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The wireless industry has flipped their business model with 3 myths
Over the last few years, both AT&T and Verizon have been successful in changing their business model from giving unlimited data and charging for calling/texting to charging for data and giving unlimited calling/texting. They did this because it was the only way to keep their profits up in a changing wireless world.
It has been rather remarkable to see both AT&T and Verizon move off unlimited data plans through a variety of claims (some through them, some through groups funded by them).
Does anyone remember the “exaflood”? The idea that Internet video bandwidth demands were simply unmanageable and that the internet would come to an abrupt halt? It never happened.
In reality, it was a term brought up by think tanks looking to convince the public and lawmakers that without slashing all consumer regulations and handing over everything to the carriers, we would all be doomed! How do we stop this?
According to groups such as the Internet Innovation Alliance, an industry trade group funded largely by AT&T, internet capacity armageddon was coming unless carriers received little-to-no regulation, no net neutrality laws, no price controls, huge subsidies and tax credits, less consumer protection.
In 2008, the IIA issued a press release proclaiming that by 2012, we will begin seeing brownouts. Which leads me to my next point.
Brownouts are similar to the exaflood except brownouts refer to specific interruptions. Apparently, the internet was going to ‘start’ experiencing these brownouts in 2010.
In an article in USAToday, it was insisted that the Internet “will start to seem pokey as early as 2010, as use of interactive and video-intensive services overwhelms local cable, phone and wireless Internet providers.” The findings of the article came from Nemertes Research with help from the Internet Innovation Alliance (i.e. AT&T):
“The findings indicate that by 2010, the Internet’s capacity will not likely accommodate user demand. As a result, users could increasingly encounter Internet “brownouts” or interruptions to the applications they’ve become accustomed to using on the internet.” – USAToday
The reason that we never experienced the exaflood or brownouts was because they were never real. With modest investment and intelligent engineering, carriers were and still are able to handle traffic thrown at them.
This is probably the most widely used and widely known myth. Is there limited spectrum? Absolutely. Nobody argues that fact. What is a myth is the notion that the major carriers would collapse unless given all the available spectrum.
Whenever Verizon needs a regulatory favor, they talk about a spectrum crunch. When AT&T was trying to buy T-Mobile, AT&T claimed that this purchase MUST be approved or else their company would go bankrupt due to the lack of spectrum.
Except as has been shown a number of times, wireless growth projections from companies like Cisco have been slashed repeatedly in the last few years. The rise of improved networks have in fact been able to handle the load of additional data found in mobile video use.
“In 2011, the spread got wider, 1090 billion MB projected vs 890 billion MB actually carried. And in 2012, the FCC projected 2219 billion MB was even further from the actual traffic of 1468 billion MB. Extrapolating these actual numbers to 2015 suggest the current allocation of 608 MHz of spectrum for mobile broadband will be close to actual demand levels in major metro areas. Of course traffic will continue to grown past 2015, but the “crisis” does not appear to be nearly of the proportions projected a few years ago.” – SummitRidgeGroup
Last year, the Department of Justice Antitrust division sent a letter to the FCC:
“(The FCC) must ensure that the allocation of spectrum at auction does not enable carriers with high market shares to foreclose smaller carriers from improving their customers’ coverage…Today, the two leading carriers have the vast majority of low-frequency spectrum, whereas the two other nationwide carriers have virtually none. This results in the two smaller nationwide carriers having a somewhat diminished ability to compete, particularly in rural areas where the cost to build out coverage is higher with high-frequency spectrum.” – Department of Justice
According to Deloitte’s predictions last year, carriers aren’t going to be able to keep pace with the data demands of smartphone users in the near future. The result will be Internet capacity and performance issues becoming widespread in just the next several years, with carriers raising prices.
So, who is ready for the next fabricated catastrophe?
(This article was co-written by Karl Bode, owner of DSLReports.com)