PHONE PRICE WARS II
David Bennahum has an interesting piece in Slate about a new piece of software that may finally lead to the mainstream realization of telephony:
For those of you who haven’t heard of Skype, the latest white-hot Internet technology and new social phenomenon, here’s what you need to know: It’s a free piece of software (of course!) that you can download to your PC; suitably armed with speakers and a microphone, you’ll then be able to “call” and talk to anyone else in the world who’s on Skype. In the less than two months it’s been available, 1.6 million people have downloaded the software, setting a world record for this kind of thing.
For a variety of reasons he explores, he thinks Verizon in particular is going to be in a lot of trouble.
The piece also expands on the impact of cell number portability that I mentioned a few days ago:
The wireless telephone business is a savage industry, where acquiring a new customer can cost $300 per person once you factor in the subsidy for the phone, which is usually sold well below cost, and the marketing and promotion efforts that got you to walk into the store. And things are about to get worse. After years of prevarications, appeals, and foot-dragging by cell phone companies, on Nov. 24 the carriers are being forced to let you change your cell phone provider while keeping the same phone number, and they’re supposed to complete your request within 2 1/2 hours.
Who wants to switch? Some analysts estimate that 9 million people will switch carriers on the first day of number portability. As the nation’s biggest wireless carrier, with 32 million subscribers, Verizon could suffer the most losses. Inevitably, number portability is going to trigger a price war. Consumers who shop around should expect dramatic drops in their wireless bills, possibly down to what’s common in Europe: 10 cents a minute, anytime, with no contract. But what’s good for consumers is potentially disastrous for Verizon, which has spent billions of dollars building its wireless network–the nation’s largest–at a cost it has yet to recoup.
What’s particularly odd to me is that, with an amazing array of competitors, the U.S. market still produces higher cost for this particular commodity. Especially strange since, before the breakup of AT&T, Americans were paying far, far less for land line telephone calls than were the Europeans (or, at least the Germans). Indeed, I’m pretty sure that’s still the case.