July, 2009

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.

The new industry-proposed "Self-Regulatory Principles for Behavioral Advertising" which Google publicly patted themselves on the back for today, conveniently do not apply to most all of Google's current advertising business. 

An unusual and notable pattern appears to be developing with Google and DOJ antitrust enforcers. 

When Investment News asked John Bogle, Vanguard's founder and the father of indexing, about my "Indexing into the Ditch" thesis (that indexing is one of the root causes of the financial crisis) he said: it “is nuts! Last time I looked, index funds accounted for about 0.4% of all stock trading ... Just perhaps the other 99.6% might bear a teeny-weeny bit of the responsibility.”

Let me first respond to Mr. Bogle's points in order.

The thesis "is nuts! "I must admit I smiled at the ad hominum implication that my thesis was "nuts" and not worth listening to; I remembered that Bernie Ebbers called me the "idiot Washington analyst" because my research was the first to charge that WorldCom's business simply did not add up.

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.

What do the Administration's new "NOFA" guidelines, which implement the $7.2b broadband stimulus package, tell us about the trajectory for broadband and net neutrality policy going forward? 

• If one listened to just the public comments of net neutrality proponents one would miss a lot of important substance and clues about where broadband and net neutrality policy may be going, given that these new grant guidelines/conditions are the first major official broadband guidance stemming from the new Congress and the new Administration.

What do we know now that we didn't know before the release of the NOFA guidelines?

I. The Administration implicitly rejected extreme net neutrality.

If you are interested in the question of wireless competition and antitrust, please don't miss this great post by Bret Swanson of Entropy Economics.

He nails how distant this DOJ telecom/wireless review is from the competitive facts on the ground that most every consumer readily understands.

Google's launch of a new PC operating system on the heels of its announcement ending the "beta" phase for its popular gmail, Calendar, Docs and Talk applications, is happening in the midst of a new era where cyber-security has been made a new national priority and internet security breaches are increasingly serious and commonplace.

Scott Wallsten of the Technology Policy Institute issued an informative and insightful report on the many international broadband measures out there; I recommend reading it if you are interested in the subject. 

I particularly liked the new data on how broadband is used that shows that the U.S. has the highest:

• Digital share of recorded music sales of surveyed OECD nations;
• Sales of online films; and 
• Online TV and video revenue per head. 

I liked these new measures because they begin to expand this discussion to how broadband is used and how people benefit from broadband rather than just a sterile and not very useful debate over broadband penetration.

The supreme irony of the special access* issue is that competitors, who want to avoid investing in next generation broadband access facilities, are demanding that the FCC... (whose top priority is a National Broadband Plan to encourage the rapid build-out of modern broadband facilities to all Americans) ...regulate copper access prices in a way that surely would discourage investment in the exact next generation facilities that the FCC wants to get built.

• * "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.
• Bronze is 90% copper and 10% tin.