Going Wireless for Everything

For some time I've been observing the potential for the disintermediation of cable offerings by less expensive alternatives. My focus had been primarily on cable-provided television, which has become much more significantly affected among younger adults.

However, in the past few weeks, I've had personal experience and talks with friends involving cutting various wired communications or entertainment services to go wireless.

For example, a few weeks ago I finally terminated my landline telephone and associated ATT long-distance service. I'd had that phone number since 1999, but, increasingly, it was turned off and disused. My cell phone provides effectively free long distance, while the landline's total monthly costs, including long distance, mostly due to legacy regulatory fees and taxes, was in the neighborhood of $40-50.

I don't actually know of a single adult, including those, like me, over 50, who has moved within the past two years and installed a landline telephone. Not one. One squash partner is now considering following my lead on dropping his landline, since he's become angry with Verizon's forcing him into Fios at much higher prices than he used to pay for phone and internet.

Next, a cycling partner asked me about alternatives to cable television, as she feels she gets virtually no use from it at all, for about $60/month. As one of the few subscribers to AppleTV, considered a failure even by Steve Jobs, she often watches "tv" with her daughter on an Apple laptop propped up on their dinner table. Her daughter finds various sources for content- Hulu, YouTube, to name just the most obvious two.

We discussed how she could buy a high-end Tivo with web access, connect it wirelessly to her internet service, and obtain her movies and older television series content via Netflix through the Tivo. Plus directly access all the websites from a television, rather than the Apple laptop.

Then I ran into a squash friend with whom I discussed dropping landlines. She wasn't so fixated on cable television, but asked what I thought could be options for dropping her high-speed cable internet service. She confided that both of her sons, who are on the same wireless plan with her, use their Android cell phones for internet access, in effect making them cellular modems for their laptops. I agreed that she could just do that and save those monthly charges. She has an Optimum Online triple play package for about $150/month, so dropping the phone and internet may save her more than $100 of that.

I related the conversation I'd had with my other friend about dropping cable television, and this friend thought about that, as well. Overall, she could recover the full $150/month from Optimum and simplify her life, as she prepares to return to Canada in the next few years. Further, she noted that she didn't need a Tivo to get Netflix, since her kids had left a PS3 at home, which now serves as a platform for Netflix, as does the Wii.

One woman I know who moved into an apartment last year after a divorce skipped the landline and internet access, simply searching for other wireless signals in her complex rather than paying the $60/month for said connectivity.

It's expected nowadays that 20-somethings use cell phones and whatever internet connection they find at work or in their neighborhood to save on cable, internet access and conventional telephone expenses. But I think it would surprise many strategists at Comcast, Verizon, Cablevision et.al. to discover how many older, well-educated, higher-income adults are cutting as many cords, cables and wires as possible in their homes to save money and consolidate communications and entertainment budgets. I suspect it's happening among older Americans of that segment far faster than was forecast perhaps even just a year ago.

What Lesson Did the Phone Wars Provide for Energy Policy?

Holman Jenkins, Jr. in last Wednesday's edition of the Wall Street Journal, provided a very concise view of the evolution of mobile telephony in the US and Europe. He discussed how the US eschewed the unified, monolithic European GSM mobile standard. And how Nokia, one of the originators of that standard, is nearly dead, while Apple and Google, thanks to the US indecision on such a standard, flourished with new approaches.


Isn't this a commentary on government's unwanted, unnecessary intrusion in sectors where competing private solutions drive better ultimate solutions?


Jenkins describes the process as messy and inefficient, but, in the end, delivering superior results. Nokia has run into the arms of Microsoft, having fallen on hard times after initially leading in the GSM standards setting process. Jenkins ended his piece,

"The lesson for the new Nokia and everyone else is an old one: Nobody knows anything, and there's no substitute for messy, wasteful competition as a finder of solutions to problems we didn't even kow we needed solutions for. Whether the mobile world will settle into one proprietary or many proprietary ecosystems is far from decided."

Interestingly, from my reading of Amity Schlaes' The Forgotten Man several summers ago, those cries of how competition is so messy and wasteful are the very same arguments that FDR and his minions used to seize control of so much of American business. They decried the waste and inefficiency of free market competition, only to stifle innovation and mismanage the economy for most of the 1930s.


There's a larger lesson here. Right now, and in a technologically intensive sector- energy.

Doesn't Jenkins' illustrative tale of the mobile phone sector over the past few years suggest that we are making a horrific mistake by acceding to demands for monolithic, command-economy directives to subsidize and produce certain energy- wind, solar, ethanol- without subjecting them all to real, fair economic forces?

What ever happened to price as a market signal? As gasoline prices rise, largely silently, above $3/gallon, pundits predict a weakening of the US economy. So be it.

I wrote this post back in the summer of 2008 after reading a WSJ piece on Air Force experimentation with synfuel for jet aircraft. We have lots of coal and a known, reliable process to liquify that energy source to burn instead of gasoline or jet fuel.

If you worry about sending dollars abroad to buy oil, then promote synfuels. If you're simply worried about carbon emissions, then admit that you want to turn the US standard of living back about 110 years.

But this government system of choosing energy source winners is going to end badly. Market forces may entail some initial waste and inefficiency, but the result is the best solution, with much less long term waste and inefficiency, while satisfying consumer needs and desires. The latter of which is the point.

Not to have government dictate what consumers want, and how they'll get it.

Google's Misunderstood Android Phone

Since the launch of Google's Android cell phone recently, much discussion has focused on Google vs. Apple. On how big a lead the iPhone has, how many units sold, users, applications downloaded, etc.

This all misses the point.

In fact, the Android provides an example of what my old boss at Chase Manhattan, Gerry Weiss, and his team at GE, in the 1960s, identified as 'arena competition.'

Portraying GE's businesses in arenas, they noticed way back in that era how cable and other entertainment forms could and would have impacts on GE's television and related businesses. The most damaging sorts of competition, they found, were when one company inadvertently entered another arena other than its own, typical product/market, in order to support business strategies in its core areas.

These new entrants often undercut the profitability of the business models of the existing competitors because their main focus was on another sector.

Google is following online eyeballs from PCs to cell phones. In order to control the environment, they want to control the operating system. To do that, they simply added the commodity platform, too. A new cell phone.

Because they don't want to earn all, or even most of their profits from the cell phones, they represent a danger to other cell phone makers. And, as one pundit noted, to Microsoft, by reducing that company's market for mobile operating system sales.

Apple? Google probably doesn't really care that much about the iPhone, per se. Rather, they care about extending their advertising business to the cell phone market.

If they can support healthy growth in ad revenues on cell phones with minimal outlays for Android, or break even, they have probably met their objectives.

In the process, they are reducing the carriers to "operators," teaching people to buy a phone, then choose the network, and disrupting a product/market they don't really even see as central to their profitability, except as it supports and facilitates continued ad revenue growth.

Rather like IBM cannibalizing all manner of products, services and labor as mainframe computing applications marched out of the first areas, into more accounting, inventory and other business processes. How many purveyors of supplies and services to old-fashioned offices of the early 1960s were put out of business by IBM, while IBM only saw rising mainframe and applications software revenues?

It's the same for Google and its Android.

Unanticipated Consequences of Wireless Multi-Media

I recently had a long talk with a colleague on the subject of the evolving world of wireless multi-media communications and devices.

Of particular interest to us was the relatively new wireless cellular modem card for use in laptops. Verizon has been advertising its MiFi service and gear relentlessly in past weeks.

Essentially, this device allows a user to take 4-5 users through one cellular router up to a cell system, bypassing an initial wireless step into a conventional WiFi hotspot router and onto the wired internet.

Instead, internet connectivity is totally wireless through the cellular carrier, until it accesses the internet backbone.

Pricing, of course, can quickly reach hefty levels if more than one person is using this in a full-blown multi-media mode. But the capability never the less now exists, practically, for several people located in the middle of nowhere, in terms of wired internet access, to have reasonably high-speed wireless access to the internet.

A recent article in the Wall Street Journal noted iPhones and similar non-Apple devices being used for this sort of multi-media application, consuming huge amounts of wireless capacity. So much, it contended, that two local wireless slingbox users could effectively consume a neighborhood's total wireless bandwidth capacity.

Thus, pricing is probably going to move, rapidly, to a bandwidth-usage basis. After the initial pricing plans incenting large volumes of text messaging for fixed prices, the subsidizing of larger-bandwidth hogging video viewing is finally exhausting existing wireless system capacity.

The logical consequence is to move to usage-based pricing in order to both effectively ration bandwidth usage and fund further capacity increases in existing wireless systems.

Ironically, this might actually overshadow any similar move to wired internet usage pricing, as that begins to look like a comparative backwater.

As I'll mention in an imminent post about coming generations of wireless reader devices, this is just the tip of the iceberg for wireless usage, pricing and capacity issues. It's going to get much more interesting, as the Journal piece noted, for companies like Google.

In fact, the article observed how quickly Apple went from fighting Verizon's possible encroachment on applications on the iPhone to a partnership to make sure iPhones can work on the latter's network. Apple is evidently seeing that getting others to pay for the infrastructure that the iPhone requires is far cheaper than being forced, through a closed system, to pay for one itself. Thus, the article mused that Google, Yahoo and other non-network-owning content providers could soon find themselves in a difficult pricing situation.

They will be using large amounts of bandwidth to serve their customers, but won't own any pipes, and, thus, will be vulnerable to applications-based pricing from their servers.

This could get quite interesting in a hurry, causing some business models to become much less profitable almost overnight.