Why Don’t Telcoms Do This In The US?
Gary Kim lets us know about an interesting development in the Indian mobile operator space. The infrastructure of the three mobile operators is being joined together as a separate entity that all three entities will own a stake in and lease capacity from. The selling of the service and the actual mobile service itself will be provided by different companies.
What does this mean for India’s mobile phone network? It means there’s a single company in charge of maintaining what amounts to a single GSM network. Three different providers don’t have to build a redundant network to provide service. Everyone in India can expect the same level of signal strength and coverage regardless of provider choice.
What makes Bharti Infratel Ltd., Vodafone Essar Ltd. and Idea Cellular Ltd.’s service offerings different, then? There’s more than just the wireless infrastructure. The main ones: pricing and customer service.
The Telecommunications Act of 1996 would have been a hell of a lot more effective if instead of requiring the local exchange carriers to sell unbundled network elements at cost, they legally separated the retail and wholesale portions of the Baby Bell business. That way, there was no “conflict of interest” between selling the service yourself and having to sell the service “at cost” to someone who competes as you.
In the mobile phone space in the US, this wouldn’t necessarily work due to the conflicting standards (GSM versus CDMA). Of course, with AT&T and Verizon Wireless going LTE, we could finally end up with a single network standard in the US. I’m delusional, though. It will never happen.
Bookmark with: del.icio.us Digg it Furl iFeedReaders ma.gnolia Maple.nu RawSugar reddit Simpy StumbleUpon
Tags: retail telecom, structural separation, wholesale telcom Fnord
Pingback by Cell Phone: Plans, Prepaid Phones, Gadgets & Reviews » Why Don’t Telcoms Do This In The US?
[...] unknown had some great ideas on this topic.You can read a snippet of the post here.Of course, with AT&T and Verizon Wireless going LTE, we could finally end up with a single network standard in the US. I’m delusional, though. It will never happen. Advertisement: Cell Phone Batteries. [...]
Comment by olly
I think this would be a HORRIBLE idea personally. Think of it this way: lets say you go to your grocery store, and you find that every carton of Orange Juice on the shelf, regardless of brand, has gone up about 8 dollars per purchase. WTF? So you ask the clerk about it, and he tells you “oh, all the orange groves in the country are now owned by OrangeGrove Inc., everyone else just buys there oranges and then makes their juice”. Why is it that it’s gone up 8 dollars? Because there is nothing in place to stop it… after all, OrangeGrove Inc simply says “you want to continue selling Orange Juice? Then you must buy from us.”.
Monopolies never a good idea, not for the consumer, not for the industry, not for anyone.
Take the telecom market. Let’s say that one company owned the whole infrastructure, and everyone else was leasing and re-selling, as is apparently happening in India. A few things to consider:
-One technology has to be chosen at this point… there are not guarantees that it’s a GOOD technology, or even the BEST technology.
-Innovation suffers because there is no incentive to innovate. After all, as a carrier (a reseller of spectrum, in this case), I have no say in the technology really — I have no ability to take risks, and independently innovate, because the technology on the infrastructure is controlled already anyway. And as the owner of the infrastructure (i.e. whatever the company equal to my fictional OrangeGrove, Inc), what do I care about innovation? If I have no competition, then I have no reason to try harder to innovate. After all, my consumers can’t very well go anywhere else, can they?
-Consumers suffer. Because the infrastructure is controlled by one company, carriers have a certain cost that must be transferred to the consumer. Carriers can’t change that cost (after all, the infrastructure company is the one that sets that cost), so it has to either be taken out of their profit structure, or taken out of the consumers pocket — guess which one is more likely! Also, as a consumer, I have no recourse if the infrastructure sucks. Right now, if T-Mobile doesn’t offer the coverage I want, then I can go to ATT or Verizon (I wish there were more options, but it’s a start). But if everyone is on the same network, and the network sucks in my area, then I’m out of luck… and the infrastructure has no real reason to hurry in improving, since they know that I can’t go anywhere else anyway.
Monopolizing sucks, for businesses, for everyone — and it doesn’t matter whether it’s a government monopoly or a private one; the results are the same.
-olly