SpectrumTalk

"Too Cheap to Meter"

In an address to the National Association of Science Writers in New York on September 16, 1954, US Atomic Energy Commission Chairman Lewis L. Strauss was talking about nuclear power and said,

"It is not too much to expect that our children will enjoy in their homes electrical energy too cheap to meter; will know of great periodic regional famines in the world only as matters of history; will travel effortlessly over the seas and under them and through the air with a minimum of danger and at great speeds, and will experience a lifespan far longer than ours, as disease yields and man comes to understand what causes him to age. This is the forecast of an age of peace." (N.Y. Times, August 7, 1955)

It is unclear what time frame Chmn. Strauss was talking about with respect to "electricity too cheap to meter" - especially when you look at the later phrases of the sentence - and this quote continues to cause controversy in the electric utility industry.

But let's look at telecom. When I joined FCC in 1979, price regulation of the Bell System was a big issue although MCI and Sprint were already around. FCC was trying to keep telecom reasonably priced through a variety of tools like reviewing AT&T's rate of return and tariff rates for long distance calls.

But today, telecom may actually be becoming "too cheap to meter". Larry Roberts, the original manager of the ARPANET project that evolved into Internet, used to say in the early 1970s that this technology had user costs independent of distance or data volume. At the time, I wasn't sure if I agreed with him since he didn't differentiate on the difference between prices and costs. Larry, you were right!

As we all know, Skype gives away a voice service - VoIP/ Voice over Internet Protocol - which is crosselastic with what AT&T used to sell and FCC used to regulate. ["crosselastic" - economics jargon for describing two products or services that are different but similar enough that one could at least partially substitue for the other depending on relative pricing.] Vonage sells for $24.95/month a VoIP service which is virtually the same as AT&T's long distance POTS and gives you unlimited calling to US, and although throws in for free Canada, UK, France, Spain, Ireland, and Italy!

Now let's look at Wi-Fi.



Free Wi-Fi hotspots are growing like mushrooms! Pay hotspots are also growing so it is not possible to be confident of the final outcome. Combine free Wi-Fi with free or nearly free VoIP and what do you get? Free/nearly free mobile phone service.

Maybe Chmn. Strauss just got the industry wrong, but was right on the concept?