It's good to be (one of several) kings

Yesterday I got a text message from AT&T today saying I'd just gone over $20 worth of text messages this month and that it would've been better for me to have paid $20 for one of their monthly text message subscriptions.

Most months, paying a la carte for text messages has worked out for me, but not this month. iMessages hasn't worked as often as it has in the past so some of my text messages to and from Apple iMessages users have ended up going the conventional route, and I was at Sundance where I received a ton of group texts from some Android users in my house.

Whenever I express my disgust at paying AT&T for text messages, people bring up the ridiculous mismatch between the cost of transmitting that infinitesimal volume of data over the telecom network and the actual cost they charge consumers. It's a mistake to think of text messages as goods that are priced on a cost-plus basis.

Telecom network operators invest a lot to build out their network. Once they have the infrastructure in place, and especially if they are part of an oligopoly, which many telecom operators were for quite some time, they can really charge whatever the market will bear for their goods. They're not looking to take the cost of a text message and mark it up by some percentage. They're looking to make as much as possible off of each of their subscribers across voice, data, text messages, and all the other services they offer.

Consumers routinely make the mistake of thinking the cost of their data, voice, and messaging plans are tied much more closely to the cost of delivering those services than they actually are. The pricing plans themselves contribute to that confusion because the more messages or data you want, the more you pay.

AT&T and Verizon no longer offer unlimited data plans anywhere in their cellular packages, and they'll blame people overloading their networks for doing so, but the truth is they are just pricing things to extract more revenue from their customer base.

This is the same economics mistake Brian Stelter of the NYTimes makes in his article Rising TV Fees Mean All Viewers Pay to Keep Sports Fans Happy. On the surface, it seems like he's right. Since ESPN is the most expensive channel for cable operators to carry (at last check when I was at Hulu, the SNL Kagan rate for ESPN was something like $5 per subscriber per month, by far the priciest of all cable channels), it seems like people who don't watch ESPN are paying to subsidize those of us who do watch ESPN.

However, almost everyone I know only watches a small fraction of the hundreds of channels they have to pay for in the cable bundles available to them. You could make arguments that ESPN viewers are subsidizing people who watch Lifetime and the History Channel.

Cable and satellite companies, like telecom network operators, have built out this expensive network infrastructure, and they are also fortunate to be part of a legal oligopoly. They work hand in hand with content owners to push the prices of your cable subscription up every month, and until now, the cord-cutting has been minimal. As your monthly cable package prices goes up, the cable/satellite guys make more money, and they hand more of it over to the content owners. Why wouldn't they both continue to squeeze more money from consumers as long as possible?

The same applies for your broadband internet access. The cost of your monthly internet access isn't based on the cost of delivering that bandwidth to you. The margins on broadband internet have been estimated to be upwards of 90% to 100%. Most of that infrastructure was paid off years ago from cable customers. Carrying internet data over the same cables and being able to charge for that service is just gravy. They can charge those extortionate rates because most consumers have very few broadband alternatives, if any, where they live.

Trying to lower the amount you pay for monthly text messaging, cellphone voice and data, cable/satellite subscription, and your internet broadband is almost impossible for consumers. If enough consumers started to cancel their text message plans because of iMessages or WhatsApp or something else, AT&T would just gouge us for revenue another way to make it up, maybe by raising the price of data or voice plans. 

The only reliable way to drive down price of these services is to offer real competition to these legal oligopolies. The FCC really failed U.S. consumers in allowing them to end up beholden to these communication oligopolies (enterprising reporters out there, this is a subject worth a long article). To build out the types of infrastructure to compete with these companies is priced beyond the hope of all but a handful of companies.

Disruption has not come as quickly as we all would love. We all thought we'd be watching content for much less on our Google or Apple TVs, or that we'd be making voice calls over some ubiquitous wi-fi network blanketing the country, and it would all cost much less than we'd paid for the equivalent services before.

Failure just forces disruptors to be more creative, though, and businesses with outrageous margins like these oligopolies have tend to fall prey to the barbarians at the gate in the totality of time. I've recently seen some companies starting to take new attack vectors on the incumbents, and I suspect the challengers will be more successful this time around. That's a subject for another day, another post.

UPDATE: Timely, but perhaps some proof that competition is the only way to get these oligopolists to lower their prices: a Time Warner broadband customer living near the Google Fiber installation in Kansas received an unsolicited speed bump and price drop.

Now that the United States has the world’s highest reported rate of incarceration, many criminologists are contemplating another strategy. What if America reverted to the penal policies of the 1980s? What if the prison population shrank drastically? What if money now spent guarding cellblocks was instead used for policing the streets?

In short, what would happen if the rest of the country followed New York City’s example?

As the American prison population has doubled in the past two decades, the city has been a remarkable exception to the trend: the number of its residents in prison has shrunk. Its incarceration rate, once high by national standards, has plunged well below the United States average and has hit another new low, as Mayor Michael R. Bloomberg announced recently. And crime in the city has fallen by more than 75 percent, almost twice as much as in the rest of the country.

Whatever has made New York the safest big city in America, that feat has certainly not been accomplished by locking up more criminals.

From a NYTimes article studying New York City's success in both shrinking its prison population and lowering crime. As criminologist Lawrence Sherman notes in the article, the U.S. is the only country he knows of that spends more on incarceration than police. America now has a fifth of the world's prisoners.

One specific policing strategy that has yielded fruits is hot-spot policing, or focusing less on individual criminals but instead on areas where they tend to work.

“Crime doesn’t move as easily we thought it did,” Mr. Gajewski said. “If I’m a robber, I want to be in a familiar, easily accessible place with certain characteristics. I need targets to rob, but I don’t want people in the neighborhood watching me or challenging me. Maybe I work near a bus stop where there are vacant buildings or empty lots. If the police start focusing there, I can’t just move to the next block and find the same conditions.”

I wish San Francisco would spend more on police. For a few months, I worked at an office in SOMA that required me to walk through some of its sketchier blocks, and even as a man I didn't feel comfortable walking home late at night. Even during the daytime I'd sometimes encounter some crazy, scary characters, from an old bearded man who would curse me out for no reason to a gaunt, pale woman who often smoked a crack pipe and who could've passed for an extra on American Horror Story: Asylum.

Just in the past year, five of my friends have had their car windows smashed in and items stolen from their car while parked on the streets of San Francisco. Small sample size, sure, but I felt safer in Manhattan than I do in San Francisco. It honestly feels like San Francisco has just decided to let parts of the Tenderloin be our Hamsterdam.

We need to create more jobs anyhow, I'd be willing to take lower incarceration to free funds to hire more police.

DNA for data storage

Scientists were able to store 739 kB of data in DNA.

The study reported that the institute's team had stored all 154 Shakespeare sonnets, a photo, a PDF of a scientific paper, and a 26-second sound clip from US civil rights leader Martin Luther King Jnr's "I Have a Dream" speech in a barely visible bit of DNA in a test tube.

"We downloaded the files from the web and used them to synthesise hundreds of thousands of pieces of DNA. The result looks like a tiny piece of dust," said Emily Leproust of Agilent, a biotech company that took the digital data and used it to synthesise molecules of DNA in a laboratory in the United States.

Agilent then mailed the sample across the Atlantic to the EBI, where the researchers soaked it in water to reconstitute it and used standard sequencing machines to unravel the code. They recovered and read the files with 100 per cent accuracy. "It's also incredibly small, dense and does not need any power for storage, so shipping and keeping it is easy," Goldman added.

Not great for retrieval given the high cost of synthesizing DNA, but as long-term backup, really robust.

The data stored in the test amounted to only 739 kilobytes, but the technique could be scaled up to store the three zettabytes, or 3,000 billion billion bytes, of stored data estimated to exist on earth, and the only limitation to wide implementation is the high cost of synthesising DNA, the researchers said. The world's data would theoretically fit in one hand and could be stored safely for many centuries, they said.

It feels like there's a sci-fi novel in this somewhere.

What?!

Everyone is talking about Lebron James tackling a lucky guy who made a half-court shot to win $75,000, and it is indeed a great moment. If you play basketball, you'll understand how that is perhaps one of the single most difficult ways to make a half-court shot, with a skyhook.

But I'm more amazed by the way this guy made a half court shot. First of all, how is this physically possible? I've never seen a basketball behave that way. Has anyone else?

Also, technically, he was past the half-court line, but given what happened after he threw the basketball, I'd give him the prize money, which turned out to be only $1,000.

Only $1,000? If you're going to make a half-court shot, remember to do it in Miami and not Atlanta. I realize the cost of living in Miami is higher than in Atlanta, but not by 75X.