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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsCorruption Responsible for 80% of Your Cell Phone Bill
Last year, a new company called Lightsquared promised an innovative business model that would dramatically lower cell phone costs and improve the quality of service, threatening the incumbent phone operators like AT&T and Verizon. Lightsquared used a new technology involving satellites and spectrum, and was a textbook example of how markets can benefit the public through competition. The phone industry swung into motion, not by offering better products and services, but by going to Washington to ensure that its new competitor could be killed by its political friends. And sure enough, through three Congressmen that AT&T and Verizon had funded (Fred Upton (R-MI), Greg Walden (R-OR), and Cliff Stearns (R-FL)), Congress began demanding an investigation into this new company. Pretty soon, the Federal Communications Commission got into the game, revoking a critical waiver that had allowed it to proceed with its business plan.
And so Americans continue to have a small number of expensive, poor quality cell phone providers. And how much does this cost you? Take your phone bill, and cut it by 80%. Thats how much you should be paying. You see, according to the Organization for Economic Cooperation and Development, people in Sweden, the Netherlands, and Finland pay on average less than $130 a year for cell phone service. Americans pay $635.85 a year. That $500 a year difference, from most consumers with a cell phone, goes straight to AT&T and Verizon (and to a much lesser extent Sprint and T-Mobile). Its the cost of corruption. Its also, from the perspective of these companies, the return on their campaign contributions and lobbying expenditures. Every penny they spend in DC and in state capitols ensures that you pay high bills, to them.
This isnt obvious, because much of how they do this has to do with the structure of the industry. Telecommunications isnt like selling apples, where you have a lot of buyers and sellers. In a business like buying or selling apples, all you need is an apple tree to get into the business. Cell phones arent like that. Its a business where you sell services on top of a network of cell phone towers that can transmit phone calls and data, and these networks cost tens of billions of dollars to build. But even if you have the money to build one, you still might not be able to, as the Lightsquared example shows. These networks all use public airwaves, or spectrum, and you need government permission to use it. Remember the electromagnetic spectrum you learned about in school? The government literally leases that out to companies, and they make radios, microphones, wifi routers, and cell phones that use it.
Read more: http://www.republicreport.org/2012/cell-phone-corruption-bill/
P.s. Both AT&T and Verizon are members of the American Legislative Exchange Council (ALEC).
SharonAnn
(13,772 posts)After they were split up, they lobbied for legislation to permit them to acquire the "Bell" companies and several wireless companies. So now, they are once again a monopoly but this time they have NO regulation.
Their business model is to buy legislation to build and protect their monopoly.
Fla_Democrat
(2,547 posts)it was all those damned text messages. Go figure.
TheWraith
(24,331 posts)For starters, they blatantly cherrypicked the two cheapest countries in Europe for those numbers. Know what the average yearly price of cell service is in Spain? About $510, close to that of the US and higher than that of Canada. Small countries, and countries with very dense population centers, are far far easier to cover than huge countries with very spread out populations. A larger country requires many times more towers, more hardware, more maintenance, and more backhaul connections to actually get phone calls where they're going, none of which is free.
Furthermore, Lightsquared didn't get shut down because they were cheap--they got shut down because they were disrupting the Global Positioning System, which is a federal crime. They got a CONDITIONAL waver from the FCC to use some frequencies on the ground that are usually only allowed for satellite use, conditional on the premise that the Lightsquared system didn't interfere with anything else. In actual testing, the reality is that it badly distorted and jammed GPS signals, making it not just unusable but in fact extremely dangerous to operate. Thus, the FCC pulled the waver. In fact the United States Air Force, which builds and maintains the Global Positioning System, filed an amicus brief essentially saying that if Lightsquared were allowed to go ahead with their plans it would seriously degrade the usability of GPS for both casual civilian use and life-sustaining purposes like aircraft guidance.
thesquanderer
(11,986 posts)...American cell phone bills have all or most of the cost of the phone built in and amortized over the length of a two year contract, whereas in Europe, I believe it is more common for people to buy the phone outright up front, so that would account for some portion of the difference as well.
dkf
(37,305 posts)Thanks for the clarification.
ProgressiveProfessor
(22,144 posts)Last edited Sun Apr 15, 2012, 11:15 AM - Edit history (1)
The author of the article (not the OP) ignores technical realities. That is never a good sign
fasttense
(17,301 posts)You quoted Spain's price which is one of the 3 most expensive. Who's cherry picking the information?
The average medium price for a medium usage package is $317.77, which is still half the price of what we pay in the US.
Australia, a pretty large continent, is $332.99. Still much cheaper than what the US pays at $635.85.
Here's a link to the actual study: http://www.oecd.org/document/20/0,3343,en_2649_201185_43471316_1_1_1_1,00.html
It clearly shows no correlation between price, size of area, or size of population.
Your argument about the size and density of populations bringing prices down is not held up by the facts.
So, I don't trust your argument about Lightsquad either.
ProgressiveProfessor
(22,144 posts)OnyxCollie
(9,958 posts)This country is fucked.
ProgressiveProfessor
(22,144 posts)fasttense
(17,301 posts)The US is being severely overcharged for cell phone usage. There is no question about it. It's just a simple plain fact.
Totals for medium usage service: (by order of least expensive to most expensive)
Netherlands $131.44
Finland 131.44
Sweden 137.94
Denmark 142.68
Norway 165.33
Iceland 197.03
Austria 199.64
Luxembourg 206.26
New Zealand 256.02
Switzerland 267.08
Japan 267.49
Poland 269.27
Turkey 269.34
United Kingdom 272.02
Hungary 309.03
OECD 317.77
Ireland 330.26
Australia 332.99
Korea 340.13
Portugal 370.35
France 378.02
Italy 394.26
Greece 400.82
Germany 405.20
Mexico 417.62
Slovak Republic 477.46
Czech Republic 484.34
Canada 500.63
Spain 508.26
United States $635.85
Here's a link http://www.oecd.org/document/20/0,3343,en_2649_201185_43471316_1_1_1_1,00.html
Why does the US have to pay the absolute highest prices in the world for cell phone service? It makes No sense. There is absolutely NO correlation in this data between size of area or population density and price.
It's because the US allows for regional and mini monopolies and price fixing. Other countries Do Not allow it. Why shouldn't we be paying close to the medium price? It's just another scam that Americans don't want to believe.
ProgressiveProfessor
(22,144 posts)That said, there should be lower cell phone rates here in the US
fasttense
(17,301 posts)I don't know anything about LS. But I know when I'm being overcharged.
ProgressiveProfessor
(22,144 posts)The conflating of the two issues was either disingenuous or deceitful by the author (not the OP)