Cell Phone Data: A Protection Racket

Cell phone operators believe they have the right to levy a fee on the type of traffic that passes over their data networks. The justification is that they've had to invest a lot in their networks and need to recoup those investments. Still, it feels like a protection racket.

For example, suppose you subscribe to a cell phone operator in a developed country. You then go on the Internet and find someone selling ring tones. The ring tone is delivered to you over the cell phone network, and all things being equal, your cell phone operator will demand a large share of the ring tone revenues.

Now suppose the vendor is in a developing country, where the charges for sending are much lower. As the world is today, the chances are your cell phone operator will try to detect that ring tones are being sold cheaply. It will then either block the traffic or, more likely, go to the vendor and demand a large chunk of the revenues.

Another example is where you try to buy an application for your cell phone using BREW (Binary Runtime Environment for Wireless). A large chunk of what you pay will go to the carriers.

In both cases, the carriers are using their strength to extort cash, where it seems their added value is very minimal.

Long term, the outlook is optimistic. As operators turn out their 3G IP services, competition should erode content-based tariffs. All-you-can-eat IP pipes should become common. 

... David Ferris

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