Friday, June 15, 2012

About That Second, Third and Fourth Wireless “Attachment”

            There is some good news about the decision by Verizon Wireless to offer shared monthly data plans.  But there could be a lot more if the FCC applied its Carterfone policy.  That policy gave consumers the power to decide what and how many devices to attach to a network connection.  If Carterfone applied, consumers could use multiple devices to access a network subscription, albeit perhaps not at the same time.  Because wireless handsets each have a separate identity, Verizon and soon every other carrier will offer the shared data plan option, albeit at much higher prices factoring in the surcharges for using more than one wireless device.

            Readers over the age of 40 may recall that there was a time when the wireline telephone company totally controlled what devices could connect to the network.  The Bell System had a monopoly on “authorized” handsets and prevented even a used, secondary market for Bell telephones.  Subscribers feared that the Bell System would know whether a non-Bell vintage telephone was in use, when more than one phone was attached.  Carterfone liberated the marketplace for both new and used handsets.

            It is a remarkable time that the Carterfone policy somehow can be converted into “job killing government regulation.”  The policy promotes consumer sovereignty, but in this bizarre time it gets framed as something bad because it requires government to do something.  And what does government do?  It removes the ability of companies to establish bogus regulations designed to preserve a monopoly and maximize profits.  In retrospect it appears crazy that Bell System managers could argue that anytnon-Western Electric telephone could harm the network (and something they called “systemic integrity”) as well as risk the lives of telephone company personnel.  But that strategy lasted for years and preserved incredible profit margins for AT&T.

            History repeats itself.  Verizon surely cannot make a credible argument that allowing multiple devices to share a download basket of capacity triggers greater costs for the company.  Bear in mind that every wireless carrier provides shared access to a basket of voice minutes.  So how is data any different?  It isn’t. 

The lack of Carterfone enforcement means that wireless carriers can create a bogus, new “cost element.”  Because these carriers copy each other (some would say collude), expect every wireless carrier to create a new billing line item for that second, third and fourth device sharing a single monthly throughput allowance.

3 comments:

Richard Bennett said...

Carterfone was a doctrine for a different kind of network. An idle phone in the PSTN doesn't impose any costs on the network, but each device on a mobile network contributes to the network's signalling overhead.

This is important technically because signalling consumes roughly half the capacity of the mobile network. The more devices, the more overhead, and the more overhead the fewer happy users.

Carterfone also stopped technical progress at the edge of the PSTN, which was not a good thing.

Richard Bennett said...

Carterfone was a doctrine for a different kind of network. An idle phone in the PSTN doesn't impose any costs on the network, but each device on a mobile network contributes to the network's signalling overhead.

This is important technically because signalling consumes roughly half the capacity of the mobile network. The more devices, the more overhead, and the more overhead the fewer happy users.

Carterfone also stopped technical progress at the edge of the PSTN, which was not a good thing.

Rob Frieden said...

Hello Richard:

Thanks for your comments--all fair points. On the other hand adding a seoncd or third or fourth handset also imposes costs, e.g., assignment of telephone numbers, porting, etc. The wireless carriers are able to absorb these costs without surcharges.