Editor’s Note: Welcome to a new weekly feature at RCRNews.com, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Current Analysis’ Peter Jarich, M:Metrics’ Seamus McAteer and Strategy Analytics’ Chris Ambrosio.
By Roger Entner, vice president of wireless telecoms for Ovum
One of our founding fathers, Benjamin Franklin, famously said that the man that trades freedom for security does not deserve nor will he ever receive either. Up until a few days ago, I did not know that his observation also applied to cell phones.
Lawmakers in four states, Georgia, Massachussets, New Jersey, and Michigan, have introduced legislation and another lawmaker in Pennsylvania and on Capitol Hill are rumored to currently write a bill that would require identification when purchasing a prepaid cell phone. To make it even better, we have actually two lawmakers in Georgia that have introduced competing bills covering the topic. More than two years after the Madrid Bombings that claimed the lives of 191 people and the 2002 Bali Bombings that claimed the lives of 202 people, the first bills get intoduced that target the prepaid phones that have been used as triggering devices for the bomb detonators. While it is important to protect people from terrorist activities, requiring ID to buy a prepaid cell phone is at best a hollow gesture as long as minors can get fake IDs and can actually buy alcohol with them.
The sponsors of these bills have claimed that the arrests of people associated with purchasing dozens of phones in connection with terrorism would justify these bills. The problem is that none of the people that purchased these phones have anything to do with terrorism as law enforcement had to admit after the first sensationalized reports. This type of fall out from misinformation and hysteria is, to word it politely, very unfortunate. I really want to believe that these lawmakers introduce these bills out of concern for their electorate rather than in a dash for publicity.
The add-on justification claims that it prevents criminals from buying dozens of phones to use for their illegal activities. Hmm, roving wiretaps are being praised by police for already achieving that goal, and please remember showing ID does not prevent anything, it just helps finding and convicting the perpetrators faster. While cell phones are targeted, nobody has come up with the idea requiring ID from people who buy boxcutters, which were the weapons the 9/11 terrorists were using. Soon we will be required to show ID for buying everything because it could be used as an assessory to a violent crime. Where does it end?
The most recent warning (or shall I say hoax?) I read was that criminals are using cameral cell phones to take a picture of your credit card when you hand it over in restaurants and stores… Oooh! Scary camera phones! I guess the good old paper and pen is out of fashion for thieves now. Lets all outlaw camera phones, and while we are at it real cameras too!
What is worse than the pointless hassle of providing ID when purchasing a cell phone is the negative impact on the poorest members of society. At approximately 75 percent wireless penetration only people who are too young or cannot pass a credit check do not have a cell phone. That is if we ignore technophobes, prison inmates, people who are institutionalized or in a coma and others who after 20 years of relentless marketing barrage by the carriers still do not see the benefits of a wireless phone… While a portion of prepaid wireless users are using wireless this way out of choice, but the vast majority use prepaid out of necessity because they do not qualify for postpaid.
Advocates of prepaid phone ID checks simply point at postpaid subscriber activations where ID checking is customary. The huge difference is that these ID checks are doing in conjunction with a credit check to avoid fraud, not to prevent terrorism. Prepaid providers are operating with razor sharp profit margins to provide these services to the poorest Americans. Tracfone, the largest prepaid only carrier and 6th largest carrier overall in the United States with 7 million customers and an ARPU of $13 (national average is about $50) has merely an EBIT profit margin of 2.9 percent for the first six months of 2006. That’s 37 cents of gross profit per month per customer. The comparison figure for postpaid is around $23 per month. How one can require ID checking without raising rates for the people who can least afford it and remain profitable is difficult understand, especially for such a futile measure.
I am all in favor of introducing real measures that protect Americans from terrorism, but these bills are just not it. Even worse, bills like this are much harder to get off the books than on the books, just like the Federal Exise Tax which was instituted to fund the Spanish-American War in 1898 and ultimately repealed 108 years later.
Questions or comments about this column? Please e-mail Roger at roger.entner@ovum.com or RCR Wireless News at rcrwebhelp@crain.com.
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