Do Not Underestimate the Power of the Dark Side

by publius

While we're all waiting for the big spectrum auction decision to come down, a quick word on Google. As some of you may have noticed, I've been skeptical to say the least of Google's chances of success here (i.e., their ability to win spectrum and enter the wireless market). Well, this column pretty much explains it all. It's hard to believe I'm just now "discovering" this weekly column. But anyway, it's not too much to say that I agree with every word. Particularly these sets of words:

By this time it should be clear that I generally support what Google has proposed and think it is a very good idea for us all. So why, then, does the headline on this column suggest that Google is on crack to have even made such a proposal?

Because they don't know who they are messing with, that's why.

I am 100 percent behind Google's four conditions, but I see very little likelihood that they will be accepted by the full commission. I also see that they have slightly moved the wireless incumbents, who are mean and spiteful companies and WILL HAVE THEIR REVENGE.

. . .

Look who Google is up against -- all the largest Internet service providers in the U.S. Google will not win this even if they win the auction, because the telcos and cable companies are far more skilled and cunning when it comes to lobbying and controlling politicians than Google can ever hope to be. The telcos have spent more than a century at this game and Google hasn't even been in it for a decade. And Google's pockets are no deeper than those of the other potential bidders.

In this movie, Sauron lasers Sam and Frodo before they get to Mount Doom. Darth Vader doesn't help Luke out in the end. Megatron wins. Wile E. catches the Roadrunner. Elizabeth Bennet learns that Darcy is a loser. Etc. Etc.

Comments

[liberal japonicus]

Does anyone remember the film the President's Psychiatrist? In that, because the president's psychiatrist has all these secrets about the President and is chased by various baddies until the final villain is revealed to be the phone company.

Having said that, while Google might get their but whooped this time, I'd like to think that they have enough staying power to shrug it off and put the hurt on them down the road. Though that's probably because I like movies where good triumphs. But I do think google's pockets are much deeper, not because of their pockets will continue to be deeper, sort of like a railroad company vs. a horse drawn carriage company.

[Ginger Yellow]

"But what if it is changed for us? What if Verizon, and AT&T, and Comcast, and half a dozen other huge broadband ISPs suddenly cut deals with some search company other than Google and your ISP-supplied browser and homepage no longer give such prominence to Google? "

You can't even set your own homepage on US phones? Jeez. Gotta love that free market. I suppose it makes up for getting Nintendo games 6 months or more before Europe.

[liberal japonicus]

that last part was horrid.

not because their pockets are deeper now, but because they will continue to deepen.

[KCinDC]

Ginger, even if you can set your startup page or search engine, the vast majority of people won't know how to do it and won't bother to do so. Defaults are incredibly important.

[bbd]

Cringely has an interesting column, but take what he has with a large dose of salt. Sometimes he is on, but often times it seems like he is the one on crack.

[Nell]

It's hard to believe I'm just now "discovering" this weekly column.

That it is, I have to agree. Maybe it's an age thing. You must not have been reading the computer mags back in the 1990s, eh?

But if you've had the exposure to tech sites that your level of interest in these issues would seem to indicate, it's still hard to see how you'd have avoided coming across Cringely.

[jonnybutter]

It's hard to believe I'm just now "discovering" this weekly column.

yes, even more especially since I linked to his column many times in the comments of your old Legal Fiction blog, Senor Publius. I know, I know - so many links, so little time. But for a really quite mainstream column, it's kind of essential.

Yes, 'Cringely' is hardly always right, but he has a better-than-decent track record, and this column seems solid to me. I am baffled by Google's move.

[publius]

i know, i know -- i'm bad. actually jb, i remember you sending me a link to this column before in an email too. my telecom-ish "studies" didn't begin in earnest until 2005, so there are gaps. in some ways, this is good b/c i don't have old romantic attachments to the internets glory days of the 90s. but it also means i have gaps. as for telecom blogs, i've only been reading them regularly quite recently, so that's why i probably haven't seen him.

[jonnybutter]

my telecom-ish "studies" didn't begin in earnest until 2005, so there are gaps. in some ways, this is good b/c i don't have old romantic attachments to the internets glory days of the 90s.

good point. Cringely, to his credit, doesn't have those romantic attachments either - one reason he's pretty good.

[Jack Robles]

The link provides some answers to my questions from the previous post. Sufficient that I make the following observations:
There's a venerable paper, Gilbert and Newberry, American Economic Review, early 1980s, title including words like "Monopoly," "Innovation" and "Preemption." Its a fairly simple read and makes a fairly simple point. Consider a market with a monopoly (granted by patent lets say) but for which there is a potential new product that would allow it's devoloper to compete with the monopolist. Who will develop the product? Well the world being uncertain one can not really say, but the monopolist has the greatest incentive and so will be most likely to win. A new firm can capture it's share of duopoly profits by making the innovation. However, the monopolist loses the difference between monopoly profits and duopoly profits should someone else innovate. Since a monopoly market generates more total profits than a duopoly market, the monopolist has more at stake than any potential competitor. This argument remains valid even if the monopolist were to devolop the product simply to claim the patent with no intention of ever marketing the product.
So okay, the Gilbert-Newberry model is grossly simple and the world is not. It nonetheless indicates a strong bias in the market.
How does this relate to the current conversation? As I understand it, cell phone technology is sufficiently available that many many companies can make cell phones easily. The only thing that grants a company market power in the cell phone market is it's ownership of a peice of the spectrum. So if we have VoIP on a peice of open spectrum, then we almost immediately turn a highly concentrated very poorly competitive market into a highly competitive market. (Note: Cringly writes as if the current cell phone providers would continue to be the only providers. If there is some technical aspect that I am missing making this true, then it stands this post on it's head.) This seems a dissaster for the current mobile phone companies. Of course, they will bid more, lobby harder, bribe more ...
I do remain unclear how Google would hope to profit from winning this peice of the spectrum. But then, maybe this is not really about profits.
Jack

[KCinDC]

OT: If you can't go on Larry King and expect a softball interview with no uncomfortable questions, what has the world come to? I think will be sticking to Limbaugh for the rest of his term.

[KCinDC]

Hmm, apparently my fingers refused to type the name of the Vice President for Torture. Insert it above as appropriate.

[Model 62]

Cringly writes as if the current cell phone providers would continue to be the only providers. If there is some technical aspect that I am missing making this true

It seems to me that the current cell providers own all the network hardware (the cell towers and etc); new entrants with their new piece of the spectrum would have to duplicate all that capital expenditure or strike a deal with someone who's already done it.

[Jack Robles]

Thank you Model 62, that is a very good point.
That being the case though, I am left wondering. What if, Google were to win this new peice of the spectrum, but the mobile providers simply did not allow their network hardware to be used for it? Surely this possibility has occured to Google. Does it seem likely that they would want to provide the network hardware as well?
Jack

[Jack Robles]

Thank you Model 62, that is a very good point.
That being the case though, I am left wondering. What if, Google were to win this new peice of the spectrum, but the mobile providers simply did not allow their network hardware to be used for it? Surely this possibility has occured to Google. Does it seem likely that they would want to provide the network hardware as well?
Jack

[Ginger Yellow]

"Ginger, even if you can set your startup page or search engine, the vast majority of people won't know how to do it and won't bother to do so. Defaults are incredibly important."

Really? On a phone? I'd have thought that people paying up for web enabled phones and high speed connections would be more savvy than your typical home internet user.

[me]

"But then, maybe this is not really about profits. "
The founders of Google have often talked about what's "most useful", presumably to the largest number of people. Their middle management may only pay lip-service to this philosophy, but this action is consistent with it.

GY: web-enabled phones are fairly common-place. Many are bought (or at least sold to) less knowledgeable people.

[Sebastian Holsclaw]

Am I the only one who can't get to the comments page on the Darfur post?

[Sebastian Holsclaw]

Never mind, I fixed it by using a classic computer fix. Turn comments off, turn them back on, mysteriously fixed. Lol.

[Nell]

I was able to go there and comment just now; see if you can.

[Nell]

Crossed in the ether... glad it's fixed.

[Gary Farber]

"Does anyone remember the film the President's Psychiatrist?"

Close: The President's Analyst. It's a classic: James Coburn, Godfrey Cambridge, The Phone Company.

Not, I emphasize, "the phone company": it's a crucial distinction.

It's sort of a vague distant cousin of the Flint films; they're all about as Sixtiesish as mod/pop mainstream Sixties silly films got. They're also primary source material for Austin Powers, although The President's Analyst has all sorts of interesting serious subtexts of paranoia about government, and corporate power, and their intersection in surveillance, and so on.