America's Cellphone Networks: Pay By The Gigabyte under the Too Big To Fail Plan


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Jul 22, 2005
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Paying by the Gigabyte and Getting Locked In

The greatest fraud ever perpetrated against consumers may exist at the old offices of Enron, or maybe some Federal Reserve banks. But here in the United States, it has not been uncommon to see cellphone companies gouge customers under the excuse that they are investing massively in new cellphone towers and infrastructure. Customers have dealt with that for decades. But the latest changes should get anyone fuming. The major cellphone companies, seemingly at the same time, in what could be considered price collusion, tiered their data plans for new customers in 2011.

What does this mean? If you sign a contract with AT&T Wireless, T-Mobile, or Verizon; the three industry leaders, you are looking at paying whenever you exceed a certain amount of data. The advent of SmartPhones came with great advantages. With Android, that included the ability to literally, turn your cellphone into a wireless router.

By turning your phone into a wireless router (hotspot), you could allow anywhere from 4 to 10 devices to connect to your phone in order to access the network. And on a 4G LTE network, the latest and greatest data networks now available, that means you could get Internet computer speeds of up to 15Mbps or greater using – that’s right – your cellphone.

The Pay-Until-You-Die Plan

To combat this problem of excessive usage, and the idea of customers actually using the service they paid for, cellphone manufacturers locked down Android phones and other devices that had the “Wiress HotSpot” feature. In 2008 and prior, Google tried to acquire a radio frequency range that had been freed up by the Federal Communications Commission (FCC). This range was freed up because the US Congress mandated that analog television would be eliminated and that only digital television would be allowed. Why would they require this?

Well, for one, the telecommunication companies probably wrote the legislation.
So now, if you want to use the “Wireless Hot Spot” feature on your phone, which effectively turns it into a wireless router, you have to pay an additional monthly fee with your service provider. On Verizon, it started at $20.00/monthly and then increased to $30.00/monthly. At AT&T Wireless, it appears to be somewhere around $50.00/monthly.

Telephony has advanced to such a stage, that you can literally now buy a box that connects into your wall and allows you to make “landline” telephone calls for around $19.99/mo. This box is not a traditional router, but automatically connects to Verizon’s cellphone network. This is similar to the way security systems like ADT in the United States provide wireless alarms to prevent home break-in. With this technology, you could have this box running in your house, and never have to worry about installing copper telephone lines anywhere. This allows traditional companies everywhere, that own the rights to decaying copper telephone lines which they use to deploy for DSL, to save even more money while allowing their infrastructure to stagnate. This will change the world when it comes to building construction, as we approach the wireless era. If you wanted, you could take your box with you, to a hotel, or a friend’s house, and use your “landline” phone from there. In essence, what we consider landline is obsolete.

And then there is Skype. Skype was one of the first services to provide an online telephone number and low monthly calling, and it still does. While Skype was supposed to put the traditional telephone companies out of business, when they developed their mobile application, chaos ensued. The same price gouging companies like AT&T, Verizon, and T-Mobile here in the United States started demanding that anyone using the Skype application be charged per minute, as if they were still using the cell towers instead of the data network to make a call. This is why on most, if not all US phone networks, you cannot use Skype with a WiFi connection. Someday, the entire world will have universal WiFi everywhere, and this would mean unlimited telephone calls for $19.99 a year.

That is what Google was trying to do when they lobbied to acquire part of the radio spectrum – specifically the 700Mhz range. This was specifically used for analog television broadcasting. If Google could have set up a wireless broadband tower at the top of the Empire State Building, it was estimated that they could have provided free wireless Internet to over 40 million people in New York, Connecticut, New Jersey, Pennsylvania, and possibly as far as Virginia, Delaware, and when boosted with an extra tower, Washington, DC. The traditional media and telephone companies lobbied hard to prevent this action.

Here was Google's plan:

  • Open applications: Consumers should be able to download and utilize any software applications, content, or services they desire;
  • Open devices: Consumers should be able to utilize a handheld communications device with whatever wireless network they prefer;
  • Open services: Third parties (resellers) should be able to acquire wireless services from a 700 MHz licensee on a wholesale basis, based on reasonably nondiscriminatory commercial terms; and
  • Open networks: Third parties (like internet service providers) should be able to interconnect at any technically feasible point in a 700 MHz licensee's wireless network

The 2008 wireless spectrum auction was possibly one of the most corrupt events to take place in telecommunications and government. Verizon Wireless filed a lawsuit against the government on September 13, 2007. They dropped the lawsuit a month later.

While Google outbid all of its competitors in the auction, the 700Mhz spectrum was divided into 5 blocks, presumably based on which company bribed the FCC the best.

  • Block A was designated to Verizon Wireless and U.S. Cellular, as well as other mobile phone companies noone has ever heard of but owns towers.
  • Block B was designated to AT&T and Verizon.
  • Block C was designated to Verzion and other tower owners.
  • Block D was unsold because no company wanted to pay over $500 million dollars to meet the reserve price.
  • Block E was given to EchoStar and Qualcomm.
At the end of the auction, it was ensured that there would never, ever be free wireless Internet throughout the United States.

Today, as a consumer, if you want a SmartPhone, which makes heavy use of Internet access, you will need to pay by the gigabyte. You will have to agree to a plan which allows you to buy “5GB”, “10GB”, “20GB”, and so on. At the highest price range, customers can find themselves paying nearly a hundred dollars a month after taxes and fees. On some networks, like Verizon Wireless, customers that had contractual arrangements prior to this change were allowed to stay on an unlimited data plan. This was targeted primarily to customers who had bought SmartPhones prior to the change going into effect.

By locking down phones and stifling innovation in the 700Mhz spectrum, limiting VoIP products like Skype, and by charging consumers to pay per gigabyte, wireless cellphone companies have colluded to prevent customers from enjoying a different type of USA. If Skype could have made it onto wireless phones without customers having to pay by the minute, everyone would be using Skype and hardly paying cellphone companies a dime. Meanwhile, if Google had been able to acquire the 700Mhz radio spectrum, they would have provided free WiFi Internet to every single location in the entire United States free of charge. They had established test urban environments where they would see how it went prior to abandoning the auction (likely realizing the corruption taking place). Google, although a powerhouse company, has been pretty good in rallying against corruption when they see it. This is best exemplified by how they handled the situation of state-sponsored hacking attempts from China. And, if the wireless companies hadn’t colluded together to start charging by the gigabyte, there’d be a lot more room for advancement in the wireless industry. The reality is that bandwidth and throughput caps on the cellphone networks are just the beginning of a lockdown of the Internet. If the cellphone companies can do it, then businesses like Cox Cable, Road Runner, Optimum Online, and Verizon Internet will ask why they can’t either.

Price Fixing and Gouging: Too Big to Fail

The basis of this story is that there was never any competition when these events took place, all though it would like to be portrayed as such. These companies conspire against the customer regularly. The only major cellphone company that still offers non-tiered, flat-rate unlimited Internet bandwidth for SmartPhones is Sprint Nextel. They have chosen to compete, rather than collude.

With the US economy collapsing, one might think these changes were necessary in order for cellphone companies to save themselves from the doldrums of bankruptcy. But cellphone companies have been making enormous profits since the 1990s, and have continued to do so today. Adopting tiered data plans was argued by most providers, not for cost saving measures, but due to a “capacity’ argument. They argued they wouldn’t have enough capacity for all those Internet users. But remember the justification for raising prices? It was to create and develop new networks and expand cellphone coverage around the entire United States. The same companies even lobbied the government for grants and loans to build their cellphone towers, which are now “over-capacity”. Ironically, on a 4G LTE phone, you are not even using a cellphone radio band, but the cellphone’s wireless network to make a phone call any way. In essence, you are using the Voice Over IP service that was going to “change the game”, except you’re paying anywhere from $50 to $200 a month for it.

The current system in WiFi and cellular networks we have now in the United States is an example of price fixing, price collusion, monopoly, corporatism (crony capitalism), corruption, and clear violations of US law. When we look at how corporations were treated in the past, as they are today, it is firmly clear that history teaches us that the application of laws has changed. The Sherman Anti-Trust Act was designed to prevent monopolies, yet it was only used to investigate, and possibly extort Microsoft for billions of dollars in what was one of the most useless and wasteful investigations of all time. But in the past, if large conglomerates like Walmart or McDonalds were to go out of business, this would have been encouraged by government. They own a large percentage of the marketplace, drive employee wages down, and provide low quality services. Under the old model of governance, corporations were struck down and split up, including the Bell Company and Standard Oil, for being “too big to fail”. Today that terminology is used to protect companies and to disallow competition. One day, I hope many people realize that this is the cellphone plan they're really on.


United States 2008 wireless spectrum auction - Wikipedia, the free encyclopedia

FCC | Adopts price controls for wireless providers | The Daily Caller

Verizon confirms it will ditch unlimited smartphone data plans starting July 7 - FierceWireless

UPDATED: T-Mobile unveils new tiered data plans for smartphones, details throttling speeds - FierceWireless

After Tiered Data Plans, AT&T Turns to Data Throttling Ahead of iPhone 5 Launch

Price fixing - Wikipedia, the free encyclopedia

Sherman Antitrust Act - Wikipedia, the free encyclopedia

Corporatism - Wikipedia, the free encyclopedia
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