The Problem With Service Providers in America

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This site’s first blog post was about how HTC created a beautiful product only to have it transformed into several models by wireless carriers.  Unless a company is named Apple, you don’t really know what the phone this company just announced will look like or even be called when you can go buy it at the store. Let’s look at a little bit of history here. Apple’s iPhone wasn’t always hugely successful. In fact, it almost didn’t come to market. None of the carriers really wanted to carry it.  Apple really wanted Verizon to be the first network with the iPhone, but was shot down. AT&T was also not convinced that offering an iPhone was in their best interest. Apple finally managed to convince AT&T to carry it, but had to sign an exclusivity agreement with them. Only after the enormous success of the iPhone did the carriers change their tune. Apple was finally in a position of power, but this was to be the exception, not the norm.
Another company that has accomplished similar success is Samsung. They previously managed to get their “Galaxy S” branding into the name of most of their flagship line of phones. The first gen Galaxy S had it only as an asterisk. After it became one the most successful Android phone, they gained a little bit more influence for the second generation. Each of the Galaxy S II variants had “Galaxy S II” as part of their name, but still had a unique carrier name along with it. After the sales of the second generation Galaxy S dwarfed the first, it was expected that the third gen would be a hit. While the hardware was still modified to be compatible with US wireless networks, the progress made from the first Galaxy S to the third is a great step in the right direction. Sprint’s variants for example, were:
1. Samsung Epic 4G
2. Samsung Galaxy S II Epic 4G Touch
3. Samsung Galaxy S III
HTC, a significantly smaller company, had no such luck. After a year of shrinking sales, they were in no position to demand similar treatment from the carriers. The HTC One X became the HTC One X, and EVO 4G LTE, and that’s just in the US. The hardware is different for the EVO, and each is exclusive to a carrier. But why would a carrier not want to offer its customers the latest and greatest devices? The answer does not look promising. The carriers want to be in control. These devices offer the consumer more options. Smartphones allow you to make calls and send messages over a data connection. Carriers charge by minutes and by messages. Because of these opportunities, they imposed data caps. Wireless carriers want to offer content and services. They want to avoid being “dumb pipes,” or simply data providers, because they make more money charging per service. They have been known to block apps that offer free alternatives to such services.
There is a similar situation in the cable television industry. Not only does each provider have a monopoly in much of its coverage area, but customers have to pay exorbitant monthly fees. There are fees to rent boxes. They often charge extra for an HD box, and more if you wand a DVR. An HD DVR adds upwards of $20, and that’s not including the DVR service that is charged separately. The best option that most consumers are not aware of is to get a CableCARD capable device, of which there are few and far between. Only this fall will there be a legitimate HD DVR replacement, with the Ceton Q and Echo devices, though the HD Home Run Prime is a good option. Unfortunately, CableCARD is incompatible with IPTV (except FiOS) and satellite providers (who also lock their customers into two year contracts). To be fair, satellite usually has smaller fees and they give away devices with a new contract.
While it is understandable that this is just providers protecting themselves from customers leaving to competitors, this all stifles innovation. It discourages developers from creating apps that offer free alternatives to paid services. It prevents manufacturers from including the latest and greatest hardware in their devices, and makes it much more expensive to have a phone that works on multiple networks. Unfortunately there is no simple solution. The FCC will not simply demand that all service providers standardize their networks. The telecommunication companies have too much influence. There is hope, however. All wireless carriers are gradually moving to LTE (and LTE-Advanced), so the only thing chipset manufacturers will have to worry about is the different LTE technologies and frequency bands. This will make it easier to have one phone that works on multiple networks, like the iPhone 4S. There is an ongoing net neutrality debate, in an attempt to establish rules for whether service providers can discriminate between types of data. For the television industry, the FCC makes proposals that are encouragements (read: mild warnings) to create standard technologies such as CableCARD. The next stage is AllVid, which should work with video on demand and satellite providers. There is also a growing IPTV ecosystem, with some companies hoping to be able to sell channels a la carte. Broadcast streaming company Aereo recently withstood an attempt at an injunction by big networks.
This is a terrible exciting time for these technologies, but it is also extremely frustrating. When innovation is stifled in fear rather than encouraged, everybody loses. Many of the issues that currently exist will be resolved in time, but if people are aware of them, it will put more pressure on the parties involved to improve. After all, creating proprietary solutions may yield profits in licensing fees, but cooperation in new establishing new standards will lower production and operating costs and lead to a much better user experience.