According to this article by Julian Hattem in The Hill (“Lawmakers warn in-flight calls could lead to fights“), 77 congressional lawmakers have sent a letter to the heads of four federal agencies warning them not to allow people to have in-flight cellphone conversations on the grounds that it “could lead to heated arguments among passengers that distract officials’ attention and make planes less safe.”  The lawmakers say “arguments in an aircraft cabin already start over mundane issues, like seat selection and overhead bin space, and the volume and pervasiveness of voice communications would only serve to exacerbate and escalate these disputes.” They’re also concerned that it may distract passengers from important in-flight announcements.

Well, I think I speak for a lot of other travelers when I say I find the idea of gabby passengers — whether on a phone or just among themselves — insanely annoying. For those of us who value peace and quiet and find airline travel to be among the most loathsome of experiences to begin with, it might be tempting to sympathize with this letter and just say, “Sure, go ahead and make this a federal problem and solve this for us with an outright ban.”

But isn’t there a case to be made here for differentiation and choice over yet another one-size-fits all mandate? Why must we have federal lawmakers or bureaucrats dictating that every flight be the same? I don’t get that. After all, enough of us would be opposed to in-flight calls that we would likely pressure airlines to not offer many of them. But perhaps a few flights or routes might be “business traveler”-oriented and offer this option to those who do. Or perhaps some airlines would restrict calling to certain areas of the cabin, or limit when the calls could occur.

I dealt with a similar issue back in 2007 when Democratic representative Heath Shuler of North Carolina, along with several cosponsors, introduced the “Family Friendly Flights Act,” which would have required that airlines create “child safe viewing areas”: no publicly viewable TV screens would air violent programming within ten rows of the designated zones. The act defined  “violent programming” as any movie originally rated PG-13 or above, or any television show rated PG-V or PG-14-V or above.

As I noted at the time, it was somewhat easy for me to sympathize with other parents of young children who didn’t want them seeing violent fare during flights. However, I noted that there were some alternatives to government censorship of in-flight films, including privacy film to cover the screens or “no-video” flight options. The law never passed and instead what we got was airlines toning down some of the more violent and racy stuff because of public pressure.

I think that same sort of “social pressure / social norms” response would deter some of the most egregious behavior by passengers who used cell phones to carry on conversations. After all, legislators are certainly correct when they assert that tensions already run high over lesser matters inside the cabin of planes (like bin space and reclining seats). But somehow we get by without new laws on that front.

So, instead of always looking first to one-size-fits all mandates to solve such problems, perhaps a little experimentation and differentiation among carriers could yield a better solution to such problems. Sure, I know that’s not easy because of the relatively standardized airplane cabin designs. But perhaps that could change, too. Is it really all that unthinkable that some carrier in the future might create segregated cabin areas for “connected class” vs. “quiet class,” for example? Why couldn’t some enterprising airline retrofit at least some of the planes to accommodate such travelers, either on the same plane or perhaps, if needed, on completely different flights catering to both types of travelers? And, again, let’s remember that a lot of airlines aren’t going to want to deal with any of this and, therefore, most of them will likely tightly self-regulate cell phone talking on their own.

The bottom line is that we should not foreclose experimentation and choice so hastily when competition might spur creative solutions to complex problems. Not everything needs to be a federal matter.

So, the GAO recently released a report on the wireless industry and found that:

The biggest changes in the wireless industry since 2000 have been consolidation among wireless carriers and increased use of wireless services by consumers. Industry consolidation has made it more difficult for small and regional carriers to be competitive. Difficulties for these carriers include securing subscribers, making network investments, and offering the latest wireless phones necessary to compete in this dynamic industry. Nevertheless, consumers have also seen benefits, such as generally lower prices, which are approximately 50 percent less than 1999 prices, and better coverage.

Now, if you are a self-described “consumer advocate,” I would hope the bottom line here is pretty straightforward and refreshing: Prices fell by 50% in 10 years. That alone is an amazing success story. But that’s not the end of the story. The more important fact is that prices fell by that much while innovation in this sector was also flourishing.  Do you remember the phone you carried in your pocket — if you could fit it in your pocket at all — ten years ago?  It was a pretty rudimentary device.  It made calls and… well… it made calls.  Now, think about the mini-computer that sits in your pocket right now.  Stunning little piece of kit. It can text. It can do email. It can get Internet access. You can Twitter on it. Oh, and you can still make calls on it (but who wants to do that anymore!)

The point is, this is a great American capitalist success story that everyone — especially “consumer advocates” — should be celebrating.  So, what does Public Knowledge president Gigi Sohn have to say?

“These trends do not bode well for consumers, despite any benefits of the moment,” she told Ars Technica.

Wait, what?  Apparently no good deed goes unpunished. In the eyes of Public Knowledge, 50% price drops + stunning innovation = we need more regulation!  According to Ars, Gigi called for wireless net neutrality, text messaging regulation, an end to handset exclusivity, and more reasonable early termination fees.

What Gigi appears to be hung up on is the fact that, as the GAO reports, there has been undeniable consolidation in this sector since 2000. (Of course, that scale was essential to spreading faster networks nationwide).  But in Public Knowledge’s world, big is always bad.  All that counts is how atomistic competition is.  If we don’t have lemonade stands* on every corner, then, by God, to hell with the entire system, they say.  It makes no difference to them how well consumers did under that system . That’s the key take-away here.

But how asinine is this?  Again, isn’t consumer welfare what really counts?  Do we really care if we have 4 or 40 competitors? So long as prices are generally reasonable (or in this case constantly plummeting) and innovation is occurring at a healthy clip (which is certainly is here), then who cares how many players are out there?  Who’s to say to say that “X” is exactly the right number of competitors?  Markets determine these things. Public Knowledge apparently doesn’t like the fact that X currently is 4 instead of 40, or whatever it is they think meets their Goldilocks standard.  And, so, to get things just right, they would bring in the regulatory wrecking ball and have FCC bureaucrats start re-engineering this sector according to their own preferred design.

Oh, the rank hubris of it all!

Anyway, you’ll have to excuse me now.  Once I finish up this post to on my Droid (yes, I can blog on my fricking phone!!!!  How amazing is that, Gigi !!) I then need to get back to reading through my day’s Twitter stream (also on my phone) my RSS feeds (also via my phone) and then sort through the tens of thousands of games and apps in the Android marketplace to find my kids some new things to keep them entertained on a long car drive during vacation next week, where I will be using the Droid’s navigation system to find the hotel, while also searching for restaurants to eat at, while also…

Oh, you get the point.  Some people are just never happy.

P.S. To understand why “lemonade stand economics” are never going to work out well in high fixed-cost sectors like wireless, please see my post, “Wireless Networks & Lemonade Stand Economics.”   For more facts about how vibrantly competitive and innovative this sector is, please see:

• Wireless Innovation is Alive & Well: Two New Reports Set the Record Straight
• CTIA’s Refutation of Tim Wu’s 2007 Wireless Net Neutrality Paper
• The Fiercely Competitive Mobile OS & Device Markets

By Adam Thierer & Berin Szoka

In a series of upcoming essays, we will be examining proposals being put forward today that would have the government play a greater role in sustaining struggling media enterprises, “saving journalism,” or promoting more “public interest” content. The reason we’re working up this multi-part series is because, with many traditional media operators struggling, and questions being raised about how journalism in particular will be supported in the future, Washington policymakers are currently considering what role government can and should play in helping media providers reinvent themselves in the face of tumultuous technological change wrought by the Digital Revolution.

For example, the Federal Communications Commission (FCC) recently kicked off a new “Future of Media” effort with a workshop on “Serving the Public Interest in the Digital Era.” (The  filing deadline for the FCC’s “Future of Media” proceeding is May 7^th).  Likewise, the Federal Trade Commission (FTC) has hosted two workshops asking “How Will Journalism Survive the Internet Age?”  Meanwhile, the Senate has already held hearings about “the future of journalism,” and Senator Benjamin L. Cardin (D-MD) recently introduced the “Newspaper Revitalization Act,” which would allow newspapers to become tax-exempt non-profits in an effort to help them stay afloat.

Thus, in light of Washington’s sudden interest in the future of media and journalism, we will be taking a hard look at several issues and proposals that are being floated today, including:

• Taxes on media devices, mobile phones, or broadband bills to channel money to media enterprises / content;
• Taxes / fees on broadcasters to funnel support to their public sector competitors or to public interest programs;
• “News vouchers” or “public interest vouchers” that would encourage citizens to channel support to media providers;
• Taxes on private advertising to subsidize non-commercial / public media content;
• Expanded postal subsidies for media mail; and
• Targeted welfare programs for out-of-work journalists or corporate welfare in the form of bailouts for failing media enterprises.

You won’t be surprised to hear that we are generally quite skeptical of most of these ideas, but we promise to give each one serious consideration.  We’ll kick things off tomorrow with our essay on why taxing media devices or distribution systems to fund media content is not a particularly good idea.

Wal-Mart is often cast as a villain by some labor unions, local politicians and small retailers, but for the average consumer Wal-Mart has been a savior: A relentless price-cutting machine that instantly changes the dynamics of every market it touches. Indeed, when Wal-Mart decides to jump into a sector by offering a new good or service in its stores, something akin to “the Southwest effect” on steroids kicks in: That market segment is often transformed overnight in that the good or service Wal-Mart starts delivering is essentially instantly commoditized. For the seller of that good or service, this is both a blessing and a curse: They gain the massive market reach that goes along with being in Wal-Mart’s 8,000 retail stores. On the other hand, they instantly surrender any semblance of pricing power they once had.  And this typically also puts downward pressure on prices not just for the particular good carried in the Wal-Mart stores, but for that entire market segment more generally. [This exact scenario is currently playing out in the book marketplace as Wal-Mart has gone to war with Amazon in cost-cutting bonanza.]

The reason I bring all this up is because, as most of you probably already heard, Wal-Mart jumped into the prepaid cell phone business this week with the launch of Straight Talk:

a new solution in no-contract cellular, exclusively at more than 3,200 Walmart stores nationwide starting October 18, 2009. Straight Talk will bring to the market a new low price for no-contract wireless service with two prepaid plans now available to customers nationwide at $30 and $45 a month. Straight Talk will only be available in Walmart stores and online at www.Walmart.com and www.StraightTalk.com. The average U.S. adult spends $78 on his or her cell phone bill to receive 1000 minutes a month. By switching to the $30 Straight Talk plan, for example, the average 1,000 minutes-per-month consumer could save more than $500 per year and still be on a reliable nationwide network.

I don’t want to overplay the significance of this development, but I really do believe that Wal-Mart’s presence in this field is significant, at least for entry-level mobile phones. While it would be easy for those of us who use more advanced smartphones to shrug off the Wal-Mart announcement, it would be a mistake for reasons made clear by David Worthington over at Technologizer:

As a technophile, it’s tempting for me to point out the short comings of those devices. There are only a few stock applications available, and unlimited data on a flip phone does not translate to the same experience that I have surfing the Web on my iPhone. But that does not matter, because the people who would buy these phones wouldn’t care. … It’s.. an economical choice for families with shoestring budgets. Leading wireless companies provide family plans, but they aren’t cheap, and usually require a commitment. … A pre-paid plan doesn’t require families to purchase much more than what they want to pay for. Whether Wal-Mart becomes a viable wireless company or not is up to the market, but its track record is pretty solid. Wal-Mart rapidly became the largest grocery store in the United States after all, and it has more locations than other pre-paid wireless companies. I’m guessing it’ll do well.

You better believe it. Have you seen the stacks of prepaid calling cards that adorn the shelves in every Wal-Mart checkout line?  Do you think they just have those there for decoration?  That’s a huge business, folks. While some of us haven’t touched a prepaid calling card since our college days decades ago, millions of people buy and use such cards every day.  As Worthington notes, prepaid plans mean you don’t have to pay for more than you’ll think you need and for many folks that’s about all they want to hear.  Esoteric inside-the-Beltway debates about tethering, Net neutrality, app stores, etc., are meaningless to most people.  They just want a phone that works at the right price — namely, cheap!

Finally, this development certainly calls into question the asinine theories being bandied about in Washington these days about the mobile marketplace lacking competition and innovation, something recent studies have shown to be complete bunk.  I’m not saying that Wal-Mart’s entry into this sector is going to turn cell phones into the equivalent of the toothpick or napkin market; there will always be room for differentiated phones and plans, especially at the higher end of the market. But as the retailing giant expands its reach in this sector, it’s bound to have an impact — especially for the entry-level devices and plans that low-income consumers might want.  Somehow I doubt this will let the regulation-happy gang over at our current FCC sleep any easier at night, but it should.