Business, Enterprise

Verizon Wireless CEO Debunks Mythical Myths. Or does he?


Last week, New York Times columnist David Pogue wrote about the state of the US cellphone industry, and how it compares to other offerings abroad.

As usual the USA was found wanting, and many issues were cited that have long been thorns in the sides of consumers such as double billing (both parties spend minutes vs. just the call initiator) or ridiculous data caps and overuse charges. Pogue wrote "Apparently, persuading cell carriers to treat their customers decently would take an act of Congress." as his final parting line.

Verizon Wireless CEO, Lowell C. McAdamSo in response, Lowell C. McAdam, president/CEO of Verizon Wireless wrote a letter to New York Times editor Arthur Sulzberger Jr. to debunk "myths" about the US cellphone market, a copy of which can be found as part of an online article here:

However, some of the myths left a few of us here at BSN* scratching our heads at exactly where these myths came from, since a few seem a bit obscure or even counter-intuitive, and some don’t seem related to Mr. Pogue’s column at all. So after some research into the debunked myths, we’ve been left with the impression that most of them seem to result from Mr. McAdam’s difficulty with reading comprehension and basic math. Below you can find the myths and their refutation as per McAdam’s original letter to the Times in italics, with some evidence from our investigation following each in normal text. Please note that the letter contains some grammatical errors which we didn’t want to change:

"Dear Mr. Sulzberger:
The wireless sector of the high-tech industry shines as one of the few bright spots in the nation’s economy. Competition has driven massive investment, continueous innovation by wireless companies and our many corporate and entrepreneurial partners, and lower consumers prices.
Despite this amazing American success story, a few vocal critics, including your paper, have leveled highly misleading charges at wireless companies.
The 85,000 U.S.-based employees of Verizon Wireless – an employee-base growing even today – encourage our elected and appointed officials, as well as the media, to rely on facts, not myths.

Myth #1: Americans pay more for wireless service.
Fact: Americans pay ten cents per minutes less than Europeans.

Among the 26 countries in the Organization for Economic Cooperation and Development, Americans use the most wireless minutes per month, about four times more minutes than the average European consumer. Americans get the lowest cost per minute?an average of 10 cents lower per minute than Europeans pay."

After looking at the OECD website, we were a bit baffled at exactly what it was supposed to offer as supporting facts to debunk this myth. A link to a specific report would have been extremely helpful. At a guess, it would appear to be something like this report titled [PDF download link ahead] "TRENDS IN INTERNATIONAL CALLING PRICES IN OECD COUNTRIES" which has a lot of information on international calling rates between countries. However, it’s a bit outdated, having been published roughly six years ago, on December 19, 2003. We didn’t find a newer report that seemed relevant and supporting of the debunking of this myth.

By looking at actual cell phone carrier rates in the US and UK, we were hard pressed to find the 10 cent per minute increase claimed. For US carriers, we found had an extremely easy way to compare plans from the major carriers, and Vodafone UK has an excellent comparison here. At the current exchange rate, that works out to about $33/month, or 5.5 cents/minute. The reason for selecting Vodafone UK is that Vodafone Group owns 49.9% of a joint venture with Verizon Communications called the Cellco Partnership, which does business in the USA under the name Verizon Wireless. You’ve guessed it right, the very same organization whose CEO claims that they’re "cheaper than Europeans." Mr. Lowell, you should check the data with your European boss next time around.

It gets worse – Vodafone UK includes unlimited text messages, and to get that on Verizon Wireless you need to bump up to $59.99/month, or 13.3 cents/min, and if you factor in the common double billing practice in the USA [both caller and receiver spend minutes], it works out to 26.6 cents/min, which seems to be a tad higher than the -4.5 cents/min predicted by the formula given by its CEO. Just to be on the safe side, double call billing is forbidden in the European Union, unless there are roaming charges involved [between two countries with separate country codes].

"Myth #2: The Wireless sector of the technology industry is not competitive.
Fact: Former Vice President Al Gore has proclaimed U.S. wireless companies the most competitive on the globe.

More than 94 percent of Americans can choose between at least four wireless companies. Four national and hundreds of rural and regional wireless companies offer great consumer choices: pricing plans, post- and pre-pay options, and more than 600 handsets for sale?more than anywhere in the world."

With all due respect to Mr. Gore, inventor of our glorious Internet (yes we know he didn’t really say that), his proclamation was his opinion. Which, informed as it may be, does not itself qualify as a fact. Thus it’s not really useful for debunking myths per say. As for the four national wireless companies and hundreds of rural and regional companies, yes consumers can choose between them? when they first sign up. But if they change their mind later, most of the time they either have to throw out or modify their phones to "unlock" them for use with other carriers. In some cases this isn’t even possible at all. And with contract-subsidized phones, consumers are left paying off devices they can no longer use, due to artificial restrictions imposed by near-monopoly national providers. In many other countries, such anti-free market practices are eschewed if not explicitly outlawed. Or they were until the iPhone was used to bludgeon man
y of them into accepting the US model

"Myth #3: Wireless customers are treated badly.
Fact: 84 percent of American wireless customers are satisfied with their service.

According to a June, 2009 U.S. Government Accountability Office recent study, 84 percent of American adults are very or somewhat satisfied with their wireless service. One popular report published for consumers says there has been a "surge" in wireless customer satisfaction."

Yes, it does indeed say that. In the same paragraph it also says "GAO estimates that about a third of users responsible for paying their bills had problems understanding their bills or had unexpected charges at least some of the time. Additionally, GAO estimates fees for the early termination of a contract were a problem for about 42 percent of users who wanted to switch services but did not, and that about 21 percent of users who contacted customer service with a specific problem were dissatisfied with their carriers’ efforts to address the problem."

Later on after the pretty charts and graphs they also add "Since, based on our survey results, we estimate that about 21 percent of wireless phone users who contacted their carriers’ customer service were dissatisfied with how their carriers addressed their concerns, FCC’s efforts to handle complaints are an important means by which consumers may be able to get assistance in resolving their problems. However, the results of our consumer survey suggest that most consumers would not complain to FCC if they have a problem that their carrier did not resolve. Specifically, we estimate that 13 percent of wireless phone users would complain to FCC if they had such a problem and that 34 percent do not know where they could complain."

So they’re mostly satisfied? when their phone works. But billing is a nightmare and early termination fees reduce choice. Meanwhile a third doesn’t even know where to complain about this. That doesn’t sound much like an A report card.

"Myth #4: The big wireless companies don’t pay attention to rural America’s needs.
Fact: The company with the most rural wireless customers? Verizon Wireless.

"Verizon Wireless has invested $60 billion to build America’s most reliable network?important whether you are in the city or the country. And our recent merger with Alltel is an even larger investment in providing even better rural service.
Verizon Wireless stands with consumers by:
– aggressively closing down telemarketers and text spammers;
– supporting hands-free driving laws, and alone among wireless companies, supporting bans on texting and emailing while driving; and
– protecting privacy by chasing down identity theft and killing efforts to create a wireless phone directory.

Already we’re investing in the benefits of fourth generation wireless broadband networks that will give Americans access to even more information, multimedia and services, including bandwidth and speeds capable of delivering high-definition video.
But 4G is about much more than entertainment: Our new network will play a major role in improving healthcare by carrying medical records securely, mitigating climate change by facilitating mobile telecommuting, advancing energy efficiency with smart grid technologies, fostering education by providing students immense computing capability in their handheld devices, and leading the economy to new prosperity.
Wireless is, indeed, a success story?an amazing American success story that even our critics can be proud of. In global technology leadership, service delivery, contribution to the national economy, solid employment opportunities, and improving productivity, Verizon Wireless is committed to delivering great wireless services and opening the doors of opportunity for our nation.

Yes a lovely tear-jerking tale about the beneficent actions of quasi-monopolies, coming to the rescue with solutions to problems they helped create, and a cornucopia of next-generation services nobody will be able to use thanks to their insane pricing schemes.
Our Own Take on Things

Now we’d like to present some myths of our own, for your consideration.

Myth 1: Anyone under 30 gives a damn about minutes.
Fact: SMS rul3z, voice dr00lz!

Or at least that’s what Morgan Stanley’s research department says. [PDF download] It might be a bit biased considering the author of this particular report is 15 though. As usual, the USA lags behind in adoption of new trends, but we believe the massive advantages SMS based communication provides make its dominance over voice inevitable.

Consider: SMS does not require real-time attention, it can be deferred until the end of the current task or longer if necessary, reducing workflow interruption. It does not require the phone to be held while receiving information, or headphones or a headset to be worn at all, freeing up a hand in some cases and the sense of hearing in all cases.

Multiple non-unified (i.e. not a conference call or group chat) conversations can be multithreaded by the user seamlessly to individual participants, allowing for multiple simultaneous conversations that take advantage of the half duplex nature of the interaction to fill pauses with other conversation threads, similar to Intel’s Hyper-Threading. It’s also more reliable in poor network conditions and uses less bandwidth. Finally, it is easier to keep a record or history than voice, reducing errors.

Myth 2: ASCII in an SMS is 61 million times more valuable than ASCII in an email.
Fact:  SMS Formula: ASCII

Electrons are Identical Particles – They are all the same, whether they describe an SMS, email, image, sound, or 3D object. Just because you place a 160 character limit on the message length doesn’t make it more valuable. Supply and demand don’t quite work with character counts. But the charges for the services disagree.

International calls over Skype or other VOIP services versus international cellphone call rates are another example. One which was covered in the 2003 OECD report Mr. McAdam mentioned earlier.

Myth 3: "Unlimited" means 5GB and only programs we like.
Fact: un?lim?it?ed
1.   not limited; unrestricted; unconfined: unlimited trade.
2.   boundless; infinite; vast: the unlimited skies.
3.   without any qualification or exception; unconditional.

Anyone who thinks 4G is going to bring HD video and rainbows and unicorns over every cellphone hasn’t looked at data prices lately. For example, all four national US providers offer "unlimited" and by that we mean "5GB and no tethering with USB or Bluetooth to get data to your laptop" for about $60/month. If you need more, will they sell you another 5GB for $60? Nope, prices vary a bit, from $50/GB on Verizon Wireless to $200/GB on T-Mobile, to $490/GB on AT&T network, and the crown of "Champion of Data Plan rip-off" goes to Sprint for its "Simply" $1000/GB.

If you really think the US is leading the charge in mobile broadband, we recommend the OECD report [PDF download link] "MOBILE BROADBAND: PRICING AND SERVICES" dated June 30, 2009. Unfortunately it too is a bit dated, since the data was collected in October of 2008, and since then all the "unlimited" data offerings in the USA have redefined the word unlimited as 5GB and not a byte more!

Myth 4: Data coming through the phone via a cable or Wi-Fi signal costs more.
Fact: Only if the phone has been crippled by your service provider.

If you actually want that data on a computer via your phone, Verizon adds another $30, AT&T will give it to you in most of their 5GB plans unless you have an iPhone, in which case you’re stuck. But they may have mercy on us in September and charge us a "mere" $55 [over the cost of data] for the privilege of teethering. T-Mobile USA doesn’t seem to like tethering, at all. In fact they had Google take the application to fix that down. Sprint seems to charge about $15/month to tether, unless you’re not a crackberry junkie and have got something like that fancy Palm Pre or you use the $99/month "Simply Everything" plan. In which case tethering adds another $50. Which is simply not everything, is it?

And tethering doesn’t mean with a wire, Bluetooth can be used too. That is if your phone hasn’t been castrated to stop you from doing things like putting your mp3s on for free instead of buying them at ridiculous rates from your phone company, or getting your photos off the phone and onto your computer.

Editor’s note
USA is "the land of the free". But if we would ask telecom operators about that one, they would probably put an asterisk to it and add numerous disclaimers about "free" not exactly being free, but rather shorten your lifespan, abilities to compete on markets etc. Or just tell you that USA is "land of the free", but only if you pay an additional $50/month.