Archive for the ‘Mobile’ Category

FCC — the Federal Crony Commission?

Tuesday, April 29th, 2014

Ok, maybe that’s a little harsh. But watch this video of T-Mobile CEO John Legere boasting that’s he’s “spent a lot of time in Washington lately, with the new chairman of the FCC,” and that “they love T-Mobile.”

Ah, spring. Love is in the air. Great for twenty-somethings, not so great for federal agencies. The FCC, however, is thinking about handing over valuable wireless spectrum to T-Mobile and denying it to T-Mobile’s rivals. This type of industrial policy is partially responsible for the sluggish economy.

From taxpayer subsidies for connected Wall Street banks to favored green energy firms with the right political allies, cronyism prevents the best firms from serving consumers with the best products in the most efficient way. Cronyism is good (at least temporarily) for a few at the top. But it hurts everyone else. Government favors ensure that bad ideas and business models are supported even if they would have proved wanting in a more neutral market. They transfer scarce taxpayer dollars to friends and family. They also hurt firms who aren’t fortunate enough to have the right friends in the right places at the right time. It’s hard to compete against a rival who has the backing of Washington. The specter of arbitrary government then hangs over the economy as firms and investors make decisions not on the merits but on a form of kremlinology — what will Washington do? In the case at hand, cronyism could blow up the whole spectrum auction, an act of wild irresponsibility in the service of a narrow special interest (we’ve written about it herehere, and here).

The U.S. has never been perfectly free of such cronyism, but our system was better than most and over the centuries attracted the world’s financial and human capital because investors and entrepreneurs knew that in the U.S. the best ideas and the hardest work tend to win out. Effort, smarts, and risk capital won’t be snuffed out by some arbitrary bureaucratic decision or favor. That was the stuff of Banana Republics — the reason financial and human capital fled those spots for America, preferring the Rule of Law to the Whim of Man.

The FCC’s prospective auction rules are perplexing in part because the U.S. mobile industry is healthy — world-leading healthy. More usage, faster speeds, plummeting prices, etc. Why risk interrupted that string of success? Economist Hal Singer shows that in the FCC’s voluminous reports on the wireless industry, it has failed to present any evidence of monopoly power that would justify its rigging of the spectrum auctions. On the other hand, an overly complex auction could derail spectrum policy for a decade.

How much would an iPhone have cost in 1991?

Monday, February 3rd, 2014

Amazing! An iPhone is more capable than 13 distinct electronics gadgets, worth more than $3,000, from a 1991 Radio Shack ad. Buffalo writer Steve Cichon first dug up the old ad and made the point about the seemingly miraculous pace of digital advance, noting that an iPhone incorporates the features of the computer, CD player, phone, “phone answerer,” and video camera, among other items in the ad, all at a lower price. The Washington Post’s tech blog The Switch picked up the analysis, and lots of people then ran with it on Twitter. Yet the comparison was, unintentionally, a huge dis to the digital economy. It massively underestimates the true pace of technological advance and, despite its humor and good intentions, actually exposes a shortcoming that plagues much economic and policy analysis.

To see why, let’s do a very rough, back-of-the-envelope estimate of what an iPhone would have cost in 1991.

In 1991, a gigabyte of hard disk storage cost around $10,000, perhaps a touch less. (Today, it costs around four cents ($0.04).) Back in 1991, a gigabyte of flash memory, which is what the iPhone uses, would have cost something like $45,000, or more. (Today, it’s around 55 cents ($0.55).)

The mid-level iPhone 5S has 32 GB of flash memory. Thirty-two GB, multiplied by $45,000, equals $1.44 million.

The iPhone 5S uses Apple’s latest A7 processor, a powerful CPU, with an integrated GPU (graphics processing unit), that totals around 1 billion transistors, and runs at a clock speed of 1.3 GHz, producing something like 20,500 MIPS (millions of instructions per second). In 1991, one of Intel’s top microprocessors, the 80486SX, oft used in Dell desktop computers, had 1.185 million transistors and ran at 20 MHz, yielding around 16.5 MIPS. (The Tandy computer in the Radio Shack ad used a processor not nearly as powerful.) A PC using the 80486SX processor at the time might have cost $3,000. The Apple A7, by the very rough measure of MIPS, which probably underestimates the true improvement, outpaces that leading edge desktop PC processor by a factor of 1,242. In 1991, the price per MIPS was something like $30.

So 20,500 MIPS in 1991 would have cost around $620,000.

But there’s more. The 5S also contains the high-resolution display, the touchscreen, Apple’s own M7 motion processing chip, Qualcomm’s LTE broadband modem and its multimode, multiband broadband transceiver, a Broadcom Wi-Fi processor, the Sony 8 megapixel iSight (video) camera, the fingerprint sensor, power amplifiers, and a host of other chips and motion-sensing MEMS devices, like the gyroscope and accelerometer.

In 1991, a mobile phone used the AMPS analog wireless network to deliver kilobit voice connections. A 1.44 megabit T1 line from the telephone company cost around $1,000 per month. Today’s LTE mobile network is delivering speeds in the 15 Mbps range. Wi-Fi delivers speeds up to 100 Mbps (limited, of course, by its wired connection). Safe to say, the iPhone’s communication capacity is at least 10,000 times that of a 1991 mobile phone. Almost the entire cost of a phone back then was dedicated to merely communicating. Say the 1991 cost of mobile communication (only at the device/component level, not considering the network infrastructure or monthly service) was something like $100 per kilobit per second.

Fifteen thousand Kbps (15 Mbps), multiplied by $100, is $1.5 million.

Considering only memory, processing, and broadband communications power, duplicating the iPhone back in 1991 would have (very roughly) cost: $1.44 million + $620,000 + $1.5 million = $3.56 million.

This doesn’t even account for the MEMS motion detectors, the camera, the iOS operating system, the brilliant display, or the endless worlds of the Internet and apps to which the iPhone connects us.

This account also ignores the crucial fact that no matter how much money one spent, it would have been impossible in 1991 to pack that much technological power into a form factor the size of the iPhone, or even a refrigerator.*

Tim Lee at The Switch noted the imprecision of the original analysis and correctly asked how typical analyses of inflation can hope to account for such radical price drops. (Harvard economist Larry Summers recently picked up on this point as well.)

But the fact that so many were so impressed by an assertion that an iPhone possesses the capabilities of $3,000 worth of 1991 electronics products — when the actual figure exceeds $3 million — reveals how fundamentally difficult it is to think in exponential terms.

Innovation blindness, I’ve long argued, is a key obstacle to sound economic and policy thinking. And this is a perfect example. When we make policy based on today’s technology, we don’t just operate mildly sub-optimally. No, we often close off entire pathways to amazing innovation.

Consider the way education policy has mostly enshrined a 150-year-old model, and in recent decades has thrown more money at the same broken system while blocking experimentation. The other day, the venture capitalist Marc Andreessen (@pmarca) noted in a Twitter missive the huge, but largely unforeseen, impact digital technologies are having on this industry that so desperately needs improvement:

“Four biggest K-12 education breakthroughs in last 20 years: (1) Google, (2) Wikipedia, (3) Khan Academy, (4) Wolfram Alpha.”

Maybe the biggest breakthroughs of the last 50 years. Point made, nonetheless. California is now closing down “coding bootcamps” — courses that teach people how to build apps and other software — because many of them are not state certified. This is crazy.

The importance of understanding the power of innovation applies to health care, energy, education, and fiscal policy, but no where is it more applicable than in Internet and technology policy, which is, at the moment, the subject of a much needed rethink by the House Energy and Commerce Committee.

— Bret Swanson

* To be fair, we do not account for the fact that back in 1991, had engineers tried to design and build chips and components with faster speeds and greater capacities than the consumer items mentioned, they could have in some cases scaled the technology in a more efficient manner than, for example, simply adding up consumer microprocessors totaling 20,500 MIPS. On the other hand, the extreme volumes of the consumer products in these memory, processing, and broadband communications categories, are what make the price drops possible. So this acknowledgment doesn’t change the analysis too much, if at all.

Why the fuss over “sponsored data”?

Monday, January 6th, 2014

Today, at the Consumer Electronics Show in Las Vegas, AT&T said it would begin letting content firms — Google, ESPN, Netflix, Amazon, a new app, etc. — pay for a portion of the mobile data used by consumers of this content. If a mobile user has a 2 GB plan but likes to watch lots of Yahoo! news video clips, which consume a lot of data, Yahoo! can now subsidize that user by paying for that data usage, which won’t count against the user’s data limit.

Lots of people were surprised — or “surprised” — at the announcement and reacted violently. They charged AT&T with “double dipping,” imposing “taxes,” and of course the all-purpose net neutrality violation.

But this new sponsored data program is typical of multisided markets where a platform provider offers value to two or more parties — think magazines who charge both subscribers and advertisers. We addressed this topic before the idea was a reality. Back in June 2013, we argued that sponsored data would make lots of mobile consumers better off and no one worse off.

Two weeks ago, for example, we got word ESPN had been talking with one or more mobile service providers about a new arrangement in which the sports giant might agree to pay the mobile providers so that its content doesn’t count against a subscriber’s data cap. People like watching sports on their mobile devices, but web video consumes lots of data and is especially tough on bandwidth-constrained mobile networks. The mobile providers and ESPN have noticed usage slowing as consumers approach their data subscription ceilings, after which they are commonly charged overage fees. ESPN doesn’t like this. It wants people to watch as much as possible. This is how it sells advertising. ESPN wants to help people watch more by, in effect, boosting the amount of data a user may consume — at no cost to the user.

Sounds like a reasonable deal all around. But not to everyone. “This is what a net neutrality violation looks like,” wrote Public Knowledge, a key backer of Internet regulation.

The idea that ESPN would pay to exempt its bits from data caps offends net neutrality’s abstract notion that all bits must be treated equal. But why is this bad in concrete terms? No one is talking about blocking content. In fact, by paying for a portion of consumers’ data consumption, such an arrangement can boost consumption and consumer choice. Far from blocking content, consumers will enjoy more content. Now I can consume my 2 gigabytes of data — plus all the ESPN streaming I want. That’s additive. And if I don’t watch ESPN, then I’m no worse off. But if the mobile company were banned from such an arrangement, it may be forced to raise prices for everyone. Now, because ESPN content is popular and bandwidth-hungry, I, especially if a non-watcher of ESPN, am worse off.

The critics’ real worry, then, is that ESPN, by virtue of its size, could gain an advantage on some other sports content provider who chose not to offer a similar uncapped service. But is this government’s role — the micromanagement of prices, products, the structure of markets, and relationships among competitive and cooperative firms? This was our warning. This is what we said net neutrality was really all about — protecting some firms and punishing others. Where is the consumer in this equation?

What if magazines were barred from carrying advertisements? They’d have to make all their money from subscribers and thus (attempt to) charge much higher prices or change their business model. Consumers would lose, either through higher prices or less diversity of product offerings. And advertisers, deprived of an outlet to reach an audience, would lose. That’s what we call a lose-lose-lose proposition.

Maybe sponsored data will take off. Maybe not. It’s clear, however, in the highly dynamic mobile Internet business, we should allow such voluntary experiments.

Discussing Broadband and Economic Growth at AEI

Sunday, September 22nd, 2013

On Tuesday this week, the American Enterprise Institute launched an exciting new project — the Center for Internet, Communications, and Technology. I was happy to participate in the inaugural event, which included talks by CEA chairman Jason Furman and Rep. Greg Walden (R-OR). We discussed broadband’s potential to boost economic productivity and focused on the importance and key questions of wireless spectrum policy. See the video below:

Simple Rules For Spectrum

Thursday, July 18th, 2013

Washington is getting closer to unleashing more spectrum to fuel the digital economy and stay ahead of capacity constraints that will stymie innovation and raise prices for consumers. Ahead of the July 23 Congressional hearing on spectrum auctions, we should keep a couple things in mind. First and foremost, we need “Simple Rules for a Complex World.” It’s a basic idea that should apply to all policymaking. But especially in the exceedingly complex and fast-moving digital ecosystem.

A number of firms are seeking special rules that would complicate — and possibly undermine — the auctions. They want to exclude some rival firms from bidding in the auctions. They are suggesting exclusions, triggers, “one-third caps,” and other Rube Goldberg mechanisms they hope will tip the auction scales in their favor.

Using examples from the labor markets and capital markets, we showed in a recent paper that complex policies — even though well intended and designed by smart people — often yield perverse results. Laws and regulations should be few, simple, and neutral. Those advocating the special auction rules favor a process that is complex and biased.

They are also using complicated arguments to back their preferred complicated process. Some are asserting a “less is more” theory of auctions — the idea that fewer bidders can yield higher auction revenues. If it seems counterintuitive, it is. Their theory is based on a very specific, hypothetical auction where a dominant monopolist might scare off a potential new market entrant from bidding at all and walk away with the underpriced auction items. This hypothetical does not apply to America’s actual wireless spectrum market.

The U.S. has four national mobile service providers and a number of regional providers. We have lots of existing players, most of whom plan to bid in the auctions. As all the theory and evidence shows, in this situation, an open process with more bidders means a better auction — spectrum flowing to its highest value uses and more overall revenue.

Some studies show a policy excluding the top two bidders in the auction could reduce revenue by up to 40% — or $12 billion. This would not only prevent spectrum from flowing to its best use but could also jeopardize the whole purpose of the incentive auction, because lower prices could discourage TV broadcasters from “selling” their valuable airwaves. If the auction falls short, that means less spectrum, less mobile capacity, slower mobile broadband, and higher consumer prices. (See our recent Forbes article on the topic.)

Fortunately, several Members of Congress are adhering to the Simple Rules idea. They want to keep the spectrum auction open and competitive. They think this will  yield the most auction revenues and ensure the maximum amount of underutilized broadcast spectrum is repurposed for wireless broadband.

The argument for simple auction rules is simple. The argument for complex auction rules is very complicated.

Net ‘Neutrality’ or Net Dynamism? Easy Choice.

Tuesday, May 14th, 2013

Consumers beware. A big content company wants to help pay for the sports you love to watch.

ESPN is reportedly talking with one or more mobile service providers about a new arrangement in which the sports giant might agree to pay the mobile providers so that its content doesn’t count against a subscriber’s data cap. People like watching sports on their mobile devices, but web video consumes lots of data and is especially tough on bandwidth-constrained mobile networks. The mobile providers and ESPN have noticed usage slowing as consumers approach their data subscription ceilings, after which they are commonly charged overage fees. ESPN doesn’t like this. It wants people to watch as much as possible. This is how it sells advertising. ESPN wants to help people watch more by, in effect, boosting the amount of data a user may consume — at no cost to the user.

As good a deal as this may be for consumers (and the companies involved), the potential arrangement offends some people’s very particular notion of “network neutrality.” They often have trouble defining what they mean by net neutrality, but they know rule breakers when they see them. Sure enough, long time net neutrality advocate Public Knowledge noted, “This is what a network neutrality violation looks like.”

The basic notion is that all bits on communications networks should be treated the same. No prioritization, no discrimination, and no partnerships between content companies and conduit companies. Over the last decade, however, as we debated net neutrality in great depth and breadth, we would point out that such a notional rule would likely result in many perverse consequences. For example, we noted that, had net neutrality existed at the time, the outlawing of pay-for-prioritization would have banned the rise of content delivery networks (CDNs), which have fundamentally improved the user experience for viewing online content. When challenged in this way, the net neutrality proponents would often reply, Well, we didn’t mean that. Of course that should be allowed. We also would point out that yesterday’s and today’s networks discriminate among bits in all sorts of ways, and that we would continue doing so in the future. Their arguments often deteriorated into a general view that Bad things should be banned. Good things should be allowed. And who do you think would be the arbiter of good and evil? You guessed it.

So what is the argument in the case of ESPN? The idea that ESPN would pay to exempt its bits from data caps apparently offends the abstract all-bits-equal notion. But why is this bad in concrete terms? No one is talking about blocking content. In fact, by paying for a portion of consumers’ data consumption, such an arrangement can boost consumption and consumer choice. Far from blocking content, consumers will enjoy more content. Now I can consume my 2 gigabytes of data plus all the ESPN streaming I want. That’s additive. And if I don’t watch ESPN, then I’m no worse off. But if the mobile company were banned from such an arrangement, it may be forced to raise prices for everyone. Now, because ESPN content is popular and bandwidth-hungry, I, especially as an ESPN non-watcher, am worse off.

So the critics’ real worry is, I suppose, that ESPN, by virtue of its size, could gain an advantage on some other sports content provider who chose not to offer a similar uncapped service. But this is NOT what government policy should be — the micromanagement of prices, products, the structure of markets, and relationships among competitive and cooperative firms. This is what we warned would happen. This is what we said net neutrality was really all about — protecting some firms and punishing others. Where is the consumer in this equation?

These practical and utilitarian arguments about technology and economics are important. Yet they ignore perhaps the biggest point of all: the FCC has no authority to regulate the Internet. The Internet is perhaps the greatest free-flowing, fast-growing, dynamic engine of cultural and economic value we’ve known. The Internet’s great virtue is its ability to change and grow, to foster experimentation and innovation. Diversity in networks, content, services, apps, and business models is a feature, not a bug. Regulation necessarily limits this freedom and diversity, making everything more homogeneous and diminishing the possibilities for entrepreneurship and innovation. Congress has given the FCC no authority to regulate the Internet. The FCC invented this job for itself and is now being challenged in court.

Possible ESPN-mobile partnerships are just the latest reminder of why we don’t want government limiting our choices — and all the possibilities — on the Internet.

— Bret Swanson

U.S. Mobile: Effectively competitive? Probably. Positively healthy? Absolutely.

Tuesday, March 26th, 2013

Each year the Federal Communications Commission is required to report on competition in the mobile phone market. Following Congress’s mandate to determine the level of industry competition, the FCC, for many years, labeled the industry “effectively competitive.” Then, starting a few years ago, the FCC declined to make such a determination. Yes, there had been some consolidation, it was acknowledged, yet the industry was healthier than ever — more subscribers, more devices, more services, lots of innovation. The failure to achieve the “effectively competitive” label was thus a point of contention.

This year’s “CMRS” — commercial mobile radio services — report again fails to make a designation, one way or the other. Yet whatever the report lacks in official labels, it more than makes up in impressive data.

For example, it shows that as of October 2012, 97.2% of Americans have access to three or more mobile providers, and 92.8% have access to four or more. As for mobile broadband data services, 97.8% have access to two or more providers, and 91.6% have access to three or more.

Rural America is also doing well. The FCC finds 87% of rural consumers have access to three or more mobile voice providers, and 69.1% have access to four or more. For mobile broadband, 89.9% have access to two or more providers, while 65.4% enjoy access to three or more.

Call this what you will — to most laypeople, these choices count as robust competition. Yet the FCC has a point when it

refrain[s] from providing any single conclusion because such an assessment would be incomplete and possibly misleading in light of the variations and complexities we observe.

The industry has grown so large, with so many interconnected and dynamic players, it may have outgrown Congress’s request for a specific label.

14. Given the Report’s expansive view of mobile wireless services and its examination of competition across the entire mobile wireless ecosystem, we find that the mobile wireless ecosystem is sufficiently complex and multi-faceted that it would not be meaningful to try to make a single, all-inclusive finding regarding effective competition that adequately encompasses the level of competition in the various interrelated segments, types of services, and vast geographic areas of the mobile wireless industry.

Or as economist George Ford of the Phoenix Center put it,

The statute wants a competitive analysis, but as the Commission correctly points out, competition is not the goal, it [is] the means. Better performance is the goal. When the evidence presented in the Sixteenth Report is viewed in this way, the conclusion to be reached about the mobile industry, at least to me, is obvious: the U.S. mobile wireless industry is performing exceptionally well for consumers, regardless of whether or not it satisfies someone’s arbitrarily-defined standard of “effective competition.”

I’m in good company.  Outgoing FCC Chairman Julius Genachowski lists among his proudest achievements that “the U.S. is now the envy of the world in advanced wireless networks, devices, applications, among other areas.

The report shows that in the last decade, U.S. mobile connections have nearly tripled. The U.S. now has more mobile connections than people.

The report also shows per user data consumption more than doubling year to year.

More important, the proliferation of smartphones, which are powerful mobile computers, is the foundation for a new American software industry widely known as the App Economy. We detailed the short but amazing history of the app and its impact on the economy in our report “Soft Power: Zero to 60 Billion in Four Years.” Likewise, these devices and software applications are changing industries that need changing. Last week, experts testified before Congress about mobile health, or mHealth, and we wrote about the coming health care productivity revolution in “The App-ification of Medicine.”

One factor that still threatens to limit mobile growth is the availability of spectrum. The report details past spectrum allocations that have borne fruit, but the pipeline of future spectrum allocations is uncertain. A more robust commitment to spectrum availability and a free-flowing spectrum market would ensure continued investment in networks, content, and services.

What Congress once called the mobile “phone” industry is now a sprawling global ecosystem and a central driver of economic advance. By most measures, the industry is effectively competitive. By any measure, it’s positively healthy.

— Bret Swanson

The Broadband Rooster

Tuesday, March 12th, 2013

FCC chairman Julius Genachowski opens a new op-ed with a bang:

As Washington continues to wrangle over raising revenue and cutting spending, let’s not forget a crucial third element for reining in the deficit: economic growth. To sustain long-term economic health, America needs growth engines, areas of the economy that hold real promise of major expansion. Few sectors have more job-creating innovation potential than broadband, particularly mobile broadband.

Private-sector innovation in mobile broadband has been extraordinary. But maintaining the creative momentum in wireless networks, devices and apps will need an equally innovative wireless policy, or jobs and growth will be left on the table.

Economic growth is indeed the crucial missing link to employment, opportunity, and healthier government budgets. Technology is the key driver of long term growth, and even during the downturn the broadband economy has delivered. Michael Mandel estimates the “app economy,” for example, has created more than 500,000 jobs in less than five short years of existence.

We emphatically do need policies that will facilitate the next wave of digital innovation and growth. Chairman Genachowski’s top line assessment — that U.S. broadband is a success — is important. It rebuts the many false but persistent claims that U.S. broadband lags the world. Chairman Genachowski’s diagnosis of how we got here and his prescriptions for the future, however, are off the mark.

For example, he suggests U.S. mobile innovation is newer than it really is.

Over the past few years, after trailing Europe and Asia in mobile infrastructure and innovation, the U.S. has regained global leadership in mobile technology.

This American mobile resurgence did not take place in just the last “few years.” It began a little more than decade ago with smart decisions to:

(1) allow reasonable industry consolidation and relatively free spectrum allocation, after years of forced “competition,” which mandated network duplication and thus underinvestment in coverage and speed (we did in fact trail Europe in some important mobile metrics in the late 1990s and briefly into the 2000s);

(2) refrain from any but the most basic regulation of broadband in general and the mobile market in particular, encouraging experimental innovation; and

(3) finally implement the digital TV / 700 MHz transition in 2007, which put more of the best spectrum into the market.

These policies, among others, encouraged some $165 billion in mobile capital investment between 2001 and 2008 and launched a wave of mobile innovation. Development on the iPhone began in 2004, the iPhone itself arrived in 2007, and the app store in 2008. Google’s Android mobile OS came along in 2009, the year Mr. Genachowski arrived at the FCC. By this time, the American mobile juggernaut had already been in full flight for years, and the foundation was set — the U.S. topped the world in 3G mobile networks and device and software innovation. Wi-Fi, meanwhile surged from 2003 onward, creating an organic network of tens of millions of wireless nodes in homes, offices, and public spaces. Mr. Genachowski gets some points for not impeding the market as aggressively as some other more zealous regulators might have. But taking credit for America’s mobile miracle smacks of the rooster proudly puffing his chest at sunrise.

More important than who gets the credit, however, is determining what policies led to the current success . . . and which are likely to spur future growth. Chairman Genachowski is right to herald the incentive auctions that could unleash hundreds of megahertz of un- and under-used spectrum from the old TV broadcasters. Yet wrangling over the rules of the auctions could stretch on, delaying the the process. Worse, the rules themselves could restrict who can bid on or buy new spectrum, effectively allowing the FCC to favor certain firms, technologies, or friends at the expense of the best spectrum allocation. We’ve seen before that centrally planned spectrum allocations don’t work. The fact that the FCC is contemplating such an approach is worrisome. It runs counter to the policies that led to today’s mobile success.

The FCC also has a bad habit of changing the metrics and the rules in the middle of the game. For example, the FCC has been caught changing its “spectrum screen” to fit its needs. The screen attempts to show how much spectrum mobile operators hold in particular markets. During M&A reviews, however, the FCC has changed its screen procedures to make the data fit its opinion.

In a more recent example, Fred Campbell shows that the FCC alters its count of total available commercial spectrum to fit the argument it wants to make from day to day. We’ve shown that the U.S. trails other nations in the sum of currently available spectrum plus spectrum in the pipeline. Below, see a chart from last year showing how the U.S. compares favorably in existing commercially available spectrum but trails severely in pipeline spectrum. Translation: the U.S. did a pretty good job unleashing spectrum in 1990s through he mid-2000s. But, contrary to Chairman Genachowski’s implication, it has stalled in the last few years.

When the FCC wants to argue that particular companies shouldn’t be allowed to acquire more spectrum (whether through merger or secondary markets), it adopts this view that the U.S. trails in spectrum allocation. Yet when challenged on the more general point that the U.S. lags other nations, the FCC turns around and includes an extra 139 MHz in spectrum in the 2.5 GHz range to avoid the charge it’s fallen behind the curve.

Next, Chairman Genachowski heralds a new spectrum “sharing” policy where private companies would be allowed to access tiny portions of government-owned airwaves. This really is weak tea. The government, depending on how you measure, controls between 60% and 85% of the best spectrum for wireless broadband. It uses very little of it. Yet it refuses to part with meaningful portions, even though it would still be left with more than enough for its important uses — military and otherwise. If they can make it work (I’m skeptical), sharing may offer a marginal benefit. But it does not remotely fit the scale of the challenge.

Along the way, the FCC has been whittling away at mobile’s incentives for investment and its environment of experimentation. Chairman Genachowski, for example, imposed price controls on “data roaming,” even though it’s highly questionable he had the legal authority to do so. The Commission has also, with varied degrees of “success,” been attempting to impose its extralegal net neutrality framework to wireless. And of course the FCC has blocked, altered, and/or discouraged a number of important wireless mergers and secondary spectrum transactions.

Chairman Genachowski’s big picture is a pretty one: broadband innovation is key to economic growth. Look at the brush strokes, however, and there are reasons to believe sloppy and overanxious regulators are threatening to diminish America’s mobile masterpiece.

— Bret Swanson

The $66-billion Internet Expansion

Thursday, November 8th, 2012

Sixty-six billion dollars over the next three years. That’s AT&T’s new infrastructure plan, announced yesterday. It’s a bold commitment to extend fiber optics and 4G wireless to most of the country and thus dramatically expand the key platform for growth in the modern U.S. economy.

The company specifically will boost its capital investments by an additional $14 billion over previous estimates. This should enable coverage of 300 million Americans (around 97% of the population) with LTE wireless and 75% of AT&T’s residential service area with fast IP broadband. It’s adding 10,000 new cell towers, a thousand distributed antenna systems, and 40,000 “small cells” that augment and extend the wireless network to, for example, heavily trafficked public spaces. Also planned are fiber optic connections to an additional 1 million businesses.

As the company expands its fiber optic and wireless networks — to drive and accommodate the type of growth seen in the chart above — it will be retiring parts of its hundred-year-old copper telephone network. To do this, it will need cooperation from federal and state regulators. This is the end of phone network, the transition to all Internet, all the time, everywhere.

FCC’s 706 Broadband Report Does Not Compute

Wednesday, August 22nd, 2012

Yesterday the Federal Communications Commission issued 181 pages of metrics demonstrating, to any fair reader, the continuing rapid rise of the U.S. broadband economy — and then concluded, naturally, that “broadband is not yet being deployed to all Americans in a reasonable and timely fashion.” A computer, being fed the data and the conclusion, would, unable to process the logical contradictions, crash.

The report is a response to section 706(b) of the 1996 Telecom Act that asks the FCC to report annually whether broadband “is being deployed . . . in a reasonable and timely fashion.” From 1999 to 2008, the FCC concluded that yes, it was. But now, as more Americans than ever have broadband and use it to an often maniacal extent, the FCC has concluded for the third year in a row that no, broadband deployment is not “reasonable and timely.”

The FCC finds that 19 million Americans, mostly in very rural areas, don’t have access to fixed line terrestrial broadband. But Congress specifically asked the FCC to analyze broadband deployment using any technology.”

“Any technology” includes DSL, cable modems, fiber-to-the-x, satellite, and of course fixed wireless and mobile. If we include wireless broadband, the unserved number falls to 5.5 million from the FCC’s headline 19 million. Five and a half million is 1.74% of the U.S. population. Not exactly a headline-grabbing figure.

Even if we stipulate the FCC’s framework, data, and analysis, we’re still left with the FCC’s own admission that between June 2010 and June 2011, an additional 7.4 million Americans gained access to fixed broadband service. That dropped the portion of Americans without access to 6% in 2011 from around 8.55% in 2010 — a 30% drop in the unserved population in one year. Most Americans have had broadband for many years, and the rate of deployment will necessarily slow toward the tail-end of any build-out. When most American households are served, there just aren’t very many to go, and those that have yet to gain access are likely to be in the very most difficult to serve areas (e.g. “on tops of mountains in the middle of nowhere”). The fact that we still added 7.4 million broadband in the last year, lowering the unserved population by 30%, even using the FCC’s faulty framework, demonstrates in any rational world that broadband “is being deployed” in a “reasonable and timely fashion.”

But this is not the rational world — it’s D.C. in the perpetual political silly season.

One might conclude that because the vast majority of these unserved Americans live in very rural areas — Alaska, Montana, West Virginia — the FCC would, if anything, suggest policies tailored to boost infrastructure investment in these hard-to-reach geographies. We could debate whether these are sound investments and whether the government would do a good job expanding access, but if rural deployment is a problem, then presumably policy should attempt to target and remediate the rural underserved. Commissioner McDowell, however, knows the real impetus for the FCC’s tortured no-confidence vote — its regulatory agenda.

McDowell notes that the report repeatedly mentions the FCC’s net neutrality rules (now being contested in court), which are as far from a pro-broadband policy, let alone a targeted one, as you could imagine. If anything, net neutrality is an impediment to broader, faster, better broadband. But the FCC is using its thumbs-down on broadband deployment to prop up its intrusions into a healthy industry. As McDowell concluded, “the majority has used this process as an opportunity to create a pretext to justify more regulation.”

Misunderstanding the Mobile Ecosystem

Thursday, August 9th, 2012

Mobile communications and computing are among the most innovative and competitive markets in the world. They have created a new world of software and offer dramatic opportunities to improve productivity and creativity across the industrial spectrum.

Last week we published a tech note documenting the rapid growth of mobile and the importance of expanding wireless spectrum availability. More clean spectrum is necessary both to accommodate fast-rising demand and drive future innovations. Expanding spectrum availability might seem uncontroversial. In the report, however, we noted that one obstacle to expanding spectrum availability has been a cramped notion of what constitutes competition in the Internet era. As we wrote:

Opponents of open spectrum auctions and flexible secondary markets often ignore falling prices, expanding choices, and new features available to consumers. Instead they sometimes seek to limit new spectrum availability, or micromanage its allocation or deployment characteristics, charging that a few companies are set to dominate the market. Although the FCC found that 77% of the U.S. population has access to three or more 3G wireless providers, charges of a coming “duopoly” are now common.

This view, however, relies on the old analysis of static utility or commodity markets and ignores the new realities of broadband communications. The new landscape is one of overlapping competitors with overlapping products and services, multi-sided markets, network effects, rapid innovation, falling prices, and unpredictability.

Sure enough, yesterday Sprint CEO Dan Hesse made the duopoly charge and helped show why getting spectrum policy right has been so difficult.

Q: You were a vocal opponent of the AT&T/T-Mobile merger. Are you satisfied you can compete now that the merger did not go through?

A: We’re certainly working very hard. There’s no question that the industry does have an issue with the size of the duopoly of AT&T and Verizon. I believe that over time we’ll see more consolidation in the industry outside of the big two, because the gap in size between two and three is so enormous. Consolidation is healthy for the industry as long as it’s not AT&T and Verizon getting larger.

Hesse goes even further.

Hesse also seemed to be likening Sprint’s struggles in competing with AT&T-Rex and Big Red as a fight against good and evil. Sprint wants to wear the white hat, according to Hesse. “At Sprint, we describe it internally as being the good guys, of doing the right thing,” he said.

This type of thinking is always a danger if you’re trying to make sound policy. Picking winners and losers is inevitably — at best — an arbitrary exercise. Doing so based on some notion of corporate morality is plain silly, but even more reasonable sounding metrics and arguments — like those based on market share — are often just as misleading and harmful.

The mobile Internet ecosystem is growing so fast and changing with such rapidity and unpredictability that making policy based on static and narrow market definitions will likely yield poor policy. As we noted in our report:

It is, for example, worth emphasizing: Google and Apple were not in this business just a few short years ago.

Yet by the fourth quarter of 2011 Apple could boast an amazing 75% of the handset market’s profits. Apple’s iPhone business, it was widely noted after Apple’s historic 2011, is larger than all of Microsoft. In fact, Apple’s non-iPhone products are also larger than Microsoft.

Android, the mobile operating system of Google, has been growing even faster than Apple’s iOS. In December 2011, Google was activating 700,000 Android devices a day, and now, in the summer of 2012, it estimates 900,000 activations per day. From a nearly zero share at the beginning of 2009, Android today boasts roughly a 55% share of the global smartphone OS market.

. . .

Apple’s iPhone changed the structure of the industry in several ways, not least the relationships between mobile service providers and handset makers. Mobile operators used to tell handset makers what to make, how to make it, and what software and firmware could be loaded on it. They would then slap their own brand label on someone else’s phone.

Apple’s quick rise to mobile dominance has been matched by Blackberry maker Research In Motion’s fall. RIM dominated the 2000s with its email software, its qwerty keyboard, and its popularity with enterprise IT departments. But it  couldn’t match Apple’s or Android’s general purpose computing platforms, with user-friendly operating systems, large, bright touch-screens, and creative and diverse app communities.

Sprinkled among these developments were the rise, fall, and resurgence of Motorola, and then its sale to Google; the rise and fall of Palm; the rise of HTC; and the decline of once dominant Nokia.

Apple, Google, Amazon, Microsoft, and others are building cloud ecosystems, sometimes complemented with consumer devices, often tied to Web apps and services, multimedia content, and retail stores. Many of these products and services compete with each other, but they also compete with broadband service providers. Some of these business models rely primarily on hardware, some software, some subscriptions, some advertising. Each of the companies listed above — a computer company, a search company, an ecommerce company, and a software company — are now major Internet infrastructure companies.

As Jeffrey Eisenach concluded in a pathbreaking analysis of the digital ecosystem (“Theories of Broadband Competition”), there may be market concentration in one (or more) layer(s) of the industry (broadly considered), yet prices are falling, access is expanding, products are proliferating, and innovation is as rapid as in any market we know.

New iPad, Fellow Bandwidth Monsters Hungry for More Spectrum

Tuesday, March 13th, 2012

Last week Apple unveiled its third-generation iPad. Yesterday the company said the LTE versions of the device, which can connect via Verizon and AT&T mobile broadband networks, are sold out.

It took 15 years for laptops to reach 50 million units sold in a year. It took smartphones seven years. For tablets (not including Microsoft’s clunky attempt a decade ago), just two years. Mobile device volumes are astounding. In each of the last five years, global mobile phone sales topped a billion units. Last year smartphones outsold PCs for the first time – 488 million versus 432 million. This year well over 500 million smartphones and perhaps 100 million tablets could be sold.

Smartphones and tablets represent the first fundamentally new consumer computing platforms since the PC, which arrived in the late ’70s and early ’80s. Unlike mere mobile phones, they’ve got serious processing power inside. But their game-changing potency is really based on their capacity to communicate via the Internet. And this power is, of course, dependent on the cloud infrastructure and wireless networks.

But are wireless networks today prepared for this new surge of bandwidth-hungry mobile devices? Probably not. When we started to build 3G mobile networks in the middle of last decade, many thought it was a huge waste. Mobile phones were used for talking, and some texting. They had small low-res screens and were terrible at browsing the Web. What in the world would we do with all this new wireless capacity? Then the iPhone came, and, boom — in big cities we went from laughable overcapacity to severe shortage seemingly overnight. The iPhone’s brilliant screen, its real Web browsing experience, and the world of apps it helped us discover totally changed the game. Wi-Fi helped supply the burgeoning iPhone with bandwidth, and Wi-Fi will continue to grow and play an important role. Yet Credit Suisse, in a 2011 survey of the industry, found that mobile networks overall were running at 80% of capacity and that many network nodes were tapped out.

Today, we are still expanding 3G networks and launching 4G in most cities. Verizon says it offers 4G LTE in 196 cities, while AT&T says it offers 4G LTE in 28 markets (and combined with its HSPA+ networks offers 4G-like speeds to 200 million people in the U.S.). Lots of things affect how fast we can build new networks — from cell site permitting to the fact that these things are expensive ($20 billion worth of wireless infrastructure in the U.S. last year). But another limiting factor is spectrum availability.

Do we have enough radio waves to efficiently and cost-effectively serve these hundreds of millions of increasingly powerful mobile devices, which generate and consume increasingly rich content, with ever more stringent latency requirements, and which depend upon robust access to cloud storage and computing resources?

Capacity is a function of money, network nodes, technology, and radio waves. But spectrum is grossly misallocated. The U.S. government owns 61% of the best airwaves, while mobile broadband providers — where all the action is — own just 10%. Another portion is controlled by the old TV broadcasters, where much of this beachfront spectrum lay fallow or underused.

They key is allowing spectrum to flow to its most valuable uses. Last month Congress finally authorized the FCC to conduct incentive auctions to free up some unused and underused TV spectrum. Good news. But other recent developments discourage us from too much optimism on this front.

In December the FCC and Justice Department vetoed AT&T’s attempt to augment its spectrum and cell-site position via merger with T-Mobile. Now the FCC and DoJ are questioning Verizon’s announced purchase of Spectrum Co. — valuable but unused spectrum owned by a consortium of cable TV companies. The FCC has also threatened to tilt any spectrum auctions so that it decides who can bid, how much bidders can buy, and what buyers may or may not do with their spectrum — pretending Washington knows exactly how this fast-changing industry should be structured, thus reducing the value of spectrum and probably delaying availability of new spectrum and possibly reducing the sector’s pace of innovation.

It’s very difficult to see how it’s at all productive for the government to block companies who desperately need more spectrum from buying it from those who don’t want it, don’t need it, or can’t make good use of it. The big argument against AT&T and Verizon’s attempted spectrum purchases is “competition.” But T-Mobile wanted to sell to AT&T because it admitted it didn’t have the financial (or spectrum) wherewithal to build a super expensive 4G network. Apparently the same for the cable companies, who chose to sell to Verizon. Last week Dish Network took another step toward entering the 4G market with the FCC’s approval of spectrum transfers from two defunct companies, TerreStar and DBSD.

Some people say the proliferation of Wi-Fi or the increased use of new wireless technologies that economize on spectrum will make more spectrum availability unnecessary. I agree Wi-Fi is terrific and will keep growing and that software radios, cognitive radios, mesh networks and all the other great technologies that increase the flexibility and power of wireless will make big inroads. So fine, let’s stipulate that perhaps these very real complements will reduce the need for more spectrum at the margin. Then the joke is on the big companies that want to overpay for unnecessary spectrum. We still allow big, rich companies to make mistakes, right? Why, then, do proponents of these complementary technologies still oppose allowing spectrum to flow to its highest use?

Free spectrum auctions would allow lots of companies to access spectrum — upstarts, middle tier, and yes, the big boys, who desperately need more capacity to serve the new iPad.

— Bret Swanson

Prof. Krugman misses the App Economy

Tuesday, February 7th, 2012

Steve Jobs designed great products. It’s very, very hard to make the case that he created large numbers of jobs in this country.

— Prof. Paul Krugman, New York Times, January 25, 2012

Turns out, not very hard at all.

The App Economy now is responsible for roughly 466,000 jobs in the United States, up from zero in 2007 when the iPhone was introduced.

— Dr. Michael Mandel, TechNet study, February 7, 2012

See our earlier rough estimate of Apple’s employment effects: “Jobs: Steve vs. the Stimulus.”

— Bret Swanson

Is the FCC serious about more wireless spectrum? Apparently not.

Friday, January 13th, 2012

For the third year in a row, FCC chairman Julius Genachowski used his speech at the Consumer Electronics Show in Las Vegas to push for more wireless spectrum. He wants Congress to pass the incentive auction law that would unleash hundreds of megahertz of spectrum to new and higher uses. Most of Congress agrees: we need lots more wireless capacity and spectrum auctions are a good way to get there.

Genachowski, however, wants overarching control of the new spectrum and, by extension, the mobile broadband ecosystem. The FCC wants the authority to micromanage the newly available radio waves — who can buy it, how much they can buy, how they can use it, what content flows over it, what business models can be employed with it. But this is an arena that is growing wildly fast, where new technologies appear every day, and where experimentation is paramount to see which business models work. Auctions are supposed to be a way to get more spectrum into the marketplace, where lots of companies and entrepreneurs can find the best ways to use it to deliver new communications services. ”Any restrictions” by Congress on the FCC “would be a real mistake,” said Genachowski. In other words, he doesn’t want Congress to restrict his ability to restrict the mobile business. It seems the liberty of regulators to act without restraint is a higher virtue than the liberty of private actors.

At the end of 2011, the FCC and Justice Department vetoed AT&T’s proposed merger with T-Mobile, a deal that would have immediately expanded 3G mobile capacity across the nation and accelerated AT&T’s next generation 4G rollout by several years. That deal was all about a more effective use of spectrum, more cell towers, more capacity to better serve insatiable smart-phone and tablet equipped consumers. Now the FCC is holding hostage the spectrum auction bill with its my-way-or-the-highway approach. And one has to ask: Is the FCC really serious about spectrum, mobile capacity, and a healthy broadband Internet?

— Bret Swanson

FCC wireless mischief: On to the substance

Thursday, December 1st, 2011

Here’s a critique of the FCC’s new “staff report” from AT&T itself. Obviously, AT&T is an interested party and has a robust point of view. But it’s striking the FCC was so sloppy in a staff report — for instance not addressing the key issue at hand: spectrum — let alone releasing this not-ready-for-prime-time report to the public.

Surely, it is neither fair nor logical for the FCC to trumpet a national spectrum crisis for much of the past year, and then draft a report claiming that two major wireless companies face no such constraints despite sworn declarations demonstrating the opposite.

The report is so off-base and one-sided that the FCC may actually have hurt its own case.

Why is the FCC playing procedural games?

Wednesday, November 30th, 2011

America is in desperate need of economic growth. But as the U.S. economy limps along, with unemployment stuck at 9%, the Federal Communications Commission is playing procedural tiddlywinks with the nation’s largest infrastructure investor, in the sector of the economy that offers the most promise for innovation and 21st century jobs. In normal times, we might chalk this up to clever Beltway maneuvering. But do we really have the time or money to indulge bureaucratic gamesmanship?

On Thanksgiving Eve, the FCC surprised everyone. It hadn’t yet completed its investigation into the proposed AT&T-T-Mobile wireless merger, and the parties had not had a chance to discuss or rebut the agency’s initial findings. Yet the FCC preempted the normal process by announcing it would send the case to an administrative law judge — essentially a vote of no-confidence in the deal. I say “vote,” but  the FCC commissioners hadn’t actually voted on the order.

FCC Chairman Julius Genachowski called AT&T CEO Randall Stevenson, who, on Thanksgiving Day, had to tell investors he was setting aside $4 billion in case Washington blocked the deal.

The deal is already being scrutinized by the Department of Justice, which sued to block the merger last summer. The fact that telecom mergers and acquisitions must negotiate two levels of federal scrutiny, at DoJ and FCC, is already an extra burden on the Internet industry. But when one agency on this dual-track games the system by trying to influence the other track — maybe because the FCC felt AT&T had a good chance of winning its antitrust case — the obstacles to promising economic activity multiply.

After the FCC’s surprise move, AT&T and T-Mobile withdrew their merger application at the FCC. No sense in preparing for an additional hearing before an administrative law judge when they are already deep in preparation for the antitrust trial early next year. Moreover, the terms of the merger agreement are likely to have changed after the companies (perhaps) negotiate conditions with the DoJ. They’d have to refile an updated application anyway. Not so fast, said the FCC. We’re not going to allow AT&T and T-Mobile to withdraw their application. Or we if we do allow it, we will do so “with prejudice,” meaning the parties can’t refile a revised application at a later date. On Tuesday the FCC relented — the law is clear: an applicant has the right to withdraw an application without consent from the FCC. But the very fact the FCC initially sought to deny the withdrawal is itself highly unusual. Again, more procedural gamesmanship.

If that weren’t enough, the FCC then said it would release its “findings” in the case — another highly unusual (maybe unprecedented) action. The agency hadn’t completed its process, and there had been no vote on the matter. So the FCC instead released what it calls a “staff report” — a highly critical internal opinion that hadn’t been reviewed by the parties nor approved by the commissioners. We’re eager to analyze the substance of this “staff report,” but the fact the FCC felt the need to shove it out the door was itself remarkable.

It appears the FCC is twisting legal procedure any which way to fit its desired outcome, rather than letting the normal merger process play out. Indeed, “twisting legal procedure” may be too kind. It has now thrown law and procedure out the window and is in full public relations mode. These extralegal PR games tilt the playing field against the companies, against investment and innovation, and against the health of the U.S. economy.

— Bret Swanson

Up-is-down data roaming vote could mean mobile price controls

Monday, April 11th, 2011

Section 332(c)(2) of the Communications Act says that “a private mobile service shall not . . . be treated as a common carrier for any purpose under this Act.”

So of course the Federal Communications Commission on Thursday declared mobile data roaming (which is a private mobile service) a common carrier. Got it? The law says “shall not.” Three FCC commissioners say, We know better.

This up-is-down determination could allow the FCC to impose price controls on the dynamic broadband mobile Internet industry. Up-is-down legal determinations for the FCC are nothing new. After a decade trying, I’ve still not been able to penetrate the legal realm where “shall not” means “may.” Clearly the FCC operates in some alternate jurisprudential universe.

I do know the decision’s practical effect could be to slow mobile investment and innovation. It takes lots of money and know-how to build the Internet and beam real-time videos from anywhere in the world to an iPad as you sit on your comfy couch or a speeding train. Last year the U.S. invested $489 billion in info-tech, which made up 47% of all non-structure capital expenditures. Two decades ago, info-tech comprised just 33% of U.S. non-structure capital investment. This is a healthy, growing sector.

As I noted a couple weeks ago,

You remember that “roaming” is when service provider A pays provider B for access to B’s network so that A’s customers can get service when they are outside A’s service area, or where it has capacity constraints, or for redundancy. These roaming agreements are numerous and have always been privately negotiated. The system works fine.

But now a group of provider A’s, who may not want to build large amounts of new network capacity to meet rising demand for mobile data, like video, Facebook, Twitter, and app downloads, etc., want the FCC to mandate access to B’s networks at regulated prices. And in this case, the B’s have spent many tens of billions of dollars in spectrum and network equipment to provide fast data services, though even these investments can barely keep up with blazing demand. . . .

It is perhaps not surprising that a small number of service providers who don’t invest as much in high-capacity networks might wish to gain artificially cheap access to the networks of the companies who invest tens of billions of dollars per year in their mobile networks alone. Who doesn’t like lower input prices? Who doesn’t like his competitors to do the heavy lifting and surf in his wake? But the also not surprising result of such a policy could be to reduce the amount that everyone invests in new networks. And this is simply an outcome the technology industry, and the entire country, cannot afford. The FCC itself has said that “broadband is the great infrastructure challenge of the early 21st century.”

But if Washington actually wants more infrastructure investment, it has a funny way of showing it. On Sunday at a Boston conference organized by Free Press, former Obama White House technology advisor Susan Crawford talked about America’s major communications companies.  ”[R]egulating these guys into to an inch of their life is exactly what needs to happen,” she said. You’d think the topic was tobacco or human trafficking rather than the companies that have pretty successfully brought us the wonders of the Internet.

It’s the view of an academic lawyer who has never visited that exotic place called the real world. Does she think that the management, boards, and investors of these companies will continue to fund massive  infrastructure projects in the tens of billions of dollars if Washington dangles them within “an inch of their life”? Investment would dry up long before we ever saw the precipice. This is exactly what’s happened economy-wide over the last few years as every company, every investor, in every industry worried about Washington marching them off the cost cliff. The White House supposedly has a newfound appreciation for the harms of over-regulation and has vowed to rein in the regulators. But in case after case, it continues to toss more regulatory pebbles into the economic river.

Perhaps Nick Schulz of the American Enterprise Institute has it right. Take a look. He calls it the Tommy Boy theory of regulation, and just maybe it explains Washington’s obsession — yes, obsession; when you watch the video, you will note that is the correct word — with managing every nook and cranny of the economy.

AT&T’s Exaflood Acquisition Good for Mobile Consumers and Internet Growth

Monday, March 21st, 2011

AT&T’s announced purchase of T-Mobile is an exaflood acquisition — a response to the overwhelming proliferation of mobile computers and multimedia content and thus network traffic. The iPhone, iPad, and other mobile devices are pushing networks to their limits, and AT&T literally could not build cell sites (and acquire spectrum) fast enough to meet demand for coverage, capacity, and quality. Buying rather than building new capacity improves service today (or nearly today) — not years from now. It’s a home run for the companies — and for consumers.

We’re nearing 300 million mobile subscribers in the U.S., and Strategy Analytics estimates by 2014 we’ll add an additional 60 million connected devices like tablets, kiosks, remote sensors, medical monitors, and cars. All this means more connectivity, more of the time, for more people. Mobile data traffic on AT&T’s network rocketed 8,000% in the last four years. Remember that just a decade ago there was essentially no wireless data traffic. It was all voice traffic. A few rudimentary text applications existed, but not much more. By year-end 2010, AT&T was carrying around 12 petabytes per month of mobile traffic alone. The company expects another 8 to 10-fold rise over the next five years, when its mobile traffic could reach 150 petabytes per month. (We projected this type of growth in a series of reports and articles over the last decade.)

The two companies’ networks and businesses are so complementary that AT&T thinks it can achieve $40 billion in cost savings. That’s more than the $39-billion deal price. Those huge efficiencies should help keep prices low in a market that already boasts the lowest prices in the world (just $0.04 per voice minute versus, say, $0.16 in Europe).

But those who focus only on the price of existing products (like voice minutes) and traditional metrics of “competition,” like how many national service providers there are, will miss the boat. Pushing voice prices down marginally from already low levels is not the paramount objective. Building fourth generation mobile multimedia networks is. Some wonder whether “consolidation of power could eventually lead to higher prices than consumers would otherwise see.” But “otherwise” assumes a future that isn’t going to happen. T-Mobile doesn’t have the spectrum or financial wherewithal to deploy a full 4G network. So the 4G networks of AT&T, Verizon, and Sprint (in addition to Clearwire and LightSquared) would have been competing against the 3G network of T-Mobile. A 3G network can’t compete on price with a 4G network because it can’t offer the same product. In many markets, inferior products can act as partial substitutes for more costly superior products. But in the digital world, next gen products are so much better and cheaper than the previous versions that older products quickly get left behind. Could T-Mobile have milked its 3G network serving mostly voice customers at bargain basement prices? Perhaps. But we already have a number of low-cost, bare-bones mobile voice providers.

The usual worries from the usual suspects in these merger battles go like this: First, assume a perfect market where all products are commodities, capacity is unlimited yet technology doesn’t change, and competitors are many. Then assume a drastic reduction in the number of competitors with no prospect of new market entrants. Then warn that prices could spike. It’s a story that may resemble some world, but not the one in which we live.

The merger’s boost to cell-site density is hugely important and should not be overlooked. Yes, we will simultaneously be deploying lots of new Wi-Fi nodes and femtocells (little mobile nodes in offices and homes), which help achieve greater coverage and capacity, but we still need more macrocells. AT&T’s acquisition will boost its total number of cell sites by 30%. In major markets like New York, San Francisco, and Chicago, the number of AT&T cell sites will grow by 25%-45%. In many areas, total capacity should double.

It’s not easy to build cell sites. You’ve got to find good locations, get local government approvals, acquire (or lease) the sites, plan the network, build the tower and network base station, connect it to your long-haul network with fiber-optic lines, and of course pay for it. In the last 20 years, the number of U.S. cell sites has grown from 5,000 to more than 250,000, but we still don’t have nearly enough. CEO Randall Stephenson says the T-Mobile purchase will achieve almost immediately a network expansion that would have taken five years through AT&T’s existing organic growth plan. Because of the nature of mobile traffic — i.e., it’s mobile and bandwidth is shared — the combination of the two networks should yield a more-than-linear increase in quality improvements. The increased cell-site density will give traffic planners much more flexibility to deliver high-capacity services than if the two companies operated separately.

The U.S. today has the most competitive mobile market in the world (second, perhaps, only to tiny Hong Kong). Yes, it’s true, even after the merger, the U.S. will still have a more “competitive” market than most. But “competition” is often not the most — or even a very — important metric in these fast moving markets. In periods of undershoot, where a technology is not good enough to meet demand on quantity or quality, you often need integration to optimize the interfaces and the overall experience, a la the hand-in-glove paring of the iPhone’s hardware, software, and network. Streaming a video to a tiny piece of plastic in your pocket moving at 60 miles per hour — with thousands of other devices competing for the same bandwidth — is not a commodity service. It’s very difficult. It requires millions of things across the network to go just right. These services often take heroic efforts and huge sums of capital just to make the systems work at all.

Over time technologies overshoot, markets modularize, and small price differences matter more. Products that seem inferior but which are “good enough” then begin to disrupt state-of-the art offerings. This was what happened to the voice minute market over the last 20 years. Voice-over-IP, which initially was just “good enough,” made voice into a commodity. Competition played a big part, though Moore’s law was the chief driver of falling prices. Now that voice is close to free (though still not good enough on many mobile links) and data is king, we see the need for more integration to meet the new challenges of the multimedia exaflood. It’s a never ending, dynamic cycle. (For much more on this view of technology markets, see Harvard Business School’s Clayton Christensen).

The merger will have its critics, but it seriously accelerates the coming of fourth generation mobile networks and the spread of broadband across America.

— Bret Swanson

Data roaming mischief . . . Another pebble in the digital river?

Thursday, March 17th, 2011

Mobile communications is among the healthiest of U.S. industries. Through a time of economic peril and now merely uncertainty, mobile innovation hasn’t wavered. It’s been a too-rare bright spot. Huge amounts of infrastructure investment, wildly proliferating software apps, too many devices to count. If anything, the industry is moving so fast on so many fronts that we risk not keeping up with needed capacity.

Mobile, perhaps not coincidentally, has also been historically a quite lightly regulated industry. But emerging is a sort of slow boil of small but many rules, or proposed rules, that could threaten the sector’s success. I’m thinking of the “bill shock” proceeding, in which the FCC is looking at billing practices and various “remedies.” And the failure to settle the D block public safety spectrum issue in a timely manner. And now we have a group of  rural mobile providers who want the FCC to set prices in the data roaming market.

You remember that “roaming” is when service provider A pays provider B for access to B’s network so that A’s customers can get service when they are outside A’s service area, or where it has capacity constraints, or for redundancy. These roaming agreements are numerous and have always been privately negotiated. The system works fine.

But now a group of provider A’s, who may not want to build large amounts of new network capacity to meet rising demand for mobile data, like video, Facebook, Twitter, and app downloads, etc., want the FCC to mandate access to B’s networks at regulated prices. And in this case, the B’s have spent many tens of billions of dollars in spectrum and network equipment to provide fast data services, though even these investments can barely keep up with blazing demand.

The FCC has never regulated mobile phone rates, let alone data rates, let alone data roaming rates. And of course mobile voice and data rates have been dropping like rocks. These few rural providers are asking the FCC to step in where it hasn’t before. They are asking the FCC to impose old-time common carrier regulation in a modern competitive market – one in which the FCC has no authority to impose common carrier rules and prices.

In the chart above, we see U.S. info-tech investment in 2010 approached $500 billion. Communications equipment and structures (like cell phone towers) surpassed $105 billion. The fourth generation of mobile networks is just in its infancy. We will need to invest many tens of billions of dollars each year for the foreseeable future both to drive and accommodate Internet innovation, which spreads productivity enhancements and wealth across every sector in the economy.

It is perhaps not surprising that a small number of service providers who don’t invest as much in high-capacity networks might wish to gain artificially cheap access to the networks of the companies who invest tens of billions of dollars per year in their mobile networks alone. Who doesn’t like lower input prices? Who doesn’t like his competitors to do the heavy lifting and surf in his wake? But the also not surprising result of such a policy could be to reduce the amount that everyone invests in new networks. And this is simply an outcome the technology industry, and the entire country, cannot afford. The FCC itself has said that “broadband is the great infrastructure challenge of the early 21st century.”

Economist Michael Mandel has offered a useful analogy:

new regulations [are] like  tossing small pebbles into a stream. Each pebble by itself would have very little effect on the flow of the stream. But throw in enough small pebbles and you can make a very effective dam.

Why does this happen? The answer is that each pebble by itself is harmless. But each pebble, by diverting the water into an ever-smaller area,  creates a ‘negative externality’ that creates more turbulence and slows the water flow.

Similarly, apparently harmless regulations can create negative externalities that add up over time, by forcing companies to spending  time and energy meeting the new requirements. That reduces business flexibility and hurts innovation and growth.

It may be true that none of the proposed new rules for wireless could alone bring down the sector. But keep piling them up, and you can dangerously slow an important economic juggernaut. Price controls for data roaming are a terrible idea.

An Economic Solution to the D Block Dilemma

Tuesday, March 8th, 2011

Last month, Cisco reported that wireless data traffic is growing faster than projected (up 159% in 2010 versus its estimate of 149%). YouTube illustrated the point with its own report that mobile views of its videos grew 3x last year to over 200 million per day. Tablets like the Apple iPad were part of the upside surprise.

The very success of smartphones, tablets, and all the new mobile form-factors fuels frustration. They are never fast enough. We always want more capacity, less latency, fewer dropped calls, and ubiquitous access. In a real sense, these are good problems to have. They reflect a fast-growing sector delivering huge value to consumers and businesses. Rapid growth, however, necessarily strains various nodes in the infrastructure. At some point, a lack of resources could stunt this upward spiral. And one of the most crucial resources is wireless spectrum.

There is broad support for opening vast swaths of underutilized airwaves — 300 megahertz (MHz) by 2015 and 500 MHz overall — but we first must dispose of one spectrum scuffle known as the “D block.” Several years ago in a previous spectrum auction, the FCC offered up 10 MHz for commercial use — with the proviso that the owner would have to share the spectrum with public safety users (police, fire, emergency) nationwide. This “D block” sat next to an additional 10 MHz known as Public Safety Broadband (PSB), which was granted outright to the public safety community. But the D block auction failed. Potential bidders could not reconcile the technical and business complexities of this “encumbered” spectrum. The FCC received just one D block bid for just $472 million, far below the FCC’s minimum acceptable bid of $1.3 billion. So today, three years after the failed auction and almost a decade after 9/11, we still have not resolved the public safety spectrum question. (more…)

More wireless connectivity? Or more politics?

Thursday, April 1st, 2010

For years we’ve been talking about the need for more wireless bandwidth, more spectrum, and a host of creative new strategies to complement our mobile phone networks — from familiar Wi-Fi to more exotic femtocells and satellites. The continuing explosion of mobile data traffic means we need these things now more than ever. In the graph below, Cisco projects 120% compound annual growth in North American mobile data from 2009 through 2013.

The Federal Communications Commission recognized these trends and needs in its new National Broadband Plan. It set the bold goal of unleashing 500 MHz of mostly dormant wireless spectrum for more productive use in new broadband Internet and media applications.

On March 29, the FCC had a chance to begin putting its Plan into action when it approved the acquisition of SkyTerra by Harbinger Capital. The result of the merger is a new wireless company that will use both MSS satellite spectrum and so-called ATC terrestrial spectrum to deliver a new hybrid mobile service. Harbinger announced it would build a nationwide, wholesale, “open access” 4G broadband wireless network at the cost of $6 billion. Although not part of the FCC’s 500 MHz push, the new Harbinger strategy aligns nicely with the goal of more, better, and broader wireless access and options throughout the country (in this case, Canada, too).

But the FCC order, which was not voted by the full commission but issued by the bureau chiefs, contains two curious provisions. The provisions restrict Harbinger’s cooperation with two important mobile service providers and could hinder the very goal of extending more wireless coverage to more Americans. (more…)

Lawyerpalooza

Sunday, March 7th, 2010

Larry Downes, author of the excellent Laws of Disruption and a new colleague at the Tech Liberation Front, notes the proliferation of patent lawsuits in the mobile phone world and points toward this good graphic in the New York Times to help make his point, that “It’s both much worse and not as bad as it seems”:

Mobile traffic to grow 39x by 2014

Wednesday, February 10th, 2010

Cisco’s latest Visual Networking Index, this one focusing mobile data traffic, projects 108% compound growth through 2014.

Wireless Crunch

Sunday, November 22nd, 2009

Adam Thierer makes important points about the wireless data boom . . . and the wireless spectrum crunch.

Did Cisco just blow $2.9 billion?

Wednesday, October 14th, 2009

Cisco better hope wireless “net neutrality” does not happen. It just bought a company called Starent that helps wireless carriers manage the mobile exaflood.

See this partial description of Starent’s top product:

Intelligence at Work

Key to creating and delivering differentiat ed ser vices—and meeting subscriber demand—is the ST40’s ability to recognize different traffic flows, which allows it to shape and manage bandwidth, while interacting with applications to a very fine degree. The system does this through its session intelligence that utilizes deep packet inspection (DPI) technology, ser vice steering, and intelligent traffic control to dynamically monitor and control sessions on a per-subscriber/per-flow basis.

The ST40’s interaction with and understanding of key elements within the multimedia call—devices, applications, transport mechanisms, policies—and assists in the ser vice creation process by:

Providing a greater degree of information granularity and flexibility for billing, network planning, and usage trend analysis

Sharing information with external application ser vers that perform value-added processing

Exploiting user-specific attributes to launch unique applications on a per-subscriber basis

Extending mobility management information to non-mobility aware applications

Enabling policy, charging, and Quality of Ser vice (QoS) features

Traffic management. QoS. Deep Packet Inspection. Per service billing. Special features and products. Many of these technologies and features could be outlawed or curtailed under net neutrality. And the whole booming wireless arena could suffer.

Agreeing with Kessler

Friday, August 21st, 2009

After challenging Andy Kessler over the Google Voice-Apple-AT&T dustup, I should point out some areas of agreement.

Andy writes:

Some might say it is time to rethink our national communications policy. But even that’s obsolete. I’d start with a simple idea. There is no such thing as voice or text or music or TV shows or video. They are all just data.

Right, all these markets and business models in hardware, software, and content — core network, edge network, data center, storage, content delivery, operating system, browser, local software, software as a service (SAS), professional content, amateur content, advertising, subscriptions, etc. — are fusing via the Internet. Or at least they overlap in so many areas and at any moment are on the verge of converging in others, that any attempt to parse them into discreet sectors to be regulated is mostly futile. By the time you make up new categories, the categories change.

Which naturally applies to one of the most contentious topics in Net policy:

Competition brings de facto network neutrality and open access (if you don’t like one service blocking apps, use another), thus one less set of artificial rules to be gamed.

Exactly. Net Neutrality could be an unworkably complex and rigid intrusion into this highly dynamic space. Better to let companies compete and evolve.

Kessler concludes:

Data is toxic to old communications and media pipes. Instead, data gains value as it hops around in the packets that make up the Internet structure. New services like Twitter don’t need to file with the FCC.

And new features for apps like Google Voice are only limited by the imagination.

The Internet is disrupting communications companies. Although yesterday I defended the service providers, who are also the key investors in all-important Net infrastructure, it is true their legacy business models are under assault from the inexorable forces of quantum technologies. Web video assaults the cable companies’ discrete channel line-ups. Big bandwidth banished “long distance” voice and, as Kessler says, will continue disrupting voice calling plans. On the other hand, the robust latency and jitter requirements of voice and video, and the realities of cybersecurity will continue to modify the generalized principle that bits are bits.

Even if we can see where things are going — more openness, more modularity, more “bits are bits” — we can’t for the most part mandate these things by law. We have to let them happen. And in many cases, as with the Apple-AT&T iPhone, it was an integrated offering (the exclusive handset arrangement) that yielded an unprecedented unleashing of a new modular mobile phone arena. Those 100,000 new “apps” and a new, open Web-based mobile computing model. Integration and modularity are in constant tension and flux, building off one another, pulling and pushing on one another. Neither can claim ultimate virtue. We have to let them slug it out.

As I wrote yesterday, innovation yin and yang.

Innovation Yin and Yang

Thursday, August 20th, 2009

There are two key mistakes in the public policy arena that we don’t talk enough about. They are two apparently opposite sides of the same fallacious coin.

Call the first fallacy “innovation blindness.” In this case, policy makers can’t see the way new technologies or ideas might affect, say, the future cost of health care, or the environment. The result is a narrow focus on today’s problems rather than tomorrow’s opportunities. The orientation toward the problem often exacerbates it by closing off innovations that could transcend the issue altogether.

The second fallacy is “innovation assumption.” Here, the mistake is taking innovation for granted. Assume the new technology will come along even if we block experimentation. Assume the entrepreneur will start the new business, build the new facility, launch the new product, or hire new people even if we make it impossibly expensive or risky for her to do so. Assume the other guy’s business is a utility while you are the one innovating, so he should give you his product at cost — or for free — while you need profits to reinvest and grow.

Reversing these two mistakes yields the more fruitful path. We should base policy on the likely scenario of future innovation and growth. But then we have to actually allow and encourage the innovation to occur.

All this sprung to mind as I read Andy Kessler’s article, “Why AT&T Killed Google Voice.” For one thing, Google Voice isn’t dead . . . but let’s start at the beginning.

Kessler is a successful investor, an insightful author, and a witty columnist. I enjoy seeing him each year at the Gilder/Forbes Telecosm Conference, where he delights the crowd with fast-paced, humorous commentaries on finance and technology. Here, however, Kessler falls prey to the innovation assumption fallacy.

Kessler argues that Google Voice, a new unified messaging application that combines all your phone numbers into one and can do conference calls and call transcripts, is going to overturn the entire world of telecom. Then he argues that Apple and AT&T attempted to kill Google Voice by blocking it as an “app” on Apple’s iPhone App Store. Why? Because Google Voice, according to Kessler, can do everything the telecom companies and Apple can do — better, even. These big, slow, old companies felt threatened to their core and are attempting to stifle an innovation that could put them out of business. We need new regulations to level the playing field.

Whoa. Wait a minute.

Google Voice seems like a nice product, but it is largely a call-forwarding system. I’ve already had call forwarding, simultaneous ring, Web-based voice mail, and other unified messaging features for five years. Good stuff. Maybe Google Voice will be the best of its kind.

There are just all sorts of fun and productive things happening all across the space. It was the very AT&T-Apple-iPhone combo that created “visual voice mail,” which allowed you to see and choose individual messages instead of wading through long queues of unwanted recordings.

But let’s move on to think about much larger issues.

Suggesting we can enjoy Google’s software innovations without the network innovations of AT&T, Verizon, and hundreds of service providers and technology suppliers is like saying that once Microsoft came along we no longer needed Intel. (more…)

Biting the handsets that connect the world

Tuesday, July 7th, 2009

Over the July 4 weekend, relatives and friends kept asking me: Which mobile phone should I buy? There are so many choices.

I told them I love my iPhone, but all kinds of new devices from BlackBerries and Samsungs to Palm’s new Pre make strong showings, and the less well-known HTC, one of the biggest innovators of the last couple years, is churning out cool phones across the price-point and capability spectrum. Several days before, on Wednesday, July 1, I had made a mid-afternoon stop at the local Apple store. It was packed. A short line formed at the entrance where a salesperson was taking names on a clipboard. After 15 minutes of browsing, it was my turn to talk to a salesman, and I asked: “Why is the store so crowded? Some special event?”

“Nope,” he answered. “This is pretty normal for a Wednesday afternoon, especially since the iPhone 3G S release.”

So, to set the scene: The retail stores of Apple Inc., a company not even in the mobile phone business two short years ago, are jammed with people craving iPhones and other networked computing devices. And competing choices from a dozen other major mobile device companies are proliferating and leapfrogging each other technologically so fast as to give consumers headaches.

But amid this avalanche of innovative alternatives, we hear today that:

The Department of Justice has begun looking into whether large U.S. telecommunications companies such as AT&T Inc. and Verizon Communications Inc. are abusing the market power they have amassed in recent years . . . .

. . . The review is expected to cover all areas from land-line voice and broadband service to wireless.

One area that might be explored is whether big wireless carriers are hurting smaller rivals by locking up popular phones through exclusive agreements with handset makers. Lawmakers and regulators have raised questions about deals such as AT&T’s exclusive right to provide service for Apple Inc.’s iPhone in the U.S. . . .

The department also may review whether telecom carriers are unduly restricting the types of services other companies can offer on their networks . . . .

On what planet are these Justice Department lawyers living?

Most certainly not the planet where consumer wireless bandwidth rocketed by a factor of 542 (or 54,200%) over the last eight years. The chart below, taken from our new research, shows that by 2008, U.S. consumer wireless bandwidth — a good proxy for the power of the average citizen to communicate using mobile devices — grew to 325 terabits per second from just 600 gigabits per second in 2000. This 500-fold bandwidth expansion enabled true mobile computing, changed industries and cultures, and connected billions across the globe. Perhaps the biggest winners in this wireless boom were low-income Americans, and their counterparts worldwide, who gained access to the Internet’s riches for the first time.

total-us-wireless-bandwidth-2000-08

Meanwhile, Sen. Herb Kohl of Wisconsin is egging on Justice and the FCC with a long letter full of complaints right out of the 1950s. He warns of consolidation and stagnation in the dynamic, splintering communications sector; of dangerous exclusive handset deals even as mobile computers are perhaps the world’s leading example of innovative diversity; and of rising prices as communications costs plummet.

Kohl cautioned in particular that text message prices are rising and could severely hurt wireless consumers. But this complaint does not square with the numbers: the top two U.S. mobile phone carriers now transmit more than 200 billion text messages per calendar quarter.

It’s clear: consumers love paid text messaging despite similar applications like email, Skype calling, and instant messaging (IM, or chat) that are mostly free. A couple weeks ago I was asking a family babysitter about the latest teenage trends in text messaging and mobile devices, and I noted that I’d just seen highlights on SportsCenter of the National Texting Championship. Yes, you heard right. A 15 year old girl from Iowa, who had only been texting for eight months, won the speed texting contest and a prize of $50,000. I told the babysitter that ESPN reported this young Iowan used a crazy sounding 14,000 texts per month. “Wow, that’s a lot,” the babysitter said. “I only do 8,000 a month.”

I laughed. Only eight thousand.

In any case, Sen. Kohl’s complaint of a supposed rise in per text message pricing from $.10 to $.20 is mostly irrelevant. Few people pay these per text prices. A quick scan of the latest plans of one carrier, AT&T, shows three offerings: 200 texts for $5.00; 1500 texts for $15.00; or unlimited texts for $20. These plans correspond to per text prices, respectively, of 2.5 cents, 1 cent, and, in the case of our 8,000 text teen, just .25 cents. Not anywhere close to 20 cents.

The criticism of exclusive handset deals — like the one between AT&T and Apple’s iPhone or Sprint and Palm’s new Pre — is bizarre. Apple wasn’t even in the mobile business two years ago. And after its Treo success several years ago, Palm, originally a maker of PDAs (remember those?), had fallen far behind. Remember, too, that RIM’s popular BlackBerry devices were, until recently, just email machines. Then there is Amazon, who created a whole new business and publishing model with its wireless Kindle book- and Web-reader that runs on the Sprint mobile network. These four companies made cooperative deals with service providers to help them launch risky products into an intensely competitive market with longtime global standouts like Nokia, Motorola, Samsung, LG, Sanyo, SonyEricsson, and others.

As The Wall Street Journal noted today:

More than 30 devices have been introduced to compete with the iPhone since its debut in 2007. The fact that one carrier has an exclusive has forced other companies to find partners and innovate. In response, the price of the iPhone has steadily fallen. The earliest iPhones cost more than $500; last month, Apple introduced a $99 model.

If this is a market malfunction, let’s have more of them. Isn’t Washington busy enough re-ordering the rest of the economy?

These new devices, with their high-resolution screens, fast processors, and substantial 3G mobile and Wi-Fi connections to the cloud have launched a new era in Web computing. The iPhone now boasts more than 50,000 applications, mostly written by third-party developers and downloadable in seconds. Far from closing off consumer choice, the mobile phone business has never been remotely as open, modular, and dynamic.

There is no reason why 260 million U.S. mobile customers should be blocked from this onslaught of innovation in a futile attempt to protect a few small wireless service providers who might not — at this very moment — have access to every new device in the world, but who will no doubt tomorrow be offering a range of similar devices that all far eclipse the most powerful and popular device from just a year or two ago.

Bret Swanson

Bandwidth Boom: Measuring Communications Capacity

Wednesday, June 24th, 2009

See our new paper estimating the growth of consumer bandwidth – or our capacity to communicate – from 2000 to 2008. We found:

  • a huge 5,400% increase in residential bandwidth;
  • an astounding 54,200% boom in wireless bandwidth; and
  • an almost 100-fold increase in total consumer bandwidth

us-consumer-bandwidth-2000-08-res-wireless

U.S. consumer bandwidth at the end of 2008 totaled more than 717 terabits per second, yielding, on a per capita basis, almost 2.4 megabits per second of communications power.

Web 3.0

Sunday, April 5th, 2009

Could the iPhone 3.0 release this summer help create the mechanism — and culture — of micro-payments that many have long been seeking to solve the Web’s intellectual property problem?

UPDATE: These guys were thinking the exact same thing.

Wireless wonders

Tuesday, March 17th, 2009

As the wireless world continues to churn out terrific new hardware and software innovations and network speeds, Engadget talks about the industry in depth with AT&T’s wireless chief Ralph de la Vega.