Could There Be An iPhone Without AT&T?

In an interesting and well-written opinion piece today published in the Wall Street Journal, Andy Kessler vents his anger with AT&T preventing Apple from allowing the Google Voice application on its iPhone. He thinks it shows that AT&T is threatened by the software because it would render its services obsolete, which would throw some more dirt on the coffin it's trying to get out of. He then presents some interesting ways to reform our national communications policy. I think his general approach is right, but a few of his ideas might not work out.

Here's the problem:

The trick in any communications and media business is to own a pipe between you and your customers so you can charge what you like. Cellphone companies don't have wired pipes, but by owning spectrum they do have a pipe and pricing power.

His analogy of pipes also applies to Apple, through its iTunes store. The idea is that a pipe is sort of a monopolistic advantage that consumers can't really avoid. This is where antitrust regulators can, and may eventually, come in. But in the case of a wireless spectrum, that might be a sort of natural monopoly, for which I'm not sure much can be done, other than to try to ensure as much competition among wireless carriers as possible.

Before delving into several ways he thinks reform could be brought to national communication, he says something absolutely true and totally relevant:

I'd start with a simple idea. There is no such thing as voice or text or music or TV shows or video. They are all just data. We need a national data policy, and here are four suggestions:

Eventually, it will have to be this way. So we might as well restructure things to reflect this change sooner rather than later. Here are his ideas:

End phone exclusivity. Any device should work on any network. Data flows freely.

I see where he's coming from here, and I agree that it's annoying to have to use AT&T if I want to use an iPhone. But I worry about the consequences. Namely, I worry about what it would mean if AT&T, Sprint, T-Mobile and lesser carriers all went out of business because Verizon has the best network. Then we'd have a real monopoly on our hands. Ending phone exclusivity sounds great in theory, but I'm not sure how great it would work out in practice.

Transition away from "owning" airwaves. As we've seen with license-free bandwidth via Wi-Fi networking, we can share the airwaves without interfering with each other. Let new carriers emerge based on quality of service rather than spectrum owned. Cellphone coverage from huge cell towers will naturally migrate seamlessly into offices and even homes via Wi-Fi networking. No more dropped calls in the bathroom.

This is another idea that sounds great until you think a little more deeply about it. There's actually a practical reason why you have to license airwaves. If you didn't there would be all kinds of real physical problems with airwave interference that would make wireless communications a total mess. That's not to say that there isn't room for reform in the process. Although auctioning tends to be a good method for sorting such things out, perhaps there's a better way. You just can't end airwave regulation altogether without chaos ensuing.

End municipal exclusivity deals for cable companies. TV channels are like voice pipes, part of an era that is about to pass. A little competition for cable will help the transition to paying for shows instead of overpaying for little-watched networks. Competition brings de facto network neutrality and open access (if you don't like one service blocking apps, use another), thus one less set of artificial rules to be gamed.

I think this is already sort of starting. I recently made the decision to shun Comcast for Verizon's FiOS after moving to a new apartment. I could also have gone satellite. Competition in this marketplace is stronger than ever, and that's a really good thing.

Encourage faster and faster data connections to our homes and phones. It should more than double every two years. To homes, five megabits today should be 10 megabits in 2011, 25 megabits in 2013 and 100 megabits in 2017. These data-connection speeds are technically doable today, with obsolete voice and video policy holding it back.

Right, sure. But I'm a little confused how he hopes to do this. In theory, competition among data providers would do this best. So anything that encourages competition would also encourage faster data connections.

There's also another constraint at play that needs to be considered when talking about this sort of thing: physical infrastructure. Phone companies like AT&T and Verizon don't use magic to beam wireless or hard-line calls around the world; they utilize infrastructure like radio towers, computer systems and thousands of miles of cables. Somehow, they have to pay for that stuff, so the idea that their services should be free, or much cheaper, sounds great to you and me, but if it became so cheap those companies could not invest to improve infrastructure, then that would be a problem. So while we may lament AT&T gouging us and stifling Google Voice, without doing so, the very infrastructure needed for the iPhone to be such a useful wireless device might cease to exist.