Forgot your password?
typodupeerror
Communications

Mobile Operators: Creating Artificial Demand For Capacity? 268

Posted by Unknown Lamer
from the so-that's-why-i-keep-paying-more-for-less dept.
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.
This discussion has been archived. No new comments can be posted.

Mobile Operators: Creating Artificial Demand For Capacity?

Comments Filter:
  • by Troyusrex (2446430) on Monday April 02, 2012 @02:23PM (#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.
    • by CanHasDIY (1672858) on Monday April 02, 2012 @02:28PM (#39552213) Homepage Journal

      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: (Score:2, Offtopic)

        by cpu6502 (1960974)

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

        • by CanHasDIY (1672858) on Monday April 02, 2012 @02:49PM (#39552461) Homepage Journal

          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.

          • by Jane Q. Public (1010737) on Monday April 02, 2012 @03:01PM (#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.

            • To reiterate my overall point:

              The reality of our economic situation is that those who can afford to circumvent the law, do.

            • by Genda (560240)

              But many of the oil multinational corporations have their roots in the US, and are only too happy to manipulate our government with petrodollars. When Oil companies pass laws regarding their own regulation and dictate energy policy to our government (up to and including the taking tens of billions of dollars of corporate welfare at a time when they are making record profits), I would have to say its fair to say whatever illegal acts they conspire to do, there appears to be no interest from our government in

          • by tlhIngan (30335) <.slashdot. .at. .worf.net.> on Monday April 02, 2012 @03:17PM (#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).

            • by Endo13 (1000782)

              Not sure why you even bothered posting all that garbage about gas stations. It's so obvious they're in collusion one way or another. Stations in any given area will always raise or lower prices almost simultaneously, and to the exact same price. This happens even with price increases or drops of $.20, $.30 or more. Occasionally you'll have a chain that's exactly 1 cent lower than the other gas stations in the area, but this is a slight exception that just proves the rule. A couple miles down the road, you'l

              • by NotQuiteReal (608241) on Monday April 02, 2012 @04:09PM (#39553443) Journal
                Gas stations raise or lower prices almost simultaneously precisely because they sell a fungible commodity. They are just keeping their notoriously low profits [bizstats.com] in line with their costs. If their gas costs too much, you won't buy their profitable sugar water and "food" they sell inside...
            • 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.

              Gas stations != oil companies, so... non sequitur.

          • by nitehawk214 (222219) on Monday April 02, 2012 @03:30PM (#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.

          • by Hatta (162192) on Monday April 02, 2012 @03:45PM (#39553189) Journal

            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.

            • 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.

              touche, mon amie, touche.

          • by peragrin (659227)

            compounding the Oil problem is if the oil companies would drill land they have permits for today they could double productions. But they want more land opened up when they are using less than 50% of what is actually available to them.

            combine it with oil refineries either shutting down or exporting vast amounts of refined petroleum and you have an industry trying to keep prices high and Like they are supposed to make higher profits.

        • by AngryDeuce (2205124) on Monday April 02, 2012 @02:51PM (#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.

        • by sjames (1099)

          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.

    • by Anonymous Coward on Monday April 02, 2012 @02:29PM (#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.

      • 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

    • Re: (Score:2, Funny)

      by MrKettlePot (2590587)

      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

    • by icebike (68054) * on Monday April 02, 2012 @03:03PM (#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 (Score:5, Insightful)

    by Anonymous Coward on Monday April 02, 2012 @02:24PM (#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 (Score:5, Interesting)

      by AngryDeuce (2205124) on Monday April 02, 2012 @03:00PM (#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?

      • The general rule is that the larger and larger a company / government gets, the more bloated it becomes. It's like a big flabby heart, instead of a smaller, but more efficient one.

        When dealing with barriers to entry, the only thing that matters is whether or not they are artificial (someone not playing by the "rules'). Now, like all things, the bigger you are, the harder you push; as such, a fair number of companies / governments can get away with murder and thievery, but not indefinitely. The problem is, n

  • Regulation (Score:2, Interesting)

    by Anonymous Coward

    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 (Score:5, Insightful)

      by game kid (805301) on Monday April 02, 2012 @02:33PM (#39552287) Homepage

      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: (Score:2, Insightful)

        Can you name a time when regulators actually encouraged competition?
        • by jhoegl (638955)
          AT&T breakup in 1984.
        • Re:Regulation (Score:5, Insightful)

          by i kan reed (749298) on Monday April 02, 2012 @02:58PM (#39552553) Homepage Journal

          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.

          • by Ihmhi (1206036)

            And now, Ma Bell is coming back together like the T-1000...

          • by s.petry (762400)

            Sorry, but you need to take Microsoft out of the list. Microsoft was not punished thanks to spending metric assloads of money lobbying congress. Microsoft's punishment by the DOJ was to further entrench their monopoly by giving schools and government offices "free" Microsoft products for 5 years.

            The story from Congress which weighed in heavily was that "Breaking up Microsoft would harm the economy." If you think it sounds like the same argument as Mah-Bell and Rockafeller gave, then you would be correct.

          • Those were not regulators. Those were lawyers and judges. Breaking up monopolies is not a matter of regulations, but of laws. Of course Ma Bell only had the monopoly that you credit government intervention with eliminating because of government intervention in the first place.
        • by Ken D (100098)

          The dismantling of AT&T in the 80s.

          • A monopoly that was created by government regulation.
            • by dryeo (100693)

              The regulators didn't get involved until after AT&T had established their monopoly. Unless you're counting their patents as regulations as that was what allowed the monopoly. Patents on telegraphy, then phones, then the real winner, vacuum tubes along with aggressive growth and refusing to inter-operate when anyone attempted to compete.
              When an entity has most of a type of infrastructure locked up it is very hard to compete.

        • by oxdas (2447598)

          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 (Score:5, Insightful)

        by icebike (68054) * on Monday April 02, 2012 @03:16PM (#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.

  • The theory: (Score:5, Insightful)

    by Qzukk (229616) on Monday April 02, 2012 @02:28PM (#39552215) Journal

    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.

    • 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: (Score:4, Insightful)

        by ColdWetDog (752185) on Monday April 02, 2012 @02:49PM (#39552465) Homepage

        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.

        • 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!

          • Fixed links would be easy. Just use really directional antennas. Yagis and parapolics all round! You could expect to see more use of free-air laser links as well, with a radio fallback for poor weather. Mobile, though, not so easy. Expect to see much more sophisticated RF equipment in access points (dynamic phase-array antennas and such), which would likely work better than today but also cost much more - but a cell network? Much more difficult, when the devices are constantly moving and have such limited p
      • by sjames (1099)

        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: (Score:4, Interesting)

      by vlm (69642) on Monday April 02, 2012 @02:43PM (#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.

      • by erice (13380)

        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.

        Maybe I don't quite understand what you are saying but it sounds a whole lot like land line service. The result is that the local carriers with the largest starting base and least ethics will bribe enough congressmen to eventually overturn all the restrictions while maintaining their guaranteed income.

      • by dgatwood (11270)

        The major telcos like AT&T own towers in major metropolitan areas, but for the other 99% of the land mass, what you described is, for the most part, an accurate description of the way cellular infrastructure is built and maintained today. Well, there's no legal requirement to sign service contracts, but if you didn't sign contracts, you wouldn't make money, so you'd pretty much have to be an idiot not to do so.

        Won't work, for precisely the same reason that the current oligopolies don't work today. The

    • by cpu6502 (1960974)

      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.

      • by Obfuscant (592200)

        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 driv

    • by Githaron (2462596)

      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: (Score:4, Insightful)

      by GIL_Dude (850471) on Monday April 02, 2012 @02:58PM (#39552561) Homepage
      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.
  • 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 (Score:5, Insightful)

    by girlintraining (1395911) on Monday April 02, 2012 @02:32PM (#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.

    • by Hatta (162192)

      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.

  • Fundamental flaw (Score:5, Insightful)

    by frisket (149522) <peter AT silmaril DOT ie> on Monday April 02, 2012 @02:34PM (#39552301) Homepage

    "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.

  • 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).

  • by PCM2 (4486) on Monday April 02, 2012 @02:36PM (#39552325) Homepage

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

    • by s.petry (762400)

      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).

  • 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.

    • by cpu6502 (1960974)

      $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.

  • 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.
  • 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.
  • An old, old story (Score:5, Interesting)

    by binkless (131541) on Monday April 02, 2012 @02:47PM (#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?

    • by rossjudson (97786)

      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, h

      • 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 (Score:4, Informative)

      by erice (13380) on Monday April 02, 2012 @04:01PM (#39553341) Homepage

      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.

      Egyptian corn? Corn is a New World crop, It was unknown in the Mediterranean region until the 16th century.

      • by AnyoneEB (574727)
        Corn [wikipedia.org] means maize [wikipedia.org] in the US and some other places, but elsewhere it is a generic term for cereal crops [wikipedia.org]. Perhaps the parent (or the author of the parent's source) is from one of those other countries.
  • 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.
    • 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.
      • "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."

        maybe, although many people (not everyone), spends 98% of their time in two places: home and work. So if both places have WiFi, then at least 98% of your wireless data needs are met. The other 2% might include 1% at airports, hotels, Starbucks, etc where there also is WiFi. So, not quite like an electric car for many, t

    • by Lehk228 (705449)
      but they won't activate a wifi smart phone without a data plan, because using only wifi wouldn't make any money for them.......

      and the capitalists wonder why we keep getting bigger and bigger government..... duh it's because the capitalists are larcenous kochsuckers always trying to scam and extra buck or ten.
  • by fuzzyfuzzyfungus (1223518) on Monday April 02, 2012 @02:54PM (#39552507) Journal
    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?
    • You're just not understanding the mindset of systemic corruption. They charge a premium for the "latest greatest" device, so they make more money on that end. This is effectively what happens with the long term contract that go with most plans. Then once they have the lock in, they can provide as much crappy service as they want, and the customer is stuck. Also, they get a lot more money when the user exhausts their base plan data amounts, and has to pay through the nose for additional data amounts.

      Just k

  • by Jane Q. Public (1010737) on Monday April 02, 2012 @03:08PM (#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.
  • 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.

  • 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".
  • for some proper competition in the mobile operator space you need three or more separate nation-wide networks
  • The oil companies, and oil producing nations, have been doing this since the 70's.

    This type of behavior, although devious, isn't new to either business or government.

Put your Nose to the Grindstone! -- Amalgamated Plastic Surgeons and Toolmakers, Ltd.

Working...