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The Telecom Scammers' Latest Ploy to Screw You for More Cash

Fees, surcharges and taxes make wireless companies tons of money.

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Most scandalous, the customer – really, the American public – has paid, through fees, taxes and surcharges, for the development of the nation’s private, corporate-controlled and increasingly unregulated wireless network. And while the telco companies have gotten fat, what has the consumer gotten? 

The telecom trust’s shift from wireline to wireless raises a serious technical questions: how much data traffic can wireless networks support?

Wireless providers, led by Verizon, are warning that they are facing capacity crunch or bandwidth congestion, that the proverbial sky is falling. To address this alleged problem, they must acquire more wireless spectrum and introduce throttling to dissuade large-data usage.

Their argument frames this as a supply-vs-demand issue, good-old traditional capitalism. In this spirit, the telecom trust argues that the digital debate is based on a new media culture of scarcity. They insist that their networks are simply overwhelmed by an ever-increasing demand for digital voice, audio, text, interactivity and video. 

The analysis places the burden for the country’s pathetic wireless – and wireline – system onto the customer for wanting too much. This is a false argument, shifiting the inadequacies of wireless networks failure away from the operators.  These service providers have not invested in upgrading the networks but crème-skimming long-term investments to meet demands of short-term profit and providing generous compensation to executive and returns to shareholders.

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Online video is transforming the traditonal broadcast and cable TV businesses. There are two competing ways that streaming works:

  •  Internet Protocol Television (IPTV) -- is a method for the delivering of digital programming over a closed or proprietary network offered by a cable or telephone company. With traditional television, all channels are broadcast simultaneously and a viewer selects which program s/he wants to watch by changing the channel. 

With IPTV, the cable/telco subscriber selects the program s/he wants to see and it is transmitted downstream to the viewer.  Like cable TV, IPTV programming requires an in-home set-top box. IPTV employs “a walled garden” strategy to deliver video content over a closed, secure infrastructure; programming is limited to only those content aggregators or syndicators who meet a distributor’s contractual requirements. Most programming is the same as that offered by a cable and satellite service.

  • Over The Top (OTT) -- refers to an open or unmanaged video data stream that rides “over the top” of an ISP’s network. OTT delivers streaming and/or VOD programming utilizing the open, public Internet.  It can be accessed through a cable or telco company’s function as an ISP. OTT programming is accessed through a specialty set-top converter like that offered by Roku Box, Google TV and Apple TV.

Until recently, Internet video mainly consisted of low-quality, user-generated content sites like YouTube that were characterized by small-size display window and grainy images. As broadband distribution capabilities improved, the quality of OTT programming has also improved. Among the leading OTT services are Google’s YouTube, Netflix and Hulu (owned by NBC Universal, News Corp. and Walt Disney Co.). 

The combination of the Great Recession and an historically “free” Internet is sucking subscribers from cable TV services. In order to counter subscriber erosion, the major cable operators (e.g., Cablevision) are promoting special “TV Everywhere” programs and offering hybrid OTT-IPTV services so as to incorporate OTT programming into their service offerings. Thus, some cable operators are offering OTT Netflix streaming as an enhanced program service.

American telecom customers seem to want to receive on their mobile device the same programming they can get on the home/office TV or computer. This has driven increased demand for wireless spectrum and led the leading wireless companies to change the pricing model they have long used. This is shifting the industry from one with “unlimited” to “limited” plans based on the ability to pay. 

AT&T plans to introduce a new fee schedule affecting its top 5 percent users on October 1. T-Mobile plans to reduce the speed on "unlimited" plans once users have exceeded their data limits. Virgin Mobile  cuts speeds to 256 kbps for "unlimited" data users after they hit 2.5 GB of monthly data use. Verizon will reduce the data speed of the top 5 percent of 3G data users, which currently equates to about 2 GB per month.