Guest post by Charles Johnson
Hedge fund manager Andy Kessler has written an excellent op-ed explaining why and how Apple and AT&T killed the new iPhone application, Google Voice, while it was still in the craddle. He writes,
Apple has an exclusive deal with AT&T in the U.S., stirring up rumors that AT&T was the one behind Apple rejecting Google Voice. How could AT&T not object? AT&T clings to the old business of charging for voice calls in minutes. It takes not much more than 10 kilobits per second of data to handle voice. In a world of megabit per-second connections, that's nothing—hence Google's proposal to offer voice calls for no cost and heap on features galore.
What this episode really uncovers is that AT&T is dying. AT&T is dragging down the rest of us by overcharging us for voice calls and stifling innovation in a mobile data market critical to the
For the latest quarter, AT&T reported local voice revenue down 12%, long distance down 15%. With customers unplugging home phones and using flat-rate Internet services for long-distance calls (again, voice is just data), AT&T's wireline operating income is down 36%. Even in the wireless segment, which grew 10% overall, per-customer voice revenue is down 7%.
(Any takers on bets for when AT&T will ask for its own bailout?)
The kerfuffle over the Google Voice application is a great example of how awful monopolies can wind up being for consumer choice and innovation.
When the iPhone was released exclusively with AT&T, I promised that for that very reason I would never buy another Apple product. Kessler rightly argues that locking technology retards innovation. Just how many other potentially societally beneficial applications are out there that won't see the light of day due to the stranglehold that Apple exploits on its own pipeline: the Apple Store?
And fortunately, there's a way around those who would lock us out from using our own products to their fullest extent. One of the first things a friend and I did when he got his iPhone was figured out a way to put SkypeOut on the phone and to unlock it from AT&T. (Skype Out allows you to call any landline, mobile, or Skype in the world for about 12.95 a month. You get 10,000 minutes and can call from any computer in which its installed.)
Cell phone plans really need to start to reflect the law of the one price, if only to ensure that innovations affect all segments of the market. According to a recently released report by the OECD, the U.S. lags behind most of the world when it comes to a mobile usage pricing. For high cell phone users, it costs nearly 6 times as much in the United States as Denmark.
Until we get some real competition in the cell phone plans, I'll see you on Skype.