The Technology Policy Institute has released an interesting new study from Robert Crandall and Charles Jackson on “Antitrust in High-Tech Industries,” which takes a close look at the impact of antitrust law in the three most high-profile technology cases of the last half century: IBM, AT&T and Microsoft. Crandall and Jackson conclude:
In each of our three cases, the ultimate source of major changes in the competitive landscape appears to have been innovation and new technology — technology that was apparently not unleashed by the antitrust litigation. In each case, the government did not and probably could not see how technology would develop over time. Therefore, it was difficult for the government to design remedies that would accelerate competition when this competition developed from new technologies.
I enjoyed the paper and encourage others to read the entire thing. It’s very much in line with what we’ve written here in the past on the antitrust and high-tech markets. See, for example, my review of Gary Reback’s recent book on antitrust and high-tech markets. As I noted there, the crucial, ‘conflict of visions‘ issue comes down to an appreciation for dynamic competition and technological evolution over the sort of static competition, fixed-pie mindset that so many antitrust defenders espouse. Those of us who believe in dynamic competition see markets in a constant state of flux and expect that sub-optimal market developments or configurations are exactly the spark that incentivizes new form of market entry, innovation, technological disruption, price competition, and so on. But the static competition crowd looks at the same situation and imagines that the only hope is to wheel in the wrecking ball of antitrust regulation since they have little faith that things might change for the better. Moreover, they ignore the profound costs associated with such regulation and litigation. Crandall and Jackson’s paper explains why patience is the better policy.
by Berin Szoka & Adam Thierer, Progress Snapshot 5.11 (PDF)
Ten years ago, Nobel Prize-winning economist Milton Friedman lamented the “Business Community’s Suicidal Impulse:” the persistent propensity to persecute one’s competitors through regulation or the threat thereof. Friedman asked: “Is it really in the self-interest of Silicon Valley to set the government on Microsoft?” After yesterday’s FCC vote’s to open a formal “Net Neutrality” rule-making, we must ask whether the high-tech industry—or consumers—will benefit from inviting government regulation of the Internet under the mantra of “neutrality.”
The hatred directed at Microsoft in the 1990s has more recently been focused on the industry that has brought broadband to Americans’ homes (Internet Service Providers) and the company that has done more than any other to make the web useful (Google). Both have been attacked for exercising supposed “gatekeeper” control over the Internet in one fashion or another. They are now turning their guns on each other—the first strikes in what threatens to become an all-out, thermonuclear war in the tech industry over increasingly broad neutrality mandates. Unless we find a way to achieve “Digital Détente,” the consequences of this increasing regulatory brinkmanship will be “mutually assured destruction” (MAD) for industry and consumers.
New Fronts in the Neutrality Wars
The FCC’s proposed rules would apply to all broadband providers, including wireless, but not to Google or many other players operating in other layers of the Net who favor such broadband-specific rules. With this rulemaking looming, AT&T came after Google with letters to the FCC in late September and then another last week accusing the company of violating neutrality principles in their business practices and arguing that any neutrality rules that apply to ISPs should apply equally to Google’s panoply of popular services. In particular, AT&T accused Google of “search engine bias,” suggesting that only government-enforced neutrality mandates could protect consumers from Google’s supposed “monopolist” control.
The promise made yesterday by the FCC—to only apply neutrality principles to the infrastructure layer of the Net—is hollow and will ultimately prove unenforceable. Continue reading →
Hey people. You owe me. All of you. You owe me free broadband. I am entitled to it, after all. That seems to be where our current FCC is heading, anyway. And hey, Finland’s just done it, and the supposed Silicon Valley capitalists at TechCrunch are giddy with delight about it. We’re apparently all just Scandinavian socialists at heart now.
Thus, I too have decided to throw in the towel on the idea of everyone carrying their own weight and picking up their own tab. So, get your wallets open and ready for me because I have lots and lots of things that I believe I have an inalienable right to receive free of charge from the government (i.e, “the people”; i.e., “YOU”). Please let me know which of the things on my high-tech wish list that you’ll be purchasing for me and I’ll check you off my registry so I don’t have to send the cops to your house to collect:
- free broadband (fiber, Wi-Max, and whatever else is around the corner);
- a couple of free new computers (and a really fast ones, thank you very much);
- 3 new HDTVs for my home (including one of those sweet new DLP projectors that usually cost about $10,000 bucks. And I’ll need you to pay for someone to help me install it. Or could you just come over and do that for me perhaps?);
- 3 free new DVRs for each new TV set that you are buying me (and could I get a nice universal remote to control everything, please);
- a free subscription in my area to either DirecTV, Cox Cable, or Verizon FIOS TV (with all the premium channels and sports packages… and don’t forget the Playboy Channel!);
- a free lifetime subscription to Netflix (or I guess I would settle for a free Blu-Ray player and some free movies);
- free new wi-fi router and signal extenders for my home (N-standard please, none of that B or G garbage… too slow for me);
- free mobile phone service for life + an iPhone + unlimited downloads in their app store (oh, could you have that iPhone autographed by Steve Jobs if you get a chance?);
- free Playstation or XBox + lots of games (and if I could get one of those driving wheels to play my new Gran Turismo game that would be dandy); and finally,
- free lifetime tech support when all this crap breaks down.
In closing, I thank you for your generosity. I mean, look, I know I don’t actually deserve any of this stuff, and that there’s no good reason that you should have to pay for my free-riding ways, and there’s obviously nothing in our Constitution to support all this, but hey… screw all that! This is my God-given birthright. I am
entitled, baby! Now get busy thinking of how you are all going to start paying for me, you selfish bastards.
Over at TechDirt, Mike Masnick has an interesting post asking “Why Did Apple Approve Spotify?” which builds on an AdAge column asking a similar question: “Did Apple Sacrifice ITunes With Latest Apps?” As the title of that AdAge piece suggests, some folks are wondering if Apple shot itself in the foot by approving Spotify, a music streaming app that some regard as a potential iTunes killer. I don’t really have any comment on the business angle here, rather, I wanted to just comment on Mike’s suggestion that one possible explanation for Apple’s approval of the app is that:
As we noted when the app was approved, Apple appears to be somewhat gunshy, following the FCC inquiry into why it “blocked” Google Voice on the iPhone (and, yes, Apple still insists it didn’t actually block the app, but Google says otherwise). Given the scrutiny, Apple probably realized that it was in for some serious political trouble if it blocked an app like Spotify, which would have received a lot of press attention. Oddly, the AdAge article doesn’t mention this at all.
Indeed, it is odd that
AdAge didn’t bother mentioning that fact. But what I find doubly odd here is that nobody is even blinking an eye at the prospect of such political meddling with — or even possible FCC regulation of — Apple, iTunes, or music streaming market in general! Seriously, have we gotten to the point now in our Bold New World of Neutrality Regulation that innovative high-tech companies must live in fear of constant regulatory intervention even when they completely lack any statutory authority to play these games? Moreover, does anyone think that the a bunch of Beltway bureaucrats can micro-manage music and high-tech application markets and give us more options than we have today?
I know the prospect of such meddling makes some academics and regulatory activists groups happy, but I can’t see how this ends well for consumers or high-tech markets more generally. Regardless, for those of you who laugh when we suggest that the slippery slope of regulation is real, consider this case to be Exhibit A. Or perhaps it’s Exhibit B since the Google Voice spat with Apple was already moving the FCC in the direction of becoming a device regulator and applying “handset neutrality” principles that have no basis in law. It’s your anything-goes government at work.
In a past life — that is, from roughly 1994-2004 — I spent an enormous amount of time countering the proponents of “open access” regulation for communications and high-tech networks. My work in that field culminated in the publication of a 2003 book with my old Cato colleague Wayne Crews entitled, What’s Yours is Mine: Open Access & the Rise of Infrastructure Socialism. We aimed to counter the efforts of bureaucrats and central planners to command technology companies and industry sectors to share networks, facilities, or specific technologies with rivals in the name of “competition.” Simply stated, sharing is not competing, and
competition in the creation of networks is just as important as competition in the goods, services, and information that move across those networks. Moreover, there are property right considerations that come into play when governments seek to commandeer networks or take over network management decisions.
But let’s just stick to the economic issue here regarding the incentives created by the network-sharing mentality of the “forced access” movement and the fiction associated with the belief that network sharing can create competition. My old PFF colleague Randy May, who currently serves as President of the Free State Foundation, continues to cover developments in this field far closer than I do, and has always done much better work on the subject than me. Recently, Randy addressed some new fictions put forth by the radical Leftist activity group, the (Un-)Free Press who are, once again, spinning a revisionist history of telecom and media policy. Specifically, Free Press has recently suggested that in the late 1990s we lived in a veritable communications nirvana, with thousands of Internet Service Providers and/or “competitive exchange carriers” hotly “competing” for our business. Here’s how Randy May addresses this:
Continue reading →
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.
Continue reading →
By Berin Szoka & Adam Thierer
As we noted in our intro to this ongoing series, Google’s tenth anniversary has passed with Googlephobia reaching new heights of hysteria.
But is Google really too big and dangerous, or are people just too lazy to find other alternatives to each of the wonderful services that Google offers? If one is truly paranoid about the firm’s supposed dominance, it doesn’t take much effort to live a Google-free life. To prove it, we set out to find alternatives to each of the services that Google provides. After awhile, we got a little tired of compiling alternatives in each category and just provided links for the additional choices at your disposal. It’s tough to see what the fuss is about with the cornucopia of choices at our disposal. If you don’t like Google, then just don’t use it or any of its services. The choice is yours.
In each case, we’ve listed Google first, even though Google may not be the market leader (
e.g., Google’s relatively unknown social network Orkut).
Search Engines
Continue reading →
By Berin Szoka & Adam Thierer
as part of an
ongoing series
With Google celebrating its 10th anniversary this week, many panicky pundits are using the occasion to claim that Google has become the Great “Satan” of the Internet. Nick Carr wonders what the future holds for “The OmniGoogle.” The normally level-headed Mike Malone worries that Google is “turning into Big Brother.” And Washington Post’s Rob Dubbin says that he can’t escape Google’s “tentacles,” even for just 24 hours. Meanwhile, speculation abounds that the Justice Department is preparing a major antitrust lawsuit against Google concerning its advertising partnership with Yahoo! or perhaps even a broader suit concerning Google’s “dominance” of online advertising generally.
Carr quotes Google co-founder Sergey Brin’s now-famous 2003 interview:
I think people tend to exaggerate Google’s significance in both directions. Some say Google is God. Others say Google is Satan. But if they think Google is too powerful, remember that with search engines, unlike other companies, all it takes is a single click to go to another search engine. People come to Google because they choose to. We don’t trick them.
In the last five years, Google has become far more than just a search engine. As Google’s suite of suite of complementary products continues to grow, so too does the specter of Google as an all-knowing and therefore all-powerful economic colossus. Yet Google isn’t even close to being the sort of nefarious monopolist out to destroy user privacy at every turn, as some seem to imply—if not exclaim. Indeed, in our view, the Net is overall a far better place because of the existence of Google and the many free services it provides consumers.
Our point is not that Google should be immune from criticism. Indeed, healthy criticism of corporate actions plays a vital role in the free market by disciplining corporate policies and behavior—often thus providing an effective alternative to government regulation. This is particularly important in the area of consumer privacy protection, as demonstrated by Google’s quick response to public concern about its Chrome EULA. Continue reading →
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