The Future of Communications

Monday, 26 July 2010 17:43 by The Lunatic


I just got back from a one-week excursion to Washington DC. I had two objectives for this trip: buy a car, and find a house to live in (since we are moving back to the USA next month.)

Buying a car and selecting a house to lease in one week is difficult enough – but it’s even more problematic when the rest of your family are on another continent. I needed to keep in contact with my wife and kids three or four times a day as I scouted out different neighborhoods and looked at houses.  To make matters worse, I didn’t have my cell phone with me since my basic calling plan (discussed below) doesn’t have international roaming.

So it was Skype to the rescue!  Calling home to Switzerland on Skype is only 2.1 cents a minute, and if the internet connection is good, the voice quality is indistinguishable from a regular phone call.

The problem, however, is that using Skype while I’m out looking at houses and cars requires that I find an unsecured wireless hotspot. It’s easy after that, but not quite as convenient as just dialing a number on a cell phone and hitting the “send” key.

For example, I found the car I wanted at a dealership in Bethesda, Maryland.  It was exactly the model I was looking for; it was a very good deal (less than I had anticipated paying), in great condition – and I was ready to buy it on the spot.  But before I wrote a check, I wanted to discuss it with the family.  I asked the sales guy if there was unsecured wireless in the building and I got a blank stare – he had no idea what I was talking about.  After asking around, I was told that the dealership DOES have a wireless network in the service department for customers to use while they are waiting for their lube, oil, and filter change. I fired up my laptop and found that the signal strength was sufficient all the way out on the sales floor. I told the sales guy I needed to talk to my wife about the car, plugged in my USB headset, and called home.

The sales guy was quite impressed that I was talking to Switzerland, and flabbergasted when I said it only cost 2.1 cents a minute for the call. He asked how good the audio quality was, so I called his cell phone and gave him a quick demonstration.

A few days later, my sister-in-law (who lives in Denver) left a voicemail.  She had recently gotten out of the hospital, and I knew my wife wanted to talk to her.  However, since I had the laptop with me, my wife couldn’t use Skype to return the call.  I had never tried it before, but the Skype “conference call” feature saved the day.  I first called Denver (from downtown Washington DC), then conferenced in our home number in Switzerland. Whoo-hoo, it worked perfectly!  It was an absolutely flawless three way conference call – no delays or echos in the line, the volume was consistent and perfectly clear for all three of us, and we chatted away for almost an hour without having to worry about the cost.

An idea popped into my head – instead of having to lug around the laptop, how about a dedicated “Skype Phone”?  It would only need to have a wireless LAN adapter and some supporting software, and you could make calls anywhere in the world (free if calling other Skype users, and still very inexpensively to call regular phones worldwide). The problem with this idea is that it would NOT work like a cell phone – at least not yet. Wireless LAN does not allow you to “roam” from connection point to connection point, so you can’t use it in a car or even while you’re walking around.  You are limited to the few hundred feet range of the wireless adapter. But this range WILL get better as time goes on and newer technologies are developed.  How about a dedicated phone built into a pair of eyeglasses, with an earpiece and microphone, which could eventually provide 24 hour “always on” hands-free communication at virtually no cost? Is that the “plugged in” future of humanity? Quite likely.

All of this got me thinking about the phone company’s current business model. Making my three way conference call from either a land-line or a cell phone would have been fairly expensive. Will the traditional phone companies stay in business as internet telephony continues to gain momentum?  History has shown that companies will either adapt to new technologies or they will fade away, and the phone companies have been remarkably resilient.

A good example of this was a little over fifteen years ago when internet services first became available on Cable modem and DSL.  The early technology behind DSL was far superior to Cable modems, but the phone companies were loath to offer high-speed DSL service.  Why? Because they were making a bundle from businesses by selling high margin T1 lines, which cost over $1,000 a month (“T1” is a point to point data line at 1.544 Mbps, it’s a subset of a “T3” line, which is just under 45 Mbps. Leasing a dedicated T3 line, at the time, was well over $10,000 per month!)  If DSL became cheap enough for consumers to afford – and also fast enough for businesses to use, then why would a business continue to pay for a T1 line? DSL was a threat to a big “bread and butter” income stream for the Telco's.

As the phone companies stalled for time, the Cable TV industry jumped in with both feet, improved their technology and service, and got an early lead on providing high speed internet to the home with Cable Modems; the phone companies had no choice but to change their business model.  With the widespread adoption we have today, the phone companies are currently making FAR more money on DSL than they ever dreamed they could make with T1 lines. They adapted.

Telecommunications is an incredibly profitable business. But for the consumer, the service charges are still too high.

Admittedly, there is a lot of cost in the infrastructure for the phone, cell phone, and cable companies.  Cell phone towers (for example) are expensive to build and maintain, and the companies usually lease the land on which the cell towers are built, so there is a monthly expense they need to pass along to the consumers.  But frankly, with the volume of calls that they handle today, cell phone service is WAY overpriced in the US.  The cost of cell phone service in the USA is among the highest in the world.  My “basic” cell phone plan in Switzerland is the equivalent to US$12 a month (unfortunately, without international roaming, as mentioned above).  Everything else is outrageously expensive in Switzerland, but I can get a pretty decent calling plan for twelve bucks!  It shows you how much profit the carriers are making in the US (especially on text messages – what a racket!).

The phone and cable companies are milking the consumer for every penny they can right now, because they know that another shift is coming.  Internet telephony will eventually replace both land line and cell phone services.  On-demand video streaming will make traditional cable TV obsolete sooner rather than later.  Small, low power transmitters on top of power poles could easily replace expensive cell phone towers.  Fiber is replacing coaxial cable at a rapid pace. Does it matter if the transmitters are owned by the power company (who already own the poles) instead of today’s cell phone providers? Does it matter if the optical fiber going to your home is installed by the phone company rather than the cable TV company?  Not at all! They will soon blur together and will be indistinguishable from one another, because the information they carry today is just bits.  There will be no analog phone lines or television signals coming into your home, just binary ones and zeros. Whomever can provide the most bits at the cheapest price will win.

The cost per bit for internet service has been dropping steadily for 15 years, while connection speed has increased, latency has decreased, and reliability has gone way up.  In the meantime, digital cameras have replaced film, CD’s have replaced vinyl records and cassette tapes, and even digital projectors are replacing film projectors in all the movie theaters.  It’s all just bits, and and bits are going to continue to get cheaper.  There’s no stopping it, so you might as well get used to the idea.

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