Maybe it’s time to look back at the D.C. Circuit’s opinion in U.S. v. Microsoft. The argument takes a few steps to outline – here’s a first try:
1. High-tech markets are different from traditional manufacturing markets. Products that get an early lead in high-tech markets are likely to stay ahead, because consumers want the goods and services that others have already bought or may buy in the future. High-tech markets may tip easily, locking in consumers with high switching costs.
2. If you’re sensing anticompetitive behavior in a high-tech market, you’ll need to act quickly. Otherwise it may be too late. No one will invest in the path of a dominant actor.
3. Let’s say you’ve got a dominant player in local broadband markets who also provides cable service. That player can use its dominant position in broadband to enter the content marketplace.
4. Even if the broadband actor doesn’t control content – content is hard, but not impossible, to dominate – it can do many things in the content market to avoid commoditization of its broadband service.
- it can raise prices for must-have content for its rivals, who have to provide bundled services in order to survive
- it can seamlessly technically intertwine must-have content with its broadband service, giving it an advantage that no one can match, driving adoption of its bundled services
- it can favor its content over broadband content
- through its purchasing power, it can influence content providers to constrain how they distribute programming over the Internet
5. The DC Circuit said something similar in Microsoft, finding that the company illegally maintained its monopoly in the operating systems market through its actions in the browser marketplace.
6. It’s not clear what efficiencies are created by combining a dominant broadband provider and a must-have content company.
Fire away – all comments welcome.