The DOJ has opened an initial review of the telecom industry, per WSJ reports, as part of the Obama Administration's and the Varney Antitrust Division's "aggressive stance on antitrust enforcement."
Antitrust enforcement is fact-driven, since it ultimately must be proven in court. The competitive facts in the telecom industry will speak for themselves; the industry is clearly and overtly competitive and trending more competitive.
This review will not be difficult or take long since the DOJ has vast and deep experience with the U.S. telecom industry -- having overseen the AT&T Consent Decree 1984-1996, been intimately involved with the drafting and implementation of the 1996 Telecom Act including the detailed development of local competition and Bell entry into long distrance. The DOJ also has reviewed and approved a number of telecom mergers over the last several years, most recently the approval of Verizon-Alltel and Centurytel and Embarq.
It is important to note that the scrutiny standard of approving a merger is a dramatically tougher standard than that of a Sherman antitrust action.
Generally as a rule of thumb, the DOJ prevents proposed mergers that would create combined market share of over 30%, while the market share standard to prove a Sherman antitrust case generally requires at least a 50% share and more likely 70-90% share.
Moreover, the DOJ will examine the telecom marketplace to see if it exhibits the core characteristics of a competitive market:
Handset marketing exclusives are a pro-competitive wellspring of wireless growth and broadband adoption. Marketing exclusives are also a legitimate, proven and widespread marketing practice that marshals maximum marketing resources for selected, potentially-hot-new-products in order to drive maximum sales and adoption.
A new coalition of some struggling broadband competitors, NoChokePoints.org, is making claims that the "special access" market is being "choked" by lack of competition and is urging the FCC to reverse course and regulate lower prices for these competitors.
"Special access" is basically the business-to-business leasing market of the copper wire connections that link many buildings and cell towers to the Internet backbone at DS1 (1.5 Mbs) and DS3 (44.7 Mbs) speeds.
To solve this controversy and determine who is actually "choking," or holding up whom, I thought it would be instructive and interesting to consider how the beloved TV detective Columbo would apply his common sense questioning to get to the bottom of this whodunit.
The latest wireless statistics submitted to the FCC today show that the U.S. leads the OECD in wireless competition, use and price; the U.S. is not falling behind.
These data show why:
Monopoly net neutrality regulations are unnecessary;
The U.S. leads the world in wireless broadband adoption and use; and
Broadband mobility is as important as broadband speed to U.S. consumers.
The CTIA study is based on Merrill Lynch's research of OECD data. Please read the report's summary findings below:
"The price per minute of service in the United States is the lowest of the 26 OECD countries tracked by Merrill Lynch.
Consumers in the United States have the highest minutes of use per month of the 26 OECD countries tracked by Merrill Lynch.
First quarter financial results prove that the success of the broadband sector's facilities-based competition, is an exceptionally strong foundation on which to build a National Broadband Strategy. (See 1Q09 results: AT&T, Verizon, Comcast and Time Warner Cable, companies are listed by revenue size.) The results show:
FreePress in petitioning the FCC to apply its Broadband Principles to wireless (because they currently do not apply to wireless) effectively has conceded that broadband is not the duopoly market they have long alleged, but is a competitive marketplace.
There are two primary problems with eBay-Skype's attempt to get the Government to force competitive wireless providers to carry Skype's free communications app under the guise of wireless net neutrality and Internet openness; first, it is wildly uneconomic, and second, it is anti-competitive.
The issue has surfaced in the news (USAToday, WSJ) as Apple enabled a Skype app on the iphone for use on free public WiFi networks, but not on the iphone's commercial network provided by AT&T; and again when Google's Android banned a tethering app because it violated T-Mobile's terms of service as reported by CNET.
I. Skype's .2% Uneconomics
What is uneconomics? Just what the term implies, not economic, unsustainable... arbitrage.
How U.S. wireless broadband competitors are heavily investing in infrastructure despite the recession;
That U.S. private wireless infrastructure investments dwarf the public investment in broadband in the stimulus pakage; and
That wireless broadband produces huge productivity benefits for the economy.
The big takeaway from this piece is that the fastest growing part of the U.S. broadband market, wireless, is strong, competitive and investing heavily -- which is very different than the state of non-communications industries in this economy.
For those who don't know Tom's impressive background... he most recently was one of the most senior advisors for Technology on President Obama's Transition Team, and he also is a past head of both the CTIA and the NCTA.
A post by a Google policy analyst yesterday attempted to make the economic case for open access in the U.S. and suggested reasons why American infrastructure providers should embrace a mandated open network model. This proposed theory warrants a strong practical rebuttal. This proposed case for the economics of open access does not hold up to close scrutiny, because it has fatal flaws in both logic and economics.
I.The fatal flaw inlogic in the case for the economics of open access:
Since the post assumes broadband markets everywhere are basically the same, it concludes that the open access experience in some European countries is relevant and applicable to the U.S. situation. The fatal flaw in logic here is the core assumption that European and U.S. markets are factually analogous. They are not. They are substantially different factually and structurally as I will explain in detail.
