The D.C. tech world is abuzz today over a front page story in *The Washington Post* by Cecilia Kang announcing an exciting new plan from the FCC “to create super WiFi networks across the nation, so powerful and broad in reach that consumers could use them to make calls or surf the Internet without paying a cellphone bill every month.”
“Designed by FCC Chairman Julius Genachowski,” Kang explains “the plan would be a global first.” And that’s not all: “If all goes as planned, free access to the Web would be available in just about every metropolitan area and in many rural areas.” Wow. Nationwide internet access for all and at no charge?!
Aggregators have run with this amazing news, re-reporting Kang’s amazing scoop. Here’s Mashable:
>The proposal, first reported by The Washington Post, would require local television stations and broadcasters to sell wireless spectrum to the government. The government would then use that spectrum to build public Wi-Fi networks.
And here’s Business Insider:
>The Federal Communications Commission wants to create so-called “super WiFi” networks all over the United States, sending the $178 billion telecom industry scrambling, The Washington Post‘s Cecilia Kang reports. … Under the proposal, the FCC would provide free, baseline WiFi access in “just about every metropolitan area and in many rural areas” using the same air wave frequencies that empower AM radio and the broadcast television spectrum.
Free Wi-Fi networks, folks! Wow, what an amazing new plan. But, wait a minute. Who is going to pay for these free nationwide networks? They’ve got to be built after all. Hmmm. It doesn’t seem like the article really explains that part. The cool thing about living in the future, though, is that you can just ask for clarification. So, DSLReport’s Karl Bode asked Kang: Continue reading →
I finally got around to reading this interesting little paper by Justus Haucap and Ulrich Heimeshoff published by the Düsseldorf Institute for Competition Economics entitled, “Google, Facebook, Amazon, eBay: Is the Internet Driving Competition or Market Monopolization?” It offers a nice snapshot of the current state of play in several online sectors and surveys much of the relevant economic literature on the issue of antitrust and information technology markets. The authors also familiarize readers with the basic economic concepts that are hotly debated in the field of digital economics, including: network effects, switching costs, multi-homing, and economies of scale.
What I particularly like about their paper is that it struggles with the two competing narratives that dominate debates over digital age economics. Here’s how Haucap and Heimeshoff put it in the introduction:
On the one hand, it is rather obvious that many very successful Internet-based companies are nearly monopolists. Google, Youtube, Facebook, and Skype are typical examples for Internet firms who dominate their relevant markets and who leave only limited space for a relatively small competitive fringe. Furthermore, most of these providers do not generate content themselves, but “only” provide access to different content on the Internet. On the other hand, the crucial question from a competition policy perspective is not so much whether these firms have such a dominant position today, but rather why they have such a large market share and whether this is a temporary or non-temporary phenomenon. Do these Internet monopolies enjoy a dominant position because they are protected from competition though barriers to entry or do they just enjoy the profits of superior technology and innovation? Are we observing some sort of Schumpeterian competition where one temporary monopoly is followed by another, with innovation as the driving competitive force, or are we dealing with monopoly firms that mainly try to foreclose their markets through anticompetitive behavior?
Faithful readers know from my past rantings here on this blog, in Forbes columns, and in various working papers, that I am firmly in the latter (“Schumpeterian competition”) camp. Continue reading →
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