The Smart Phone Con Job: Your So-Called 4G Phone Isn't What It's Cracked Up To Be

The FCC and other federal agencies are reviewing AT&T’s application to acquire T-Mobile wireless business for $39 billion. Given the deference they show toward America’s largest corporations, this deal will in all likelihood go through.

In our previous article, "The Secret $8 Billion Wireless Scam," we argued that the merger should be stopped. Going further, we recommended that the giant telecommunications conglomerates (e.g., AT&T and Verizon) should be divested of their wireless businesses. The “communications trust” should be broken up.

AT&T’s acquisition of T-Mobile is a good place to start the “break ‘em up” campaign. It will further increasing consolidation within the wireless market. The U.S. Senate Judiciary Committee held a hearing on May 11 on the merger. It was cleverly titled, "The AT&T/T-Mobile Merger: Is Humpty Dumpty Being Put Back Together Again?"  

At the hearing, Chairman Patrick Leahy (D-VT) raised a fundamental challenge: “At present, four companies control nearly 90 percent of the national wireless market. The proposed acquisition would further consolidate an already concentrated market for wireless communication.”   

The four companies that control the market (and their estimated market share) are AT&T (26.8 percent), Verizon (26.0 percent), Sprint (22.9 percent) and T-Mobile (11.0 percent). With the merger, AT&T (44.0 percent) and Verizon (30.5 percent) will control nearly three-fourths of the market; Sprint’s share will increase to 16 percent and the rest of the providers will drop to 6.3 percent.

At the hearing, the good senator naïvely stated, “AT&T represented to me that within two years, this acquisition will result in 250,000 more Vermonters having access to its 4G service than would otherwise be serviced by either company on its own.” If he only knew the true history of what is called “4G service,” he would have most likely probed deeper into AT&T’s service offerings.

Do you have a “4G” cellphone?  If so, you got taken.  

4G stands for “fourth generation” and signifies what telecom marketers promote as the cutting-edge of wireless communication. In the three decades since the first mobile telephones were introduced, there has been a sustained and significant increase in performance. Carriage shifted from analog to digital, transmission speeds increased and users were offered more services or functions. However, as this occurred, hype replaced performance and Americans got conned.

A short history of the U.S. wireless system illustrates how today’s con job occurred. More importantly, it suggests a leverage-point at which senators like Leahy, Al Franken (D-MN), Amy Klobuchar (D-MN), Herb Kohl (D-WI) and others can block the AT&T/T-Mobile merger or at least hold Humpty Dumpty’s feet to the proverbial fire.

Wireless "generations" are established through industry consortia or an international standards organization. The first or “1G” wireless phones introduced in the 1980s were big, bulky Motorola phones offering analog voice services. Foretelling the future, the ‘60s TV show “Get Smart” spoofed wireless phones with Agent Smart’s shoe phone; Hollywood writers knew more about the future than the engineers at AT&T. By the ‘80s, Moto introduced phones as big as a golf shoe and as heavy as a bowling ball.  

In the ‘90s, a real breakthrough in wireless technology occurred with the introduction of the first digital cellular networks, called “2G.” It offered data rates of 14.4 kbp/s with improved sound quality, better security, higher capacity and even text messaging.  

Unfortunately, in the mid-‘90s, the wireless market exploded and, in turn, suffered a marketing-hype implosion. This can be called the 2.5G shuffle. The General Packet Radio Service (GPRS) standard, adopted in the U.S. in the late ‘90s, enabled both voice and data to run over the same wireless network, thus linking the wireless phone to the Internet. While worldwide technical groups called for transmission rates of over 100 kbp/s, most U.S. GPRS providers were glad to offer 40 kbp/s data rates. According to industry analyst Chris Ziegler, GPRS “marked one of the first times that operators could effectively bill by the kilobyte, rather than by the minute.”

Simultaneously, the UN’s International Telecommunication Union (ITU), an organization that sets telecom standards, put forth a far more robust next-generation or “3G” standard, the IMT-2000. It called for data rates for stationary transmission at 2 Mbp/s and mobile speeds of 384 kbp/s, rates nearly tenfold greater than what U.S. providers were offering. (This standard was adopted in the advanced industrial countries of Europe and Asia, but, sadly, not in the U.S.)

Since the mid-‘90s, U.S. wireless providers undercut the ITU standard in two important ways. First, consumers were led to believe, with 3G and with what is now hyped as “4G,” they were getting comparable performance as in the rest of the advanced world. Second, the ITU was compromised or, in effected, “captured” by the U.S. telecom industry, reducing standards to marketing hype.

In 2008, the ITU set the technical specifications for the IMT-Advanced or 4G standards, with downstream data rates at 100 Mbps for high mobility communication (i.e., for trains and cars) and 1 Gbps for low mobility communication (i.e., for pedestrians and stationary users). These rates outstrip the average DSL or cable broadband connection. As could be expected, none of the latest phones offered by the major U.S. wireless providers, whether AT&T, Sprint, T-Mobile or Verizon, hits the mark.  

Last December, the ITU artfully caved to enormous pressure from the U.S. telecom trust and loosened its technical definition of 4G. Thus, overnight the competing systems offered by Verizon (LTE), Sprint (WiMax) and T-Mobile (HSPA+) met the 4G definition. AT&T (HSPA+) essentially rebranded its 3G network (sometimes called 3.5G) as 4G.

(For more on the evolution of wireless, see Ziegler’s piece of January 17, 2011, at www.engadget.com.)

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AT&T promised Senator Leahy that “250,000 more Vermonters [will have] access to its 4G service …” within two years after the merger is approved. In all likelihood, AT&T will fail to fulfill its promise. Get ready, Sen. Leahy, your constituents will get repackaged and over-hyped 3G service masquerading as 4G and pay more.

According to MSNBC’s telecom analyst Wilson Rothman, AT&T claims to offer 4G download speeds of up to 6-Mbps. However, Rothman insists “the ‘4G’ term doesn't denote any particular technology or performance level.” He argues that all wireless provides “will have different performance — it's really just a marketing push.”

More troubling, T-Mobile has been promoting a more aggressive 4G speed; its myTouch 4G has a "theoretical" peak of 14.4-Mbps and the Galaxy S 4G peaks at 21-Mbps. These speeds are fast, really fast. Thus, in addition to the loss of moderate competition, the AT&T/T-Mobile merger will likely lead to the diminution of T-Mobile’s 4G data rates; T-Mobile’s customers will suffer.  

Equally troubling, approval of the T-Mobile acquisition would set the scene for the remaining piece of the puzzle, Sprint Nextel, being absorbed by either Verizon or AT&T to further consolidate the duopoly.

Keep your eye on a bill in Congress, the “Next Generation Wireless Disclosure Act,” intrduced by Rep. Anna Eshoo (D-CA) of the House Energy and Commerce Committee's Communications and Technology Subcommittee. It is intended to force wireless companies provide consumers with accurate information about service data rate, network reliability and pricing. It would also require the FCC to evaluate service data rate and provide consumers with comparisons between alternative services. Want to bet it won’t pass?

In all likelihood the AT&T/T-Mobile merger will go forward. The FCC and Dept. of Justice will propose weak and unenforceable requirements on AT&T that will be forgotten once the deal is completed. Sen. Leahy and his Vermont constituency, along with the rest of the country, will be left holding the bag, with sub-4G service at higher prices. And AT&T executives will be laughing all the way to the bank.