From $199 to much more, Apple & AT&T expect premium prices for iPhone addicts.

High demand for a product often carries a premium price to acquire and use it.  The Apple iPhone, one of those few mobile products that can generate lines extending out the door of a retailer, is one such product.  AT&T Mobility, which still holds an exclusive contract with Apple for iPhones in the United States, has made it clear it will not be making any price changes to its wireless data plans with the introduction of the Apple 3G S on June 19.  Speculation about lower pricing started with AT&T Mobility CEO Ralph de le Vega, who spoke at a conference last month indicating he was amenable to “limited data plans for lower fees.”  That message was soon modified into a more generic ‘price cut’ as the story traveled.

“We’ve been very happy with our pricing,” AT&T spokesman Mark Siegel told Dow Jones Newswires.

AT&T already charges a pretty penny for iPhone users on their network.  Customers signing up for service face a minimum voice plan of 450 minutes for $39.99.  An “unlimited” data plan, required for the iPhone, adds $30 per month.  AT&T claims the average iPhone customer spends about $90 per month for voice and data.  The company also reserves the right to crack down on excessive data usage and limits some applications.

Should de le Vega’s tolerance of limited data plans become reality, plans with more specific usage limits may be forthcoming, at a moderately discounted price.

AT&T has had a bad week in the public relations arena, as current iPhone owners continue to object to the full-price upgrade price they may have to pay if they are in a two year contract.  Thousands have signed a Twitter petition and have filled AT&T’s online support forums with complaints about AT&T “price gouging” loyal customers.

AT&T has enjoyed significant revenue from their exclusive arrangement with Apple.  But iPhone users are dedicated to their combination phone and data device, and try to get their money’s worth.  That has put pressure on AT&T’s network, and despite the company’s revenue from its premium priced plans, has been criticized for not keeping up with that demand.

Verizon Wireless, AT&T’s biggest competitor, trashed AT&T’s proposed upgrades as inadequate:

Verizon Wireless CEO Lowell McAdam characterized AT&T’s promises as “too little too late”. He said that AT&T’s “ceiling for their network will be the floor for our network.” McAdam called AT&T’s announcement on its network upgrade old news—about a year old. He also noted AT&T’s promises to upgrade speed are spin.

We are still tracking down some nuisance bugs, and have had a report of at least one browser crash when trying to visit our site.

The bug we are currently aware of, particularly for those running Mac OS 10.5 and Safari 4 is:

Error #2044: Unhandled IOErrorEvent:. text=Error #2124: Loaded file is an unknown type.

We *think* that is related to one of the video players (the one that shows a blank screen before starting a video).

If you are experiencing that error, let me know if you can clear it and still access video, or if it completely disrupts your visits here.

Any other error reports should include:

• Your operating system (XP, Vista, OS10, etc.)
• Your browser & version
• If the error occurs only in one browser, some, or all browsers.
• If you are disabling Macromedia Flash (if you know)
• The exact error message you see, if you see one.
• If there is a specific action you take which routinely causes the error problem.

Because some errors might impact your ability to use our contact form, you can e-mail me directly at:  bugswat (-at-) phillipdampier.com or reply as a comment here.

You should replace the (-at-) with @ like you would with any e-mail address ([email protected]).   I use this format to keep those spam e-mail address harvesters from picking up my e-mail address and blitzing me.

When we are confident the bug(s) are gone, this message will disappear.

Thanks for your help.

For those who tried to watch the live stream from this past Monday’s Internet Town Hall from Toronto, it was a process that demonstrated the limitations of broadband service in Canada.  Evidently the hotel broadband connection was inadequate for the task, and the stream suffered ongoing video and audio problems for the duration.

An audio podcast version has now become available and is included below.  Because the event runs nearly two hours, you may wish to download the audio and listen on the go.  If you want to listen here, remember that the audio player will only work as long as you remain on this page.

Internet Town Hall On Canadian Broadband/Net Neutrality Issues – Toronto, June 8, 2009 (1 Hour 50 minutes)
You must remain on this page to hear the clip, or you can download the clip and listen later.

Robert Cyran, writing for BreakingViews, is concerned about the profit capacity of telephone and cable companies in the coming years.

Noting that wired, high speed services often account for more than half the revenue of providers, anything that challenges those margins could provoke hostile reaction from Wall Street, dissatisfied with diminishing returns.

Cyran specifically calls out Frontier Communications, FairPoint Communications, and Qwest for not having wireless (mobile phone) divisions and for their high level of debt.

He’s also been absorbing Sanford Bernstein’s views on the telecommunications industry, which typically guarantees Verizon fiber-to-the-home cost bashing.  And yes, it’s in there:

True, in urban areas where Verizon and AT&T are laying optical fibre, their fixed-line businesses are doing relatively well. Customers like super-fast internet connections, and the companies can pump bundles of services such as voice and television through it. But in rural areas, fibre is prohibitively expensive to lay, and customers without high-speed service options have more reason to rely solely on a mobile phone.

Verizon and AT&T won’t escape unharmed. Verizon is spending about $4,000 per customer to lay fibre.

Verizon is spending money on fiber service that customers like and are generating healthy revenues, but the fiber optics “harms” Verizon.  At least the bashing is consistent.

Cyran claims cable’s biggest problem is that margins for their broadband divisions have been slowly dropping.  Should customers defect en masse to competitors, things could get bad fast:

And when businesses like these with high fixed costs see customers defect, margins can contract quickly and even go negative.

One way to guarantee mass defections is to try to gouge consumers with Internet Overcharging schemes.  In markets where equivalent levels of service are available, customers have the option of leaving the Overcharger behind for a more customer-friendly option.  Unfortunately, not every market has equivalent competitors.

Cyran’s predictions for the future?  Big troubles for Frontier, FairPoint, and Qwest who he predicts will see ongoing declines in their cash flow and increasing difficulty in paying back their debts.  The companies will also struggle with the limitations of aging copper infrastructure to provide advanced class services (high speed broadband, video, and telephone) customers increasingly expect.  In larger communities, many customers will leave for competitors who can provide those services (in these cases that means the cable company).  In rural communities, customers will increasingly rely on cell phones as their only telephone line.

Fairpoint’s stock has fallen about 70% over the last 12 months and Hawaiian Telecom, which Carlyle bought in 2005, filed for bankruptcy at the end of last year. Yet Quest and Frontier’s stocks both still trade at more than 10 times estimated 2010 earnings. Since there’s little chance customer defections from wired telecom businesses such as theirs will stop, their stocks could have much further to fall.

The United Kingdom is the latest country to face the downside of arrogant Internet service providers throwing hissyfits when people actually use their broadband connections.  When broadband service providers entice investors with promises of fat returns, assuming most people won’t actually use those high speed connections for anything except web page browsing and e-mail, they get mighty upset when they catch their users watching online video instead.

One of the benefits of broadband is that it provides fast speeds to let people do more than what they used to with dial-up access.  That happens to also be one of the major selling points to get customers to part with a significant sum of money each month for the service.

They just don’t want you to use it.

British Telecom (BT) is the latest ISP to complain that the BBC’s iPlayer, which allows British residents to stream TV and radio programming on demand, and YouTube are using their broadband pipelines, but not paying them anything to do so.

That conveniently ignores the fact that their customers throughout the UK are paying them to deliver that connectivity, providing them with a handsome return.

Internet Service Providers not content with earning money from one side, now increasingly want a piece of the action on the other.  It’s the equivalent of making a long distance call, but asking both the person calling -and- the person called to pay a fee.

Since the companies providing the content consider the payment demands ridiculous, ISPs have started singling out certain types of traffic on their network and slowing it down, ruining picture quality and annoying their customers trying to access the content.

BT implemented a “Fair Use” policy for one of their broadband packages which lets them cut the speed of online video from the normal 8Mbps down to 896kbps between 5pm-12am each day.  BT claims that’s enough to watch online videos, but that very claim would negate any benefit from slowing down the connection.  How many TV shows do people stream at the same time on the same connection?

In fact, BT’s policy does impact on the quality of the video streamed to the viewer.  The iPlayer is capable of sensing your broadband speed and reducing the quality of the stream to match the speed you have available.

Of course, should the BBC agree to pay BT some sort of transport fee, they might find their way clear to take the speed bumps out of their way.

A founding principle of Net Neutrality is to treat online content equally when transporting it.  Your stream from the BBC should not be hampered while a stream from someone else is not, just because they paid extra.  Are bandwidth costs increasing?  No, they are decreasing.  There is no compelling argument to prevent providers from keeping up with demand.  If they want to earn money from content, they can produce their own and provide it to subscribers on equal terms.