OK then just replace this sentence: "That would only explain why they overprice their services, not why they do it in a confusing manner" with the following: "That would not explain why they price their services in a confusing manner."

In other words, regardless of whether their services are overpriced or not, why do they sell cheap phones that lock you into a two-year contract to pay them off via an inflated bill for the cell service, rather than selling a phone for a flat price (which you can pay on installments if you want to spread it over two years), and selling the service separately? What's an explanation that is unique to the cell phone industry? (And would explain why, for example, the laptop industry doesn't do the same thing.)

OK. But once they had a monopoly, they just charged a lot for their products, instead of doing something silly like signing people up for monthly contracts that turn out to be more expensive than people expect.

So the cell phone companies' behavior can't simply be explained by the fact that it's a monopoly/oligopoly. That would only explain why they overprice their services, not why they do it in a confusing manner.

I think all of this is true, it's just not clear why this happens in the cell phone industry in particular but not in other industries.

If it's an oligopoly without effective competition, why don't they just jack up the prices and screw us over that way? Why play the numbers game? It seems like it can't just be "to fool people", because surely most people aren't fooled any more after they get out of their first two-year contract.

On the other hand, if, as you posit, there are enough companies for there to be real competition, why didn't anybody (before T-Mobile) decide to compete by offering clarity on the device and service plan pricing?

Maybe the answer is that the market just moves a lot less efficiently than it's supposed to, and so the natural result was that eventually a company would break ranks and offer clear pricing, and the others would have to start doing that to compete -- it just took a long time.

The problem with this "explanation" is that if the companies wanted cash to expand, why not just charge full price for the phones and charge for the service separately, and then give people an installment plan if they can't afford the phone up front? Surely even "stable cashflow" over two years, is not as good as *cash up front*.

The answer also can't just be that they got away with it because they're a monopoly/oligopoly, because then they could just jack up the price of the phones and screw people over in a more straightforward manner. It doesn't explain why they had to do it through funny math and confusing pricing - or why other companies like Microsoft, with pseudo-monopolies, don't/didn't do the same thing through funny math -- they just charged a lot for their products.

That's a very interesting explanations. It fits all the facts and I can't think of any loopholes on it. Could that be the entire answer?

Although, it doesn't explain one thing -- why the carriers didn't just encourage you to pay full price outright for the phone, and then go month-to-month for the service. (You could always do this, of course, but companies like Verizon didn't give you a discount on the month-to-month service even if you paid outright for the device, so the choice made little sense.) Surely having you pay the entire cost of the device up front, is preferable for them than having you enter into monthly installments.

Wow, that's almost the first time someone did that for me and saved me the trouble. Thanks Brian! :)

OK. There's always an implied "Can you think of a reason why my answer is wrong?" or "Can you think of a better answer?" in all of my arguments, but maybe I can make that more explicit. But in the notorious Fifth Amendment article, I stressed very clearly, I want you to tell me your answer to this question, and most people still missed the point.

I do think however that if someone has an answer to my question, they should post it whether or not I have included my own answer to the same question. Surely it would be irrational for me not to supply an answer that I think is right, and surely it would be irrational for someone else not to post their answer just because I'd already supplied one.

OK. For future reference any time I'm raising a question of "What a shitshow this situation is" the implied "interesting" question is "Why hasn't the market led to a more optimal outcome here?"

For example, that was the subtext of an article I wrote about a Stratosphere phone that I hated:
http://mobile-beta.slashdot.or...
If the phone had been a dud in the marketplace, I wouldn't have bothered. But since it shipped millions of units, I thought the interesting question was how the marketplace doesn't lead to better outcomes in terms of usability (and then went on to a proposed answer, and a proposed solution).

I like questions which appear to have an obvious answer but where the obvious answer is wrong, and masks a deeper and more interesting problem. The trouble with posing questions like that is that everybody starts shouting out the obvious "answer" and facepalming when you don't agree with them.

Of course these decisions are "business-driven decisions". Well, duh. That's the obvious answer, and it's not wrong, but it just raises more questions.

Here's the question with the non-obvious answer: Why have market forces, which are supposed to lead to approximately optimal outcomes, resulted in such a clearly non-optimal outcome in this case, with so much data plan bandwidth being wasted? In other words, if many users would like to have the option to cache content locally (so that they can watch it on the go without using up their data plan), and if it's legal for content providers to do that (e.g. Google Play), then why haven't competitive forces led to either Netflix or Hulu to offer that? Which assumption does not hold -- that users don't want to be able to watch movies on the go without using up too much data, or that market forces don't work effectively on the companies in question?

I meant "how much" as in "too much", not in an attempt to pin down a precise number. As in, if someone asks, "How many kids have gotten sick because of Jenny McCarthy's anti-vaccine activism?", they're probably not looking for an exact number, just calling attention to the problem.

The new understanding is that there's not much awareness of discussion of how much bandwidth is wasted in this way. Can you point to a single article anywhere, prior to this one, pointing out how much data plan bandwidth is wasted every day by proprietary streaming that can't be cached locally?

Of course I'm going to provide an answer if I think I have one, not just pose the question and then stop. What would be the point of that? If people have other answers, or reasons why they think my answer is wrong, that's what the comments are for.

It seems you have two separate points here:
1) I was using "DRM" to include Netflix and Hulu streaming content in a way that is encrypted to make copying difficult, but you're saying that's an incorrect usage because the playback does not involve verifying any license rights. OK. Then call the article "How Much Data Plan Bandwidth Is Wasted By Proprietary Encrypted Streaming?" and the rest of the argument still holds.
2) You're saying that streaming is "here to stay", which is obviously true, but the examples that you cited are all music streaming services, where I think people prefer more spontaneity. For TV shows and movies, people more often have some idea in advance of what they're going to watch later, and they would be more likely to cache it on their devices to save on data plan usage, if that was an option.

Like I just said: I'm talking about when companies use streaming AND use DRM to prevent the users from saving the streams as a file.

The companies could ameliorate this by modifying their apps to allow local caching, OR by removing the DRM from the streams so that people could save the streams themselves.

Of course there are examples of companies that have done the former, I cited Google Play as an example.

Of course you're right that the policy of Hulu and Netflix is the real problem, but the problem is also that it's enforced via DRM which makes it impossible for third parties to write tools that could save the stream to your hard drive. Both the bad policy and the DRM have to exist at the same time for the problem to exist; removing either of those would solve the problem (although fixing their policy would be a better solution).

Hmm, why would it be more useful for music files? The usefulness of this feature is equal to the difference in convenience between caching the content, and streaming it. The larger the file, the greater the difference in convenience -- which, by that logic, would make it more "convenient" for movies than for music files.