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Carriers look for new business models to afford iPhone bandwidth

post #1 of 94
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As bandwidth-heavy smartphones like Apple's iPhone turn huge profits for handset makers, wireless carriers across the world have struggled to keep up with bandwidth needs. One executive said this week that new business models must be explored for carriers to remain profitable.

Vittorio Colao, CEO of Vodafone, said at the Mobile World Congress in Barcelona, Spain, on Tuesday that the demand for data in mobile devices has become a problem for carriers. According to Reuters, he specifically named Google and said the company should not be allowed to control the flow of money through dominating the search and advertising market.

To get their fair share, Colao said, carriers could charge customers more for greater bandwidth, or guaranteed high speeds. They could also charge content providers, and guarantee them bandwidth speeds as well.

Under the current business model, Colao said it is difficult for operators to invest in their networks.

With the new high-speed 4G long term evolution wireless standard on the horizon, things are only expected to get more expensive for carriers. The transition to LTE is expected to cost U.S. carriers an estimated $1.78 billion each in the first year alone. Last week, AT&T announced partnerships with Alcatel-Lucent and Sony Ericsson for 2011 commercial deployment of its 4G network.

T-Mobile on Tuesday revealed its own plans to introduce a nationwide "4G" HSPA+ network in 2010. Phones compatible with the network have not yet been announced, nor have specific cities or a timetable been revealed, though the program is currently active in Philadelphia, Penn.

Reuters also spoke with Mike Lazaridis, co-CEO of Blackberry maker Research in Motion, who said handset manufacturers need to do something to ensure their products use less bandwidth. He said if they don't, a global "capacity crunch" would emerge, which has already begun in the U.S.

"Manufacturers had better start building more efficient applications and more efficient services," Lazaridis reportedly said. "There is no real way to get around this."

Last December, Ralph de la Vega, president and CEO of mobility and consumer markets with AT&T, the exclusive carrier of the iPhone in the U.S., made headlines when he said it was inevitable that high-bandwidth users will be charged for what they use. Those comments led to speculation that AT&T was exploring tiered data plans for the iPhone -- a rumor the wireless carrier quickly denied.

As smartphones become more bandwidth-hungry, the iPhone has lead the pack, causing major network problems for AT&T upon the launch of the iPhone 3GS last summer. One report said the average iPhone user consumes 10 times the bandwidth of a typical smartphone user. De la Vega, too, noted that 40 percent of AT&T's network capacity is consumed by just 3 percent of smartphone users.
post #2 of 94
Sounds like code for "charging more" as if the tons I overpay for my iPhone every month isn't enough for covering their costs.
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post #3 of 94
3 percent? Ha. Yeah right.. Yet, they think Verizon Wireless would be a solution. Hahah, what-a-joke!
post #4 of 94
Perhaps a new 'Technology' model is required rather than a new 'Business" model. The billions spent on overlapping, competing and in many cases incompatible networks in the US seems wasteful IMHO. I realize competition accelerates progress in many cases but it seems to be a little wacky in this case. If the companies could agree on a world wide compatible standard system and pool resources to implement that strategy and share costs surely it would be a better scenario. I also realize this would require some oversight by watchdog groups (with teeth) to prevent the public getting screwed but there has to be a better way than this ludicrous waste going on now.
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post #5 of 94
The guy has no clue of what his talking about. Sure 4G or LTE what ever you wanna call it, cost more money but it also gives networks 5x more capacity so I doubt carriers will wanna go with a different business model. When LTE arrives data plans will be dirt cheap since carriers will be able to compete more agressive cause a single carrier will have room to handle all the US customers for example.
post #6 of 94
I think AT&T is now in the enviable position of having learned quite a bit from its iPhone support so far, and of course to have profited in more ways than one from it.

Perhaps this experience was the basis for its announced iPad terms--that coupled with its recent and soon-to-be-implemented infrastructure upgrades, so that it can look forward to new higher levels of service and support, as well as the consequent higher profits it should enjoy from the iPad.

The other providers are understandably concerned as they most likely realize that they are about to be left out in the cold, so to speak, but that they've also been sleeping way to long in their complacent arrogance.

No number of assorted efforts with all the Windoze and Android gadgets is going to result in any lasting competition, as there're no CONCERTED efforts to compare with Apple and AT&T.

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post #7 of 94
All of this is just thrashing by an industry that doesn't want to admit its lucrative business models are dead. With 4G/LTE, voice just becomes another stream of data (albeit with QoS guarantees). Eventually, the consumer ideal would be Internet in the Sky--carrier agnostic and with none of these weird structures to artificially retain customers.

Sure, we might have metered billing--but that will be better than 1000 minutes plus or minus 100 minutes around the full moon except on Tuesday evenings from 9pm to 3am with type N Motorola handsets.
post #8 of 94
I wish I had the business problem of so many customers I have to continually upgrade to serve and retain them to the tune of a couple billion dollars a year.

Heck, now and then I might even pass on my bonus to put up an extra tower or two.
post #9 of 94
Quote:
Originally Posted by digitalclips View Post

Perhaps a new 'Technology' model is required rather than a new 'Business" model. The billions spent on overlapping, competing and in many cases incompatible networks in the US seems wasteful IMHO. I realize competition accelerates progress in many cases but it seems to be a little wacky in this case. If the companies could agree on a world wide compatible standard system and pool resources to implement that strategy and share costs surely it would be a better scenario. I also realize this would require some oversight by watchdog groups (with teeth) to prevent the public getting screwed but there has to be a better way than this ludicrous waste going on now.

+1

Betting on the scarcity business/technology model is a proven loser.
post #10 of 94
Quote:
Originally Posted by digitalclips View Post

The billions spent on overlapping, competing and in many cases incompatible networks in the US seems wasteful IMHO.

This is typical of new technology and capitalism. We saw it with the railroads putting in redundant tracks, and then running price wars until one or the other went bankrupt. We saw it with companies laying fiber-optic cables. And we see it with competing cellphone companies.

One alternative is a planned economy, which generally has not yielded good results where it has been tried.

Capitalism is the worst economic system in the history of the world - except for all of the others.
post #11 of 94
I grew up in the days before personal computers and cell phones. Back then there was a phone in the house and if there was someone home to answer the thing you made contact and if not, then not. Most households paid roughly $100 to put up a TV tower and that was it. Movies were plentiful on network TV, albeit at the cost of having to sit through all those ads, or you could head over to the local theatre and pay to see movies commercial-free.

Now we pay hundreds a month to be connected. Carriers want us to pay more and more and more. There has to be a limit. I'm sure many folks are cutting corners. I own a Touch and not an iPhone because data plans are an expense I'd rather live without. If service providers think us consumers are an endless supply of ever-expanding revenue, they are mistaken. I have a certain amount of cash I'm willing and able to devote to my connectivity needs and I refuse to go beyond that amount, regardless of what I have to do without to hold that line.

Then again, I grew up in the days before personal computers and cell phones.
post #12 of 94
Quote:
Originally Posted by iGenius View Post

This is typical of new technology and capitalism. We saw it with the railroads putting in redundant tracks, and then running price wars until one or the other went bankrupt. We saw it with companies laying fiber-optic cables. And we see it with competing cellphone companies.

One alternative is a planned economy, which generally has not yielded good results where it has been tried.

Capitalism is the worst economic system in the history of the world - except for all of the others.

lol, love the last line. I take your point though
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post #13 of 94
Quote:
Originally Posted by iGenius View Post

This is typical of new technology and capitalism. We saw it with the railroads putting in redundant tracks, and then running price wars until one or the other went bankrupt. We saw it with companies laying fiber-optic cables. And we see it with competing cellphone companies.

One alternative is a planned economy, which generally has not yielded good results where it has been tried.

Capitalism is the worst economic system in the history of the world - except for all of the others.

What a pile of steaming crap! Your lame opportunistic attempts at propaganda only betray your profound stupidity. Every time I see your screen name I think, "NOT!"

Go upstairs and tell your mother she's calling you.

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post #14 of 94
Quote:
Originally Posted by digitalclips View Post

lol, love the last line. I take your point though

Thanks, but it s not original. A man much wiser than me said it about democracy.
post #15 of 94
Quote:
Originally Posted by iGenius View Post

Capitalism is the worst economic system in the history of the world - except for all of the others.

It really irks me that free market types co-opt every democratic principle and claim to be about markets. I'm sure you very well know that that quote is about democracy itself:

It has been said that democracy is the worst form of government except all the others that have been tried. --Sir Winston Churchill

The idea that capitalism and liberty are somehow interrelated, and that one cannot exist without the other is one of the great lies of the 20th (and now the 21st century). It will not take long for the Chinese to disabuse semi-literate, undereducated Americans this notion.
post #16 of 94
Quote:
Originally Posted by DanielSW View Post

What a pile of steaming crap! Your lame opportunistic attempts at propaganda only betray your profound stupidity. Every time I see your screen name I think, "NOT!"

Can you tell me what I said that was not correct? If I've misunderstood history or economics or anything else, I'd love to learn the truth.

And BTW, swearing, insults and personal attacks have no place on this forum.
post #17 of 94
Quote:
Originally Posted by AppleInsider View Post

To get their fair share, Colao said, carriers could charge customers more for greater bandwidth, or guaranteed high speeds. They could also charge content providers, and guarantee them bandwidth speeds as well.

That last part is why we need net neutrality laws. If they start charging to guarantee bandwidth speed to content providers, only those that can come up with enough cash for the 'protection' will be accessible to end users.
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post #18 of 94
Quote:
Originally Posted by 2 cents View Post

It really irks me that free market types co-opt every democratic principle and claim to be about markets. I'm sure you very well know that that quote is about democracy itself:

Yes, I know that.

And you should know that I am no fan of laissez faire. FWIW, I am a fan of regulated capitalism.

Free markets have good and bad points. One good point is that consumers might get cheap goods. One bad point is that domestic companies might have to compete with slave labor.

Planned economies have good and bad points too.

Something in the middle is likely best.
post #19 of 94
Quote:
Originally Posted by iGenius View Post

Yes, I know that.

And you should know that I am no fan of laissez faire. FWIW, I am a fan of regulated capitalism.

Free markets have good and bad points. One good point is that consumers might get cheap goods. One bad point is that domestic companies might have to compete with slave labor.

Planned economies have good and bad points too.

Something in the middle is likely best.

I have to agree with you. It is a shame getting to the middle ground in anything these days is almost impossible with extreme (dare I say nut job) view points on each side always hi-jacking every sensible notion and jerking it to their side either for power or greed.
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post #20 of 94
I think changing their business model is a no brainer, despite all the carping about it. If something is scarce, charge more for it. People who use less bandwidth should pay less. People who use more should pay more. The extra proceeds can be used to invest in more capacity, leading to lower overall prices in the long run. It's absurd that the carriers think they should make money off of advertising or devices or services. They should make money from selling bandwidth, and do a good job of providing that bandwidth. Why is this so hard to understand?
post #21 of 94
Quote:
Originally Posted by AppleInsider View Post

As bandwidth-heavy smartphones like Apple's iPhone turn huge profits for handset makers, wireless carriers across the world have struggled to keep up with bandwidth needs. One executive said this week that new business models must be explored for carriers to remain profitable. ...

This goes completely against the facts that these same companies have been touting for years.

They've been charging ridiculously high prices for years and saying that they would *love* to get more people on the smartphone train. The prices were supposedly high, so that they could reap (rape?), the amount of money needed to "make sure the infrastructure was there" for the customers.

Now we find out that with users currently only using about tenth of the data they are being charged for on average, that the infrastructure is already "failing" and was probably never really there in the first place. Now they want to charge even more money to the users, so they can provide the things that they contractually promised to provide, and previously claimed to be already providing, in the first place.

It's totally corrupt no matter how you look at it.

They knowingly made contracts they could never fulfil, knowingly sold bandwidth that they knew they didn't have, and now are going to welsh on those contracts without even blinking, and raise the prices of the contracts. I bet the average consumer rolls over and licks their hand too.
post #22 of 94
Quote:
Originally Posted by iGenius View Post

Yes, I know that.

And you should know that I am no fan of laissez faire. FWIW, I am a fan of regulated capitalism.

Free markets have good and bad points. One good point is that consumers might get cheap goods. One bad point is that domestic companies might have to compete with slave labor.

Planned economies have good and bad points too.

Something in the middle is likely best.

OK, that's where I stand too. Perhaps I overreacted and I apologize for that. In these days of "populist" uproar to take away every aspect of the social safety net and tear down civil society in favor of economic barbarism, tensions are running a bit high.

And for the record, I still object to you using that quote and substituting "capitalism" for "democracy" but I see you later give proper attribution in a later post so I take you at your word that it was not intended to deceive.
post #23 of 94
AT&T's profits rose 26% last quarter to over $3 billion, in the worst economy of the last 60 years. Yeah, this is quite a crisis for them.

Maybe they could get more people to pay 20 cents each for 140 byte text messages.
post #24 of 94
The problem with these companies is they've setup business models that were unsustainable. They padded everyone's monthly cost by offering flat cost packages. This model rewards high-data consumers with low-cost data plans and penalizes low-data consumers with high-cost data plans. From the providers standpoint this guarantees a certain level of cash-flow. Long-term, however, this business model fails miserably. Unlimited plans and similar services were created with short-term data consumption in mind. The providers failed to anticipate a generation of people and devices that would overnight max out their infrastructures capabilities.

To put it another way. Imagine the natural gas companies said, "For 100 dollars a month we guarantee unlimited gas usage." They based their business model on current climate conditions and heating devices. This is a great model providing all things remain constant. It guarantees consistent cash flow and is based on averages, rewarding high-consumption gas users and penalizing, subversively, low-consumption gas users. All of a sudden heating device manufacturers introduce high consumption gas devices and the climate takes a turn for the cold. The gas companies are now in a pickle. They took it upon themselves to promote consumerism and maintain control. It backfires.

Okay, now we all know the gas companies would never, ever manage their cashflow like this. It's way to volatile. But this is how data providers are treating data. It's ludicrous. If they want to promote efficient devices and lower data consumption data usage must be metered just like any other utility. Any other business model will fail. Consumers and device manufacturers must consider their actions. Consumers will be more careful about what sites they visit and how much data they consumer. Device manufacturers and software developers will be more careful about the amount of data their products consume... they won't be able to sell inefficient products because consumers won't buy them if their liable for high-data usage.

That's the only solution.
post #25 of 94
I wonder if the real problem isn't that phone companies haven't upgraded their systems at an appropriate rate and are now struggling with data congestion. It's my guess that it's not an increase in traffic, but a lack of adequate cell phone networks.
post #26 of 94
Quote:
According to Reuters, he specifically named Google and said the company should not be allowed to control the flow of money through dominating the search and advertising market.

The Bullhockey is running deep today.
post #27 of 94
North Korea -- State-controlled and planned economy

South Korea -- Capitalism economy


Do we have to go any further to know which system seems to produce better results?
post #28 of 94
Quote:
Originally Posted by heath.gerlock View Post

The problem with these companies is they've setup business models that were unsustainable. They padded everyone's monthly cost by offering flat cost packages. This model rewards high-data consumers with low-cost data plans and penalizes low-data consumers with high-cost data plans. From the providers standpoint this guarantees a certain level of cash-flow. Long-term, however, this business model fails miserably. Unlimited plans and similar services were created with short-term data consumption in mind. The providers failed to anticipate a generation of people and devices that would overnight max out their infrastructures capabilities.

To put it another way. Imagine the natural gas companies said, "For 100 dollars a month we guarantee unlimited gas usage." They based their business model on current climate conditions and heating devices. This is a great model providing all things remain constant. It guarantees consistent cash flow and is based on averages, rewarding high-consumption gas users and penalizing, subversively, low-consumption gas users. All of a sudden heating device manufacturers introduce high consumption gas devices and the climate takes a turn for the cold. The gas companies are now in a pickle. They took it upon themselves to promote consumerism and maintain control. It backfires.

Okay, now we all know the gas companies would never, ever manage their cashflow like this. It's way to volatile. But this is how data providers are treating data. It's ludicrous. If they want to promote efficient devices and lower data consumption data usage must be metered just like any other utility. Any other business model will fail. Consumers and device manufacturers must consider their actions. Consumers will be more careful about what sites they visit and how much data they consumer. Device manufacturers and software developers will be more careful about the amount of data their products consume... they won't be able to sell inefficient products because consumers won't buy them if their liable for high-data usage.

That's the only solution.

This is so obviously correct -- I totally agree.
post #29 of 94
The answer to this is simple. Carriers need to begin a shift in their business models. Everything will migrate entirely to data in the [near] future. It's time for carriers to move their voice services to VoIP and start shifting bandwidth allocation from voice to data.

Lower the prices on traditional voice "minutes" while simultaneously raising rates on "data" plans. Essentially customers' bills will remain the same, but carriers will be applying the revenue to where the expenses are going.
post #30 of 94
heath.gerlock is also correct. A one-size data plan does not fit all.
post #31 of 94
Quote:
Originally Posted by mytdave View Post

The answer to this is simple. Carriers need to begin a shift in their business models. Everything will migrate entirely to data in the [near] future. It's time for carriers to move their voice services to VoIP and start shifting bandwidth allocation from voice to data.

Lower the prices on traditional voice "minutes" while simultaneously raising rates on "data" plans. Essentially customers' bills will remain the same, but carriers will be applying the revenue to where the expenses are going.

It'll take some time. LTE will have to be well entrenched. Voice will likely still cost extra per month, but it might be a flat rate. Voice isn't just data, it's a specific phone number, it's your voicemail and, most importantly, it's QoS that will make the call feasible.

Verizon will be offering LTE for data with CDMA still being used for voice. CDMA has a good voice codec, it's well known and paid for so there is no reason to move from this tech right now. I think it'll be used for the next decade. How GSM-based networks will proceed seems less certain. NTTDoCoMo is adding LTE this year with LTE phones coming in 2011 so we'll get to see how they are handling voice by then.
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post #32 of 94
Quote:
Originally Posted by Hudson1 View Post

North Korea -- State-controlled and planned economy

South Korea -- Capitalism economy


Do we have to go any further to know which system seems to produce better results?

I don't think anyone would argue in general, however either side can go too far, e.g. 2005 in the USA. The out of control, unregulated free market managed to nearly wreck the entire global economy. There has to to be balance, common sense and controls, as in most things in life.
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post #33 of 94
Quote:
Originally Posted by digitalclips View Post

Perhaps a new 'Technology' model is required rather than a new 'Business" model. The billions spent on overlapping, competing and in many cases incompatible networks in the US seems wasteful IMHO. I realize competition accelerates progress in many cases but it seems to be a little wacky in this case. If the companies could agree on a world wide compatible standard system and pool resources to implement that strategy and share costs surely it would be a better scenario. I also realize this would require some oversight by watchdog groups (with teeth) to prevent the public getting screwed but there has to be a better way than this ludicrous waste going on now.


You're absolutely right. 3-5 different networks co-existing is a waste. The govt should've set a standard and let the carriers pool their money and let a 3rd party actually build the network, and then require them to spend x amount of dollars upkeeping and upgrading. I can only imagine how dirt cheap our current plans could be.
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post #34 of 94
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post #35 of 94
Quote:
Originally Posted by Hudson1 View Post

South Korea -- Capitalism economy
Do we have to go any further to know which system seems to produce better results?

A particularly unfortunate comparison for the laissez faire crowd.
The Korean Communications Commission is far more involved than the US FCC in regulating and streamlining their 'net.
Which is why the entire country has 100mbps today and will have 1Gbps in 2012, wireless at 10mbps and IPTV.
post #36 of 94
Quote:
Originally Posted by Hudson1 View Post

North Korea -- State-controlled and planned economy

South Korea -- Capitalism economy


Do we have to go any further to know which system seems to produce better results?

Yeah, but S. Korea has universal health care so by American standards, they are wild-eyed Bolsheviks.

I like the idea of everything being run by free market principles. What could possibly go wrong?
post #37 of 94
When the Internet came, it was pay per minute - now it's a montly fee for your selected speed.
When the Mobile Internet came it was pay per kb - now it's getting popular and we're trying flat rates, pay per MB, pay for 1 GB then per MB etc.
The only thing we can assume for sure is that mobile internet usage will get more and more popular. And it will grow faster if the devices are more user friendly, like with Apple's mobile devices.

So the only right thing to do is to build a better system that is designed to work over time, designed to be upgradable and designed to coop with an increasing ammount mobile network traffic.

I'm truly surprised that CEO's in the mobile carrier are surprised by this. And even more surprised that they aren't happy about it. This should be great news, if you were ready for it technically.
post #38 of 94
Quote:
Originally Posted by iGenius View Post

Yes, I know that.

And you should know that I am no fan of laissez faire. FWIW, I am a fan of regulated capitalism.

Free markets have good and bad points. One good point is that consumers might get cheap goods. One bad point is that domestic companies might have to compete with slave labor.

Planned economies have good and bad points too.

Something in the middle is likely best.

iGenius, this is getting scary. Twice now in the last week or so I find myself agreeing with you. Maybe I'll have to reread all of your posts to see where "I've gone wrong".

I've often thought a more balanced approach to an economic system .. one that pays equal consideration to environment, people and profit should be the answer. How to get there, 'tho, seems to be the problem ... no one wants to consider anything outside their "sphere of influence".

It would not only take a "regulated capitalistic system" but an overhaul of government systems that allow/encourage power brokers and lobbyists to "lead" the government where they want them to go. I fear I will not see that in my lifetime, but I still can hope.
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post #39 of 94
Quote:
Originally Posted by heath.gerlock View Post

The problem with these companies is they've setup business models that were unsustainable. They padded everyone's monthly cost by offering flat cost packages. This model rewards high-data consumers with low-cost data plans and penalizes low-data consumers with high-cost data plans. From the providers standpoint this guarantees a certain level of cash-flow. Long-term, however, this business model fails miserably. Unlimited plans and similar services were created with short-term data consumption in mind. The providers failed to anticipate a generation of people and devices that would overnight max out their infrastructures capabilities.

To put it another way. Imagine the natural gas companies said, "For 100 dollars a month we guarantee unlimited gas usage." They based their business model on current climate conditions and heating devices. This is a great model providing all things remain constant. It guarantees consistent cash flow and is based on averages, rewarding high-consumption gas users and penalizing, subversively, low-consumption gas users. All of a sudden heating device manufacturers introduce high consumption gas devices and the climate takes a turn for the cold. The gas companies are now in a pickle. They took it upon themselves to promote consumerism and maintain control. It backfires.

Okay, now we all know the gas companies would never, ever manage their cashflow like this. It's way to volatile. But this is how data providers are treating data. It's ludicrous. If they want to promote efficient devices and lower data consumption data usage must be metered just like any other utility. Any other business model will fail. Consumers and device manufacturers must consider their actions. Consumers will be more careful about what sites they visit and how much data they consumer. Device manufacturers and software developers will be more careful about the amount of data their products consume... they won't be able to sell inefficient products because consumers won't buy them if their liable for high-data usage.

That's the only solution.


That's not a good comparsion. Data doesnt have to be mined and then refined. Its not a limited commodity, the price of it doesnt rise and fall due to supply and demand. None of us complain about the prices we pay for the internet at home, whether we just check our e-mails or download music and movies. Why should we pay the penalty for websites becoming more feature rich. The faster the internet gets the more features websites will get. Most websites are now wide screen because of flat panel displays. Network neutrality is something we're all for but I'm afraid that it'll eventually bite us in the ass.
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post #40 of 94
Quote:
Originally Posted by OccamsAftershave View Post

A particularly unfortunate comparison for the laissez faire crowd.
The Korean Communications Commission is far more involved than the US FCC in regulating and streamlining their 'net.
Which is why the entire country has 100mbps today and will have 1Gbps in 2012, wireless at 10mbps and IPTV.

For all the people who think the free-market ruined the economy, you might want to check out how many special deals, tax-breaks, tariffs, etc are put in place to protect the large businesses and lobbyists. The US is not a true free market.

I lean more in the middle between a heavily regulated economy and an unfettered free-market. We need regulations that actually regulate instead of exceptions for certain companies.

Big Business loves Big Government because Big Government looks after Big Business because Big Business pays off Big Government...

back on topic: 10mbps wireless would kick butt. I suspect they have better internet at least in part because of the size of the country.
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