Updated on August 17th, 2011
In my initial post addressing Googorola, I suggested that Google’s motivation for buying Motorola may be less about patents and more about emulating Apple’s vertically-integrated mobile device platform. If I’m right, the deal would have a significant impact on competition throughout the mobile ecosystem and mobile broadband policy. Although I can’t cover all the possibilities presented by Googorola in one post, here’s my take on some interesting potential winners and losers in the mobile market and in mobile policy.
Potential Winners
Googorola: If Google’s stock price is any indication, it looks like the market thinks the deal is a mistake. In think the alternative – failing to even try to monetize Android’s 40% market share – would be a much bigger mistake. Read the rest of this entry »
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merger mobile wireless wireless competition
Updated on August 16th, 2011
Google announced yesterday that it has agreed to buy Motorola Mobility for about $12.5 billion, a premium of 63% to the closing price of Motorola Mobility shares last Friday. Google’s CEO, Larry Page, said in a corporate blog post that the merger will “supercharge Android” and strengthen Google’s patent portfolio. Initial stories focused on Motorola’s patent portfolio, saying it is “the centerpiece of the deal.” I’m skeptical this deal is primarily a patent play. A 63% price premium for a major hardware manufacturer with ongoing operations is a lot to pay for patent defense. The largest patent verdict in U.S. history to withstand appellate review was only $290 million. That’s not chump change, but it is significantly less than $12.5 billion. It’s also telling that Google first raised Android patent issues less than two weeks before announcing the Motorola deal. Google’s recent post alleging patent attacks on Android looks like a transparent effort to focus deal commentary on Motorola’s intellectual property and divert attention from other aspects of the deal. Read the rest of this entry »
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merger mobile wireless wireless competition
Updated on August 15th, 2011
Captain, Road Prison 36: What we got here is… failure to communicate. Cool Hand Luke (1967).
“People love to categorize.” Categorization helps us make sense of a complicated world. But, when categorization doesn’t reflect substantial similarities, it obfuscates as much as it illuminates. So it is with communications policy, which is categorized primarily by the technologies used to deliver communications services (“stovepipes”) rather than their impact on consumers. This approach to categorization obfuscates the relevant question – whether a particular regulatory approach maximizes consumer welfare (rather than the prospects of particular competitors).
If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.
The ongoing debates about broadcast incentive auctions and universal service reform offer a poignant example of such obfuscation. Because the services that are the subjects of these debates use different technologies, and are thus categorized separately, these debates are being conducted independently. When viewed from the perspective of consumer welfare, however, these debates are inherently interrelated. They both involve regulations that are intended to address the same concern – the widespread dissemination of information to consumers from a multiplicity of sources.
The core question in both debates is to what extent the government should subsidize consumer access to information. Because broadband service provides access to far more information than is possible through over the air broadcast, answering this question in the universal service debate informs the incentive auction debate: If the government subsidizes universal broadband, it would render government subsidization of over the air broadcast duplicative.
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broadband mobile spectrum Universal Service Fund USF wireless
Updated on August 3rd, 2011
Annie: Well, I should probably tell you that I’m taking the bus because I had my driver’s license revoked.
Jack: What for?
Annie: Speeding.
Speed (1994).
Yesterday the FCC released its “Measuring Broadband America” report, “the most comprehensive and rigorous assessment ever of broadband performance in the United States.” (See FCC Chairman Genachowski’s statement here.) The report debunks one of the most widely believed broadband myths with actual data.
Myth: “[C]onsumers aren’t getting the service that they are paying for.”
Fact: “DSL, cable, and fiber-to-the-home are all delivering quality service generally consistent with what they advertise.” (Chairman Genachowski’s statement.)
In fact, consumers are sometimes getting service that is faster than that for which they are paying even when measured during periods of peak usage. The report found that, on average during peak periods, fiber-to-the-home services delivered 114% of advertised speeds (DSL-based services delivered 82% and cable delivered 93% of advertised speeds).
It’s refreshing to see an FCC report based on actual data that sets the record straight.
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broadband FCC
Updated on July 11th, 2011
Many have noted that net neutrality regulations are in essence price controls. (See this post at The Technology Liberation Front.) In his statement proposing a “third way” to achieving net neutrality, however, Chairman Genachowski said his net neutrality regulations would “not [regulate] broadband prices or pricing structures.” Given the negative history of Title II pricing regulation, sidestepping the implicit price regulation issue has been critical to the pro-net neutrality movement’s narrative. Netflix CEO David Hyman must have missed the memo.
In a recent op-ed in the Wall Street Journal (subscription required), Mr. Hyman urged regulators to prohibit usage-based broadband pricing and bandwidth caps. (Well, to be fair, he used a metaphor about a frog and a pot of boiling water in lieu of an express request for regulation, but strip away the metaphor, and the intent is the same.) Of course, there is nothing anticompetitive or anti-consumer about usage-based pricing: Mr. Hyman admits that usage-based pricing is a standard pricing mechanism in other contexts, e.g., electricity. So what is his real complaint?
Mr. Hyman’s real complaint is that usage-based pricing and bandwidth caps don’t maximize consumer access to the particular service his company provides. Unfortunately for Netflix, that’s not the relevant question. The government doesn’t (or rather, shouldn’t) regulate pricing to maximize the profits of particular companies or services, and it shouldn’t intervene in the market for broadband access service to maximize the profits of Netflix.
TANSTAAFL, and adding more pricing controls to the existing net neutrality regime would impose costs on everyone. As I’ve posted previously, the business case for fiber deployment already entails considerable risk. Further reducing broadband infrastructure investment incentives to boost Netflix’s profits, when millions of Americans still don’t have access to the best broadband technologies available, would be absurd. In its letter to shareholders describing its Q1 2011 results, Netflix showed 95% growth in operating income and 94% growth in net subscriber additions. That hardly sounds like a company that needs government intervention to “compete.”
At the end of the day, those who oppose net neutrality might be thanking Netflix for making its request for Internet price regulation so transparent – a transparency that often appeared lacking in last year’s net neutrality debates. Net neutrality advocates, however, might be wishing they’d gotten Mr. Hyman the memo.
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broadband net neutrality