Monday, March 31, 2014

Why the Government Needs to Provide Internet Access

Vox, a new "explain-the-news" website has put up this wonderful video explaining in very simple terms why internet access in the United States is horrible and why the government needs to step in and do something about it:

Why the Government Needs to Provide Internet Access

This is the problem for AT&T.  It set off, as a matter of policy, many years ago to try to rebuild a communication monopoly that the government had correctly, and thankfully, broken up.  That's their underlining goal and they seem determined to ignore the fact that they are playing with fire.  They assumed that they can simply buy off politicians and the public will put up with third world country service at first world country prices.  I just don't think it's going to work.

As Susan Crawford thoughtfully points out, this is bad for business and bad for America and the public is getting really angry about it.  AT&T should have kept their heads low and built out their service to at least an acceptable level of quality/price.  Instead, they have simply charged as much, or more, than the market will bare, while exploring every possible option to break net neutrality and double and triple dip.

This is the kind of thing that starts revolutions.  People will rise up on issues that fundamentally effect their quality of life everyday.  And internet access is critical to modern life.  It doesn't help matters that many businesses are also fed up.  The question is whether AT&T can change course soon enough to prosper in a world of competition.  Right now it isn't looking like it will.

Tuesday, March 25, 2014

Why AT&T's Attack on Netflix Might Shoot Itself in the Foot

So Netflix caved in to Comcast and started paying to play in order to have decent internet connections to its subscribers.  It's part of the erosion of net neutrality that has been a dream of ISP providers since they started buying up all the little guys and forming a nice information oligarchy.  Of course, now that Comcast got their cut, AT&T and Verizon want theirs.   As Cory Doctorow points out, this is simply extortion.

But the question in my mind is whether they're winning this war, or if they won a battle they may regret.   Because the cat is definitely out of the bag now.  The big ISP players are at war with the internet as we know it, and forces are lining up against them.  Netflix, itself, might have given in to Comcast just to force the debate, as we can guess from this terrific posting by Reed Hastings:


Of course, AT&T had to reply and make their own argument that net neutrality sucks.   Jim Cicconi tries his best to spin it:


As usual, AT&T only has one argument as to why it should screw over not only it's own customers, but also other business and the the future of technology.  It's the tired and unsuccessful divide and conquer technique.  "Why should those greedy Netflix customers have all the fun?  Don't you hate those Netfix customers, wanting free bandwidth!?  Netfix doesn't want to pay their own share!  Let Netflix pay, and charge its subscribers more!"

It's a spin on the successful welfare queen political tactic where you divide the poor against each other by saying some are getting more than others.  The goal is to get them to hate each other more than the rich people taking advantage of them.  The rich people are obviously AT&T (and the other ISPs) and the poor people are Americans since we pay more for the some of the worst service in the civilized world.

So now, not only to we overpay for third world service, but AT&T wants individual companies to provide it with payola if they want their popular offerings available.  This is classic double dipping, and it should be illegal.  The problem for AT&T is these deals are supposed to be done in back rooms, without the public knowing what is going on.  Reed Hastings is breaking rank by going public about it.  So AT&T feels the need to respond.  But they don't have much of an argument.  Except divide and conquer.  "You think your service sucks now?  You think you're over paying?  Yeah, well if those assholes who subscribe to Netflix have their way, you'll pay even more.  Why should they get a free lunch.  Make them pay.  And maybe… we might not charge you as much for our shitty service."  Hey, it seemed to work for the Republicans, why not?  It's a riff on the old "data hog" argument where AT&T tried to convince everyone that it was a great idea to charge pre-bit (also double dipping) because data hogs were watching too much porn.

The problem is, the Republicans "welfare queen" attack was taking advantage of long standing racism.  I'm not sure AT&T will be so successful whipping up hatred of people who like "House of Cards."  On top of that, the Republicans weren't getting much in the way of a black vote anyway, so covertly blaming them for all the problems in the world wasn't so dangerous.  But Netflix subscribers are probably the best customers AT&T could have.  People who really want to use their service.  So attacking their best customers doesn't seem to be a good business or political move.

Politically, AT&T already lost its attempt to buy T-Mobile and paid a huge price.  I blame it in part their rush to charging a pay per bit model which undermined their promises of great low cost service once the merger was approved.  No one believed them.  AT&T still needs the good will of politicians to advance it's long term interests.  Attacking a large upscale sector of their own customer base probably isn't a good idea.  Netflix customers are voters.  They can write their congressmen.  They can lobby to have their cities provide free internet service or take advantage of Google's fiber efforts.

On the business side, what is AT&T going to do if Netflix decides to pay off everyone… but AT&T?  With a solid deal with Comcast in place, Netflix could make a quiet deal with Verizon and then punish AT&T by not making a deal and making them explain why their Netflix service sucks.  Or by moving very slowly to make a deal, and leaving AT&T out in the cold for as long as possible.

While there is clearly not enough ISP competition in the United States, there is some.  Apple fans are learning that AT&T is not the best place for iPhone customers.  (Try Sprint.)  Does AT&T really want to be known as the ISP you never use if you love Netflix?

Wednesday, January 29, 2014

T-Mobile Gloats Over AT&T's Latest Idiotic Move

I didn't write this.  Honestly, I didn't.  But it sure reads like I did:


Not often does a major corporation find itself compelled to issue whimsically sarcastic press releases.  But, as the press release points out, AT&T's poorly thought out reaction to T-Mobile's chess moves must be laughed at.  They are giving customers an extra reason to leave and test T-Mobile.

As I said before, AT&T really needs to figure out what marketing niche they want to compete in.  Do they want to compete on price?  Or on service?  Or coverage?  Or simply flail about without a long term plan other than to be Number 2 to Verizon and more expensive than Sprint or T-Mobile?

Friday, January 3, 2014

AT&T Struggles to Find It's Future in a World of Competition

I've been talking a lot lately about how AT&T's disastrous over reach in their failed bid to buy T-Mobile seriously damaged the company's long term prospects by creating a powerful competitor that can chew out profits from the low end of the market.

And clearly the top management at AT&T is starting to sweat, making a desperate bid to bribe T-Mobile customers to switch to AT&T.

T-Mobile CEO Laughs at AT&T's Desperation

It won't work and it's absolutely the wrong move for AT&T.  T-Mobile's customers are much more likely to be price sensitive, and long term thinking (since they made their reputation on no-contract deals).  Not many are going to rush to take a quick bribe from AT&T in order to get locked into higher overall rates, from a company known for horrible rates.  Also, where did all these new T-Mobile customers come from?  Mostly from people fleeing AT&T's lousy service and price gouging.  Not likely they're going to be fooled into coming back soon.

Now, in fairness, AT&T management probably knows it won't work, but they are simply trying to preempt T-Mobile's announcement of a similar deal to lure buyers away from AT&T.   Maybe if customers get confused, they'll just assume all the carriers are the same.  If T-Mobile offers incentives to switch, then AT&T will offer incentives.  If T-Mobile offers no-contract deals, then AT&T will offer no contract deals.  If T-Mobile offers unlimited data, then… opps!

Unlimited data?  AT&T was supposed to have won that battle long ago.  After all, hadn't they patiently explained over and over that it was impossible to have unlimited data plans?  Didn't they pay tons of tech bloggers to say that tiered data was inevitable?  That is was un-American to even consider that you shouldn't have to pay per bit?  Remember all those evil data hogs that were ruining it for everyone?

Of course, it was all bullshit and part of AT&T's grand plan to double dip on phone service by charging everyone per bit, and then getting businesses to pay an extra fee to directly to AT&T to not charge customers for those bits.  It was the kind of plan that could only work if AT&T had a monopoly (or close to with collusion from Verizon).  But Sprint didn't bite and now it and T-Mobile steal customers away by the millions offering "unlimited" data.

AT&T's latest announcement shows that's its making so much money per customer it can offer a $450 bribe just to try to lock them into to their uncompetitive rates.  So how long before AT&T has to bite the bullet and offer unlimited data again?  Not long, I would guess.

AT&T cannot win chasing after T-Mobile in a race to the bottom.  They need to shift gears quickly while they still have much larger market share and can at least claim to have better coverage.  So here's a five point plan to save AT&T:

1. Get rid of tiered data.  Customers hate it.  Fine, you can offer a 5gb plan as "Unlimited," and have some pricing for tiers over that, but stop trying to force people into ridiculous 300MB plans to further your impossible dreams of double dipping.  It won't work.  Offer one simple plan, preferably with a throttled cap after 5gb, and then a high data plan for high use customers with no throttle.  Keep it simple.  That's what customers want.  And then they will be willing to play a little more for AT&T coverage.

2. Embrace the iPhone.  Stop trying to talk customers into crappy Android and other low end phones. You just make enemies of one of the best customer bases: Apple fans.

3. Embrace subsidies.  Rather than lecture customers that subsidies need to go away, AT&T should offer the best ones.  That is, after all, how it built its smart phone base to begin with.  Much better to offer the iPhone 5S for free, rather than $199, then try to bribe a low rent T-Mobile customers with $450 to switch.  Offer something that T-Mobile won't match.  Highly subsidized iPhones.  Then go ahead and lock people into long term plans at higher rates, but at least they got something they want upfront.  Do it all one better by promising a $99 upgrade to the latest iPhone anytime they are released in the future.  That would bring in the customers and still probably cost less that $450.

4. Embrace the iPad and iPad mini.  Early on AT&T dismissed the iPad.  Huge mistake.  It costs extra for people to buy a cell connected iPad.  AT&T should give them every incentive to do it.  Anyone with AT&T phone service should get a free 500mb monthly for their AT&T connected iPad.  And a huge discount on 5gb and beyond.  The carriers are crazy not chasing after this market.  Rather than encouraging people to use wifi on their iPads by making it too expensive, they should get them used to the idea that cell service is more convenient.  Even if eventually they raise prices on it.  (I don't expect AT&T to give up evil completely.)

5. Put an emphasis on premium service.  AT&T service sucks.  Rather than chase after the low end of the market, they need to make it clear they charge a little more, but offer better service.  This will be hard, but it's absolutely necessary.  At minimum, their marketing needs to emphasize better service to justify their higher prices.  They can't fool anyone into thinking their the cheapest carrier anymore. And they shouldn't want to be the cheapest carrier.  They should act like a premium service.

If none of this works they can always switch gears and race for the bottom.  But if they don't try this first, they won't have the option later.  If it works, being the premium service is much better in the long run.