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Google and Yahoo! have announced a non-exclusive agreement to run Google ads alongside Yahoo! search results. The usual suspects are ginning up to demand antitrust scrutiny, and I’m not persuaded. One self-identified “consumer” group sent me a release which says:
Google influences what consumers see in terms of advertising and search ranking, which lead consumers to click ahead in ways that benefit Google, its products and its sponsors. According to Steve Pociask, president of the American Consumer Institute, “[Google’s] dominance makes it harder for small firms to enter the market and differentiate themselves.” He adds, “the Justice Department should now realize that it’s dealing with what is essentially a monopoly and, without strong action, consumers will lose choice, differentiation and innovation for years to come.”
This argument doesn’t make sense, and it doesn’t make the case for antitrust scrutiny of the deal.
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“I know a smart business decision when I see one — choosing open standards is a very smart business decision indeed. No citizen or company should be forced or encouraged to choose a closed technology over an open one.”
The above proclamation is from Neelie Kroes, the EU’s Competition Commissioner, as reported in the New York Times. And it seems odd–perhaps even an abuse of the position–for a regulator charged with enforcing competition rules to advocate for one business model over another.
First of all, the world is not so simple as “open” or “closed.” Most software has both open and closed elements, and thus falls along a linear spectrum of being more open or more closed (or proprietary). But politicians, we know, will often eschew nuance and speak in simple rhetoric. And what rhetoric it is! No citizen should be forced or ENCOURAGED to choose a “closed technology” — this is more befitting of the Free Software Foundation or any NGO, just not a government’s chief antitrust official.
On a related point, I’d like to refer you to a blog post by Noah Clements, who is a guest on the ACT blog. He’s an attorney and former computer programmer, and he recently discussed why governments should not choose technology standards:
First, it is simply too easy to bet on the wrong horse. A prominent developer, John Sowa, summarized this idea as the “law of standards”: “Whenever a major organization develops a new system as an official standard for X, the primary result is the widespread adoption of some simpler system as a de facto standard for X.”
Second, and a point that flows from the first, even when you choose the best option available, that option will not be the best for long, nor will it be the best solution for all problems.
I invite you to read the rest of his post.
Michael Powell seems to have finally found his political voice. Reed Hundt probably never lost his. But both former FCC chairmen got into the spirit of debate at the Federalist Society gathering today at the National Press Club. Reporters William Korver and Cassandre Durocher, of BroadbandCensus.com, were present to record the exchange.
The story is just the most recent of a stream of news articles on broadband-related subject available for free at BroadbandCensus.com. As TLF readers may be aware, the goal of BroadbandCensus.com is to collect user-generated data — otherwise known as “crowdsourcing” — through inviting individual Internet users’ to contribute to our publicly-available database of local broadband information, all sorted by ZIP code.
Now, we’re pleased to announce that we are also following technology and communications policy news in Washington, and elsewhere, through daily reporting. If you haven’t been to BroadbandCensus.com, I encourage you to do so. And don’t forget to Take the Broadband Census!
Read Net Neutrality Disagreement Between Two Former FCC Chairmen at BroadbandCensus.com
In a new PFF essay, my colleague Barbara Esbin and I address a recent petition filed by the Rural Cellular Association (RCA) asking the FCC to prohibit exclusive arrangements between wireless handset producers and carriers. The RCA petition claims that large wireless companies have an unfair market advantage by giving their customers exclusive access to certain advanced smart phones, such as the Apple/AT&T iPhone—and that this anticompetitive practice is harmful to rural consumers served by RCA members.
In the piece, we debunk RCA’s arguments premised on a supposed lack of competition in wireless markets. RCA will likely now redouble these arguments by pointing to Verizon’s planned acquisition of Alltel (by far the smallest of the “Big 5” carriers), which was announced the day our piece was published. But even with four large carriers instead of five, the wireless market remains vibrantly competitive—especially as compared to 1992, when the FCC decided that even the two-carrier market was “extremely competitive,” and rejecting arguments that it ban exclusive handset arrangements. Continue reading →
Remember the Sirius-XM deal? It was in all the papers March before last, when the two satellite radio firms asked the FCC for permission to merge. The FCC still hasn’t made a decision on the issue (the Justice Department approved the deal earlier this year.)
Yesterday on CNBC, FCC chairman Kevin Martin was asked when an answer might be forthcoming. “We’re taking a close look at that and I suspect the commission will act soon,” Martin stated. CNBC’s Mark Haines was a bit taken aback by the vague response, asking how it could possibly take nearly a year and a half to review the transaction. “Aren’t you under some obligation to answer these guys, if not today, tomorrow or very soon?, ” he asked.
Martin wasn’t at all plussed, responding: “I do hope we’ll be able to get back to them soon.”
Hope to get back to them soon? Talk about putting someone on hold. One can just imagine it: “Thank you for calling the FCC. Your $4 billion transaction is very important to us. A regulator will get back to you very soon.”
After 445 days of consideration, you’d think the FCC could do better than this. This is an agency, after all, that used to brag about it’s 180 day “shot clock” for merger review. But that clock has long expired (even though the FCC didn’t even formally start the ticker until the 78th day).
XM and Sirius deserve more than “we’ll get right back to you on that” platitudes. The FCC needs to decide on the merger — yes or no. Then it needs to review it’s merger review procedures to find out what’s gone so terribly wrong. Although there’s no telling how long that could take.
WASHINGTON, June 3 – Microsoft CEO Steve Ballmer said Tuesday that his company’s attempt to acquire Yahoo was an effort to bring greater competition to the media business and the advertising industry.
“We are trying to give good competition to the market leader in that category,” Ballmer said about Google, his voice rising to a pitch as he addressed a question about changes in the market for online advertising.
Continue reading CEO: Microsoft-Yahoo Will Bring Competition to Media Business
WASHINGTON, June 2 – Ensuring that all Americans have access to broadband is about more than ensuring high-speed Internet connectivity, said the CEO of the One Economy, a non-profit organization promoting a philosophy of “digital inclusion.”
In addition to ensuring that broadband is present, affordable and available for adoption by low-income Americans, groups aiming to make a difference in stemming the digital divide must also focusing on human capital and digital media content, said Rey Ramsey of One Economy, speaking last week at plenary session the International Summit for Community Wireless Networks here.
Continue reading Digital Inclusion About More Than Connectivity […]
From an interesting collection of economists, including L. Vernon Smith and Cass Sunstein, a paper calling for changes to facilitate the growth of prediction markets.
Another paper on happiness research and cost-benefit analysis. “Opportunity cost, Opportunity Cost!” shrieks Ludwig von Lachman from beyong the grave.
Here is a more questionable contribution from the more mainstream Herbert Hovenkamp. ., “Innovation and the Domain of Competition Policy” “U Iowa Legal Studies Research Paper No. 08-07 . The paper advocates the more expansive use of antitrust law in intellectual property disputes, on the grounds that IP law has been tainted by rent-seeking, and that antitrust law has not. Granted, that the antitrust statutes have not been much revised. So the lobbying action is at the DOJ, the FTC, and pretty much everywhere else rather than in the halls of Congress. And yet more action in the offices of the countless economic consultancies that have sprung up, spouting reams of game theoretic nonsense in the pursuit of fat expert witness fees. And the antitrust bar. Dr. Hovenkamp has been fortunate to remain oblivious to it all. See George Bittlingmayer at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=344040.
Another curiousity is this paper by Dr. Richard Gilbert, proposing that “innovation” as such also be subject to antitrust scrutiny when the distribution of market power is interesting. Talk about subjecting ordinary business conduct to a chilling and error-prone regulatory regime. I read it through wondering if it was a clever reductio ad absurdum of the whole enterprise, but in the end when there was no punch line delivered I concluded sadly that the author was serious. Gilbert, Richard, “Holding Innovation to an Antitrust Standard,” 3 Competition Policy 47 (2007). http://papers.ssrn.com/sol3/papers.cfm?abstract_id=987322
Is it anticompetitive for Google to let Yahoo use some of its technology to earn more money in the search ad business if Google had 61.6 percent of the search market in April while Yahoo had 20.4 percent and Microsoft, 9.1 percent?
It’s only anticompetitive if you believe search ad revenue is—and always will be—the bedrock of the Internet economy. But that’s quite an assumption. Not too long ago some believed Microsoft’s success in desktop software would allow it to monopolize the online world.
Then along came Google and search ads, which no one foresaw.
An outsourcing deal between Google and Yahoo could be profoundly procompetitive because Yahoo makes less than it could in search ads. Using Google’s technology may enable Yahoo to pocket an extra $1 billion which could make Yahoo a stronger player in the search for the next big thing.
It’s important to consider that there may be a next big thing because neither Yahoo nor Microsoft may be capable of giving Google a run for its money in search ads despite their vast resources, in which case it would not be procompetitive to keep them afloat through government intervention. It would just be inefficient.
What if Google becomes a monopoly in search ads? Most monopolies are temporary. Schumpeter teaches that durable monopolies are aided and abetted by government. The risk of that grows with government intervention led by antitrust attorneys.
Microsoft and Yahoo need to find their strengths; we shouldn’t subsidize their weaknesses.
What would be procompetitive would be for Microsoft and Yahoo to invent something new.
The Rural Cellular Association wants the FCC to eliminate exclusivity arrangements between cellphone carriers and manufacturers of popular handsets.
For many consumers, the end result of these exclusive arrangements is being channeled to purchase wireless service from a carrier that has monopolistic control over the desired handset and having to pay a premium price for the handset because the market is devoid of any competition for the particular handset.
Exclusivity deals are common throughout the business world and often serve procompetitive purposes. And there is no way to condemn AT&T-Apple iPhone, Verizon Wireless-LG Voyager or Sprint Nextel-Samsung Ace without condemning exclusivity generally. For one thing, there are five major cellphone carriers and many smaller competitors. AT&T (Mobility), the largest, has an approximate market share of only 26 percent. You can’t argue this is a concentrated market. The only thing unique about this market is the unnecessary presence of a legacy regulator.
The obvious course of action for the rural carriers is to partner with a handset manufacturer and develop something of their own which customers will want. “If you build a better mousetrap…,” as they say. Perhaps some rural carriers lack the imagination or the ingenuity. But it’s really not the job of government to try to compensate for that.
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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.