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"AT&T Network Upgrades Degrade Service for 2G Phones" Timothy Butler reports at http://www.ofb.biz/safari/article/512.html. I haven't been able to confirm that over the weekend, but his details seem right. "In an act affecting owners of 2G cell phones on AT&T Mobility’s network, including the highly visible, and originally highly expensive first generation iPhone, Open for Business has learned that AT&T has been quietly sacrificing 2G signal strength in an effort to speed up the build out of its next generation 3G network." They seem to be allocating all their 800 MHz spectrum for their troubled 3G service. In particular, some people with 2G iPhones are discovering they no longer can use the (expensive) phone at their homes while AT&T is insisting they maintain their contracts.At least for those customers, the network is broken.

The newer 3G customers are very profitable, so it makes some business sense for AT&T to improve 3G even if it alienates some other customers. Even if Butler was misinformed, there are many similar examples of telco service cutbacks which the current FCC and FTC policies can't address. Any competition, even two players, is better than none, but it's become indisputable that many obvious consumer abuses aren't prevented by current U.S. competition. Under the current practices of the FTC and FCC, the government will do nothing about something like this. The new Obama team hasn't yet decided on policy changes that would help, either. Several remain true believers that competition solves almost everything. That was plausible in 1998, undefendable in 2008. Competition is great, but not always enough. Most U.S. competition is weak, with only 2 to 4 competitors.

Here's some sensible ways to improve things:

Enforce strictly the current rules that if a carrier changes the terms of service in a way that affects a customer they can cancel the contract without penalty. Extend the right to cancel for any degradation of service that harms the customer. In practice, the carriers have made it so hard to exercise this right it's become almost meaningless. There were many reports of carriers refusing to allow customers to end contracts when they raised the texting fees - twice.

Insist the carriers provide detailed information about their service and full data about how and where it works. So-called "free marketers" have ruled D.C. until now, but they've neglected the first two rules of the free market from any textbook. You can't have competition without competitors, but the number of substantial competitors has been allowed to drop by half. In addition, markets do not work well if the customer does not have good information. What we've seen instead is massive confusion about the actual quality of service. Sprint, AT&T, and Verizon are all running ads "We are the Best," which can't be true. Even industry insiders aren't sure which two are lying overall, and the results in different areas are often very different. Because consumers don't have good information about the service, they have to buy on price and the value of phone offers, which they can evaluate. The result, at least in wireline phone and cable/satellite video quality, has been a race to the bottom hurting consumers.

In the long run, it's worth a look at how you can "create more spectrum." More spectrum for wireless service and competition will be the prime goal of the Obama team, who are on track to raise U.S. spectrum available by 50-100%. Beyond that, using spectrum more efficiently is also to the point, but efficient spectrum usage is not part of the rules. The carriers have many ways to deliver more per MHz, freeing spectrum for other uses.