Today’s news that the cable guys and the wireless guys are visibly working together (Comcast/Verizon/TimeWarnerCable/BrightHouse) comes as no surprise.
For almost two years now, I’ve been working away on articles and a book manuscript (coming at SXSW in 2012!) explaining that the cable guys (mostly Comcast, some TWC) control our wired future and don’t want themselves to be directly in the wireless market. AT&T and VZ, for their part, can’t keep up on the wired side (and got jammed with terrible programming deals), so they’re focusing only on wireless. These are great businesses: Like a train line, they’re expensive to build in the first place, depend on government permits/rights-of-way/spectrum, and thrive on scope and scale. It’s just about impossible for anyone new to enter. These four guys allow a bit of competition just for appearance’s sake. We’ve deregulated the whole lot of them.
So now what we’ve got is no competition and no regulatory oversight. Wireless is not substitutable for the kind of wireline Internet access that Comcast and TWC can provide. These are two separate enormous markets, each controlled by a couple of mammoth players. What’s at stake? Everything about the future of information in America. (Second of two articles here.)
As the WSJ puts it today:
The cable guys, who had been noodling with the idea of getting into the wireless business, are going to let Verizon handle it instead. And Verizon, which has already committed a ton of money to get into the cable TV and broadband business, won’t spend any more.
Call it a virtual merger, or detente, or whatever you like — it’s both sides agreeing to work together by staying out of each other’s way.
Okay, so I was right – and maybe now more people will pay attention – but it’s not a great feeling. This isn’t where America should be.
Does antitrust law have nothing to say about this? I know it’s a lot trickier to apply current antitrust law to vertical mergers and collusion than horizontal (if those dimensions mean anything here), but if two firms agree to stop competing in repsective spaces and divide up territory, is that not an antitrust problem? Here it’s not physical territory, but virtual. Still though…
A good compliment to your NYT piece.
Doesn’t have to be this way. The market condition you describe is not an inevitable product of objective technology, but is a product of the current concentrated industry structure combined with a continued lack of adequate government response, including abandonment of substantive regulatory responsibility. This industry can and should be — TODAY — leading economic recovery, jobs creation, investment and innovation. However, the requirement for that to happen is that this critical infrastructure be actively regulated in an open access and price-regulated environment, which is necessary to account for its current concentrated condition and resulting huge barriers to new entry investment. The scale and scope issues you cite are not applicable or remotely relevant to a regulated access environment. A network of networks industry structure permits much lower scale/scope entry than is assumed here. Neither do these scale and scope assertions relate to the technology inherent under many more rational industry structures that could be fostered by government vision. The many faults of the current Administration in its handling of this industry are embodied succinctly in the failed FCC Chairmanship of Julius Genachowski, marked by an apparent lack of substantive capability, and vision, and his timid, mostly politically-motivated initiatives that rely on “Mother, may I” requests to the concentrated industry leaders, who seem to despise him, to work with him in nonsensical ways. The monumental mishandling of this industry’s potential alone could well prevent the re-election of this President.
Susan,
Although we have never met, yet I am one of your biggest fans. I avoid being pulled into the blogoshpere as my days are already 18 hours plus over the past two decades. My life has been focused on trying diligently to create competitive broadband network alternatives in opposition to the slippery slope we are rapidly descending towards a telecom/media oligarchy. Judge Greene where is your contemporary equivalent when we so desperately need it? I was hugely hopeful that you would have been nominated as FCC Chairman, and still hold out hope that the administration will actually embrace the fact that entrepreneurs and innovators, not major corporations, are the engine that drive progress, jobs and economic growth. Incumbents will not change or innovate without external stimulus, and to be the only proven innovator (I am the former CEO of the original developer of the OFDMA technologies that are now the norm for 4G services) who has ever had an experimental license application formerly denied by the FCC is an “honor” that concerns me greatly as a now restrained contributor to our national well being. I would enjoy the opportunity to share insights and ideas to address these challenges, as we respectively face the looming challenges in our immediate future. There is an essential need for independent and robust media alternatives and broadband access networks to support true and legitimate facilities based competition. I appreciate all you do.