It seems as if Google CEO Eric Schmidt has been reading Richard Shell's Make the Rules or Your Rival's Will, a book of colorful stories about how firms like MSFT, Intel, and CBS have used the legal and regulatory process to further their own competitive strategies.
Google wants the FCC to mandate access rules that would turn the newly auctioned spectrum into a "third broadband pipe" (in addition to cable and DSL) that would allow Google to offer content and advertising to mobile users (article1, article2, article3). Preston McAfee in his Competitive Solutions: The Strategists Toolkit, calls this the "sixth" competitive force--the one that Michael Porter forgot--competition from complements.
The problem, of course, is that restricting use of the spectrum reduces what other firms, like Verizon (position paper) and at&t, are willing to pay for it. To counter this argument, Google has offered to bid $4.6 billion for the spectrum should the FCC madndate its version of "open access" licensing. Restrictions may also reduce the incentive to invest in innovative uses of spectrum.
Watch the stock price reactions to major FCC announcements to see who is winning this war.
From time to time, the FTC or US Department of Justice weighs in on these legislative and regulatory battles when they think consumers are being harmed. See James Cooper, Paul Pautler, and Todd Zywicki for a history of competition advocacy at the FTC.
A bit off-topic from the competition aspect, but what I would be curious to see is an analysis of the net economic benefits of licensed and unlicensed spectra. The position of the FCC is that any spectrum that can be auctioned is a good thing. I'm not convinced that is the case if the larger economic impact is measured.
ReplyDeleteA prime example would be the cellular licenses of the '90s that resulted in huge write-offs and bankruptcies versus the unlicensed spectrum used for wireless LANs or cordless telephones. Which had the greater positive economic impact?
I believe this is the question that the FCC should be asking with regard to the opening of the former television broadcast spectrum, not what the rules should be for the licensee.
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