In reading the FCC's Press release on the state of competitiveness in the wireless industry, it is obvious that wireless is a competitive industry. Prices fell 22% during 2005 alone from 9 cents a minute to 7 cents. The number of subscribers increased from 185m to 213m. In addition, JD Power reported wireless service quality increased.
So on what basis are the online giants: Google, Yahoo, eBay, and Microsoft arguing that wireless is not competitive? and should be subject to net neutrality regulation for the first time since 1993? Where is the logic, merit or ethic of that self-serving position?
Why would regulation-averse tech companies be lobbying so strenuously to regulate the competitive wireless industry?
The answer is simple -- competitive advantage. These companies built their first mover positions into dominant market postions presuming monopoly regulation which prevented potential competition from broadband players.
Well sorry folks, but the regulatory arbitrage of the online giants is ending. With the maturation of broadband competition, come competitive prices.
The online giants don't want their regulatory advantage to go away. They have built up extraordinary 80-90% gross profit margins through regulatory arbitrage which shifted most all their distribution cost to the consumer. Increasing competition means prices for the online giants and bandwidth hogs will gravitate to a new equilibrium of supply and demand over time -- not the artificial regulatory arbitrage where all the low bandwidth users subsidize all the costs of exceptionally high relative bandwidth use.
The online giants are fighting this because in a competitive market they will have higher costs and they will have to largely absorb them out of profits because competition will make it harder to shift those costs to the consumer over time. That's the real rub behind all the high falutin rhetoric.
