January 31, 2005 1:29 PM PST

Merger, shmerger, where's my ESPN phone?

Even though U.S. carriers are consolidating forces, tech advances such as broadband telephony should keep the price of a local phone call down, industry veterans said Monday.

It speaks volumes that phone giant SBC can bid on AT&T and so far there have been few predictions of high prices ahead for consumers. After all, basic economic theory holds that when there's lots of competition, prices ultimately come down. With fewer businesses competing, prices tend to go up.

But commentators and industry insiders dissecting SBC's $16 billion bid for AT&T say the latest technology is giving rise to a new breed of phone operator: one that doesn't have to have its own network. That's injecting much more competition into the local phone market than ever before.

"It's not that hard to be a telephone company anymore," said a source at Comcast. "The trick is staying in business."

Most networkless operators rely on voice over Internet Protocol (VoIP), which is a low-cost technology that lets a broadband line double as a phone line. The VoIP market was seeded by the likes of Vonage, which only requires that customers have an existing broadband connection. Dozens of new U.S. phone operators base their service on VoIP, including major cable companies that bundle a VoIP service in with their broadband plans.

At the same time, companies with popular brand names are getting into the cell phone business as mobile virtual network operators. These arrangements allow a diverse group of companies, from 7-Eleven to ESPN, to become wireless providers without having their own network. These operators are helping fill the void created by the purchase by Cingular Wireless of AT&T Wireless, by Sprint's upcoming merger with Nextel Communications and by a wave of consolidation among smaller cell phone operators.

The basic premise of reselling calling minutes bought from major carriers is an old one. But it took breakthroughs in billing and database management for it to become relatively inexpensive to launch and operate as a virtual cell phone operator. There are at least 10 new cell phone operators launching in the next few months, A.T. Kearney analysts said.

The only real quibble industry insiders had on Monday was about how stable a small percentage of the new competition is.

Cable companies probably have the best chance, since they own their own networks. And VoIP operator Vonage, with 400,000 customers, is a very respectable foe, even though it doesn't own a network. The successes in the cell phone business by the Virgin megabrand--its Virgin Mobile USA has more than 2 million subscribers--is proving the same point on the wireless side of the phone industry.

In the mid-1980s, government regulations provided a competitive boost for those unable to invest tens of billions of dollars in building a new network. Rules that were phased out in 2003 guaranteed an operator access to a local phone network at relatively cheap prices. The sunset of those rules, as evidenced by AT&T's shrinking dominance, has had a dramatic impact on the companies that relied on them.

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You don't know the half of it
In early December, I registered a cell phone with AT&T that allegedly was good everywhere in the country, in preparation for a 3-week trip to Missouri, so I wouldn't get clobbered with roaming charges on my regular cell phone. I wasn't able to use the phone anywhere except in larger cities (Amarillo, Texas isn't one of them) because I wasn't in an AT&T area.

About halfway through the trip, I got an email from SBC, my landline provider, that showed that I had "added services". Not knowing what they were, when I got home, I called. After finding out that it was a standard response to a piece of mail they had sent and that I had returned, the nice lady asked if there was "anything else SBC could do", to which I replied, "Yes, if you can provide cell phone service."

She signed me up, on Jan 10, with Cingular, and migrated my existing account over from AT&T. She was supposed to send me two new phones, too.

On Jan 21, I still didn't have them, so I called, only to find out they'd shipped them to the wrong address (in a town two hours away, to an address that doesn't exist). On Jan 28, my existing phone stopped connecting; despite the fact that the phone says Welcome to AT&T, and then shows Cingular, and despite the fact that their computers show my account, their system apparently doesn't recognize my phone (which had worked fine the day before) as being part of their system.

And I still don't have the new phones.

The whole SBC/Cingular/AT&T mess is beginning to remind me why Ma Bell was broken up in the first place; it takes them a few hours or days for billions of dollars to change hands -- but the phones don't work, and nobody can tell you what's going on.

Eric Peterson
Posted by EENetminder (16 comments )
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Cingular doesn't like Virtual Networks?
I signed up with T-Mobile in California about 2.5 years ago, and at that time T-Mobile was using the Cingular network in CA (and elsewhere, I believe) to fill holes in their own network. So much for not supporting MVNOs. In was concerned about the impact of the ATT-Wireless&Cingular merger, but my personal expert on the subject (who also has T-Mobile service in CA) assured me that the service would be transferred as necessary.

However, as of about Jan 28th, my service, which has mainly worked very well in Canada, the UK, Germany, the Czech Republic, Italy, etc., and fairly well in much of the USA, developed a new "feature", where on making or answering a call, the communication was all one way (i.e. I could hear them, but they could not hear me), for long enough thay would hang up, though after about 60 secs the connection would become two way, and work as normally. Since all but one (now 2) of my 15-20 calls since had "worked" this way, I finally called the "Customer Service" number, from whence I learned that "about 18 towers in my area had a technical problem", though not the one where I live (where many of the calls had been based).
So maybe Cingular have just discovered their "no MVNO support" policy?

What happens when my wife's ex-Cellular-One then ATT-W now Cingular (TDMA) phone gets converted to the new (GSM) system?
Posted by OldFartPeter (7 comments )
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WhichVoIP Plan search
Even though VoIP provides a significant benefit to the user, in both its savings and its ability to provide additional features there is one big hurdle to overcome.

This is the fact that there are so many different providers and plans available that it is hard to find the one that meets your particular needs.

However I have found a great site, <a class="jive-link-external" href="http://www.whichvoip.com" target="_newWindow">http://www.whichvoip.com</a>. In addition to having FAQs, expert guides etc, the WhichVoIP site provides a comprehensive search, allowing the user to choose what they require. From the comprehensive results the user is able to choose the plan that meets their needs.

Try it out

Robert
Posted by caiger (3 comments )
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