Competition in broadband and cell phone services is poor; prices are much higher than they could be, both in the U.S. and Canada. That's interesting given the fact that the monopolistic incumbent companies rely on resources, such as the radio spectrum and conduits over and under roads and homes, that on a fundamental level don't belong to them. These resources belong to the public, but the government has granted them permission to use these resources by various licensing schemes, typically at a fixed price set long ago, while letting them keep all the profits.
Now, of course, it is necessary to let somebody use them, or they would be wasted. And without some regulation of the wireless spectrum, the resulting free-for-all could lead to a tragedy of the commons. So the airwaves must be regulated, but it must be done carefully or monopolies arise, leading to high prices and artificial scarcity. The trouble is that has already happened. Prices are high and the wireless spectrum is not used efficiently. Consider Wi-Fi; using an 802.11 wireless network, users can get speeds as high as 54Mbps (= 6.44 megabytes per second) which is 27 times faster than a 2 Mbps DSL internet connection in my area. Even if an area is congested, with many users on the same network, your data still transmits through the air faster than it can across the internet. Yet, you can buy your own personal wireless router for under $100 (and sometimes under $50).
I find it interesting that while I have my own personal wireless network almost for free, but I have to pay $30/month to use the cell phone network for (at most) a few hours. And that's just voice. Internet access would cost an additional $100/mo for only 250 MB of traffic. For comparison, a 54Mbps Wi-Fi router can (sometimes) transmit 250 MB in under 40 seconds. Maybe one of the reasons they can charge so much for so little is that on the cell network, that amount of data could take hours to send.
Imagine, now, if there were a network of Wi-Fi routers that provided internet access from anywhere in a city. How much do you suppose that would cost? It's clear to me that the prices of incumbent cell phone providers could be undercut by a huge margin. It's not my idea; it's called municipal broadband or municipal wi-fi and it's been proposed by many city goverments, smaller companies and public interest goups. Google has even implemented it in its home town. In addition to internet, services such as Skype would make it possible to use the network for calls to ordinary phones at low rates. If municipal broadband took off, Skype and other companies would certainly produce Wi-Fi phones that work like ordinary cell phones, except at much lower prices.
Naturally, the powerful telcos have been lobbying state and federal govenments to ban these networks. The sad thing is that governments have a curious tendency to listen to them.
The reason you can have your own wireless network for so cheap is that the spectrum used by wi-fi is unlicensed. It is still regulated by the FCC in the U.S. and the CRTC in Canada--in particular, power output is limited, so these devices cannot have a long range--but no one has been granted an exclusive license, so anyone can use it. Decades ago there might have been a valid argument that this free-for-all would have a tragedy of the commons effect, because the signals of so many "free riding" users would step on each other, leading to a chaos of noise that would destroy the value of the band for most practical purposes.
This has not happened. Even in crowded places with many devices in use, access only becomes slower, not worthless. An important reason for this is that digital technology is used in this band, technology that can automatically and instantly negotiate with other devices to share the channel efficiently. Even if there are a few "bad" devices on the band that do not play by the digital rules (e.g. microwave ovens and cordless phones), the devices can switch to different channels and/or retransmit lost signals automatically in order to get the data through.
Now, today's wireless signals are usually point-to-point, meaning that transmissions only have one destination, yet current wireless gadgets transmit (roughly) equally in all directions. Thus, radio chatter is received by lots of devices that don't want to hear it. In a room with 100 laptops and several access points, only a few devices can transmit at the same time, which leads to the slowdown I was talking about. At some point in the future, space-division multiplexing, meaning that signals are sent in the general direction of their destination, should allow more devices to talk at once.
I'm really not sure why some govenments are easily persuaded to ban such an obvious public benefit, but perhaps certain cash cows are a factor. Although the main beneficiaries are obviously big businesses, govenments get a cut too. Harold Feld explains in his discussion of the selling of former TV spectrum in the 700MHz range:
"Now you would think that (a) if the incumbents—large and small—are accused of gaming the system, and (b) all the incumbents defend the rules, while all the non-incumbents argue for a rule change, that the FCC would believe its own Chief Economist rather than the very people accused of gaming the rules to their advantage. Ha ha. Instead, the FCC adopted an industry sponsored 'compromise' that they easily manipulated to achieve open bidding. With the predictable result that the incumbents blocked the DBS guys and any other real competitor (while rewarding the mid-sized carriers with needed licenses).I highly recommend his excellent discussion, even though the auction is not directly related to municipal Wi-Fi. It illustrates a way in which government, even in unelected bodies like the FCC, can be influenced by big, monopolistic business at the expense of the public.
"Why? In part because this stuff is hard to understand and it's very difficult to buck the kind of political pressure the incumbents brought to bear. In part because a number of folks at the FCC stil think of mid-sized carriers and cable cos as 'competitors' rather than 'incumbents.' But, most importantly, because spectrum auctions are the crack cocaine of public policy. Faced with the threat that the major incumbents would refuse to play (as if they could let that spectrum fall into the hands of rivals) and that the AWS auction would not gross the promised billions, the FCC caved like a chocoholic at a Godiva's outlet."
Mind you, the former UHF TV spectrum would make an excellent basis for municipal Wi-Fi if the FCC and CRTC would only allow it. One article explains:
At lower frequencies -- like in the television band -- signals travel farther and can go through walls, trees and mountains. Opening up some of this spectrum would make Community Internet systems much faster and cheaper to deploy, allowing a new generation of broadband entrepreneurs to enter the market. The broadcasters are about to return a sizable chunk of spectrum as part of the digital television transition, a portion of which could be reserved for Community Internet if Congress [don't you mean the FCC?] doesn't auction it all off to the cell phone companies. Another option would be to reallocate vast, unused "white spaces" between TV channels for wireless broadband. Either way, more "unlicensed spectrum" is the key to making universal, super-fast broadband for $10 a month a reality.When it comes to the opposition of elected bodies to municipal broadband, campaign contributions are an obvious thing to look at, as well as the general phenomenon that politicians tend to favor big businesses--the bigger, the better. The telcos are rightly terrified of municipal wi-fi, given how cheap it can be done compared to how much they charge, and so I'd expect them to be lobbying like mad. Indeed, a completely free service (paid for by taxes) is the cheapest kind of service to provide, since no billing system is required and no "tech police" need to be hired to defend the network against free-riding attempts. This would be efficient and cheap for consumers, and a boon for the economy. At the same time it may harm the telcos, which would only be able to make money on the internet backbone and on services that are better than whatever the municipal network offers.
On the bright side, while municipal wi-fi has reportedly been banned in 14 states, Harold Feld thinks that incumbent opposition is softening because they know they can't stop it. As evidence he notes that AT&T plans to build a "muni wifi" system in Springfield, Il--the strategy being that if you can't beat 'em, pretend to join 'em and see how much profit you can get under the circumstances.
One final thought (source):
Settles noted that, when put in perspective, building a WiFi network is not that expensive. City governments regularly shell out hundreds of millions of dollars to build sports arenas, ballparks, and stadiums, yet balk at the much smaller cost (usually measured in tens of millions of dollars) to build and maintain a WiFi network.Links:
"When you come down to it, you’re not talking about a lot of money," Settles said of the cost to build a WiFi network.
- Municipal WiFi Projects in the U.S. - Part 1, part 2, part 3
- Let There Be Wi-Fi
- From third class citizen to first among equals: rethinking the place of unlicensed spectrum in the FCC hierarchy
- Going Wi-Fi in Canada: Municipal and community initiatives
- Municipal broadband @ Wikipedia
- Wetmachine: an interesting blog