Carriers Should Accept That Openness Can Be Good for Them

T-Mobile is trying to work with the Federal Communications Commission to cut in half the number of days a land-line carrier has to transfer a phone number to a cell phone, according to the New York Times. This cracks me up as number portability was once the bane of the cellular operators; they were among those that lobbied hardest against the passage of the local number portability regulation back in 2003 because it made it easier for customers to switch carriers.

Six years later, I would argue that unless you’re Sprint, number portability is a very good thing. Witness AT&T, which has netted more than a million new subscribers thanks to the iPhone. This seamless transfer of data — this openness surrounding phone numbers — has undoubtedly helped carriers and consumers. So why won’t carriers accept that more openness will benefit them?

Two recent news items show that carriers still haven’t learned that openness can benefit them. One is AT&T trying to hobble Skype on the iPhone. Skype’s use of VoIP takes traffic off the voice network and moves it to the data network, but it’s still traveling over AT&T pipes. With LTE (when we get there), voice should all be VoIP because it will travel over an IP network rather than a circuit-switched one. But this isn’t a technical problem; it’s a business model problem because Skype could cut into AT&T’s wireless voice plans. So AT&T is trying to keep its network closed to Skype.

The other example is the removal of some tethering apps for the T-Mobile Google phone. T-Mobile doesn’t want people to use their phones as wireless broadband modems. While attaching a phone to a computer does allow it to consume a lot more data, the user experience is fairly mediocre, meaning bandwidth-hogging applications aren’t a large danger. Again, this is less a technical problem and more about keeping its network closed to protect an existing business model. T-Mobile wants to sell data cards plans and phone data plans, not just a single, cell-phone data plan.

This is where greater carrier openness comes into play. I’m not entirely sure that unbridled network neutrality can work on current capacity-constrained wireless networks, but I also believe that protecting voice minutes, as AT&T is trying to do with restrictions on Skype and T-Mobile is doing by halting tethering, is counterproductive to increasing wireless data use by consumers.

The wireless data business has so far been very good to carriers, just look at the prices they charge for data. AT&T’s 200 MB plan costs 20 cents per megabyte while Verizon’s smallest data package (50 MB for $40) costs 80 cents per megabyte. However, once folks move up to the 5 GB tier the per-megabyte costs go down to 1.2 cents.

Carriers don’t want to shoot the golden goose of fat wireless data margins, but they don’t seem to realize that the golden goose is already sick. The web and the ability to deliver a multitude of competing IP-based services over a pipe is clearly coming to wireless broadband, neither interfering with Skype nor halting tethering will change that. By encouraging apps on their pipes, and offering data packages that capitalize on the growing obsession with mobile data, carriers would actually drive the average consumer toward data cards and 3G plans. Openness will lead to more money, even if it is made on a dumb pipe.

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