At the risk of making TLF the “All Wu All the TIme” blog, I wanted to pass on Randy May’s just-released commentary on Tim Wu’s wireless paper. May–president of the Free State Foundation in Maryland–focuses particularly on Wu’s support of a “Carterfone” rule for wireless. May’s reaction to this? “Back to 1968, No Way!”. (Bringing to mind mental images of Chicago police rounding up protesting free-market economists on the street…)
May provides some valuable perspective, contrasting the static Bell System monopoly that spawned Carterfone and the constantly-changing wireless industry of today:
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I’ve got a write-up of Tim Wu’s paper over at Ars. Most of it’s a summary of Wu’s paper, but I do a bit of policy analysis near the end:
Surprisingly, Wu does not mention one reform that could alleviate what he identifies as the biggest barrier to entry in the wireless market: the high cost of spectrum. Various scholars have proposed that more spectrum be auctioned off to private firms for use in next-generation wireless services. That would make it feasible for more firms to enter the wireless marketplace, providing much-needed competition. Wu himself notes that the smallest of the national carriers, T-Mobile, also has the least restrictive policies. It is likely that if enough spectrum were made available to allow additional carriers to build nationwide networks, those carriers would tend to follow T-Mobile’s lead and build more open networks than the largest incumbents.
Wu also does not spend much time considering the feasibility of enforcing open access rules on wireless carriers. Although Carterfone is widely regarded as a success, some more recent attempts by the FCC to force incumbents to open their networks to competition have not been so successful. The FCC unsuccessfully attempted to force the Baby Bells to share their DSL lines with competitors during the Clinton administration, sparking nearly a decade of litigation that only concluded with Supreme Court’s 2005 Brand X decision. And the cable industry is fiercely resisting the FCC’s attempts to open up the market for cable boxes, a process that has has been raging for close to a decade with no end in sight. It is likely that the wireless industry would be equally resistent to any effort to forcibly open its network to new entrants.
With the debate over network neutrality regulations of wireline broadband providers sucking all the oxygen out of the room, it’s unlikely that Wu’s proposals will have an impact on the telecom debate during this session of Congress. But as wireless technologies become ever more ubiquitous, questions about whether and how to regulate the wireless industry will only become more frequent and more contentious.
I think the CableCard analogy would be particularly worth exploring in more detail. Wu actually cites it as a possible model for interoperability done right, but my reading of the situation is that so far, at least, it’s been less than a raging success. The first generation CableCard spec had an extremely limited feature set, and even more limited consumer interest. Approximately zero cable customers have actually requested CableCards from their cable companies. The FCC’s “integration ban” goes into effect this summer, which could enlarge the market for third-party CableCARD devices, but the jury is definitely still out, and it’s rather premature to be hailing it as a success. And remember that Congress first ordered the FCC to open up the set-top box market a decade ago.
Adding to the general clamor, Scott Wallstein of the Progress and Freedom Foundation has released an analysis of TIm Wu’s study endorsing neutrality regulation of wireless networks. Among other things, he points out that the history of the kind of access regulations Wu endorses is not a happy one, pointing to the UNE fiasco. He also raises a good point regarding Wu’s call for carriers to work together to create clear unified standards–arguing that getting acceptable standards is harder than Wu implies. In fact, Wallstein points out, Wu decries one of the leading standards that has been developed, WAP.
Overall, Wallstein concludes that competition in this market is healthy, stating that “the wireless industry is robustly competitive and exhibits scant evidence of a market failure. Consumers consistently benefit from increasingly lower prices and more features.”
Worth reading.
Google has lost its copyright appeal against Belgian newspaper publishers. There seem to be conflicting reports about what exactly Google was found liable for. Here’s the WSJ:
A Belgian court ruled Tuesday that Internet search engine Google Inc. violated Belgian copyright law when it published snippets and links to Belgian newspapers on its Web site without permission.
And here’s the AP:
A Brussels court ruled in favor of Copiepresse, a copyright protection group representing 18 mostly French-language newspapers that complained the search engine’s “cached” links offered free access to archived articles that the papers usually sell on a subscription basis.
Snippets and entire cached pages are very different things. But whatever the case, what this case highlights is how unsettled copyright law is as it applies to search engines (and I’ll limit myself to just the U.S.). As for snippets, sure, there’s Kelly v. Arriba Soft, which found that indexing photographs and displaying their thumbnails is a fair use. But that’s just one circuit’s opinion, which is very persuasive, but not controlling in other circuits. Then there’s Perfect 10 v. Google, which cuts in the opposite direction.
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Wow, we’ve really been piling on Tim Wu’s new paper. Having read it, I’m inclined to think that we didn’t quite give him enough credit.
With my libertarian hat on, I’m still far from convinced that regulations of the wireless market is either necessary or beneficial. But wearing my geek hat, I think it’s worth noting that Wu does an excellent job of documenting a real problem. Along some dimensions, the wireless marketplace is fiercely competitive and consumers are benefitting from lower prices and better service. But along other dimensions—especially next-generation data services—the current state of the market leaves much to be desired.
Admitting to the existence of these sorts of problems obviously puts us as libertarians in a bit of an awkward position. The argument for limited government is easiest to make when we can simply argue that whatever’s happening in the marketplace is working perfectly. So our first instinct is to just reflexively defend whatever the current incumbents are doing. But the reality is that even in a competitive market, the incumbents are far from perfect.
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Many thanks to Jim Lippard for naming the Tech Liberation Front as one of his “5 Blogs that Make Him Think.”
He did so as part of this new “Thinking Blogger Awards” contest. It’s not really a contest per se, rather, you’re just suppose to nominate 5 more blogs that make you think after someone else has already nominated your blog on their list.
So, to keep things going, here are 5 blogs that make me think (and I encourage my TLF colleagues to nominate others):
(1) Nick Carr’s “Rough Type”
(2) Mark Cuban’s “Blog Maverick”
(3) Chris Anderson’s “The Long Tail”
(4) Jay Rosen’s “Press Think”
(5) Reason’s “Hit and Run”
As I noted in previous installments of this series, our government seems to have a problem keeping tabs on its laptop computers, especially the ones with sensitive information on them.
I know private sector companies lose plenty of laptops too. And sometimes those laptops also contain sensitive information. But there are at least two important qualitative differences between private and public laptop or data losses: (1) While some sensitive data may be lost or compromised when private laptops are lost, almost everything that government collects and stores on laptops is going to be at least somewhat sensitive information, and in other cases very sensitive. And much of that information that government collects about us is gathered without our consent. (2) When private companies lose laptops or data, someone is usually held accountable. Heads roll and lawsuits fly. Not so with the government, at least not most of the time.
That’s why I make such a big deal about government laptop losses. And that’s what makes this new Department of Justice report so disturbing.
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Last year, as the net neutrality wars raged, the wireless industry by and large stayed out of the line of fire. It firmly opposed regulation, no question of that, but the debate almost exclusively focused on telephone companies and cable company broadband services. Now here comes Tim Wu–a prof at Columbia University and father of the term “net neutrality”–with a paper (to be presented this week to the FTC) arguing that wireless telephone service should be comprehensively regulated under net neutrality principles based on those applied the old Bell System.
This is a major escalation of the neutrality war, promising to change the character and dynamics of the entire debate.
I have always thought that one of the weak points of the argument for network neutrality last year was its over breadth. At its core, the argument for neutrality regulation boils down to a claim that broadband markets are not competitive. Yet, proposals for regulation virtually–no, skip the virtually, they never made exceptions for competitive elements of this market–such as wireless broadband.
Certainly, I thought, it wouldn’t be too long before someone proposed carving out wireless from regulation, so as to focus public attention away from this innovative and fast-growing market. Instead, Wu’s paper goes in the opposite direction–arguing that the wireless industry is in dire need of regulation.
It’s a bold argument. But completely wrong. And, it the end, one that may hurt the entire neutrality regulation effort, by showing how–once unleashed–few will be safe from its reach.
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I haven’t had time to read Tim Wu’s new paper, but something struck me from reading Hance’s summary. Wu describes the wireless market as “a textbook oligopoly with four major players, premised on a bottleneck resource.” That didn’t strike me as being quite right, so I did a quick check on Wikipedia. Wu is right that the four largest carriers are AT&T, Verizon, Sprint, and T-Mobile. But these are not, as he implies, the only carriers. If Wikipedia is to be believed, at least, Alltel is #5 with 15 million customers in 36 states. U.S. Cellular is #6 with 5.7 million customers in 26 states. There are also a variety of smaller carriers. Most of them are Mobile virtual network operators piggy backing on networks owned by the big four, but you’ve also got Cellular South, Centennial Wireless, and SunCom, all of which appear to be non-trivial wireless carriers, although none of them come close to being national networks.
And then we must keep in mind that many customers still use landlines through their Baby Bell or cable company for their phone service. The Baby Bell option doesn’t add much competition since most people have either Verizon or AT&T for a Baby Bell. But most peoples’ cable companies are independent companies, and I don’t believe that Qwest owns any of the major wireless providers.
So depending on how you count, and what part of the country you’re in, the average consumer has between 5 and 8 choices for wireless phone service. Update: Oops, I meant to say “phone” here–including cable and Baby Bells as options
Now that’s obviously not as competitive as say, the PC industry. But it’s certainly comparable to a lot of industries we don’t generally think of as problematic. Your average metropolitan area only has 3 or 4 major supermarket chains, for example. Obviously, it’s always nice to have more competition, and we should be looking at policies that might open up the market to more players. But 5 to 8 major providers strikes me as a reasonably healthy industry by almost any standard.
How does Columbia Law Professor Tim Wu justify his proposal to impose massive new regulation on cellphone networks? His forthcoming paper, “Wireless Net Neutrality,” which Jerry discusses here, proposes regulating cellphone networks like common carriers:
(1) Allow any consumer to attach any safe device to their cellphone, and
(2) use the applications of their choice and view the content of their choice.
(3) Require cellphone providers to disclose, fully, prominently, and in plain English, the following information: * Limits on bandwidth usage; * Devices that are locked to a single network; and * Important limitations placed on features; and
(4) reevaluate their “walled garden” approach to application development, and work together to create clear and unified standards to which developers can work.
“Oligopoly”
Wu acknowledges critics will point to vibrant competition in the cellphone industry as the main reason we don’t need this. Although most people don’t, Wu completely dismisses the extreme competitiveness of the industry. According to him, it’s a “textbook oligopoly with four major players, premised on a bottleneck resource.”
Well, in an oligopoly prices could be expected to rise, service deterioriate and innovation suffer. But this is precisely the opposite of what we see in the cellphone space. Cellphones used to be a luxury item, now they’re ubiquitous. The FCC noted that during the five-year period ending in June 2002, the number of cellphone subscribers increased from 48.7 million to 134.6 million. This is a result of falling prices, improved coverage and the introduction of new features. None of this would have happened if the market were broken.
Wu’s oligopoly argument rests on two faulty premises:
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The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.