January 7, 2016
The world is watching and taking note of the FCC’s blatant competition double standard that totally favors America’s dominant edge platforms above most everyone and everything else.
Consider an apt and illuminating comparison between the competition U.S. wireless broadband providers face versus the competition Silicon Valley’s edge platforms face.
The FCC’s Non-Neutral Internet Competition Policy
The FCC’s 2015 Open Internet Order has an implicit blind-eye competition premise in that it reclassified the broadband provider half of Internet access, and not the “edge” platform provider half, as subject to FCC Title II common carriage regulation.
That is because the FCC focused only on broadband and concluded its level of competition required the strongest possible net neutrality regulation, while it turned a blind-eye toward “edge” platforms in uncritically assuming that “edge” platform networks were competitive and thus did not have to be neutral, open, or transparent.
Recently the FCC, in its 18th annual Wireless Competition Report to Congress, did not find the U.S. wireless market competitive despite 92% of Americans having access to 4+ providers and 97% having access to 3+ providers.
This FCC nothing-burger is in stark contrast to a recent trenchant analysis of “edge” competition by a well-informed, high-profile, “edge” insider.
Recently Om Malik, a widely-respected Silicon Valley blogger, researcher, and venture capitalist, best known for founding Gigaom, has effectively taken on the warning mantle of a “canary in the coal mine.”
In his outstanding New Yorker op-ed entitled: In Silicon Valley Now, It’s Almost Always Winner Takes All, Mr. Malik concluded that “most competition in Silicon Valley now heads toward there being one monopolistic winner.”
He explains further: “In the course of nearly two decades of closely following (and writing about) Silicon Valley, I have seen products and markets go through three distinct phases… when the dust settles, there are one, two, or three players left standing. Rarely do you end up with true competition.”
In his must-read op-ed, he makes several trenchant competitive assessments of Silicon Valley’s leading “edge” platforms:
“The only competition that matters in ride sharing is between the two largest companies: Uber and Lyft.”
“Google is a winner that has taken it all…Microsoft Bing…currently runs a distant second in the search engine sweepstakes.”
“Facebook has created a near monopoly in social networking. …Twitter is a distant second in the social web.”
“Amazon has run away with online retail, leaving everyone else to fight for scraps.”
“Microsoft, even today, controls the office-productivity business.”
“Google’s Android and Apple’s iOS are the two dominant players [in mobile operating systems].
“Even in chips, it is still Intel and some others.”
“There are two companies that dominate the public cloud – Amazon, followed by Microsoft’s Azure.”
Mr. Malik also shares other insights very relevant to the state of “edge” competition and network neutrality as it compares to the broadband competition analyzed in the FCC’s wireless competition report.
“While in the early days of networks, growth was limited by the slowness and cost at numerous points – expensive telephone connections, computers that crashed, browsers that didn’t work – the smartphone has essentially changed all that.” [bold added]
“This loop of algorithms, infrastructure, and data is potent. Add what are called network effects to the mix and you start to see virtual monopolies emerge almost overnight.” [bold added]
“… in our connected age, data, infrastructure, and algorithms give companies a distinct advantage…it is a winner-takes-all world.” [bold added]
Please note the stark and unwarranted FCC double standard here toward “network effects” and the consequent expectation of network neutrality.
National/regional scale, physical infrastructure, broadband networks are subject to maximal transparency, utility regulation, and the presumption of anti-competitive discrimination, despite real competitive pressures.
On the other hand, the dramatically-larger and more powerful, global scale “networks” of the world’s dominant “edge” providers are not transparent, totally unregulated, have no expectation to be neutral to content, apps or traffic, and are subject to substantially-less, rivalrous-competitive pressure than broadband providers.
The only explanation for this highly discriminatory treatment of adjacent industries is a highly-political U.S. industrial policy where “edge” providers have been politically chosen to win and broadband providers politically chosen to lose.
The largest edge platforms may relish how they have politically commandeered the FCC regulatory process to help their businesses in the U.S., but they will prove increasingly naïve and unwise long-term, as the rest of the world’s leaders and regulators get this U.S. joke, and follow America’s short-sighted and self-serving lead, and use it for political cover, as they politically choose to favor their own regional/national sovereign interests and citizens as “winners” over America’s dominant “edge” platforms’ commercial interests as “losers,” when they come up with new and revised laws, regulations, and policies on: encryption, privacy, competition/antitrust, tax, copyright, etc.
What happens in the U.S. does not stay in the U.S.
Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, a research consultancy for Fortune 500 companies, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests.