Why Is Regulation Appropriate?
Wireless networks were built in part from public money, in the form of tax breaks and subsidies: Wireless companies often hold that they should be unregulated because they built the networks and have a right to charge what they please for the services they deliver over them. In truth, those networks are partially owned by taxpayers; thus, our lawmakers are duty-bound to protect the interests of smartphone customers.
The airwaves that service providers license from the government to carry their services are publicly owned: Since the 1990s the major wireless carriers have paid billions of dollars for the right to license the wireless spectrum over which they send their signals. The service providers do not own that spectrum; the airwaves are required by law to be public property, their use overseen and regulated by the FCC.
The wireless industry does not have enough competition to create a de facto regulatory force: In the United States we have four major, national wireless providers and a large group of smaller, regional providers. In most parts of the country, prospective smartphone owners have but a handful of providers to choose from.
In other markets where many providers compete for business, individual companies have less opportunity to impose unfair prices or practices on customers. If they did, competing companies would steal customers by offering a better deal and better treatment. In this way the competitive market regulates itself. In the U.S. wireless market, that sort of environment doesn't exist--instead, it's an oligopoly. Competition is not able to regulate the market, so a third party must step in to protect consumers from the collusion of the few wireless carriers.
We've already seen clear examples of such collusion.
Example #1: Over the past two years, the major U.S. wireless companies moved together to double the price of text messages to 20 cents.
Example #2: The two-year cost of ownership for the leading smartphones in the United States is set, regardless of the carrier, to about the same amount ($150 per month). When competition is limited, it's in all of the carriers' interest to keep smartphone cost of ownership high.
Without regulation, more examples of this anticompetitive behavior may appear in the future.
The United States is one of the top three most expensive countries for wireless service in the world (along with Canada and Spain), according to a survey from the Organization for Economic Cooperation and Development. Americans pay an average of $635.85 per year for cell phone service, the study shows, compared with $131.44 per year in the Netherlands.
Profits from the sales of wireless services are a bright spot on the balance sheets of large telecom companies such as AT&T and Verizon. Yet while wireless profits are rising, public records show that those companies' investment in their wireless networks has been declining as a percentage of revenue. Meanwhile, demand for wireless broadband service is exploding.
In the absence of either strong competition or active regulation, the smartphone owner loses, and will continue to lose. It's time for some common sense. Send this story to your congressperson; ask him or her to copy and paste it into a bill and introduce it.
Sneaky Fees (Tom Spring, PC World)
The Irksome Cellphone Industry (David Pogue, New York Times)
Why AT&T Killed Google Voice (Andy Kessler, Wall Street Journal)
Wireless Carriers: 10 Things I Hate About You (Mike Elgan, Computerworld)
Five Ways Wireless Carriers Gouge You, And How To Fight Back (Yardena Arar, PC World)