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Mobile Operators: Creating Artificial Demand For Capacity?
An anonymous reader writes with an excerpt from Broadband Convergent: "We all have been taught the basics of supply and demand since high school. If demand is high, prices rise. If demand is low, prices fall. Simple, but true; yet this concept can be manipulated artificially if, as seen with the latest projections of mobile operators, that higher demand means higher prices. Are the dire predictions being promoted by operator's a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the mobile industry?"
The gist seems to be: operators have no incentive to maintain good infrastructure because it costs money and the artificial scarcity of capacity allows them to charge more.
After all, AT&T's shoddy network encouraged huge numbers to switch to other carriers the moment Apple allowed them to. In business having a poor product might allow you to gain in the short term but is a huge detriment in the long term.
Which is where competition is supposed to come in. If there is that much profit sitting out there, then there is an incentive for other players to enter the game, or for existing players to differentiate with high quality. Unfortunately, it often doesn't happen quickly, and sometimes needs some governmental encouragement. This is especially true with services that have such a high barrier to entry, like mobile.
This is why competition must not be hindered by regulators. If it's allowed then other entries into the market will drive down the price, seeing the potential to take marketshare away from the higher margin telcos.
Canada is a great example of this. Prices were stupid for years, then entrants like Wind and Mobilicity got in, often despite the best efforts of the regulatory-captured cftc, and have cut prices so you can now get unlimited everything (really unlimited) for $25.
It has a fixed amount of room (per tower), and has to share that fixed amount with other services like TV, radio, emergency/police services, military, and so on.
It's like the difference between wireless TV and cable TV. You can get wireless TV using a rooftop antenna but it only gives you 30-40 channels. Or cable TV wired direct to your home, and get 300-400 channels.
I think wired internet, just like wired TV, is the way to get the most throughput as lowest cost. Wireless internet is for convenience, but will always be more expensive.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
In business having a poor product might allow you to gain in the short term but is a huge detriment in the long term.
That is, of course, until you and your competitors collude to keep prices high; then everybody (who isn't a customer) wins!
An enigma, wrapped in a riddle, shrouded in bacon and cheese
In theory, companies that produce shitty service and charge too much for it go out of business.
In reality, the government metes out frequencies in a bidding process that generally shuts out competition.
The alternative would be to close down the FCC and let people broadcast whatever they want wherever they want at whatever power pleases them. There are probably people who think this is a good idea, and won't believe otherwise until Anonymous gets a hold of a transmitter.
If I have been able to see further than others, it is because I bought a pair of binoculars.
This works as long as there are competitors that are providing sufficiently better service. If there's a market containing, only, say, three companies, and barriers to entry are sufficiently high to block any new firms from forming, it's entirely possible that all three would, individually, seek to keep capacity as low as possible and just assume that the others will do the same. It's a prisoners' dilemma, sure, but those don't always preclude unspoken collusion when the number of participants is sufficiently small.
Big business is only one step above big government in that at least big business has to give you something they created with capital, albeit a rip-off, sometimes, while big government gives you (or whoever they choose) some of the money that they confiscated from you (after bloat, largess and bureaucratic handling fees, of course.) Then, you go up the hierarchy with child molesters, lawyers, etc.
www.chihuahuarescue.com- Help to end dog abuse, abandonment and cruelty
operators have no incentive to maintain good infrastructure because it costs money and the artificial scarcity of capacity allows them to charge more.
Which wouldn't be a problem except the government created the teleco monopoly by creating a resource scarcity, namely exclusive contracts, tower permits, etc. The cost of entry into the market is so high that there can be no new players except from related businesses who feel like blowing a few billion cutting the red tape will go over well with their shareholders.
#fuckbeta #iamslashdot #dicemustdie
This is one of the pitfalls of capitalism that benefits only one side.
Much like "futures", there is only benefit to causing trouble and turmoil in the market.
You mean so I can go from a grandfathered unlimited data plan that gets throttled the moment I really use it, to a LIMITED data plan that STILL gets throttled the moment I really use it? Yup a WIN-WIN for the carriers and what ever I do I lose.
"We all have been taught the basics of supply and demand since high school. If demand is high, prices rise. If demand is low, prices fall. Simple, but true; yet this concept can be manipulated artificially if, as seen with the latest projections of mobile operators, that higher demand means higher prices. Are the dire predictions being promoted by operator's a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the mobile industry?" ...as seen with the latest projections of [Industry Noun], that higher demand means higher prices. Are the dire predictions being promoted by [Industry Person] a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the [Industry Name] industry?" ...as seen with the latest projections of Oil companies, that higher demand means higher prices. Are the dire predictions being promoted by Oil barons a true demand, as we have been told, or capacity hoarding that will lead to artificially higher prices and more profits for the Oil and Gas industry?"
"We all have been taught the basics of supply and demand since high school. If demand is high, prices rise. If demand is low, prices fall."
In that case, the author was poorly educated. The caveat "...in the perfect market" is missing; that is, where all players have perfect knowledge.
The so-called "law" of supply and demand can also be operated in reverse: keep prices artificially low and demand will rise; keep prices artificially high and demand will fall. Anyone who doesn't know this will not last long in business.
Ironically this will mean the end of free services like TV and radio (over the air).
Not that Microsoft, Google, Apple, ATT, Sprint, et cetera care. Less competition from free services means more customers that have to take-down their antennas & buy ~$70/month or $30/month just to see TV (via cable) or hear the radio (through cellphone).
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
The basics of supply and demand that you've been taught since high school aren't really a complete theory of economics.
Breakfast served all day!
Okay so any sort of price fixing is bad and it sucks for consumers that it's more profitable not to expand infrastructure as fast as possible.
BUT
I get more minutes/data/messaging than I ever use for $90 a month. I don't have any problem with that, because I'm a heavy user.
Things getting cheaper is always nice but a little perspective is good too... I've got a phone that I tether anytime I like without worrying about data usage for what I can only describe as a very reasonable monthly cost.
Collusion is illegal. It's called a cartel, and it's how the record companies ended-up getting prosecuted by the U.S. DOJ.
My AC stalker: " I personally agree with your posts most of the time, but that won't keep me from modding you troll"
This would only work in industries/markets that have only a handful of players. They essentially can do whatever can legally be done.
In this industry barrier for entry is very high and hence requires a closer attention from the regulators over predatory practices.
They can get away with charging a quarter to send a text and another quarter to receive it. If there were 10 competing players, it would have been a totally different scenario.
The real solution is mandate common protocols and frequency ranges among all the wireless carriers, ban wireless carriers from subsidizing phones, and mandate month-to-month contracts for consumers.
Furthermore, carriers should not be allowed to install crapware or spyware on any phones, and all phones should be vendor unlocked.
That's an extremely high cost business, unlike say Software, so they have to do something. Their profit margins are seriously razor thin and the Iphone made things worse, not better, from a profitability perspective. It's very complicated, but if you want companies to trash for gouging, the cell phone companies are barely getting by. You'd be better of posting stories on BANKING or HEALTH...industries that are *really* turning the screws on working people.
This is the same bunch of "competitors" that drug their collective feet as long as possible when it came to selling DSL in the 90's, preferring instead to artificially prop up the revenue from their legacy data offerings, until Covad et al actually presented them with some real competition.
We all have been taught the basics of supply and demand since high school.
Yeah, just like we were all taught the difference between the mean and median of a distribution.
I guarantee you most /.'ers couldn't explain opportunity cost without hitting Wikipedia, let alone a market equilibrium.
In ancient Rome, they would always say that food prices were too high, and there were ships full of Egyptian corn offshore, just waiting for the price in the marketplace to rise.
During the seventies the rumor was that Sixty Minutes had film of tank trucks of gasoline being dumped in the desert to keep prices high.
Now mobile providers are holding back on capacity in order to raise prices.
Sound familiar?
A traveler from the future:
This is not some crazy conspiracy. Normally as technology becomes cheaper, more efficient and more robust capability of that technology goes down. It's just a fact of life. Just look at the internet, we started with 56k dial up modems and then that was slowed down to 32k, then 16k, and as you all know most users now rely on the futuristic 8k modem. The same is true of hard drives, where we once enjoyed 30 terabytes drives those sizes have been going down ever since due to cheaper and more effective technology. I miss the days when I could store all 10 of those mp3 on my hard drive but you can't stand in the way of progress!
I love this current approach, taken by at least AT&T and Sprint, where they show you and sell you on how wonderful having wireless (3G/4G) data is... but then ACTIVELY promote using WiFi whenever possible. Sprint even has a specific "educational" program designed to show you how to make using WiFi on your smartphone as easy as possible, all the while they try to sell you their wireless 3G/4G service.
Collusion is illegal.
Well, thanks there, Capt. Obvious... hard to recognize you without the cape, lol.
In all seriousness, collusion is only illegal if A) someone notices, and B) the government decides to prosecute. For example, prior to the repeal of Glass-Steagall, it was illegal for a holdings bank to operate as an investment bank (and vice versa); yet that did not prevent Goldman Sachs from requesting (and receiving) a pass from the SEC to do just that.
Another example: the oil industry. In fact, I don't even really have to go into detail on that one; I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.
In short, while you are 100% correct in principle, the reality of our economic situation is that those who can afford to circumvent the law, do.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Collusion is illegal.
That's true, but it still must be investigated and prosecuted to prove it, and it sure doesn't seem like it's a high priority to the DOJ right now.
I mean, would you trust this Supreme Court with a case like this? They've gone full retard with their adulation of any major corporation these days, and for all we know, we could end up with another travesty like the AT&T Mobility v. Concepcion ruling.
I was in Seattle at a convention this last weekend, and AT&T's "4G" didn't work on the 4th floor, where the main convention area was. Full signal, 4G indicator, but perpetually timing out.
Seattle doesn't apparently have AT&T LTE, and the speeds I was getting at "4G" were in the low 7Mbps, with 400ms latency. This is pretty awful. In Vancouver BC, I get at least 20Mbps with 180ms latency on HSPA+ and 60down/30up on LTE on the Rogers network.
What I don't understand about telco behavior is their simultaneous enthusiasm for dragging their feet as hard as possible on infrastructure buildouts/enhancements and service pricing and for pushing dubiously mature 4GLTE!!!zOMG 433453Gigabits! based handsets that get approximately 45 seconds of battery life, which would be just enough time to run through an 'unlimited' data plan were it not horribly throttled by congested backhaul...
Given the, um, impressive state of competition, sandbagging on service upgrades, sometimes even going backward on pricing, is pragmatic enough; but why are they accompanying that with a push toward devices that are vastly overqualified for the infrastructure, cost more, and deliver lousier user experience?
there's nothing artifical about the capacity limits, one tower can only support so much bandwidth. Need more bandwidth you need more towers and half the time building more towers is impossible because someone read on the internet that someone things it might be dangerous so they don't want it anywhere near where they live
"In all seriousness, collusion is only illegal if A) someone notices, and B) the government decides to prosecute."
Nonsense. That's like saying murder is only illegal if you get caught.
Collusion might not get prosecuted, but it's still illegal.
And the oil cartels are not U.S. entities, so that argument is 100% straw-man.
...that they are constantly trying to convince us that watching movies and sports on a 4-inch display with horrible, tinny speakers, is somehow a desirable thing.
Never mind that a lot of batteries won't survive an entire movie or sports game unless they were fully charged in advance.
Kind of like Volkswagon giving free Mountain Bikes with their Jetta's?
The barrier to entry in the market is the reversal of the work that Judge Greene did to break up AT&T (the real one, not Southwestern Bell with lipstick). T-Mobile tried to get, via various acquistion and investment, a toehold. It's not working very well.
There is no old "Bell Standard" for quality of connection across the turf and geography of the US. No one can tell the telcos what to do to have minimum service qualities in any location for cellular data. The TCA helped remove a lot of jurisdiction by the various state public utility authorities to push it to Washington, where lobbying moneys could be more focused.
The hoarding effect is a great analogy. It's all about stockholder return and immunity from acquisition. It's not about service as the telcos are universally loated (in the US, anyway). The concept of free WiFi is being killed so as to provide further nails in the coffin. In the EU, free WiFi is mostly gone; in the US, it's tougher and tougher to find. Somehow, dammit, you're going to pay is the boardroom mantra.
---- Teach Peace. It's Cheaper Than War.
After all, AT&T's shoddy network encouraged huge numbers to switch to other carriers the moment Apple allowed them to. In business having a poor product might allow you to gain in the short term but is a huge detriment in the long term.
That can't possibly prove anything wrong, because it itself is wrong.
The secret has been out for over a year that AT&T did not lose any significant number of users to other iPhone carriers when exclusivity ended. They actually GAINED customers, and they GAINED more iPhone 4S customers than did Verizon or any of the other iPhone carriers.
So your premise is totally wrong.
The huge detriment you speak of, on the other hand is accruing to the carriers that gain the iPhone, but not for the reason you expect. Selling the iPhone is huge drain on a carriers bottom line.
According to CNN-Money: all carriers that carry the iPhone lose money on it over what they were making previously. If AT&T has a network problem it has been caused directly by the iPhone and iPhone users. From lame Infinion chipsets that brought the towers to their knees early, to the data sucking ways of the typical iphone user.
Between 2009 and 2010, Verizon averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%.
This is not to say I have any argument with the subject of this story, namely the suspicion that carriers are hording bandwidth and creating artificial shortage.
Sig Battery depleted. Reverting to safe mode.
... the pressure on entrepreneurs to join the market increases.
Making your own network obsolete is a self-defeating business model.
Artificial scarcity is nothing new, nor is it a "violation" of the principles of supply and demand. Rather, it is a well-known exception, called monopolistic (or in this case oligopolistic) business practices, which are made possible by lack of competition.
In a situation like this, where prices are kept artificially high, there is little or no competition to jump in and undercut the other players. So regular market forces to not come to bear. There is nothing at all strange about this.
They whine about how much bandwidth users are using... yet they REQUIRE that you have a data plan if you have an iPhone (or other suitably "smart" phone, AFAIK.) Even if it's a used/not in contract one! If you get an old iPhone 3GS from a friend and stick a SIM card in it, AT&T says you MUST have a data plan. ($20/month minimum.)
Though I guess they're just using the low end to subsidize the high end, since you can get 10x as much data (3GB instead of 300MB) for 50% more ($30 vs. $20).
Maybe, just maybe, if they charged something vaguely resembling reasonable rates for data, their network capacity issues would go away.
Dear Slashdot: next time you want to mess with the site, add a rich-text editor for comments.
The bottleneck generally is the last hop. Tower to customer.
As much spectrum as these carriers have they could increase bandwidth to any arbitrary location but that requires upgrading/augmenting equipment at the tower sites. So are we suggesting they should just simply replace the most expensive part of all their infrastructure? Well they are constantly doing this.
It would be nice if a voice network would not upgrade but rather keep prices for voice only extremely low. See were still in a race to just trying to provide enough bandwidth for consumer demand.
I suppose I shouldn't defend them as my cellphone bill of $110 for 2 phones/text seams ridiculous. But I'm glad they charge high fees because it lets my company undercut them. At any time they could lower prices and snuff us out. But we have some loyalty as well.
SPLIT THEM UP!!
One company for the link, another for the service (NO EQUIPMENT), and then let the customer pick the phone that cover the needs from whoever sells it, Samsung, Apple or Kitchen-Sink terminal services.
Here we have Att/T-Mobile competing with trakphone, and who ever - It's a JOKE
If demand is high, prices rise. If demand is low, prices fall. Simple, but true;
Well known, and simple, and often false.
The textbook model of supply and demand curves works under a set of very stringent assumptions that are often false. It requires rational agents, fine granularity of transactions, fine granularity of agents on both the supply and demand sides, isolation of the market in question from other markets, durable goods that can be withheld from the market, ...
The model ignores marginal costs, opportunity costs, asymmetrical knowledge, asymmetrical market power, ...
E.g., in markets for commodities with large fixed costs and small marginal costs, a reduction in demand often yields an increase in price. The suppliers divide fixed costs over a smaller number of transactions. If the remaining demand is sufficiently rigid, they can get the higher price, at least for a while. This phenomenon can lead to a further reduction in demand, further price increase, and a market failure at the end of the spiral.
E.g., if there is a sufficiently flat segment in the supply curve, and a large buyer knows about it, the large buyer will pay a price at the low end of the flat segment, even though the a priori demand curve intersects at a much higher price. The large buyer will not consider the isolated value of the commodity, but the marginal value of paying more, vs. other uses for that money.
These are just two of myriad examples where the simple "law of supply and demand" that everybody knows is false.
Mike O'Donnell http://people.cs.uchicago.edu/~odonnell/
Even if it is true that they withholding network upgrades for this reason, they would not be "artificially creating demand". They would be "artificially limiting supply".
AccountKiller
This isn't a surprise. Comcast, Time Warner, and all dem other ISPs do the same thing. They don't have a significant interest in improving capacity, and find that the "new tiered" method of charging for access is a treasure trove akin to the rush of Free-to-Play games in the video game market.
Welcome to a corrupt judicial system. All we are missing is the stars pained on the ceiling of the star chamber court :-)
ARE they colluding, though? Or just responding to price rises/drops very quickly and economically efficiently?
I mean, take a common situation of two gas stations at opposite corners at an intersection. For simplicity, we'll call them A and B. Doing this we eliminate disparty in local taxation (assuming a road isn't the dividing line between two towns/cities/etc), and assume for the most part, everything is equal. We'll also make the assumption that consumers don't have brand loyalty.
Now say gas station A drops their price 10 cents. Gas station B can decide to drop their price, or leave it be, or raise it. Gas station B observes - if A's traffic increases, B's drops, the obvious reaction is to drop the price 10 cents to match A's.
However, it's also possible that A's traffic increases, B's remains constant, which means the disparity isn't hurting business. In the case, maybe B might decide to RAISE prices a little bit, say, 2 cents. Or if A only dropped 5 cents, to riase by 5 cents (increasing the difference to 10 cents between the two).
Now look at it from A's perspective - B drops the price, picks up extra customers. A needs to decide if the loss in profit from selling cheaper is outweighed by the extra traffic. Perhaps the required extra traffic hasn't materialized, so A is making a loss (sell for less profit, make it up in volume) - making A consider raising prices or holding steady.
However, if B decided to not join in the price war, and customers still go to B such that B can raise the price, A would be leaving money on the table since B's making more per unit of gas. A rational business will then raise prices - perhaps still under B , but not much so. Or match prices.
The neat thing with gas stations is - the change in traffic is practically instantaneous - you'll know within minutes of changing the gas price if it was a good idea.
And the reason traffic to B, even though its more expensive, might not drop is easy - if A has more customers they can service, then people may see B as a more expensive alternative, but avoid waiting in long gas queues. Or maybe the difference isn't large enough to justify potential inconvenience of having to turn around.
Competition doesn't necessarily lower prices - it can lead to prices stabilizing to some arbitrary level. Depending on how easy it is for customers to switch between compeitors, it determines how closely prices track one another. If it's really easy (like gas), prices rise and fall pretty much simultaneously (the geographical are of which is determined by customers' willingness to go farther in search of cheaper gas). This applies too to TV and internet, and cellphones to some extent. But take something like food staples where customers might wish to stick with brand names rather than the considerably cheaper store brands.
Remember, in a perfectly functioning market, the prices will be the same amongst competitors to equalize supply and demand. New competitors might come in and increase supply, lowering prices, but that depends on how much capital investment is required - cellphones and gas stations being particularly heavy (equipment is expensive/haz-mat concerns).
And yes, prices rise faster than they fall, because a business that sees someone making greater profit by selling product more expensive will tend to have others selling at the higher price. Case in point - netbooks. They started at $200, then rapidly jumped to $300, then "premium" netbooks starts showing up costing $400, $500 or more (barging into low-end laptop territory), until the whole market collapsed with the tablet craze.
Heck, tablets are the same - they were released at $500, and everyone questioned why get one when you can buy an iPad. So they dropped to $400 and hovered there ever since (with the iPad being Apple able to command a premium).
More like Volkswagon encouraging you to use public transportation in order to cut down on the wear and tear on your VW during the warrantee period where VW would have to pay for the maintenance and service costs...
Or even more like VW requiring you to buy an extended warrantee service package but then encouraging you to use public transportation during the extended warrantee period...
and w.r.t. to the carriers, given their WiFi Encouragement programs, you learn that its true, you CAN replace 80-90% of your 3G/4G data usage with Wifi and it chews up less battery and is faster too...(if you didn't know this already). So you find out that most people actually DON'T really need 3G/4G enough to make it worth the money... yet you are still forced to buy the data service.
If, perhaps due to insanely high barriers to entry, there is very little competition, it is possible to tacitly collude without the actually illegal deal in the smoke filled room. They all have the same agenda and the same incentives. They all make more if nobody breaks ranks. They need not worry about a newcomer upsetting the applecart in order to get into the market.
for some proper competition in the mobile operator space you need three or more separate nation-wide networks
And the oil cartels are not U.S. entities...
Neither is the pirate bay, wikileaks, Canadian drug companies, gambling websites, etc. etc. etc.
If I had 5 carries to choose from and none of them required a contract, the service provided would be reflected by an appropriate price point, plain and simple.
WiFi on a phone is like an electric car. Its cheap to run, its great within a short distance to your home, but if you go any further you can be SOL if you can't find a place to charge it.
Collusion is illegal.
Well, thanks there, Capt. Obvious... hard to recognize you without the cape, lol.
One would think Captain Obvious would always be easy to recognize.
I'm a good cook. I'm a fantastic eater. - Steven Brust
I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.
Boy, are you naive. Republicans apparently believe that there is a free market in oil, and that the free market is not a global market. Otherwise, they would be laughed off stage when it's suggested that increasing domestic production of oil would affect gas prices in the US.
Give me Classic Slashdot or give me death!
That's like saying murder is only illegal if you get caught.
It's not murder until you get both caught and convicted. That's what I hear on Slashdot anyway.
Not sure why you even bothered posting all that garbage about gas stations. It's so obvious they're in collusion one way or another. Stations in any given area will always raise or lower prices almost simultaneously, and to the exact same price. This happens even with price increases or drops of $.20, $.30 or more. Occasionally you'll have a chain that's exactly 1 cent lower than the other gas stations in the area, but this is a slight exception that just proves the rule. A couple miles down the road, you'll find another set of stations doing the exact same thing, except the prices will be 10 cents higher or lower. You'll see this being done by all chain gas stations everywhere in the US. The only true exceptions are the rare Mom & Pop stations that are not franchises of some chain.
If they weren't in collusion, they would rarely have their prices set exactly the same, and they certainly wouldn't always be changing their prices at almost exactly the same times.
There is no -1 Disagree mod. Slashdot.org/faq defines mod options. USE IT.
The reality of our economic situation is that those who can afford to circumvent the law, do.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
ARE they colluding, though? Or just responding to price rises/drops very quickly and economically efficiently?
I mean, take a common situation of two gas stations at opposite corners at an intersection.
Gas stations != oil companies, so... non sequitur.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
As an economics PhD student, I would describe the situation differently.
The author states that companies restrict capacity in order to increase profits. Whether this is actually possible depends a lot on the details of the market. If there are a number of competing firms, it is difficult for any one to restrict capacity, because they would just lose market share to the others.
If all firms collude, then it is possible to simply set the price to whatever maximizes total profits (this price will be higher than the price under the free market, and so will result in less bandwidth usage). On the other hand, in a competitive market, close to all available capacity will be used, and capacity will be built whenever there is demand for it.
It is possible (I don't know how likely) that while firms couldn't collude enough to set prices, they are colluding by not producing enough infrastructure. This kind of collusion is easier to maintain, through an implicit "I won't if you wont" agreement. Any one firm building a lot of infrastructure would trigger every other firm starting building infrastructure too, and the result would be less profits for everyone. So no one has an incentive to start building infrastructure.
Anyway this is the theory, it depends a lot on whether you can build infrastructure by small increments or only by big projects. If infrastructure can be built by small increments, it seems like each firm would gradually build more infrastructure to gain market share, and so collusion could not be maintained.
I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.
Boy, are you naive. Republicans apparently believe that there is a free market in oil, and that the free market is not a global market. Otherwise, they would be laughed off stage when it's suggested that increasing domestic production of oil would affect gas prices in the US.
touche, mon amie, touche.
An enigma, wrapped in a riddle, shrouded in bacon and cheese
Time to start warming up the divestiture hammer again!
the preceding comment is my own and in no way reflects the opinion of the Joint Chiefs of Staff
Gas stations raise or lower prices almost simultaneously precisely because they sell a fungible commodity. They are just keeping their notoriously low profits in line with their costs. If their gas costs too much, you won't buy their profitable sugar water and "food" they sell inside...
This issue is a bit more complicated than you think.
I have to charge my wifi? Is this because of the pirates clogging the tubes?
Two gas stations competing with each other have little to nothing to do with the price of oil. A convenient store only offers gas to get you to buy something else. The margin to the store is maybe 5 cents on the gallon. What the convenient store decides to sell it for has virtually zero effect on the oil company that provides it since gas cost about the same from the wholesalers with a few exceptions for value added gasoline like some Shell gas for example.
maybe, although many people (not everyone), spends 98% of their time in two places: home and work. So if both places have WiFi, then at least 98% of your wireless data needs are met. The other 2% might include 1% at airports, hotels, Starbucks, etc where there also is WiFi. So, not quite like an electric car for many, though, agreed, if you are not in WiFi territory you are sorta SOL (hardly SOL though, not like you are in a dead electric car with no way to leave)...
but they won't activate a wifi smart phone without a data plan, because using only wifi wouldn't make any money for them.......
and the capitalists wonder why we keep getting bigger and bigger government..... duh it's because the capitalists are larcenous kochsuckers always trying to scam and extra buck or ten.
Snowden and Manning are heroes.
The oil companies, and oil producing nations, have been doing this since the 70's.
This type of behavior, although devious, isn't new to either business or government.
No man is an island, But if you take a bunch of dead guys and tie them together, they make a pretty good raft.
compounding the Oil problem is if the oil companies would drill land they have permits for today they could double productions. But they want more land opened up when they are using less than 50% of what is actually available to them.
combine it with oil refineries either shutting down or exporting vast amounts of refined petroleum and you have an industry trying to keep prices high and Like they are supposed to make higher profits.
i thought once I was found, but it was only a dream.
This might be the stupidest thing I've read all year.
And, we get out of high school and grow and learn the world really isn't as simple as we learned in school.
Just because prices are the same doesn't necessarily mean collusion is going on, I think in the case of gas stations it seems that way because, with sales being so sensitive to price, they all base their prices off what other stations in the area are selling gas for. (not to say they necessarily are not colluding, though.)
This system, where the price of a good is based on how much everyone else is able to charge for it is just like how cell/telecom companies set their prices.
The price you pay for internet/phone/tv/cellphone service is based on how much telecom companies can get people to pay, not the cost of providing the service (which is an insultingly small fraction of how much you actually pay, much like with gas).
Law of "offer and demand" was debunked a while ago.
This whole series is worth watching:
http://m.youtube.com/watch?v=KWUG1n1jEJI
Let me correct that for you "Gas stations = oil companies"
Look it up .... Gas stations are not allowed to set the price of gas only Oil companies e.g. BP, Exxxon, etc can as per their contractual obligations.
P.S. yes, I know it is exxtra.
Without the cape he's easy to confuse with Captain Subtle.
"Another example: the oil industry. In fact, I don't even really have to go into detail on that one; I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it."
With the exception of OPEC, which isn't subject to anti-competitive laws in, say, the USA, it's no more price fixing than it is for grain producers and coffee producers who also try to play with supply and demand. There are cartels to varying degrees in most commodities. The difference is, if prices rise too high, then it is relatively easy to bring additional land into cultivation. If prices rise for oil, it does lead to increasing production, but it is increasingly difficult to significantly affect production as the cheap and accessible supplies are depleted or go into permanent decline. Oil is both non-renewable and not recyclable if used for energy (unless you count multi-million year time scales). If you run into a supply problem with agriculture, you plant more. If you run into limits for non-renewable metals, you open mines that until recently were marginal and you recycle more efficiently. If you run into those limits for oil, you pretty much have to live with higher prices for a scarcer resource, particularly if the demand is increasing over time. You can tap a few deposits that were marginal at lower prices (e.g., the oil sands), but only so far. On the other side, the cartels can generate artificial scarcity, but this only works so long as most of the production is within the cartel rather than outside it, and if they don't crash the economy (which is what they did in the 1970s, which also crashed the demand). This means the cartels try to track the actual supply:demand pretty carefully, and while you pay a premium because of the manipulation, I doubt it is more than 10-20%. If you think that the rising price of fuel is primarily due to market manipulation, then you should ask yourself the question why oil companies waste money drilling in exotic and expensive places like the deep Gulf of Mexico where the cost to drill is 10x or more of what it would be on land. Answer: the stuff actually is getting scarcer.
So why should operators want to increase capacity and drive demand down and therefore prices?
WTF? He's mixed supply and demand throughout the blog entry, the entire thing makes no sense.
I have wifi at work, but it only allows http traffic and requires temporary passwords to be generated. Something about security.... Good luck getting your imap mail to sync on your phone. I'm also not about to set up 500 AP's and use unsecured AP's to get coverage around town. There is also no hand over between wifi, so you'll be dropping connections if you walk more than 50m while doing something. Very few busses have wifi as well...
This might be the stupidest thing I've read all year.
Agree. Modems were never 32k, 16k or 8k. They were 19.2k, 9600, 4800, 2400, 1200, 600, and 300
When our name is on the back of your car, we're behind you all the way!
If the market will bear the cost, of *COURSE* they are going to raise the prices, possibly even with artificial scarcity.
I'm Not Surprised that this would occur, either. They just want to make more money however they can.
And in other news, water is wet, film at 11. Back to you in the studio Jim...
We're talking regulatory & legislative capture here. In lay terms, the regulators are in the carTel's pocket. Illegal? Maybe, but that can be changed.
Your gas station analogy sucks.
I used to support gas stations, I've worked for multiple petroleum companies. Something every corporate owned or contracted store does is have the manager drive around and report everyone else's gas prices to the corporate HQ who then sets the prices at the location calling in. It's a way to form a trust without working directly with one another. Using this method no one significantly undercuts anyone and everyone's prices stay close.
If you don't believe me look up the phone number of any gas station you like, call them and ask for their gas prices, They won't tell you because they don't want to make the other managers job any easier, if they have to drive around and get prices then dammit so do you.
The preceding post was not a Slashvertisement.
No, it's a carefully constructed trust setup that is exercised in such as way as to stay legal.
I'm an insider.
To top it off providers like Exxon Mobile in particular structure their sales in such a way as to limit individual stations to $0.10 a gallon. The same guy can own three stations miles apart, buy his gas off of the same truck and charge wildly different prices at each station. The gas off the truck will vary in price at each station so as to limit him to $0,10 a gallon, there is no incentive to raise or lower prices in that case. If I were that guy I would make the gas prices as low as I possibly could, even if it butted up against Exxon's bottom line and forced me into $0.09 a gallon profit just to drag everyone else's prices down.
The preceding post was not a Slashvertisement.
> To top it off providers like Exxon Mobile in particular structure their sales
That's one way to put it.
http://www.ucan.org/blog/gasoline_autos/gas_prices/gas_hogwash_it_all_about_supply_and_demand (how it works)
> If I were that guy I would make the gas prices as low as I possibly could, even if it butted up against Exxon's bottom line and forced me into $0.09 a gallon profit just to drag everyone else's prices down.
Do you remember the Los Angeles owner who's supplier cut him off for doing just that? (I can't find a link to the old story, but it was a featured report on NBC in Los Angeles a few years back) - I believe the current strategy is that a retailer is attacked legally, then disciplined by suppliers, then undercut. Big Oil always wins.
Any links you can find regarding oil companies running out the owners who attempt to subvert their price fixing, tend to disappear. This is real conspiracy theater stuff. Most link you will come up with are fringe/kook sites, but I think you would be able to dig up real evidence using some facts gathered from them (filtering the noise is the problem). Now here are some links, annotated as accurately as possible from a once-over. These few pieces took entirely too long to find as it is.
http://www.nuwireinvestor.com/articles/rural-gas-station-forced-to-close-due-to-rising-prices-57051.aspx (editorial?,no substantiation that I could see)
http://www.firingsquad.com/news/siteseeingarticle.asp?searchid=576&up=2&filterLevel=1&page=1 (no substantiation)
http://www.rickross.com/reference/rama_behera/rama_behera42.html (kook, no substantiation)
This isn't my bag, it's just something I accepted a long time ago. There are more important issues to focus on imo.
Often wrong but never in doubt.
I am Jack9.
Everyone knows me.
Oh, delicious Cumberland Farms tuna on wheat, how I can I resist your siren's call?...
Speaking for myself, I didn't get an iPhone until it was available on Verizon, because as a former AT&T customers, I knew they sucked. I doubt I was the only one.
Think about how insanely profitable AT&T became from exclusivity over the iPhone, and how many people stick with them because none of the other 2 or 3 major carriers offer decent service where they live.
Wow, you're really misunderstanding what you're reading. Verizon's margins may go down, but their overall profits go up from the massive number of postpaid subscribers shelling out huge amounts of money per iPhone.
I don't think that there are any numbers that support the claim that large numbers have switched to other carriers from AT&T. Do you any source to back up that claim?
I can only speak from my personal experience and where I live, AT&T has by far the best service.
Also, AT&T, as are all carriers, are making huge investments right now in their networks.
This might be the stupidest thing I've read all year.
Agree. Modems were never 32k, 16k or 8k. They were 19.2k, 9600, 4800, 2400, 1200, 600, and 300
Don't forget 14.4k. I had one of those for ages.
"What in the name of Fats Waller is that?"
"A four-foot prune."
"One would think Captain Obvious would always be easy to recognize."
That just made my day.. BIG time.. heh
But many of the oil multinational corporations have their roots in the US, and are only too happy to manipulate our government with petrodollars. When Oil companies pass laws regarding their own regulation and dictate energy policy to our government (up to and including the taking tens of billions of dollars of corporate welfare at a time when they are making record profits), I would have to say its fair to say whatever illegal acts they conspire to do, there appears to be no interest from our government in holding them to account.
Another example: the oil industry. In fact, I don't even really have to go into detail on that one; I think pretty much everyone who buys gasoline (which, consequently, is pretty much everyone) is fully aware of how the oil cartels collude to fix prices and get away with it.
Not just the prices, either. Successful collusion between Big Oil, auto manufacturers, and insurance companies has for decades successfully fooled gullible Americans into believing that you need to change your oil every 5,000 miles. I live in Europe, and my 4-year-old car is just going for its first major service at 30,000Km, which does include an oil change (at the 10,000Km service the oil just gets topped up if necessary).
Republicans apparently believe that there is a free market in oil, and that the free market is not a global market. Otherwise, they would be laughed off stage when it's suggested that increasing domestic production of oil would affect gas prices in the US.
Are you really so dumb as to claim the oil market is global on one hand and then on the other deny that pouring more production into said market will have no impact across the market as a whole?
It simply will not ONLY have an impact on U.S. production, nor will it have AS LARGE an impact as it might. But it will have an impact.
Meanwhile while you bask in your ivory tower of stupiditude, real people have to pay for real gas and wonder why for ten years we've been denied the opportunity to ramp up production substantially in the U.S., where we could at least monitor the environmental controls around oil production instead of sweeping THAT under the run by pretending other oil producing countries are good stewards of the environment.
If you care about gas prices, if you care about the environment, if you care about giving money to cultures that treat women abysmally - if you are about any or all of those things you would be DEMANDING oil production be increased in the U.S. at once.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Ironically, you're right, it's just that mobile data has traditionally been too cheap, and it's untenable to continue charging at those rates. Once they start charging reasonable rates instead of discounted rates, their network capacity issues may well go away.
Except the only way that's true is if all across the US, gas stations in any given small area always buy their gas of the same truck within minutes of each other. Otherwise, the gas being sold at different stations on any given day didn't cost the same and there is no reason for their prices to be raised and lowered simultaneously to identical amounts. You would see one station raising or lowering prices a day or two after another, based on when they bought their gas, etc. There would also be stations marketing "higher quality" gas that would keep their prices higher (but not necessarily always the same amount higher). But that's not how it works, because they're told when they have to raise or lower their prices, and by how much. You must either have no understanding of economics at all or be willfully blind to not see the collusion going on here.
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If by "tens of billions of dollars of corporate welfare" you mean tax credits and deductions that every other company gets then yes. I assure you that oil companies pay the government billions upon billions of dollars. There are only dollars flowing one way. Now do I agree that oil companies lobby as hard as they can to reduce their tax burden? Yes, but so does every other industry. If you want to look at companies that pay little to no taxes and still reap in profits... Allow me to introduce GE, alternative energy companies, and "american" car manufacturers.
Also, if the oil industry is so good at manipulating the government, why hasn't the Keystone XL pipeline been approved? Oh right, because the government uses oil companies as pawns in their PR games. Everyone loves to hate oil companies when the price of gas is high. Have you tried refining crude oil recently? How much does it cost you?
Yes it's an anecdote! Were you expecting original research in a Slashdot comment?
325D.71 UNLAWFUL GASOLINE SALES
Any offer for sale of gasoline by a retailer by way of posted price or indicating meter that is below cost, as defined by section 325D.01, subdivision 5, clause (3), is a violation of section 325D.04, except that the criminal penalties in section 325D.071 do not apply. In addition to the penalties for violations and the remedies provided for injured parties set forth elsewhere in this chapter, the commissioner of commerce may use the authority under section 45.027 for the purpose of preventing violations of this section. A retailer who sells gasoline at the same or higher legally posted price of a competitor in the same market area, on the same day, is not in violation of this section.
A retailer who offers gasoline for sale at a price below cost as part of a promotion at an individual location for no more than three days in any calendar quarter is not in violation of this section.
325D.01 DEFINITIONS sub division 5 clause (3)
(3) for purposes of gasoline offered for sale by way of posted price or indicating meter by a retailer, at a retail location where gasoline is dispensed into passenger automobiles and trucks by the consumer, "cost" means the average terminal price on the day, at the terminal from which the most recent supply of gasoline delivered to the retail location was acquired, plus all applicable state and federal excise taxes and fees, plus the lesser of six percent or eight cents.
So here we have a case where the minimum price is mandated. Add in the zone pricing for delivery and individual stations have basically a fixed predictable minimum price, they could charge more but most don't as typically stations make very little on gasoline sales (probably 8-9 cents a gallon in Minnesota). They make most of their money on inside sales of things like pop, cigarettes, candy, coffee, ice, chips, etc as most of these are high margin items especially fountain pop and coffee which can easily exceed 90% margin. If you want to complain about gas prices it is not the individual stations you should be mad at, it is farther up the supply chain in the refiners, terminals, shippers, and oil producers. For the record I worked at a gas station for years in high school and college where I made my way up to assistant manager and thus got to see all the various invoices, zone maps, daily reports, monthly reports, and other stuff.
Time to offend someone
You have a flawed idea of how they pay for gas. They aren't raising the price of gas to cover the truck that filled their existing supply. They are trying to get enough money from the sale of their gas to buy the next truck. Hence they have to hedge how much gas will cost when they need to get another truck. That's why sometimes large truck stops have lower prices because they don't have to forecast as far because they get such high turnover. It's easier to guess what the price of wholesale gas will be tomorrow vs predicting it next week.
Obviously YOU are the one who has no understanding of economics.
Yes it's an anecdote! Were you expecting original research in a Slashdot comment?
Congratulations you just discovered zone pricing. That has been going on for years in the gasoline industry so it shouldn't be a surprise to anyone but yet it still is.
Time to offend someone
Yes that "Nitrogen Enriched" fuel works much better with the nitrogen enriched atmosphere.
Yes it's an anecdote! Were you expecting original research in a Slashdot comment?
Yes, you have to charge your device if you'll be using Wi-Fi often. And where there's Wi-Fi coverage, there's usually an AC power outlet to charge it.
Then why can't people buy and carry a dumbphone along with a PDA such as the Galaxy Player or iPod touch?
many people (not everyone), spends 98% of their time in two places: home and work
Only in places with no public transit. I have a half hour to burn on my way to work and another half hour on my way home; that's already nearly 5 percent of my waking life.
agreed, if you are not in WiFi territory you are sorta SOL
Which is why I prefer having a netbook to having a tablet. Netbooks run PC applications, which tend to allow doing more things offline. There are still several things that Apple won't allow in iPad applications, and to work around that, one has to connect to the Internet and use something like VNC.
I have wifi at work, but it only allows http traffic
No HTTPS?
Good luck getting your imap mail to sync on your phone. I'm also not about to set up 500 AP's and use unsecured AP's to get coverage around town.
If your IMAP and SMTP go over TLS, what's the danger of using an open AP?
Very few busses have wifi as well
And very few cities that aren't big enough to have a major league sports team have a usable bus system in the first place. If there is a bus system at all, it's like the one in Fort Wayne, Indiana (pop ~200,000): 60 minute headways and no service at all at night, on Saturday evenings, or on Sundays or major holidays. People in such cities have to rely on a bike or car, and if you can't carpool, you can't use your mobile device.
you buy access for a limited expiry time with usage caps. Your statement adds nothing
It doesn't "add[] nothing" to express frustration that "access for a limited expiry time with usage caps" is the only pricing model offered to individual customers. It's rare to find rollover data or a plan with capped fast data and unlimited EDGE data nowadays.
You're really unaware of the oil-specific subsidies that have recently been debated in Congress?
Educate yourself, my friend
How do the oil companies collude to fix price ? I can only think of one particular mechanism currently which allows of inflated prices not dictated by demand and that is speculating. Do you know of others ? Also please do not post assumptions but rather facts that back up any statements you make.
Actually he is right. I am not sure if you aware of this but gas stations actually will sell gas at a loss. The belief behind this has been that they make very little anyways. If they take a slight loss and you go into there store to buy drinks, candy etc then they make a profit. This is the big reason why Chevron, Shell and all the other oil companies have decided to get out of the gas station business. The gas station has become less about gasoline and more about other services. The oil companies arent in the business of changing your oil or selling you candy.
no one can possibly have both friends and a main-line cellphone for $60 a year.
A lot of households still have a land line at home and a "throwaway" cell phone for each resident (e.g. Virgin Mobile USA on the $20 per 90 days plan) because that's cheaper than even the "land-line-replacement" family plans that the major carriers offer.
required contract (subsidized) plans to clearly separate the subsidy from the price of service and sell plans to "bring your own phone" folks at that price of service
The free market has done this itself as prices of Android-powered smartphones have dropped. Lately, carriers have been offering month-to-month plans for these that are somewhat cheaper than the contract plans. T-Mobile was probably the first with its Value Plans that used to be called "Even More Plus", but lately, Virgin Mobile offers "Beyond Talk" and AT&T offers "GoPhone". The problem here is getting carriers to offer voice-only service for a smartphone whose owner plans to use Wi-Fi for all data.
If you already have a law that covers a given scenario, why are you passing another?
Because it is discovered that the law doesn't in fact completely cover the scenario, or another scenario has emerged. Look at the patches that continue to be applied to Linux, both to fix vulnerabilities and to add support for additional hardware.
Yes but missing the point. Collusion is the defacto modus operandi for big telecom.
The telecom companies have never proven real scarcity of bandwidth. The government needs them healthy to rake in the money during the next spectrum auction.
U.S. oil companies do not control the oil cartels. To suggest that they do is silly.
On the contrary: the cartels (controlled for the most part by middle-eastern interests) have been frequently known to piss off the oil companies.
Some gas stations will go out of their way to get gas from a more distant terminal (sometimes more than 100 miles father away) just to get on a different price scale and undercut the other stations by 3 cents
Your target for your ire concerning gas prices is not correct. You cannot blame the person making $.01/gallon for $4/gallon gas. The supply and demand model for fuel is broken but not because the gas station is ripping you off. The big boys who own the production and distribution system are the ones using your exit point for their enjoyment.
There is more oil being produced in the US right now than has been produced in 30 years and we are using less today than we did 10 years ago. So much is being produced that they are exporting fuels we don't have capacity to use (where they are located). A big part of the problem is the lack of a way to move the fuel from where it is to where it could be used. This means pipelines but your government (at all levels) needs to approve the construction of a new pipeline and that just doesn't happen anymore. Big oil is happy to ship cheap gas to places willing to pay high prices for it and then import oil in other areas and stick you with the cost because they make profit both ways and they don't have to spend money on new3 pipelines.
Thank you local vendor for trying to stay in business to serve you. Direct your anger where it belongs, big oil and the politicians they own.
Clearly my friend you've made a preoccupation of ignoring the wrongs committed against America and the world at large by the Oil Industry. For starters, there is a long standing close relationship between Middle-East oil cartels and multinational oil companies (if you don't think they scratch each others back, your naivete may only be exceeded by your rose colored glasses.)
Under the Bush administration, the Minerals Management Service became a public toilet, staffed by friends of Oil Interests and filled with such profound graft and bribery that it became known as the federal office joke without a decent punchline. Oil executives were invited to closed door sessions where they effectively wrote laws regarding their own oversight, regulation and freedom to act. Ultimately they've gone on to ignore safety laws, resulting in a number of high profile disasters along the gulf coast and Texas, and to date have received nothing more that a wrist slap from Federal agencies.
As for corporate welfare, you would only have had to do a simple search on "Oil subsidies" to find that the Oil Industry has been receiving record amounts of money from your federal tax dollars at a time when they are already pulling down record profits. This is maybe one of the best examples I've ever seen of the phrase "Adding insult to injury...".
Add the billions they've spent to prevent renewable energy technology, and dump FUD on the American public, and I say to you in all earnest, these people are not your friends, and apparently you're not bright enough to see that.
After watching the business ethics in AT&T and prior to that Southwestern Bell (who took over the AT&T name when they purchased it).
I am afraid it is time for the Justice Department to start reviewing the 'new AT&T'. To me it seems like their DSL addon, xfinity?, is really just a work around for the Defense Decree that caused the old AT&T to be broken up. ... Just my observations.
If that were true, then the prices for any particular chain of gas stations would be more or less the same throughout the region, but slightly different from the other chains, because the different chains have different amounts of gasoline in their stockpile, thus they're hedging against a different load of gas. But that's not what we see. The prices that are the same are stations at the same street corner, of whatever brand. Except, of course, one brand that may always be exactly 1 cent lower than the rest (so much for Bob's "they're selling at state minimum" excuse). Also, large truck stops generally DON'T have lower prices. They usually have higher prices. But there again, all the truck stops at any given intersection are all going to have exactly the same price. Except for the rare mom & pop truck stop. Theirs might be higher or lower, depending on what the market is actually doing.
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Except that's demonstrably false in the case of gas pricing. The only "zone pricing" in gas is extra price hikes at locations that see more traffic. It doesn't cost $.10/gallon more to deliver gas 3 miles further down the road, especially if the higher-priced location is just off the freeway, while the other location is 3 miles further away from the freeway. It also doesn't cost $.20/gallon less to deliver gas to the middle of nowhere. But that's often where you find the best deals.
Also note that I never said I was surprised or necessarily upset at any of this. It's just it's very obviously collusion blessed by the government. Call a spade a spade.
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