is not only flat out wrong, but his argument is overly simplistic and suggests that he doesn’t really understand the economics or business model of the wireless industry.

Let me explain.

First off, it costs more to send more text messages–contrary to what Stross and Keshav claim. Verizon Wireless, AT&T and Sprint declined to speak with Stross. But James Gerace, a spokesman for Verizon Wireless, told me in an email that the company “had to invest an additional $200 million in the network just to accommodate the ’08 volume in text messaging.” That is not chump change.

“This op-ed is bunk,” wrote Gerace, adding that he sees the Times story as an example of “trial lawyers placing it looking for a new revenue stream.”

Second, Stross totally discounts the price of wireless spectrum, which is really, really expensive. In the most recent spectrum auction, wireless carriers and other technology companies paid an astounding $19.6 billion to acquire the nation’s most desirable remaining airwaves. Yes, Stross mentions that the “carriers pay dearly for the rights to use” spectrum. But in the next breadth he writes off the cost by noting that text messages are “free riders” that piggyback on the control channel of the wireless network.

This gets me to my last point. Stross doesn’t seem to grasp the current economics of the wireless biz. Here’s the deal. The voice side of the business is becoming increasingly commoditized. So the future success of the industry hinges on the ability of carriers to grow the revenue they get from data services such as text messaging, wireless web surfing and wireless applications.

That’s the fundamental reason why carriers have doubled the price of text messages from 10 cents to 20 cents over the last few years. I have no idea if the carriers engaged in price fixing. If they did, they should be punished. But there is a legitimate economic reason why they have raised prices for individual text messages.

Click here to read the rest of the post.

Verizon Wireless and RIM Unleash Storm

October 8, 2008

Today I published a story in BusinessWeek about the new phone from Research In Motion, the Storm. Verizon Wireless and Vodafone struck a life-time exclusive deal to offer the first Blackberry touchscreen device.

I also break the news that Verizon Wireless has jumped on the latest wireless trend: It is setting up an online bazaar where customers will be able to download a range of games, tools, and other applications for use on the Storm. On Oct. 9, the company will release a toolkit designed to help software developers build applications for the application store, dubbed the App Zone.

FCC Chairman Kevin Martin Defends the FCC Wireless Auction

March 21, 2008

Yesterday, I was lucky to get the Federal Communications Chairman Kevin Martin to talk to BusinessWeek about the recently completed wireless spectrum auction. I was keen on interviewing Martin since he was so vocal about the importance of the auction and its ability to spur more competition in wireless broadband services. Here’s the story I wrote for BusinessWeek.

I wanted to get Chairman Martin’s thoughts following the cover story I wrote last year, Telecom: Back from the Dead, in which I wrote a sidebar on the auction called “A Scramble for the Perfect Wave.” In the story, I correctly predicted that the “auction could generate as much as $20 billion.” The final tally was $19.6 billion–the biggest wireless auction of all-time. And I also was correct in writing that “despite the fervor for a new entrant, most analysts believe it’s unlikely one will materialize.”  

Last summer you told me you were “hopeful about a new entrant if we set [up the auction] right. Were you satisfied with the auction results? 

When I talked about the auction last summer I said we would end up with a more competitive platform from a broadband standpoint.  

Thanks to the auction, we will have more wireless broadband services that could compete with cable modem or DSL service. The auction was a success. The auction will be used to create a third broadband pipe into people’s homes. And that service will be offered by companies that are different than your local phone or cable company. 

 Are you disappointed that Google didn’t end up with any spectrum?

No. Would I have liked to see a new entrant on a nationwide basis? Sure. I also do think there are examples of other new entrants. There was another bidder who won a license in every market of the country.  

Of all of the bidders who won, there are still 99 companies other than the national incumbent providers who won 754 licenses, or 69% of the 1090 licenses sold in the auction. It means you are going to see these 99 companies that are all going to be offering wireless broadband service. It won’t be on a nationwide basis but it will be offered in each market.   

Do you think the auction will allows AT&T and Verizon Wireless to become even more dominant? 

We were auctioning off multiple licenses in each area. There were five licenses in each area. In every market there is someone else who won. There’s no question they will follow through on offering service.  

How much can those small players impact the market?

They will be able to come in and compete.  

 Why didn’t a new nationwide competitor in broadband wireless emerge?I think we set it up to be as conducive as possible. In the end there was still an incumbent willing to buy the spectrum. I don’t think people anticipated an incumbent would purchase the spectrum with an open access provision. It’s a good thing because it will make all of the wireless industry allow for additional innovation.     

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