Legal intercept requirements cost money for the incumbents. Telcos have substantial legal intercept requirements in all markets.
If new entrants do not need to meet regulatory requirements, they can have substantially lower costs than the incumbents, allowing them to undercut them (for example, free text messaging).
This applies in all markets, such as Air BnB suppliers' avoidance of fire safety legislation that hotels have to meet (and zoning, traffic, etc).
Uber/Lyft's avoidance of taxi legislation, which is not necessarily about medallions. Some markets have licensing requirements which aren't applied to normal citizens (work hours and additional provision on license) [1].
Banking is a perfect example of this. You know those Visa cards that were offered by, say, Disney[2]? Offering a Visa card requires a banking license (which I understand is expensive and awkward), so they white-box an existing bank's cards (Chase does a lot of business here).
New entrants can be reasonably asked to meet the regulations. If they choose to not adhere to local legislation, it is perfectly reasonable to bar them from operating in a market.
There is a discussion on whether or not the requirement is sensible. That's for the locals to decide. With the passing of the UK's Investigatory Powers Act 2016 (Snooper's Charter), look for similar regulatory findings to start happening in the UK if there is significant pick-up of traffic on Signal.
The majority of telco products have traditional legal intercept baked in already, it's just a licensed feature. While there are additional costs (training, supporting infrastructure for storage, connectivity for government agencies to perform traces etc.), I do question how 'substantial' they are, as opposed to say pure licensing costs of said equipment (a HLR or SMS-C ain't cheap).
That said commercial passive telco probes are horrendously expensive so the devil may be in the implementation details.
With new meta-data retention laws coming into play (i.e. 2 years for Australia).. I'm assuming the costs will be raised significantly. You can read the mandate here -
Carriers price based on total revenue per subscriber, not just the profit per type of service. So, while the markup on SMS is high (might not actually be high), the RPU (revenue per user) covers total network costs.
As a cost, legal intercept isn't a drop in the bucket, and it has killed many an offering at a telco when they go to the regulator and the regulator says "you have to support legal intercept".
The cost structure behind SMS is typically due to many of the carrier's suppliers charging the carrier per subscriber (or per SMS). This puts a floor on the carrier's cost structure, and encourages them to look at any lever they can pull to keep new entrants out. Legal intercept would be part of the package. I have no idea how big a cost it is, but I would expect it to be a definite profit center for the equipment supplier - regulatory tends to be bespoke, special snowflake software that the customer MUST HAVE or else they will be turned off.
So, once a regulation is in, it's very easy to apply it as a barrier to entry. Imagine a mobile phone company starting up and not offering number portability.
There is even history in the telco market and messaging services, RIM (BlackBerry Messaging) ran into the exact same issues in the Middle East and India over the same thing [1].
Based on your comment, is then Nokia, Ericsson, Siemens, ex-Nortel, Huawei, Cisco are all responsible for mass murder? Who in these organisations is responsible? The systems engineer, the project manager or the CEO? Or the developer who wrote the lawful intercept feature?
When making statements of this nature, can you please be a little more specific?
"Legal intercept requirements cost money for the incumbents. Telcos have substantial legal intercept requirements in all markets."
Shouldn't cost much at all. I'm assuming they have servers or appliances for monitoring anyway at the points they'd likely implement LE. They just have to use them for it. Many of the U.S. telcos also charge a fee for police monitoring per PDF's on cryptome. The prices looked like they could buy new servers or monitoring gear every time a request happen plus the smaller cost of processing it. I think the L.E. cost is inflated by the companies being heavyweights that inflate cost of most things. It could be optimized like monitoring is at smaller firms.
If new entrants do not need to meet regulatory requirements, they can have substantially lower costs than the incumbents, allowing them to undercut them (for example, free text messaging).
This applies in all markets, such as Air BnB suppliers' avoidance of fire safety legislation that hotels have to meet (and zoning, traffic, etc).
Uber/Lyft's avoidance of taxi legislation, which is not necessarily about medallions. Some markets have licensing requirements which aren't applied to normal citizens (work hours and additional provision on license) [1].
Banking is a perfect example of this. You know those Visa cards that were offered by, say, Disney[2]? Offering a Visa card requires a banking license (which I understand is expensive and awkward), so they white-box an existing bank's cards (Chase does a lot of business here).
New entrants can be reasonably asked to meet the regulations. If they choose to not adhere to local legislation, it is perfectly reasonable to bar them from operating in a market.
There is a discussion on whether or not the requirement is sensible. That's for the locals to decide. With the passing of the UK's Investigatory Powers Act 2016 (Snooper's Charter), look for similar regulatory findings to start happening in the UK if there is significant pick-up of traffic on Signal.
[1] https://www.nzta.govt.nz/commercial-driving/taxis-shuttles-b...
[2] https://disneyworld.disney.go.com/visa-card/