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6 reasons an open spectrum would benefit prepaid, and 4 reasons why it would hurtposted by Joe on July 27th, 2007 - 1:00 pm | 700 MHz spectrum
Six beneficial reasons
1. Major carriers would be forced to overhaul their prepaid plans
Let’s face it: most of the major carriers have pretty crappy prepaid plans. And to an extent, it’s understandable. They value their contract subscribers far more, because they commit to two years of service. With prepaid, they’re guaranteed nothing. So of course they’re going to concentrate their efforts on the portion of the business that brings them the best (and most guaranteed) profits.
Most of them — Sprint most notably — delegate their prepaid services to MVNOs. This allows them to 1) continue concentrating on contracts and 2) still offer prepaid services of their own to some extent — while the MVNOs capture niche markets like teenagers and big yappers. So they’re basically offering their prepaid services to those who have poor credit. And as we’ve discussed ad infinitum on this here site, that is not the only reason to go prepaid.
An open access spectrum would necessitate a shift from contracts to pay-as-you-go, much like it is in Europe. Of course, their current prepaid plans wouldn’t cut it in such a scenario. So they’d have to actually offer, you know, decent options that would satisfy some section of the market.
Really, the only thing major carriers’ prepaid services have going for them right now is the network. Wouldn’t it be nice to see them use more resources in this arena? We think it would. There’s a ton of untapped potential in prepaid, and we think that even without an open spectrum, one company could really revolutionize that kind of system. Of course, they’ll never see it that way, so open spectrum is the only way to accomplish it.
2. More companies would be able to get phones onto the market
Ever browse around a prepaid carrier’s website (as we do, like, hourly)? You’ll notice that a strong majority offers five or six phones, most of which are either outdated or way too expensive. This is because handsets aren’t cheap. You may be paying a decent price with a contract, but that’s the result of a subsidy paid by the company in compensation for signing a long-term contract. No contract, no subsidy. So you’re stuck paying full price, or with an old, refurbished phone. Nice.
However, an open spectrum would allow more companies into the fray. The big carriers couldn’t pick and choose what phones they want to offer, so Chuck Schmuck could go build an awesome phone and offer it to any person on any network. Novel concept, huh? It’s a little something we like to call competition.
Presumably, many of these phones would be made on the cheap, which would provide attractive options for the average cell phone user, who spends between $40 and $150 on a phone.
An added bonus: as supply increases, prices will drop. Remember that whole supply/demand concept they grazed over in your high school economics class? Yeah, that would go completely into effect. Even if the demand remains the same, the supply would drastically increase. And that would turn into lower prices. Plus, we know that as technology evolves, prices drop. All this would lead to cheaper handsets than you see now.
3. Customer service would have to improve
Go ahead and read some of the comments on our provider reviews. Notice the overwhelming number of complaints about customer service. There are a number of reasons for this, but we think we can name two far-reaching ones. For major carriers, it seems that they treat their prepaid customers far worse than their contract subscribers — and even with their contract subscribers, they have them locked down for two years, so there’s not much you can really do. Plus, you probably have at least a decently expensive phone that is locked to the company — another thing they have hanging over your head.
For MVNOs and smaller carriers, we think it’s because the business has to be run so tightly that high quality customer service just isn’t in the budget. This is not an excuse of any kind; we feel that high quality customer service itself perpetuates business.
With an open spectrum, consumers would be free to come and go as they please. So if Company A botches some aspects of customer service, people can dump them and move on to another carrier — one that actually treats their customers with respect.
And that would mean something big: a true focus on customer service in the wireless arena. It’s seriously lacking right now, but there’s not a whole ton consumers can do because of the aforementioned reasons. Who wants to switch providers when they have to buy a new phone to do so? It would be super sweet to not wait on hold for 30 minutes just to hear an emphatic “no” from a customer service rep.
4. You’d have the flexibility to change to a service that best fits you
Let is wax philosophical for a moment: What is a year? Obviously, it’s the length of time it takes the Earth to revolve around the sun. Thus, it’s how our calendar is laid out. But when it comes to the measurement of time, it’s pretty arbitrary. So when you’re signing a two-year contract, it’s arbitrary. Who knows if this is the optimal contract length (though we’re pretty sure it’s not).
In reality, no contract is the best option from a consumer standpoint. One service might work for a while, but conditions do change. So if you’re with Company A, and seven months later you realize that Company B better fits your current needs, you’re still stuck with Company A — whether it be because of a contract or a locked phone.
With an open spectrum, you can always be with the company that best fits your current needs. Isn’t that the way it should be, anyway? Of course, companies wouldn’t like this, because it means they’d actually have to sink money into customer service. Oh the horror.
5. In the end, you’d get better service because companies competing on a higher level for your business.
This is really pursuant to Nos. 3 and 4. Overall, you’d get a higher level of service both on the calling end and the customer service end. This is because of the competition an open spectrum would naturally evoke.
For an example of how this currently fails, look no further than AT&T and the iPhone. It’s set up on the crappy EDGE network, which doesn’t allow the user of this super-expensie device to make the most of its potential. Why is AT&T still using EDGE? Because it’s really, really expensive to upgrade the whole network. Yeah, they’re working on it, but they’re moving at their own (slow) pace.
Now, if the iPhone wasn’t locked to the AT&T service, do you think anyone would opt to use the EDGE network? Of course not. They’d jump on a 3G network. That would force AT&T to upgrade their network more quickly, lest they lose out on all that is the iPhone. But because people can only get an iPhone on their network, they don’t have to upgrade, because people will buy it regardless.
We think this is a major flaw in the wireless arena. And an open spectrum would be one way to combat it.
6. More carriers would have the chance to build a network and provide service
We’ve made no mistake of our contempt for having just two major national wireless carriers, and two lesser ones (three if you count Alltel). So you’re either stuck with them, a regional carrier that can’t fulfill your national needs, or an MVNO that likely has terrible customer service. This is a conundrum we should not be in.
An open spectrum would give more carriers a chance to get in on the game. Whether that be by building their own network because of the more level playing field or becoming an MVNO (more on that in just a moment), you would certainly have more choices of where to use your phone.
Four hurtful ones
1. Most MVNOs would be eliminated
With an open spectrum, MVNOs become more of a competitor to the company that leases them airwaves. If you can just up and leave one company for another, you might opt for one that offers more features for slightly higher rates.
This is very speculative, as there will always be a demand for niche markets which major carriers cannot pander to. However, when you can change carriers on a whim, those niches do become competitors.
2. Major carriers might attempt to block certain phones on their networks
Whether it’s open access or not, the big companies still own the networks. As such, they can block certain phones from working on those networks.
So how is this different from what they do now? Now they restrict phones on their network by locking them. However, if they’re not allowed to lock them, they lose power. This allows you to take a phone from network to network, but not necessarily to let you use any phone you want on any network you want.
We see this as a knee-jerk reaction to any kind of open spectrum movement. The big carriers need to keep a certain level of power, and this is one way to assert it.
3. Service might worsen for a time while everyone catches up
As we’ve said, there will need to be some level of sacrifice involved in this open spectrum. It’s a major transition, and as such there will likely be complications in the beginning. Those complications will be worked out in time, though, and everyone needs to realize this before making any snap judgments based on preliminary service.
We see the major carriers making this case to bring things back to the way they were. They’ll point out that things aren’t working when solutions are just on the horizon. And that will only hurt progress.
Everything worth having is worth sacrificing for, and this is no different. Once the kinks are worked out, everything would run smoothly. However, there is little doubt that service would suffer at first.
4. You’d pay full price for phones
No locked phones, no subsidy paid by wireless carriers. Once again, this is about sacrifice. You may be paying more for a handset, but that extra money pays for your freedom to choose and change. That, we think, is worth the hike in phone prices.
This is also a matter of temporary sacrifice. The supply of handsets will rise in an open access environment, which will relatively flood the market. This means prices drop. We believe that the only reason handset prices are so high is because the market is so limited. Opening the spectrum opens the market, which will eventually provide better, cheaper phones.
As you can see, the negatives of the open spectrum are mainly about temporary sacrifice. Isn’t it worth it to cope with poor service now in order to revolutionize the market later?