Today’s The Wall Street Journal Europe published an editorial that Alberto Mingardi of Istituto Bruno Leoni and I penned about the competition complaints brought against Google in Europe.
If policy makers set the terms in a primitive year like 2010, nobody will have to respond to Google.
By WAYNE CREWS AND ALBERTO MINGARDI
Google isn’t a monopoly now, but the more it tries to become one, the better it will be for us all. Competition works in this way: Capitalist enterprises strive to gain in profits and market share. In turn, competitors are forced to respond by trying to improve their offerings. Innovation is the healthy output of this competitive game. The European Commission, while pondering complaints against the Internet search giant, might consider this point.
Google has been challenged by a German, a British, and a French Web site, for its dominant position in the market for Web search and online advertisement. The U.S. search engine is said to be imposing difficult terms and conditions on competitors and partners, who are now calling regulators into action. Google’s search algorithm is accused of being “biased” by business partners and competing publishers alike. 
Before resorting to the old commandments of antitrust, we should consider that the Internet world is still largely impervious and unknown to anybody—including regulators. We are in terra incognita, and nobody knows the likely evolution of the market. But one thing is for sure: Online search can’t evolve properly if it’s improperly regulated—no matter the stage of evolution.
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photo credit: Flickr user HarshLight
Mike Kirkwood of ReadWriteWeb recently wrote a piece asking the question “Will One Company Become the Dominant Player in Cloud Computing?” Kirkwood offered a series of arguments both for and against the idea of the market being one where a “natural monopoly” might occur and a few of his arguments are worth exploring in greater depth.
Addressing the potential for vendor lock-in (think Outlook .PST files), Kirkwood points out that cloud customers may demand data portability:
If customers demand solutions where they can move from vendor to vendor freely, it will impact the landscape. Companies with cloud solutions in the marketplace could be required by these customers to remove barriers to moving data and services between different entities.
Kirkwood should know that this is already happening. CRM solutions like HighRise by 37Signals and cloud-based office solutions like Google Apps already have these features built in. One of the biggest reasons that many companies are moving to cloud-based applications is because they’re weary of being locked-in to solutions that hold their data hostage. It’s doubtful that these exit doors will disappear when things like office suites, CRMs, accounting software, and other software categories are almost exclusively offered as cloud applications or web apps. Customers already expect and will continue to demand the freedom to move their data around—a new culture of data portability is being created as a part of the shift to the cloud and that consumer expectations may be permanently altered because of it.
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Last July, Adam Thierer and I argued in a Forbes.com piece that the Microsoft/Yahoo! search partnership should be cause for “celebration among as a good thing for consumers. By providing a strong competitor with a combined 28% market share, the deal should also be a source of relief at Google, which has come under increasing attack for its supposed market dominance.” Today, 205 days later, the companies have finally announced that EU and US antitrust regulators have approved their deal.
So… how does a delay of nearly seven months help consumers? Wouldn’t we be better off if the two companies had been able to start working together immediately to develop a stronger search engine competitor without this “Mother, May I?” routine?
Last year, I described how Microsoft’s delayed entry into search advertising put them at a serious disadvantage in competing with Google. (The company dithered over buying search ad startup Overture and ultimately decided to build its own system—which proved a serious miscalculation.) I’ll just reiterate what we said about the Yahoo!/Microsoft deal when it was first announced.
Yahoo!/Microsoft pact is just the latest pairing of Web 1.0 titans struggling to reinvent themselves and compete with Google, a titan that still thinks of itself as a start-up. All three companies will struggle to meet new challenges as search evolves toward the social(reflecting what your friends like), the semantic (reflecting the precise, rather than presumed, meanings of Web content), the personalized (reflecting your own preferences) and the interactive (including user-generated comments or reviews)…. Continue reading →
Over at “Convergences,” I write on the origins of the idea of a “public option” for health insurance. In part, I note:
At a superficial level, the “public option” for health care is both appealing and puzzling. From a competition policy standpoint, the entry into the market of a subsidized competitor offering a wide array of benefits certainly might put downward pressure on prices as well as easing humanitarian concerns about access. Equally obvious, though, are objections. What mechanism of accountability would exist to ensure that this subsidized entity is well run? It cannot be allowed to go bankrupt; nor is it likely that unhappy customers would have much leeway in suing it. How would it avoid driving private insurers out of the market for low-end service entirely? How much of a subsidy would it get, and how is this to be funded?
Since the party and administration that sponsored this proposal are associated with the intelligentsia, however, people hoping to improve the health care system probably felt entitled to trust that these questions had good answers. Somewhere, someone deep in the bowels of the brain trust had considered these issues. Curious about this, I found myself reading one of the more serious works to address the public option, a paper by Randall D. Cebul, James B. Rebitzer, Lowell J. Taylor and Mark E. Votruba entitled, “Unhealthy Insurance Markets: Search Frictions and the Cost and Quality of Health Insurance,” identified as NBER Working Paper No. 14455, from October 2008.
Read my whole piece, here.
Glen Robinson, my favorite professor back at Virginia Law, will be giving a lecture about “Regulating Communications: Stories from the First Hundred Years” at George Mason Law School this Thursday (2/18) at 4 pm. You simply couldn’t find a better person to give that talk. Robinson isn’t quite old enough to first-hand stories all the way back to the birth of the Federal Radio Commission in 1926 and the FCC in 1934, but he started practicing communications law back in 1961, was an FCC Commissioner 1974-76, and has taught at UVA since 1976 (until finally retiring in 2008).
Reading about his long career is a bit like watching the British comedy series Black Adder: Somehow, like Rowan Atkinson’s character Black Adder, Robinson keeps popping up again and again at pivotal moments in communications law history—most notably, he worked to draft early anti-cable rules in the 1960s and voted for the FCC’s indecency prosecution against George Carlin’s “Filthy Words” monologue. But unlike Black Adder, who always happens to be at the right place at the right time, make the wrong decisions and foolishly learns nothing, Robinson sometimes made the wrong decision, but demonstrated that rare ability to rethink his approach and admit he was wrong—an intellectual honesty most famously exemplified by FA Hayek. Robinson grew to become among the most trenchant, and certainly the most sage, critic of the FCC’s constant evolution towards censorship and curtailing competition in the communications industry. His general skepticism about administrative regulation is perhaps the most thoughtful and refined you’ll find in academe—and not just in communications law. Continue reading →
At least that’s how my former colleague Tom Miller, now at the American Enterprise Institute, used to put it. Still another government/business funded report, this one called “Nanotechnology: a UK Industry View” reaches yet again the same conclusions about nanotechnology as the ones that pop out occasionally like the U.S. Environmental Protection Agency’s “Nanotechnology White Paper” or the Food and Drug Administration’s “Nanotechnology.”
The conclusions always secure an open-ended role for political bodies to govern private endeavors, and since the business parties are so dependent on political funding, they have to go along with it, cut off from envisioning an alternative approach.
The reports say–brace for it–that governments should fund nanotechnology and study nanotechnology’s risks; and that they should then regulate the technology’s undefined and unknown risks besides. This approach, so different from, say, the way software is produced and marketed, assures that there will never be a “Bill Gates of nanotechnology” (or in another sector, a Bill Gates of biotechnology, as CEI’s Fred Smith often puts it). If every single new advance requires FDA medical-device-style approvals, this is an industry that cannot begin to reach its potential. Continue reading →
By Berin Szoka & Adam Thierer
We learned from The Wall Street Journal yesterday that “Federal Communications Commission Chairman Julius Genachowski gets a little peeved when people suggests that he wants to regulate the Internet.” He told a group of Journal reporters and editors today that: “I don’t see any circumstances where we’d take steps to regulate the Internet itself,” and “I’ve been clear repeatedly that we’re not going to regulate the Internet.”
We’re thankful to hear Chairman Julius Genachowski to make that promise. We’ll certainly hold him to it. But you will pardon us if we remain skeptical (and, in advance, if you hear a constant stream of “I told you so” from us in the months and years to come). If the Chairman is “peeved” at the suggestion that the FCC might be angling to extend its reach to include the Internet and new media platforms and content, perhaps he should start taking a closer look at what his own agency is doing—and think about the precedents he’s setting for future Chairmen who might not share his professed commitment not to regulate the ‘net. Allow us to cite just a few examples:
Net Neutrality Notice of Proposed Rulemaking
We’re certainly aware of the argument that the FCC’s proposed net neutrality regime is not tantamount to Internet regulation—but we just don’t buy it. Not for one minute.
First, Chairman Genachowski seems to believe that “the Internet” is entirely distinct from the physical infrastructure that brings “cyberspace” to our homes, offices and mobile devices. The WSJ notes, “when pressed, [Genachowski] admitted he was referring to regulating Internet content rather than regulating Internet lines.” OK, so let’s just make sure we have this straight: The FCC is going to enshrine in law the principle that “gatekeepers” that control the “bottleneck” of broadband service can only be checked by having the government enforce “neutrality” principles in the same basic model of “common carrier” regulation that once applied to canals, railroads, the telegraph and telephone. But when it comes to accusations of “gatekeeper” power at the content/services/applications “layers” of the Internet, the FCC is just going to step back and let markets sort things out? Sorry, we’re just not buying it. Continue reading →
So the proposed Comcast/NBC merger was met with “skepticism” by Washington politicians. Will Comcast charge for content that was once free? Will it ensure that emergency programming gets through? These services and decisions about them are normal offerings that a concerned public expects; a merged entity ignores them at its peril.
The two firms’ CEOs respectively made assurances to lawmakers like 18-term term Chairman Henry Waxman. (Speaking of the lack of choice, this gentleman’s own constituents get to vote for him, but none of the rest of us have any say whatsoever–decade after decade–even though his laws impact us all).
But those assurances about programming aren’t what politicians care about, not really. This proceeding serves to help re-energize the old political campaign against what politicians laughably call “media consolidation.” (Here’s one of my defenses of so-called “media monopoly” in Communications Lawyer so no need to repeat it here now; I’m not an attorney but I play one at a think tank.)
Any antitrust intervention that relieves Comcast/NBC’s competitors of critical market impulses, of the driving need to respond to any potentially new superior service or slate of services, hurts the interests of consumers. These endless proceedings and delays–and before this one, those of Echostar/DirecTV, Sirius/XM and others–all directly harm consumer interests and the communications marketplace. There is too much tolerance of pointless FCC and Congressional interference in today’s media-saturated world, and too much tolerance of media competitors who properly should have no say whatsoever in whether or not a rival’s merger goes forward.
Basically, antitrust is about dismantling what others have created or hope to create, undermining large scale voluntarism and enterprise, and replacing it with even larger scale compulsion or prohibition. The (not “unintended,” as often claimed) result of this is to send the “free” market careening off into a direction it never would have taken, a direction in defiance of shareholder capitalism and market pressures. I wrote about this very problem in a letter in the Wall Street Journal last week.
The emergence of ever-greater competitive alternatives on the media horizon will be damaged by the destruction of wealth entailed in halting a productive merger. The merger, if it goes through, may or may not prove successful for the companies themselves. Regardless, it is precisely the market’s task to respond to this and future deals competitively, not leverage Washington to avoid having to engineer and sweat over such a response. To those rivals that might feel satisfaction at the barriers and future conditions put on this merger if it’s even “approved” (how is that even a term appropriate to free enterprise?): Political disapproval of Comcast/NBC makes it even easier to put others in the crosshairs next time.
For those of you inclined to read protracted legalese filings, NBC Universal, Comcast and GE submitted their Public Interest Statement to the FCC this week. You can read the filing here.
Many conspiracies have been touted, claiming that public control of communication mediums will be wrested away from the public because of this venture and that consumers stand to lose the most. Adam did a good job debunking these concerns earlier this month. The fact is that this merger in no way would result in the dreaded “M” word, aka monopoly.
Whatever the case, this process is still bound to take another year or so before finalization, which gives you, dear reader, time to process the entire 145 page document. Happy reading!
The Ticketmaster-Live Nation antitrust saga has come to a bittersweet end. Earlier this week the Justice Department finally approved the merger between the two firms, just shy of one year after it was announced.
While a number antitrust experts had speculated that the Justice Department might seek an injunction to block the deal outright, the DoJ ultimately opted to approve the deal while subjecting Ticketmaster-Live Nation to several conditions that are supposed to promote competition in the events marketplace. Under the terms of the consent decree, the combined firm will be required to license its ticketing software to competitor Anschutz Entertainment Group and divest Paciolan, a ticketing subsidiary of Ticketmaster. Ticketmaster-Live Nation also faces ten years of monitoring by antitrust officials to “prevent anticompetitive bundling of services.”
Ticketmaster has long been a controversial firm among concertgoers, frequently drawing consumers’ ire for charging hefty “convenience” fees and offering customer service that’s not exactly stellar. But it’s important to remember that today’s entertainment market is more fragmented than ever, and consumers have a huge array of choices for listening to music and viewing live events. Even YouTube is getting into the business of airing live events. The video site has broadcast several live events already, including U2’s Rose Bowl performance in October 2009, and is eyeing the pay-per-view live streaming market as well.
So it’s not hard to see why consolidation is taking place in the event ticketing and promotion markets. Economists have demonstrated that vertical integration, done properly, often results in sizable efficiencies, translating into overall welfare gains for consumers. Together, Ticketmaster and Live Nation are in a stronger position than before to offer value to event venues and promote concerts and shows. And as much we all hate service fees, in industries characterized by high fixed costs and declining marginal unit costs – like ticketing – big per-unit “markups” are often necessary to induce businesses to compete and innovate. While Ticketmaster may not be the most innovative company in the world, the firm faces an uncertain future as its contracts with venues come up for renewal. If Ticketmaster really is harming concertgoers – and by the way, there’s no clear evidence that it is – it will be disciplined not only by concert lovers, but by venues and artists as well. Derailing a potentially efficient business arrangement simply because it might not work out, whether in the event ticketing market or the cable television market, results in harm to consumers.
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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.