According to experts, Consumers are not getting
the benefits of new wireless technologies which they deserve.
Today I was searching for a good
solution to minimize my cell phone bill due to financial crunch which almost we
all are facing right now. I found a very interesting point of view of Lauren
Orsini, She is well known author of several technologies based articles
which published in well known international journals. According to her statement:
“How much do you really know about 4G data service on your Smartphone?
Did you know that it not only provides you with faster data, but is also
cheaper for cellular carriers to deliver? And yet it still costs you the same
or more as slower 3G service? Answer is very simple and it is, “Certainly Not” here's
why?”
The average user does not have much of an idea what 3G or 4G
means beside “one is newer and faster.” And why should they? Carriers use 3G
and 4G more as marketing terms than
technical ones, and basically all of them have lied (with official
blessing from the International Telecommunications Union) about what a 4G phone
actually gets you. The "real" definition of 4G, something that
worldwide carriers have not yet accomplished, are download speeds of 1
gigabit per second in a fixed location and 100 megabits per second while in
motion.
However, the
technical infrastructure of how efficient 3G works is compared to 4G is where
it gets really interesting. The ITU—a branch of the United Nations that acts as
the wireless global standards body—shows that as each generation of cellular
technology is developed, it’s not just a better, faster experience for users.
It’s also easier and cheaper for carriers to deliver.
How Carriers Drink Your Milkshake
The simplest
technical definition of cellular speeds refers to how much data you can
transfer per second. With the updated technology that carriers are equipped
with in the fourth generation, known as Long Term Evolution (LTE), they’re able
to deliver significantly more bits per second, which means a better experience
at half the effort.
For a metaphorical
example, imagine you are drinking a milkshake. With a thin straw, it’ll take a
long time to drink a thick, ice-cream based beverage. But with a thicker straw,
you can drink it much more quickly. 4G is kind of like having a thicker straw.
The ability to move
more bits of data faster is measured by something called spectral efficiency (also known as spectrum efficiency
or bandwidth efficiency). Spectral efficiency is a measure of the rate at
which information flow and improves with every successive cellular generation.
Steven Stravitz,
founder of Spectrum Management Consulting, is a former engineer
who studies emerging technology trends with a focus on wireless and
mobile. Here's how he explains the nuts and bolts.
“Let’s say that a
cell site operator allocates a 10 megabyte channel of wireless spectrum. In a
3G network, you should be able to download 10 megabits per second. In a 4G
network, since it’s more efficient, you should be able to get 15, which is a 50
percent increase in efficiency,” Stravitz said.
In other words,
advances in cellular technology mean that carriers can get 50 percent more capability
while using the same amount of bandwidth already allocated to them.
That all makes sense
from a technical perspective, but in reality, 4G LTE speeds are more difficult
to define. LTE speeds vary based on the amount of spectrum available to a particular
carrier, the type of LTE being deployed and how the carrier handles spectrum
between downlink and uplink from cellphone to cellular towers.
Cellular carriers
also have varying degrees of strength when it comes to backhaul, the
infrastructure that moves data between cell towers and the Internet. Some
carriers have excellent backhaul on 4G networks (AT&T and Verizon, notably)
while others are still building it out (Sprint).
Yes, They Drink It All Up
Users don’t know about the technical side of cellular
spectrum efficiency. So they’re content paying just as much for 4G phones as
they did for 3G. In some cases, like with Republic Wireless, they actually pay
more—the company has a $25 3G plan and a $40 4G plan.
From a business perspective, 4G services and technology are
very profitable for carriers. Foremost, the ability to slap "4G LTE"
onto devices helps sell Smartphone’s and make fun television commercials.
Second, consumers want "4G," even if they don't actually know quite
what that means. The carriers are delivering faster service with higher
margins, and pocketing the rest of the money from users who think it’s a deal.
After all, doesn't it just make sense to you to pay as much or more for better
service than you were getting?
In the U.S., carrier profits are bigger than ever for a
variety of reasons, but better margins on its core cellular product don't hurt.
For instance, Verizon's profits in the first quarter were nearly twice what
they were in the first quarter of 2013, up to $3.95 billion from $2 billion.
Of course, in a competitive market, rival carriers would try
to siphon off each other's customers by offering cheaper service until they
bled away all that extra profit. That this doesn't seem to be happening tells
us something interesting about the U.S. cellular market.
The Economist had an
interesting chart in October 2013 showing that consumers in the U.S. pay far
more for cellular plans with just 500MB of data than almost every other
country. Cellular plans in the U.S. with 500MB of data cost about $85. Our
friendly neighbors to the north, by contrast, pay $40.60 for the same plans.
The U.S. has much deeper penetration of LTE than Canada, yet Americans still
pay more for that data.
Steve Shaw from Juniper Networks put it in perspective to cellular-focused publication
RCR Wireless last year: "Today a gigabit of traffic on
Verizon’s network is something on the order of $7.00, $7.50 a gig, in some
markets it’s as low as $1.00 or less, and so in those particular cases just
pricing based on bandwidth isn’t enough,” Shaw said.
Essentially, the U.S. carriers are able to gouge consumers
even though the cost per bit on their networks is technically going down over
time. The carriers will contend that they need to charge what they do because
they investing in the infrastructure of the country. But once all the base
stations are built, all the backhaul is optimized, will prices actually go
down?
Will consumer knowledge of the way the technical side works
change the way carriers charge for 3G and 4G? Probably not, said
Stravitz.
“I think something that doesn’t get discussed much is the
elasticity curve,” he said. “What price point’s people pay dictates the usage,
so there’s a tie between the two. They haven’t dropped it down because they
really don’t need to. The tie between how people react and what they pay is
extremely strong, so operators can meter usage in essence, by the rate plans
they offer.”
However, it’s something to consider in the upcoming decade,
when the next generation of becomes a reality. Our phones will be faster, cheaper,
and easier to produce, but carriers will only get richer.
