Technology Liberation Front

Newsflash to FCC: The iPhone is a Closed Platform, and Consumers Love It

by Ryan Radia on August 2, 2009 · 30 comments

Just when you thought the FCC’s investigation of the wireless industry couldn’t get any stranger, TechCrunch reports that the Commission has sent letters to AT&T, Apple, and Google inquiring about Apple’s recent decision to reject the Google Voice app from the iPhone App Store (as Berin discussed yesterday). google-voice-iphone-app-rejected-by-apple

It’s been over two years since the original iPhone was launched, but it seems the FCC still doesn’t get it: the iPhone is very clearly a closed platform — a prototypical walled garden — and Apple has the final say on what applications users can install. When you buy an iPhone, you’re not simply buying a piece of hardware, but actually a package deal that includes software, hardware, and a wireless contract. Is this anti-consumer? 26 million consumers don’t think so. The iPhone 3GS, the latest version of the phone, is selling so fast that Apple’s CFO says they can’t make enough to meet demand!

Of course, the iPhone model isn’t for everyone. I, for one, don’t own one because I’m an obsessive tinkerer and prefer a phone that’s as open as possible. But not everyone shares my preferences. As mentioned above, over 26 million iPhones have been sold since June 2007, so openness clearly isn’t make-or-break for a lot of consumers. Who knows, maybe some people actually trust Apple and like the comfort of knowing that every app they can get comes with a seal of approval from Cupertino.

The FCC’s letter to Apple demands an explanation for why Google Voice was rejected. If Apple’s explanation doesn’t satisfy the FCC’s criteria — which, by the way, are entirely unclear — then what? Will the FCC force Apple to accept Google Voice? Say what you will about Apple’s app store track record, but the prospect of federal regulators having the final word on which applications smartphone owners can install hardly seems pro-consumer. The FCC can’t even figure out how to run its own website!

In some ways, the iPhone has perhaps been too successful for its own good. It’s so popular that many consumers seem to no longer view it as just another product but instead as an item to which they are entitled. Thus, bureaucrats and Congresscritters in search of political points are making a big fuss over the fact that the iPhone isn’t everything to everyone. Why can’t it be wide open? Why isn’t in available on every carrier nationwide? Why is it so expensive to purchase without a service contract?

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Help Us Build a Better TLF!

by Berin Szoka on August 2, 2009 · 9 comments

As you might have noticed, we’re giving the TLF a facelift as we approach our five-year anniversary on August 14. Our own Jerry Brito is leading the charge, with Cord Blomquist and PJ Doland providing backup vocals. Thanks, guys!

We’re still ironing out bugs and experimenting with widgets, but we’d welcome your feedback as we work things out. Please feel free to share your thoughts on the new design or features by posting comments here, or to email me at bszoka pff.org.

Party on, Wayne!

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Can Microsoft Grasp the Internet Cloud?

by Bret Swanson on August 1, 2009 · 6 comments

See my new Forbes.com commentary on the Microsoft-Yahoo search partnership:

Ballmer appears now to get it. “The more searches, the more you learn,” he says. “Scale drives knowledge, which can turn around and drive innovation and relevance.” Microsoft decided in 2008 to build 20 new data centers at a cost of $1 billion each. This was a dramatic commitment to the cloud. Conceived by Bill Gates’s successor, Ray Ozzie, the global platform would serve up a new generation of Web-based Office applications dubbed Azure. It would connect video gamers on its Xbox Live network. And it would host Microsoft’s Hotmail and search applications. The new Bing search engine earned quick acclaim for relevant searches and better-than-Google pre-packaged details about popular health, transportation, location and news items. But with just 8.4% of the market, Microsoft’s $20 billion infrastructure commitment would be massively underutilized. Meanwhile, Yahoo, which still leads in news, sports and finance content, could not remotely afford to build a similar new search infrastructure to compete with Google and Microsoft. Thus, the combination. Yahoo and Microsoft can share Ballmer’s new global infrastructure.

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Google & Apple: In Collusion or Cut-Throat Competition?

by Berin Szoka on August 1, 2009 · 13 comments

The iPhone-obsessed blogosphere is atwitter about the Apple”s exclusion of the Google voice application from the iPhone app store. On Friday, the FCC sent letters of inquiry to the two companies as well as AT&T.

Whatever one thinks about whether Apple and AT&T should be able to operate their own networks as they see fit, this cat-fight should at least demonstrate the pointlessness of the investigation opened by the FTC in May as to whether Apple and Google are violating the antitrust laws by having two members of their boards of directors in common: Google CEO Eric Schmidt and former Genentech CEO Art Levinson. If the two companies were, in fact, trying to collude in an anti-competitive manner, they don’t seem to be doing a very good job of it!

Meanwhile, if you don’t like how Apple runs its app store, don’t get an iPhone! If you already have one, you could follow the lead of TechCrunch’s Michael Arrington and simply cancel your existing iPhone contract to get a more “open” phone—such as one powered by Google’s Android operating system.

Me, I’m just waiting for Google Voice to offer number portability so I can start using the service without having to change the number I’ve had for the last five years—and plan to take to my ashen grave (somewhere beyond low Earth orbit).

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Why People Hate Copyright

by Berin Szoka on July 31, 2009 · 26 comments

Probably largely the same reason that people hate lawyers: Anytime you’re dealing with legal rights and contracts, it’s a pain to get anything done. (Having just celebrated my fifth law school reunion, I should know!)

Case in point: I was thrilled to discover the Canadian radio show The Age of Persuasion, dedicated to a subject I’ve come to know and love (to the point of considerable repetition): advertising! Yup, that’s right, those annoying little ads that fund all the free online content and services we all take for granted.

Anyway, the good news is that the show is available online. The bad news is that it’s only available in streaming audio form—which means I can’t take it with me on my iPod, which means I’ll basically never listen to it. From Podcasting: what’s ‘holding up the delay’?:

Okay, we’ve got to stop meeting like this.

Time, she passes, yet the legals surrounding podcasting are yet to be settled. Meanwhile, our finely honed spider-sense (and a steady stream of daily emails) tells us many of you are wondering when an AOP podcast will happen.

Alas, for the moment, we are bound not to release Age of Persuasion episodes for podcast. (No, we don’t like it either.)

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The Deadweight Costs of Antitrust Scrutiny: Distracted Management

by Berin Szoka on July 30, 2009 · 15 comments

Nick Wingfield has a great piece in today’s WSJ: Yahoo Tie-Up Is Latest Sign Tide Turning for Microsoft’s Ballmer (subscription required but can be found through a Google News search) about how Microsoft’s fortunes may be looking up across the board—especially with yesterday’s Yahoo!/Microsoft search/advertising partnership. The most interesting passage is this one:

For [Microsoft CEO Steve] Ballmer, the agreement provides some redemption in an area he has stressed is critical to Microsoft’s future. In an interview, he says the Yahoo deal received “more of my personal attention over the last 18 months than anything else we’re involved with,” including focusing on its most important new product in years, Windows 7. “It’s a big deal,” he says.

Of course, complex partnerships always require lots of time from senior management, but in this case, Ballmer’s quip speaks directly to the costs of antitrust scrutiny in terms of one of the most valuable resources available to any company: the time and attention of senior management. The “attentional cost” can of this deal for Microsoft could be broken into four parts beyond the normal costs of structuring any deal to make the most business sense:

How to structure the a Microsoft/Yahoo! deal so that it would be approved by regulators (defensive);
How to block a Google/Yahoo! deal (offensive);
Nursing the deal through the regulatory approval process over the coming months; and
The possibility that all of these costs could be wasted, to varying degrees, if antitrust regulators decide to block or restrict the deal.

These are all “deadweight losses” on the economy pure and simple—and ultimately costs to consumers.

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A Bargain Deal on Yahoo! for Microsoft & the Regime Uncertainty of Antitrust

by Berin Szoka on July 29, 2009 · 9 comments

Eric Goldman, one of the few active cyberlibertarians in legal academe, has a thoughtful post about the search partnership announced today. Eric notes blogger Danny Sullivan’s observation about the decline in Yahoo’s assets and his comment that:

Microsoft is getting a huge bargain courtesy of the US Department Of Justice. Without Google being able to compete for Yahoo’s business, the billions that were floating around in 2008 become millions in 2009.

Danny and Eric certainly have a strong point: One of the costs of the Justice Department’s decision to block Google from partnering with Yahoo! is that Yahoo! wound up fetching much less in its deal with Microsoft. But the intervening slump in the economy and online advertising has also contributed in the drop in Yahoo!’s share price and overall valuation, so it’s difficult to make an apples-to-apples comparison. Eric is probably right that in assessment that:

Yahoo was unbelievably crazy for passing on Microsoft’s acquisition proposal from a year-and-a-half ago. It looked like a foolish mistake at the time, and hindsight has definitely not improved that assessment!

It would seem that both Yahoo! and Microsoft under-estimated the likelihood that antitrust regulators would block a Yahoo!/Google deal a year ago: Microsoft probably wouldn’t have offered as much as it did to acquire Yahoo!’s search business ($31/share) and Yahoo! (currently $15.14/share) certainly wouldn’t have held out for a better deal from Google. While the end result ended up being a Yahoo!/Microsoft deal anyway, the delay of over a year in reaching a deal is itself a significant cost of what economists would call the “regime uncertainty” created antitrust: Without clear rules, it’s difficult for economic actors to predict the decisions by regulators. A delay of a year could well prove to make a big difference in the ability of the two companies to mount a successful response to Google in search and advertising—just as Microsoft’s 18 month delay back in 2003-2004 in developing a search ad auction system to respond to Google’s AdWords system (which now produces 2/3 of its revenue) probably did much to thwart Microsoft’s initial efforts to compete in search. Continue reading →

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Antitrust Law Can’t Keep Up with High-Tech

by Adam Thierer on July 29, 2009 · 25 comments

A key point that Berin and I try to get across in our Forbes editorial today about the Yahoo!-Microsoft deal is that the high-tech marketplace evolves too rapidly for creaky Analog Era antitrust laws to keep up. We wanted to say more on that point in our piece, but we had a tight deadline (and a strict word limit!) Well, turns out that we really don’t need to do so now because Farhad Manjoo of Slate has done a better job than we ever could have making that point in this essay today entitled, “The Case Against the Case Against Google“:

But if the government was right on the facts [in the Microsoft case], it was wrong on the big picture. The theory behind the prosecution was that Microsoft’s mobster tactics would raise the price of software and slow down innovation. But that didn’t happen. In 2002, Microsoft settled the antitrust case with the Bush administration; it faced no substantial penalties for its years of bad behavior. At that point, it still looked unbeatable—it had the same OS monopoly, office-software monopoly, and Web-browser monopoly. And you know what happened? It got beat anyway. Many of Microsoft’s assets turned out not to matter, because upstarts like Google and old foes like Apple found ways to innovate around them.

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Our Forbes.com Op-Ed on Yahoo!-Microsoft Search Partnership

by Berin Szoka on July 29, 2009 · 17 comments

We’ve just published an op-ed over at Forbes.com about today’s big Yahoo!-Microsoft deal.

Searching For Success: Web 1.0 Titans Struggle to Reinvent Themselves by Berin Szoka & Adam Thierer

Yahoo! and Microsoft on Wednesday announced a partnership in which Microsoft’s Bing search engine technology will power search for both companies, but Yahoo! will manage advertising sales and content creation.

This should be cause for celebration 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. But if recent concerns about online search, advertising, competition and privacy are any guide, many will fail to appreciate why the deal is pro-consumer, or what it says about the rapid evolution of the Internet.

It’s easy to forget that just a decade ago most of us still hadn’t done our first Google search, Microsoft was still focused on the desktop and Yahoo! was still serving up the online equivalent of the Yellow Pages. AltaVista, AOL, CompuServe and Geocities still ruled the roost.

Today, as we enjoy the fruits of a true cyber-renaissance, cyberspace circa 1999 increasingly looks like the Digital Dark Ages: The old online walled gardens have crumbled, desktop applications have migrated to the cloud and search has redefined our experience of the Web.

Oh, and did we mention just about all of it is “free“? Sounds like exactly the sort of vigorous innovation, expanding consumer choice, falling prices and cut-throat competition that policymakers should want, right?

Alas, regulators seem stuck in the past. European officials in particular seem hell-bent on continuing the antitrust crusade of the ’90s against Microsoft, myopically focused on fading paradigms (desktop operating systems and Web browsers). But instead of narrowly defining high-tech markets based on yesterday’s technologies or market structures, policymakers should embrace the one constant of the Internet economy: dynamic, disruptive and irrepressible change.

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