Yesterday on my commute to work, I became annoyed with the spotty coverage and slow connection provided by Verizon Wireless. I tweeted my frustration.
Imagine my surprise when AT&T’s social networking Tinkerbell responded to me: “Connect when and where you want with our reliable 4G LTE!”
I found that amusing. The reason I switched to Verizon Wireless was because AT&T was so awful. I bought the first version of the iPhone, with AT&T as the sole carrier. The device was a delightful and innovative glass brick. Great apps, brilliant design, game-changing paradigm shift. Except for that whole wanting-to-make-phone-calls on it issue. For that purpose, it was worthless. That’s what I mean by glass brick. I returned it for a full refund, and got some ugly non-iPhone at Verizon that I actually could make phone calls on.
Once Verizon got the iPhone, I returned to the glass brick, new and improved -- now with phone-calling capabilities!
All of which raises the question: Why are telecom services in the U.S. so unconscionably awful? Sure they're expensive, but at least they are slow and unreliable! We invented most of the technologies so why are they so superior in other countries?
Not just a little: The Organization for Economic Co-operation and Development, noted that “people in Sweden, the Netherlands, and Finland pay on average less than $130 a year for cell phone service” -- at a much higher quality level than in the U.S. Even worse, as revenue has increased, U.S. companies are spending less and less on capital expenditures to maintain and improve service and coverage.
There are a few answers as to why, none of which are remotely satisfying:
Deregulation: The Telecommunications Act of 1996 was supposed to open markets to innovative new companies and technology start-ups. Instead, a huge wave of consolidation led to increased concentration of ownership. Today, there are fewer telecom, cable and Internet companies than pre-1996.
As a condition of allowing deregulation, the government should have required minimum standards for wireless connectivity, bandwidth and Internet speeds.
Lack of Competition: Instead of robust competition, the U.S. has been geographically divided into regional monopolies or duopolies. Robust aggressive competition on price or service quality is nonexistent.
Service is so poor in the U.S. that tech writer Farhad Manjoo actually proposed a “Cell Phone Bill of Rights” for consumers. If we had true competition, these sorts of things would be unnecessary.
Corruption: Telecom and cable companies are among the freest spending lobbyists working the corridors of power in Washington. Last year, lobbying by the National Cable & Telecommunications Association ($19.8 million), Comcast ($16.8 million), AT&T ($15.9 million) and the National Association of Broadcasters ($14.5 million) earned them places among the top 20 spenders in the nation's capital.
Keep in mind that the wireless services require use of the public airwaves. Instead of mandating minimum standards for the services, we let a faux-free market argument win the day. The skewed belief that the marketplace will lead to improved service was misguided; instead, it allowed a public good to be converted into higher profits. Since the public has ownership of the airwaves, requiring minimum standards would have created a better telecom infrastructure.
Meanwhile, the U.S. ranks behind Bulgaria and Latvia in terms of Internet speed and bandwidth availability. Spend any time in Europe or Asia and you quickly learn just how awful service is in the U.S. Connectivity, clarity and reliability is superior elsewhere. There is a catch to getting these much better telecom services abroad: They cost much less than in the U.S.
The U.S. has less competition, little price regulation and no minimum quality requirements. Is it any wonder our telecom infrastructure is consistently ranked lowest by consumers of any country in the developed world?
Better and cheaper, why would we want that?
To contact the author of this article: Barry Ritholtz at firstname.lastname@example.org.
To contact the editor responsible for this article: James Greiff at email@example.com.