The WSJ article brilliantly exposes a
powerful potential motive behind why the online giants want to apply net neutrality regulation to the competitive wireless industry.
The WSJ article explains that Google and Yahoo could lose out to smaller search competitors in becoming the default search engine on the 2-3 inch screen of mobile handsets, because the much smaller handset screen is such a different animal than the much bigger PC screen where the search-opoly of Google and Yahoo dominate. the story explains that people use their mobile Internet access very differently than stationary PC search over DSL/Cable modem.
Given that the wireless market is
officially ruled competitive by the FCC, wireless broadband providers are currently free to commercially negotiate to determine which search engine will be the default search bar on a wireless company’s mobile handset screen. It is important to note that broadband carriers have pledged not to block access to any search engine’s website and search bar. The issue is just, which search engine will get the default screen placement, because of the limited mobile screen space available. This commercial negotiating freedom is no different than when Google paid to be the default search engine on Dell PCs, or Yahoo cut a deal with AT&T to do AT&T-Yahoo co-branded broadband.
What is highly unusual here is that the search-opoly that dominates the PC industry search market is trying to pass NN legislation (Snowe-Dorgan) which would ban (under the guise of non-discrimination) a competitive wireless broadband provider the commercial negotiating freedom to select a default mobile search engine.
The search-opoly has defended the need for NN regulation by alleging that there is unfair market power in an alleged DSL/Cable modem “broadband duopoly.” The problem is that wireless is officially ruled competitive by the FCC and thus one cannot credibly make the market power excuse for regulating the competitive wireless market like Snowe-Dorgan proposes.
So who is really being anti-competitive here? The search-opoly in seeking permanent and special legislative protection from broadband competition, or the officially competitive wireless market, which is simply engaging in commercial negotiations just like the search-opoly companies do in their competitive markets?
This footnote supports my assertion that the wireless market is competitive:
Here is the link to the FCC's Tenth Report on competition in the wireless industry released in Sept. 2005. The link is at http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-05-173A1.pdf.
The FCC's Tenth Report on Competition in the wireless industry repeated the finding that the Commission has made year after year, to the effect that the wireless industry is performing competitively.
Page 4, paragraph 2, observes: "the Commission concludes that even with fewer nationwide mobile telephone carriers there is still effective competition in the CMRS marketplace. Among the indicators of market structure that support this conclusion, we note that 97 percent of the total U.S. population lives in counties with access to three or more different operators offering mobile telephone service, the same level as in the previous year, and up from 88 percent in 2000, the first year for which these statistics were kept. The percentage of the U.S. population living in counties with access to four or more and five or more different mobile telephone operators also remained roughly the same as in the previous year."
Page 4, paragraph 3, in particular notes not only that "competitive pressure continues to compel carriers to introduce innovative pricing plans and service offerings, and to match the pricing and service innovations introduced by rival carriers" but also that "the deployment of next-generation networks based on competing technological standards continues to be an important dimension of non-price rivalry in the U.S. mobile telecommunications market."
Page 37, paragraph 94, notes "In comparing competitive entry in counties with population densities of 100 persons per square mile or less to those with densities greater than 100 persons per square mile, we find that the less densely populated counties have an average of 3.7 mobile competitors, while the more densely populated counties have an average of 5.5 competitors." While the latter declined slightly (from 5.7 to 5.5 on average), the options available in rural markets remained the same.
Page 38, paragraph 95, notes "Based on our rollout analysis and information provided by commenters, we conclude that CMRS providers are competing effectively in rural areas." and "Despite the smaller number of mobile operators in rural areas as compared to urban areas, there is no evidence in the record to indicate that this structural difference has enabled carriers in rural areas to raise prices above competitive levels or to alter other terms and conditions of service to the detriment of rural consumers. In addition, data and statements presented by commenters on the Tenth CMRS PN support the conclusion that there is effective competition with respect to CMRS in rural areas"
Pages 44 through 46 may also be of real interest - given the broadband issue you raised - since they note the upgrading of carriers' networks with next generation technologies, and paragraph 119 on pages 46-47 specifically notes that "CDMA 1xRTT and/or 1xEVDO has been launched in at least some portion of counties containing 278 million people, or roughly 97 percent of the U.S. population, while GPRS, EDGE, and/or UMTS has been launched in at least some portion of counties containing 267 million people, or about 94 percent of the U.S. population."
The report winds-up by repeating on page 76 in paragraph 204 that "Even with fewer nationwide mobile telephone carriers to choose from, U.S. consumers continue to benefit from robust competition in the CMRS marketplace."
