Wireless

Bandwidth From Strangers Challenges AT&T, Verizon


The Mobile World Congress in Barcelona

Photograph by Denis Doyle/Bloomberg

The Mobile World Congress in Barcelona

“A bit is a bit,” says Eyal Toledano, “and these inefficiencies in radio can be solved, and inefficiencies in business should be discussed openly.” These are simple statements, all true. But Toledano is offering them as a request to America’s wireless carriers. He wants to them to change the way they think about selling data. How they answer will turn him into either a rich man or a radical.

Toledano, a 36-year-old master’s degree candidate at the MIT Media Lab in Cambridge, Mass., has built an Android app, Air Mobs, which—were it ever released—would allow you to sell wireless bandwidth to a stranger near you in return for credits allowing you to buy bandwidth from another stranger in the future. He used to serve as chief technology officer for Samsung Telecom Research Israel and is not completely naive about the nature of America’s wireless broadband market. Toledano is fairly certain, as am I, that his app will not immediately please AT&T (T) or Verizon Wireless. (Verizon declined to comment; AT&T has yet to respond.)

“I want to open a wider discussion,” he says, “and hopefully by opening the discussion get some operators excited about this and then find a way to collaborate with them—or at least get their silent approval.” The mere existence of the app poses an honest question to the carriers: Why shouldn’t this work?

Wireless broadband service, as Toledano points out, is stuck with two kinds of inefficiency. The first lies in the nature of radio communications. Cell towers are expensive to install and maintain, and yet the more densely a carrier packs them, the more efficiently it can re-use the spectrum it has. So carriers have to find a balance between serving growing demand and keeping down infrastructure costs.

Business, not physics, drives the second inefficiency. You might think that your wireless provider is in the business of selling you minutes or texts or data. It is not. It is in the business of making as much money on a contract from you, the customer, as it can. On calls with investors, carriers refer to this as “revenue per user,” spoken as “arpu.” Carriers do not put a price on each individual bit they serve you, have you consume what you will, and then ask you to pay for it. Instead they sell blocks of bits, having you guess each month how much you think you might need and charging you a penalty when you’re wrong. They do not do this because it is simpler for you. They do this because it guarantees them more arpu.

Again, this is business, not physics. If you want to make a wireless executive shudder, tell him he works for a utility, selling bits the way the city sells you water. “A bit is a bit,” says Eyal Toledano. Radical.

Air Mobs would eat at both inefficiencies. First, imagine that you are standing at the bottom of a subway escalator with a sight line to the sky. You cannot get a signal from a wireless tower, but you could get one from a stranger standing with a cell phone at the top of the escalator. Your carrier will never have reason to put a tower at the subway entrance for your convenience; Air Mobs creates what engineers call a “small cell” architecture that no amount of carrier investment could replicate. Second, arpu operates on fear, requiring that customers pay for a cushion to keep them under their monthly blocks. But that cushion is inefficient. In theory, you’ve paid for it, but it’s hard to use exactly what you’ve paid for, and bits don’t roll over like minutes. Air Mobs lets you exchange bits and access you have now for bits and access you might need later.

The app would force carriers to cooperate with each other to provide better coverage. They already do this when it makes sense for them. When you are home, wireless carriers offload all traffic onto your Wi-Fi router, onto bandwidth you buy through your home broadband provider. Air Mobs offloads onto other wireless carriers when you’re out in the world. And it forces carriers to sell data efficiently, whether they want to or not. Or it would, if it’s ever released.

Toledano isn’t dropping the bomb himself. Rather, he wishes to show the carriers what’s possible. His threat of disruption sits as a simple fact on a hard drive in Cambridge. “The technology is there to provide better services and better value to the user,” he says, “and there is lacking a business incentive to actually pursue that value.”

Business, not physics. Over to you, AT&T.

Greeley-brendan-190
Greeley is a staff writer for Bloomberg Businessweek in New York.

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