Category Archives: Business

Bell’s Blues

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Google denied selling out network neutrality with Verizon earlier this month but the ballistic blogosphere bucked that.

You may recall that Google and Verizon unveiled a plan on August 9 that would prohibit wireline operators from discriminating on the open Internet but proposed a second, closed (mobile) Internet where they could do just that.

Turns out that BP’s Tony Hayward has assumed the helm of the joint GOOG-VZ P.R. department.

[Important Note: The following column appeared under this same title in the Burlington Free Press in March of 1997.]

“Hang on. I dropped the phone.”

Like the toilet, the telephone is the household appliance that must perform faithfully every time you need to make a call.

Once upon a time the telephone came one style (Durable Dial), one color (Bell Black). One monopoly served everyone. Local calls were unlimited, operators assisted, phone bills were reasonable, and the phones stood up to the occasional gambol on the kitchen floor.

Then, with a swipe of the judicial pen, “Ma Bell” split into AT&T and all the regional Baby Bells like New England Bell. Phone bills soared. We all had to buy cheap phones that bounce poorly. Trust in the phone company went down the toilet.

Heard at a Vermont IGA, “Their minutes last 53 seconds.”

[Historical Note: New England Bell spawned NYNEX which in turn merged with Bell Atlantic and spawned Verizon which sold out to Fairpoint which went bankrupt. See how that works?]

Thanks to the Vermont Telecommunications Agreement, NYNEX gave us measured service. In phone company parlance, measured service counts each instant of local phone use. Then they bill us. NYNEX sold measured service to Vermonters by saying it controls our local telephone costs.

Sure. The old way, we paid $19.63 every month.

Measured service means we can’t “pay any more that $26.67.” If you manage not to use their minimum daily allowance, you’ll pay only $19.52.

Here’s the scoop. NYNEX “gives” us a $6.95 worth of message units each month. Every message unit amounts to one minute on the phone. More or less. When you use more message units, NYNEX bills you. NYNEX charges you for each whole minute’s worth if you use even a single second. Even if you get a wrong number. If I use less than my allotment, does NYNEX give me a discount? No. They just make more profit.

Who counts those minutes? The electric company puts their meters where we can see them. When I pump gasoline into my car, the readout tells me how much in thousandths of gallons. I’ve always wondered why I need that kind of precision.

I installed a phone timer to record every outgoing call; the log shows whether the call is peak or off-peak. The local usage charge on my bill has never come within 10% of the total shown in the log. Since NYNEX apparently cannot count, I guess I do need the gas pump kind of precision in my phone bill. Wasn’t NYNEX forced to return a $15 million excess profit?

Maybe that’s why they needed an 8.2% rate increase [then].

Measured service is such a delicious oxymoron. It positions its purveyors perfectly in a world where decamping lovers practice “cruel kindness,” a computer crash can cause a “partial shutdown” in your life, and “call answering” leads to a heartfelt conversation with a computer voice.

Almost everyone has a phone story. Your state Public Service Board wants to hear yours. Speak up at public hearings; write to them in your state capitol. If one or two of us sing loud and long, it might sound like a song from Woodstock. If a hundred of us serenade them, they’ll think it’s a movement. And if they get letters by the mailbag, who knows, NYNEX might get some competition. With more than one dial tone provider looking for your business, Vermonters might get nicer phone bills.

There is another way. A NYNEX representative told me she has had measured service for a few years, and it doesn’t cost her any extra.

“How so?” I asked.

“I don’t make any calls.”

Back to Verizon and Google. The Internet will be open but not the mobile Internet.

The big players say it is to protect bandwidth.

Some of the talking heads agree and note it is to protect (phone company) revenue.

The Media and Democracy Coalition, for example, noted that this have-have not system “could further widen the digital divide, particularly for those that rely primarily or exclusively on wireless Internet access, as do many individuals in rural areas, and many low-income consumers. It may also create a barrier to entry by independent creators, entrepreneurs and startups.”

That’s true but there is a bigger issue.

Remember the NYNEX message units? Verizon does. You pay them every time you dial your cellular phone.

Bank of America will test a system that bills consumers for purchases they make with their mobile phones. The initial mobile payments test, beginning in New York City next month, includes BP gas stations, New York City taxis, Burger King and McDonald’s restaurants, Home Depot, and the Walgreen’s and CVS drug store chains.

Mobile payments. Phone company collectors with baseball bats.

Mobile payments are especially popular in Asia and Europe where consumer use smartphones to pay for goods and services. The billing uses SMS-based transactions, “direct mobile billing,” mobile web payments (WAP), or the fastest-growing contactless NFC (Near Field Communication). Most purchases are for digital goods (music and videos, ebooks, online games, and the like), bus fares or parking meters, and burgers.

Experts say the market for mobile payments will exceed $600 billion globally in less than three years. That’s almost as much as the AIG bailout.

And you think Google and Verizon aren’t slobbering to skim that?

Remember the former Soviet republic of Moldova? About the same time in 1997 that I reported the NYNEX fleecing of Vermonters, that tiny country gave us the Moldovan horse, a Trojan horse that hijacked customers’ modems and dialed up Eastern Europe, at tens or hundreds or even a thousand dollars per minute. Victims ended up with phone bills that cost more than their cars.

AT&T’s Fraud Control Group got involved. The FTC investigated intensively. And while that was going on the phone company mafia kept collecting on those thousand-dollar phone bills.

Are these the peeps you want in charge of your Visa bill?

Google says their mobile Internet plan is “compromising not selling out.”

Uh huh. And NYNEX said the check was in the mail and they won’t … well, you know the rest.

Breaking News:
Verizon Wireless will pay about $90 million to 15 million cellphone customers who were wrongly charged in one of the largest-ever refunds by a telecommunications company.




Bell’s Blues

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[Important Note: The following column appeared under this same title in the Burlington Free Press in March of 1997.]

“Hang on. I dropped the phone.”

Like the toilet, the telephone is the household appliance that must perform faithfully every time you need to make a call.

Once upon a time the telephone came one style (Durable Dial), one color (Bell Black). One monopoly served everyone. Local calls were unlimited, operators assisted, phone bills were reasonable, and the phones stood up to the occasional gambol on the kitchen floor.

Then, with a swipe of the judicial pen, “Ma Bell” split into AT&T and all the regional Baby Bells like New England Bell. Phone bills soared. We all had to buy cheap phones that bounce poorly. Trust in the phone company went down the toilet.

Heard at a Vermont IGA, “Their minutes last 53 seconds.”

 

[Historical Note: New England Bell spawned NYNEX which in turn merged with Bell Atlantic and spawned Verizon which sold out to Fairpoint which went bankrupt. See how that works?]

 

Thanks to the Vermont Telecommunications Agreement, NYNEX gave us measured service. In phone company parlance, measured service counts each instant of local phone use. Then they bill us. NYNEX sold measured service to Vermonters by saying it controls our local telephone costs.

Sure. The old way, we paid $19.63 every month.

Measured service means we can’t “pay any more that $26.67.” If you manage not to use their minimum daily allowance, you’ll pay only $19.52.

Here’s the scoop. NYNEX “gives” us a $6.95 worth of message units each month. Every message unit amounts to one minute on the phone. More or less. When you use more message units, NYNEX bills you. NYNEX charges you for each whole minute’s worth if you use even a single second. Even if you get a wrong number. If I use less than my allotment, does NYNEX give me a discount? No. They just make more profit.

Who counts those minutes? The electric company puts their meters where we can see them. When I pump gasoline into my car, the readout tells me how much in thousandths of gallons. I’ve always wondered why I need that kind of precision.

I installed a phone timer to record every outgoing call; the log shows whether the call is peak or off-peak. The local usage charge on my bill has never come within 10% of the total shown in the log. Since NYNEX apparently cannot count, I guess I do need the gas pump kind of precision in my phone bill. Wasn’t NYNEX forced to return a $15 million excess profit?

Maybe that’s why they needed an 8.2% rate increase [then].

Measured service is such a delicious oxymoron. It positions its purveyors perfectly in a world where decamping lovers practice “cruel kindness,” a computer crash can cause a “partial shutdown” in your life, and “call answering” leads to a heartfelt conversation with a computer voice.

Almost everyone has a phone story. Your state Public Service Board wants to hear yours. Speak up at public hearings; write to them in your state capitol. If one or two of us sing loud and long, it might sound like a song from Woodstock. If a hundred of us serenade them, they’ll think it’s a movement. And if they get letters by the mailbag, who knows, NYNEX might get some competition. With more than one dial tone provider looking for your business, Vermonters might get nicer phone bills.

There is another way. A NYNEX representative told me she has had measured service for a few years, and it doesn’t cost her any extra.

“How so?” I asked.

“I don’t make any calls.”

Breaking News:
Verizon Wireless will pay about $90 million to 15 million cellphone customers who were wrongly charged in one of the largest-ever refunds by a telecommunications company.

 

Agreement?

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I am not a lawyer. Nor do I play one on TV. On the other hand, I am uniquely qualified to offer this legal advice because I wrote a rental contract while in college that the landlord’s lawyer could not break. Sam the Landlord learned from that experience (he never signed a contract again that his own lawyer hadn’t written) and I learned how much fun teaching can be.

[Editor’s Note: gekko and I are following in the footsteps of 60 Minutes’ Shana Alexander and James Kilpatrick in paired blog articles. After reading this article, please go read title for the counterpoint argument.]

Over on the other blog, gekko was spurred by a Safari program called Reader.

Reader is really neat. It strips the page of all the advertisements, sidebars, and inconsequential stuff, and pops up just the text in a translucent overlay. That scares the advertisers who believe they have a contract with the viewers, readers, or users on the site; seeing all the ads is the price they charge us to see the content.

gekko thinks the contract is not between us readers and the fodder provider. The contract, she says, is only between the content provider and the advertiser.

Contract is an important legal term. A contract is actually “just” an agreement between thee and me to trade something I have for something you have. To be valid, the contract must be (1) enforceable by law and (2) equitable.

Trade? That sounds like business and it is. I might have a book you want. You might have a dollar I want. We can contract to trade my book for your dollar and both walk away happy. Even if our contract is no more than this conversation:

“Hey, you got that book?”

“Yup, Cost you a buck.”

That fulfills the basis for a legal contract.

<pedantic mode> Both of us must be old enough and not impaired to buy or sell that book and the contract must be neither trifling, indeterminate, impossible, or illegal.

As long as the good or service we trade is legal, our oral agreement can constitute a binding legal contract. In practical terms, written contracts are more enforceable because they list all the terms we decided on at the time we made the agreement.

Enforceable means that we each promise to do something for the other guy and that the other guy has specific legal remedies if we breach that promise. A “compensatory remedy” means the Sheriff will make me pay what I said I would and maybe more besides. An “equitable remedy” usually means the Sheriff will stand over me to make sure I perform what I agreed to do and reneged on.

Equitable means fair to both parties. A court would accept as equitable the sale of a used copy of Pocket Shakespear for a buck — both parties benefit more-or-less equally. A court ought not accept as equitable the sale of an original signed manuscript of Macbeth for a buck — here the seller takes it in the ear. </pedantic mode>

Back to the Safari Reader.

Reuters reports that “the Internet is [now] by far the most popular source of information and the preferred choice for news ahead of television, newspapers and radio, according to a new poll in the United States.”

There are two contracts in play. In the first, the advertiser contracts with the Internet content provider (the fodder we want to read) to place the ads and other links on the content page so the viewer/user will see them. gekko contends that’s The One. In the second, the viewer/user agrees to view the ads and other links on the page in order to see the fodder we want to read. I maintain that’s The Other One.

In many ways, this is exactly the same model we have used for “free” radio and television broadcasts since 1920 when KDKA went on the air in Pittsburgh.

gekko believes the second contract does not exist, partly because we the viewer/user never agreed to it.

<pedantic mode> An implicit contract (A.K.A. an “implied-in-fact contract”) is one agreed by our conduct, rather than by the words we say. The U.S. Supreme Court defines it as an agreement “founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding.” </pedantic mode>

So. Does watching American Idol on Fox or reading the New York Times online mean we agree to watch or read the commercials that support it?

Yes.

TANSTAAFL (There Ain’t No Such Thing as a Free Lunch). The writers and publishers of the information we absorb so easily offer it in exactly the same way I sold you the book and for exactly the same reason you go to work each day. Paying the writer is at least as important as paying your mechanic to tighten the lug nuts when he changes a tire on your car.

I traded the book for a buck. You trade your hours at desk or workbench for, I hope, more than a buck. You may have no written contract with your employer but your boss offered you the position, salary, and appropriate working conditions in return for your appearance on time and performance of the assigned duties. That’s an implicit contract.

VCRs, DVRs, other recording devices, and now Safari’s Reader allow us to breach that contract with the broadcaster or website. The fact that we can breach the contract does not mean we should breach the contract any more than we should rob the gas station down the street just because the President did.

The contract hinges on enforceability but in this day of a Democratic President and Congress ignoring the law or changing it to fit their whims, I would not be a bit surprised to find the Library police reassigned to ad watch duty.

[Editor’s Note: gekko and I have written paired blog articles. After reading this piece, please go read title for the counterpoint argument.]

I have no advertising on this page, so there is no implicit contract that you, dear reader, will pay for these words. OTOH, donations via the Tip Jar are always welcome.

A Perfect Ten(ure)?

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Perfect?

Tenure /TEN-yur/ n. The status of holding one’s position on a permanent basis without periodic contract renewals or threat of dismissal.

My grandfather, a full professor (Chemistry) at Temple, had tenure. My cousin, a full Professor (Wildlife Ecology) at Perdue, has tenure. My 12th grade English teacher, the one who made me memorize John Donne’s birthday, has tenure. OK, she’s dead, now, but she still has her teaching position.

Vermont and Florida are at-will employment states. Under American law, the legal doctrine simply means the employer can fire your furry butt “for good cause, or bad cause, or no cause at all,” and the employee can quit, strike, or take a permanent sabbatical with no liability. There are a couple of caveats. Tenure, an employment contract, or a collective bargaining agreement all govern the employment relationship and negate at-will laws. According to employeeissues.com, “Virtually all states are employment at-will states.”

Teachers unions love tenure.

I taught in Vermont Colleges for a number of years. I have never sought nor held tenure.

There’s no real point to teacher tenure, especially in primary or secondary schools. These schools aren’t universities where professors like my grandfather and cousin create controversy through groundbreaking research and publication. School teachers teach. They need the same level of protection against bombasts, crying parents, and incompetent bosses that any professional needs. And not a penny more.

Gov. Arnold Schwarzenegger (R-CA) supports California Senate Bill 955. That bill proposes to give school administrators the ability to assign or fire teachers based on their effectiveness and to clean up the firing process itself. No longer will bad teachers get the free ride.

The legislation was quickly blasted by the California Teachers Association and by my friend Lido (“Lee”) Bruhl who thinks it a mere ploy to fire all the senior (translation: “expensive”) teachers. “I do not think a teacher should get sacked just because they’re higher up the pay scale,” he said, “and I don’t think there’s enough difference between how teachers teach for that to be much of a factor.”

Lee was born on another planet. They may not have schools there.

Public school teachers across this country receive step raises every year. Year in, year out, a teacher who does nothing but show up for work most of the 179 days in the average U.S. school year gets a raise. Exactly the same raise as the teacher who works overtime every day, brings work home on nights and weekends, attends conferences, takes extra courses, and (just as an oh, by the way) happens to have classrooms full of happy, productive students who actually learn stuff.

A Los Angeles Unified School District task force has delivered recommendations about teacher effectiveness. It’s a major push toward removing outrageous obstacles to firing bad teachers and creating a robust evaluation system for teachers.

Imagine that. Judging a teacher’s worth by his or her performance on the job. Now there is an unusual concept.

“‘Worth’ is not always easy to judge, Dick, outside of the fantasies of right-wing ‘thinkers’ like you,” Lee said.

Another planet. With neither creativity nor original thought, it is difficult to design a system that measures how well teachers teach. After all, having successful students ought not be part of the equation, now, should it? The creators of the standardized tests we all took for college and graduate-school admissions, academics to a person, all claim their tests are not “objective.” The employee ranking systems now popular with B-School grads uniformly lead to disaster in employee morale and performance. After all, it is possible to have a department full of chowder heads. Do you want to grade them on a curve? Or you could be part of a department of superstars. Do you want to end up on the bottom of that curve?

This ain’t rocket science. The appraisal criteria for a teacher:

  • must be objective;
  • must be based on an analysis of actual job requirements;
  • must be based on individual behaviors (performance) rather than personality;
  • must relate to classroom actions, not what the school board or state is doing,
  • must be measurable;
  • and must be within the control of the teacher.

This ain’t rocket science. Principal communicates the job requirements to the teacher. Teacher sets measurable goals. Principal and teacher meet every now and then to measure performance against the goals.

On the other hand, my next notion may be heresy. If we look at objective measures like today’s test scores, Lee might be right. There may not be enough difference between teachers for classroom performance to be much of a factor.

January 21, 1572

Rum and Kook a COLA

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There is no inflation. The Cost of Living hasn’t risen for several quarters.

Cost of living is by definition the cost of maintaining a certain standard of living.

Employment contracts, pension benefits, and government payments such as your Social Security check can be tied to a cost-of-living index, typically to the CPI or “Consumer Price Index.”

The CPI reports the average price of a lot of stuff — what is called a constant “market basket of goods and services” — purchased by average households. According to Bloomberg Business News, the CPI wonks add up and average the prices of 95,000 items from 22,000 stores and 35,000 rental units. Those prices are weighted by assuming that you distribute your spending along strict percentages. Housing: 41.4%, Food and Beverage: 17.4%, Transport: 17.0%, Medical Care: 6.9%, Other: 6.9%, Apparel: 6.0%, and Entertainment: 4.4%. Taxes are exempt from the CPI totals so when your property tax or sales tax or income tax or Cadillac health care tax or gasoline tax or telecommunications tax or blue cheese tax rises, it doesn’t actually cost you any extra.

In calculating the CPI, the U.S. Bureau of Labor Statistics uses a formula that reflects the fact that consumers shift their purchases toward products that have fallen in relative price. Although this substitution game means the BLS reduces what we pay by “living with” store brands instead of name brands, BLS says my analysis is incorrect. Their objective “is to calculate the change in the amount consumers need to spend to maintain a constant level of satisfaction.” As long as the BLS gets to define “satisfaction.”

Where, oh where is Mick when we need him?

The Social Security Administration writes, “Since 1975, Social Security’s general benefit increases have been based on increases in the cost of living, as measured by the Consumer Price Index. We call such increases Cost-Of-Living Adjustments, or COLAs. Because there has been a decline in the Consumer Price Index, there will be no COLA payable in 2010.”

  • Campbell’s Cream of Tomato soup costs between 80 cents and $1 per can in most markets today. Do you remember when it was 40 cents? I do. But the Cost of Living has declined.
  • A five-pound bag of flour costs about $2.49 in most markets today. Do you remember when it was a buck? I do. But the Cost of Living has declined.
  • Gasoline costs between $3.50 and $4 per gallon in most markets. Do you remember when it was $0.999? I do. But the Cost of Living has declined.
  • According to USAToday, health insurance premiums cost about $13,375 per annum last year. (And despite the new law, insurers say they do not have to cover kids with pre-existing conditions.) Do you remember when a family policy cost $2,500? I do. But your premiums will still go up. And, of course, the Cost of Living has declined.
  • Milk costs between $3.50 and $4 per gallon in most markets. Do you remember when it was $1.75? I do. But the Cost of Living has declined.

I wish stuff didn’t cost so much but even more I wish our “leaders” didn’t lie to us about stuff costing so much. Oddly, I cannot vote myself a raise.