A blog about business and economics.

Sept. 16 2014 4:16 PM

The iPhone 6 Marks a Fresh Chance for Wireless Carriers to Kill Your Unlimited Data

Apple is enjoying a record success with its iPhone 6. In its first day of pre-orders, the iPhone 6 received some 4 million requests—doubling the number the iPhone 5 got in its first 24 hours two years ago. Demand is so strong that Apple announced it is already exceeding the initial pre-order supply. While a "significant amount" of the devices will be delivered to customers starting this Friday, the company said "many" of the pre-orders will have to wait until October.

Should you want to get in on the iPhone 6 craze, you'll have ample choices from wireless providers. Verizon, Sprint, and AT&T are selling the 16 GB version starting at $199 with a two-year contract, while T-Mobile is carrying it contract-free for the full list price of $649. As per usual, at least one carrier is also using the iPhone 6 as a chance to break the customers still clinging to unlimited data from their plans. Verizon customers who wish to have their unlimited data grandfathered in with an iPhone 6 are once again being told that they must buy the device outright. If they choose to do that, the unlimited data will cost $30 a month on top of $55 to $90 per month for voice and texting fees.

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Is the hefty upfront cost worth it in the long run? That depends on how much data you use. We crunched the numbers for a single smartphone on Verizon's standard More Everything plan as well as one on AT&T's Mobile Share Value plan to see how long you'd have to use your device—and with how much data—before keeping an unlimited plan would pay off.

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Hover on Plan Above to Compare Price

As you can see from the interactive graph above, Verizon users who consume 3 GB or less of data a month shouldn't bother paying the full list price on the iPhone 6 to keep their unlimited data; they'd be better off purchasing a two-year contract (assuming they don't plan to hang onto their phone much longer than that). But for people who use 4 GB of data or more a month, it's a smart investment.

At AT&T the deal appears to be better: Holders of unlimited data are not required to purchase the iPhone 6 outright to keep their grandfathered plans. Still, there's a catch. AT&T starts reducing data speeds—aka "throttling" unlimited users—after the first 3 to 5 GB are used each month. So as much as the unlimited plan seems financially worth it if you use more than 2 GB of data, the actual benefits are more limited.

T-Mobile, on the other hand, still offers an unlimited data option on its Simple Choice Plan. Because the plan does not include annual service contracts, T-Mobile also requires users to buy their devices outright. But once you do that, it charges less each month than Verizon does on its grandfathered unlimited plan.

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Sept. 16 2014 2:35 PM

Germany’s Nationwide Ban on Uber Lasted All of Two Weeks

For a short time, Uber appeared to be facing a significant challenge abroad. At the start of September, a German court placed a nationwide ban on the company's peer-to-peer transportation service, UberPop, after ruling that it competed unfairly with the local taxi industry. Should Uber continue to operate illegally, the court cautioned, the company could face fines of up to 250,000 euros (or about $330,000) and also risked having its employees jailed for as long as six months. It took only two weeks for Germany to lift that ban.

A court in Frankfurt overturned the broad ban against Uber on Tuesday, saying that taxi drivers had brought their case too late for the injunction to remain in effect. The court did not rule definitely on whether Uber's services are legal in Germany, but for now the company is free to resume operating there. Uber said in a post on its blog that it "welcomes the decision." It added that Germany is one of its "fastest growing markets" in Europe and its ridership there is expected to double in size by the end of the year. Taxi Deutschland, which filed the suit, plans to appeal the decision.

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Uber, in its typical brash fashion, all but ignored Germany's ban while it lasted. It continued running UberPop and proclaimed on its blog that German sign-ups for its service more than tripled in the first 24 hours after the ban went into effect. In doing so, Uber was making a familiar bet that public demand for its service would ultimately override attempts by local regulators to suppress it. The general logic behind Uber's fast and aggressive expansion is that it's worthwhile to defy authorities if it exposes more people to Uber's service. Because only once those people try Uber do they know they want Uber. Based on the latest events in Germany, that bet has paid off once again.

Sept. 16 2014 12:43 PM

Middle-Class Incomes: Still Dead in the Water

One day, there will probably be some news about middle-class incomes worth celebrating.

Today is not that day. In its big income and poverty report, the Census Bureau reported that the median household income was $51,939 in 2013, statistically unchanged from a year before. I'm thinking of a word. It begins with "stag" and ends with "nation."

Sept. 16 2014 12:22 PM

Poverty Rate Falls for First Time Since 2006, Remains Way Too High

The official U.S. poverty rate fell last year for the first time since 2006, dipping to 14.5 percent, according to a new annual report by the Census Bureau. For the past several years, it had hovered around 15 percent. In total, 45.3 million Americans lived under the poverty line during 2013, including some 14.7 million children.

The official poverty rate is sometimes criticized as unreliable because of its odd origins and narrow definition of income. The statistic was basically MacGyvered into existence in the 1960s by a lone Social Security Administration economist who based it on cost of food for a family of three, since that was just about the only data on living standards she had to work with. Since then, the stat has only really been updated for inflation. While it counts cash payments such as Social Security towards a family’s finances, it doesn’t account for benefits such as food stamps. As a result, it vastly understates the decline of material need in America over the decades.

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That said, it does provide a decent snapshot of poverty as it exists today. For several years, Census researchers have been honing an alternative statistic known as the Supplemental Poverty Measure, which takes into account more government benefits along with geographical variations in the cost of living for a much more sophisticated approach to quantifying need. But in 2011, the SPM was only 1 percentage point higher than the cruder, official measure we've been using since the Johnson days.

In short, poverty has been high for years now, and its persistence has been one of the clearest indicators of the weaknesses of the economic recovery. Last year’s drop, while welcome news, came far too late.

Sept. 15 2014 7:27 PM

Could IUDs Be the Next Great Weapon in the Battle Against Poverty?

There aren’t any simple solutions to poverty. But of the tools we have, making effective birth control cheap and easily available for low-income women is pretty much a no-brainer. Growing contraception use has already helped bring down America’s teen pregnancy rate to its lowest levels in more than half a century. And in a New York Times op-ed published this weekend, Isabel Sawhill of the Brookings Institution makes a compelling case that the humble IUD could help halt the ongoing rise of single mothers, who are disproportionately impoverished.

Here’s Sawhill’s argument, slightly condensed. “Marriage is disappearing,” she writes, and out-of-wedlock childbirth is becoming the norm, with more than 40 percent of new mothers unmarried. Some conservatives say the government should respond by working harder to promote matrimony—but they have little idea of how to do it. Some liberals (including yours truly) say we need to accept widespread single motherhood as a fact of American life and expand the safety net to accommodate them—but that will, admittedly, cost money.

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Sawhill believes we should split the difference. “What we need instead is a new ethic of responsible parenthood,” she writes. That starts with making sure women don’t get pregnant before they’re ready, since almost 70 percent of out-of-wedlock pregnancies are unplanned. How? In part by raising awareness about the challenges of single motherhood, and in part by promoting IUDs and other long-acting reversible contraceptives that are inserted in a woman’s body and must be removed by a doctor.

Many women, Sawhill reasons, end up pregnant because they misuse their birth control (the pill doesn’t work if you forget to take it). But IUDs and implants are basically foolproof—according to one major study, they are 22 times less likely to fail than the pill—because they don't require effort to use once implanted. Although the devices have had a troubled reputation due to health scares they caused in the 1970s and 80s, today’s models are safe. And while price turns some women off from them—an IUD can cost $1,000 upfront—Obamacare now requires health plans to cover the whole cost of the devices, just like other contraceptives. Medicaid also pays for them in states that have expanded the program under health reform. But Sawhill thinks we should do even more to make long-acting contraceptives widely available, for instance by educating doctors who aren't up to speed on their benefits.

“If these or other new forms of contraception were more accessible and less costly, and if more people understood how effective and convenient they are, unplanned pregnancies would decline,” she writes.

The nice thing about Sawhill’s argument is that, even if she frames it as a third path between conservative and liberal approaches to fighting poverty, it can complement either nicely—unless social attitudes get in the way. You won’t find many progressives who are opposed to the idea of making effective contraceptives available on the cheap to every poor woman in America. Fiscal conservatives could get on board, too, since helping low-income women avoid unintended pregnancy prevents the government from having to make welfare program payments when the child is born. According to Brookings’ calculations, preventing an unplanned pregnancy saves Washington at least five times what it costs. You’re most likely to find opposition from the religious traditionalists, like the groups that have challenged Obamacare's contraception mandate in court, who just can’t abide the idea of subsidizing birth control on principle. But good policy ideas are always going to make somebody unhappy.

We shouldn't expect better birth control availability to work miracles. Researchers have found that around 40 percent of accidental pregnancies result from the misuse of contraceptives. On the one hand, that demonstrates just how much of a difference fail-safe options like IUDs can make. On the other, it shows that getting many couples to use contraceptives at all is still a formidable challenge. A giant educational campaign might help raise awareness, but Brookings’ own projections suggest that such a push would only reduce the number of children born to unmarried parents by just a few percentage points. That would be wonderful progress, but it wouldn’t be the end of single motherhood. Even if change came faster, there would still be millions and millions of one-parent families in need of a stronger safety net in the U.S..

But in the end, that simply means nobody should fixate on better birth control as a silver bullet for poverty (Sawhill, to her credit, doesn’t). There’s no good argument against promoting effective contraceptives. Like I said, it’s a no-brainer.

Sept. 15 2014 3:00 PM

Apple Will Allow Ingrate Public to Return the Sacred Gift of U2

Realizing that some users might feel a little icky about the corporate crypt keepers of their personal media collections reaching a ghastly digital arm through the Internet and foisting a U2 album into 500 million iTunes libraries, Apple has backtracked slightly.

Apple posted specific instructions for removing U2’s Songs of Innocence from users’ libraries six days after gifting the album to every iTunes user and automatically downloading it from the cloud into the libraries of those who had that feature enabled. Apple went as far as to create a specific link to automatically remove the album in only four more manual steps than the process that put it there.

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I’m being hyperbolic with the affront here, but it’s a creepy precedent, and over the weekend I did have to skip over U2 songs I never asked for on my phone. Also, is Apple betraying a note of petulance in its page title, which refers to an "iTunes gift album"? Come on you ingrates, we bought you a present, and this is the thanks we get? It's almost as if people have no idea how much it costs to buy 500 million U2 albums directly from Bono. It's almost as if... people have never heard of U2.

Sept. 15 2014 12:25 PM

Watch John Oliver Make a Love Actually–Style Plea for Scotland to Stay With England

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With Scotland's big vote on independence scheduled for this Thursday, America's favorite British late-night host used his slot on Last Week Tonight to assess the relationship between the Scots and the British. His take? "Scotland and England have been involved in something of a 300-year arranged marriage. And look, I will be the first one to acknowledge, England has been a little bit of a dick since the honeymoon. In 1746 we actually banned the kilt just because we knew they liked it."

John Oliver has plenty of gripes with Scotland. "When they got to choose a national animal ... they selected a unicorn." "For their national flower, the Scots chose a thistle." Then there's the questionable economics of it all. The Scottish National Party is optimistically betting that crude oil resources in the North Sea will be enough to sustain an independent economy. The SNP also wants to stay on the British pound. If they don't, as Oliver puts it, "they'd either have to join the currently unstable euro, or revert to Scotland's old currency, which I believe was sheep and threats."

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David Cameron might not be ready to make the big romantic gesture to Scotland. But Oliver is. And he's doing it Love Actually–style to keep the couple together.

Sept. 15 2014 12:12 PM

The Maker of Bud Wants to Buy the Maker of Miller

Because no amount of fizzy yellow water can quench its thirst for market share, Anheuser-Busch InBev, the world’s No. 1 beer-maker, is reportedly talking to bankers about plans to buy No. 2, SABMiller. Between them, the companies control almost one-third of the planet’s beer sales. Nothing is formal yet, according to the Wall Street Journal, but AB InBev has been trying to secure financing in order to make the long-rumored marriage a reality.

AB InBev owns Budweiser, while SABMiller produces Miller (as well as Milwaukee’s Best, Keystone Ice, Leinenkugel, and more). It would be bad for American consumers if the two companies were allowed to combine their stateside operations, but chances are that won’t happen thanks to antitrust concerns. When AB InBev purchased Corona-maker Grupo Modelo last year, the Justice Department forced it to spin off a new brewer that would produce all of the Mexican beer titan’s brands in the U.S., thus preserving domestic competition. Something similar might happen in the event that AB InBev gobbles up SABMiller.

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As of now, SABMiller's brands are brewed and sold in the U.S. by MillerCoors, a company it co-owns with Molson Coors, maker of Coors and Coors Light. The two created the joint venture in 2007 in order to better compete with Anheuser-Busch; today, it controls about 27 percent of the American market, according to data from Beer Marketer’s Insights, versus AB InBev’s 45.6 percent share. Should AB InBev manage to buy SABMiller, it will likely have to sell off MillerCoors to placate regulators.

So in short, even if this monster merger were to happen, there will probably still be plenty of competition among makers of mass-market American swill.

Sept. 12 2014 5:54 PM

Olive Garden Has Been Committing a Culinary Crime Against Humanity

Hedge fund Starboard Value delivered the mother of all food reviews this week with a 294-page slide presentation tearing apart Darden Restaurants, the struggling parent company of Olive Garden. It charges the Italian chain with all manner of incompetence—from serving too little alcohol to serving too many breadsticks—but the most powerful accusations are reserved for its pasta.

Here's why: Olive Garden has stopped salting its pasta water.

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"According to Darden management, Darden decided to stop salting the water to get an extended warranty on their pots," Starboard, which is in a proxy fight for control over Darden's board, explains. "Pasta is Olive Garden’s core dish and must be prepared properly. This example shows how disconnected Darden management is from restaurant operations and how little regard Darden management has for the guest experience. If you Google 'how to cook pasta,' the first step of Pasta 101 is to salt the water."

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Elsewhere, Starboard calls the decision to stop salting "appalling," and concludes that it "results in a mushy, unappealing product that is well below competitors' quality despite similar cost."

For the non-home cooks out there, salting water is essential for correctly flavoring pasta.* Once the noodles are done cooking, you can also use starchy, briny leftover water to prepare a nice pan sauce. It's all basic stuff, and an act of culinary bad faith for any restaurant not to do it.

Anyway, Starboard also says that these days Olive Garden's breadsticks taste like "hot dog buns." Vicious stuff.

*Correction, Sept. 14, 2014: This post originally misstated that salting water helps pasta cook correctly by increasing the liquid's boiling point. Despite the dearly held beliefs of many home cooks, adding a moderate amount of salt does not significantly change the temperature at which water boils.

Sept. 12 2014 5:51 PM

The Apple Watch Will Make Everyone Around You Just a Little Worse Off

When Apple launched the iPad in 2010, it precipitated a long and surprisingly acrimonious debate about screens. Specifically, is it better to read from a screen that reflects light, as the Kindle does, or one that emits light, as the iPad does? In the end, as even Amazon realized, the difference was not enormous; what really matters is the resolution of the screen. Ink on paper is extremely easy to read just because it’s very high-res, and any device that can approach or replicate that resolution will also be easy to read.

When the Apple Watch goes on sale next year, I suspect that the screen debate is going to return louder than ever. Only this time it’s not going to be about reading or resolution. Instead, it’s going to be about how glowing screens on people’s wrists inflict what economists call negative externalities on everybody else.

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I’ll admit that I’m particularly sensitive to sensory distractions. If you’re wearing a strong scent, it will give me a headache, and if there’s a TV screen behind you I will find it much more difficult to pay attention to what you’re saying. But then again, I’m only being human; we have evolved to be attuned to scents and to shiny moving objects. That’s why perfume and jewelry are such big business — and it’s also why strong perfume and ostentatious jewelry are considered déclassé.

A glowing screen attached to someone else’s wrist, of course, is shinier than all but the blingiest of jewels. On American men, especially, it’s weird to see such a thing. This summer, I’ve talked to a number of men wearing some kind of Pebble or Android smart watch, and in every conversation, the watch was intrusive and distracting — especially when it was on. (So far, interestingly, I haven’t found myself talking to any women wearing one.)

You know exactly what I’m talking about if you’ve ever found yourself in a movie theater with someone texting in the row in front of you. It doesn’t matter if they’ve set their phone to silent: that glowing screen is incredibly annoying to everybody nearby. A glowing Apple Watch will be just as annoying, and I doubt that theaters will be particularly successful in asking patrons to turn off their watches for the duration of a film or a play. 

Apple, and all other smart phone manufacturers, must make it very easy to turn on a “dark mode,” in which the watch is still on but the screen doesn’t light up. But realistically, most Apple watches are going to be in “light mode” nearly all the time. And that’s going to end up being a minor irritation to everybody in their vicinity. Not a huge irritation, to be sure. But it adds up. Your Apple Watch might be a wonderful gadget, for you. But it’s also going to make everybody around you just a little bit worse off.

Which is one reason (there are others) why I’m not going to buy the Apple Watch when it comes out. Instead, I think I’m going to get a Withings Activité — a smart watch with a simple, elegant design that doesn’t emit any light at all. No battery anxiety, no complex operating system of taps and presses and twiddles to learn — and no negative externalities. It’s the polite smart watch, and I wish it the very best.

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