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Against Monopoly

defending the right to innovate

Monopoly corrupts. Absolute monopoly corrupts absolutely.





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International Roaming

So I'm mostly posting this because I can. According to the map on the screen in front of me I'm in between Salt Lake City and Denver at an altitude of 35,000 feet. For the ten and a half hour flight from LA to Munich, I'm paying a lump sum of $27 for a high speed internet connection. So what does this have to do with monopoly? At the moment, using skype, I can call - with pretty good sound - anyone with skype anywhere in the world for free, and anyone in the U.S. or Europe for about 2 cents a minute. Once I arrive in Munich and start using my cell phone, the price goes up to a dollar a minute. There is pretty clearly some lack of competition in international roaming rates - it can't cost fifty times more to call by cell than it does by skype. Fifty times - that is a high price to pay for monopoly.

Addendum: David Laibson was puzzling over the same thing in Munich. The problem is that neither of us can figure out where there is lack of competition. There are multiple US providers that offer overseas roaming, and multiple overseas providers with whom they can and do contract. So unless there is some government regulation here we don't know about, the market looks pretty competitive. My best guess is that what is going on has something to do with bundling - few people are going to switch U.S. providers just because of a small difference in international roaming rates. When T-Mobile offered much better rates than Cingular several years ago, Cingular lowered their rates to be closer to T-Mobile, but they didn't try to undercut them.


Comments

First of all, I totally agree that there should be more competition in international roaming rates.

That being said, I'd like to express my strong reservations against Skype. For many people Skype is the "Google" of VoIP: they are nice people. They give the software for free and charge low fees for their services. No matter how nice they are and the major role Skype has played in making VoIP popular, I have strong objections against the closed protocol they use.

Most other companies in the VoIP market have adhered to SIP-based protocols [1]. This is the case, for example of the Gizmo Project [2] and the Open Wengo [3]. The service they offer is similar, with high audio quality and low fees (Gizmo charges 1 cent per minute for US destinations). Moreover, as they use SIP (an international standard), you can choose the softphone of your preference and possibly call other SIP phones. On top of all this, they offer more innovative solutions than Skype, in my opinion, with some features that Skype does not have. For example, it seems to me that with Skype you cannot have a regular phone connected to you modem in order to receive calls: you need to use a USB phone, that means you must keep you computer turned on when it should not be necessary. With Gizmo you can record your calls and locate the person you are talking to in a map. Wengo has a Firefox extension that works as the softphone. These are only some examples, check the websites below and see for yourself.

[1] http://en.wikipedia.org/wiki/Session_Initiation_Protocol
[2] http://www.gizmoproject.com
[3] http://www.openwengo.com/

No question that Skype is a triumph of promotion over quality. I also would prefer that the market adhere to SIP standards. But the problem is that it has already coordinated on Skype. I'm sure we will get bitten by that somewhere down the road - but at the moment the problem is that you can't talk to Skype users without Skype.

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