|
economics of scarcity vs the economics of abundance
Traditional economics and traditional organizations are built on the
assumption of scarce resources.
In a world of abundant resources, the traditional organizations will
try to make the new world behave as the old one did, where those
organizations grew and prospered.
In
The
Future of Ideas, Lawrence Lessig writes:
This is not because a company is irrational or because it
doesn't understand the nature of the market. The blindness that keeps the
company fixed in a dying path is actually its clear understanding of probable
returns. It sees real revenue from existing customers who need marginally better
technology. It doesn't see the revenue from radically new technologies that
depend upon unidentified or undeveloped markets. From its perspective, given its
customers and reasonable expectations, these successful companies rationally
fail.
Industry incumbents who can't be certain if they'll gain or lose from
a change in direction. They tend to stick with what they know works. And
they have powerful means by which to do so – brand value, existing
assets, the ability to form cartels, regulatory roadblocks, even the
courts and Congress. The complexity of their existing networks of
relationships with customers, suppliers and regulators also provides a
natural resistance to change. These bodies tend to keep moving in the
same direction. That's inertia. |
Competition forces the price of goods toward their marginal cost.
When the marginal cost is zero, the price of digital goods -- music,
movies, books -- will fall toward zero.
|
The public Internet should be stupid. |
The public Internet should be smart. |
Loose | The owners of the wires, fibers, cables, and spectrum (the pubic
Internet) should treat all bits the same. It is an end-to-end network with no
central services. For the sake of our economy, it is too risky to do otherwise.
Tight |
The owners of the wires, fibers, cables, and spectrum (the pubic Internet)
should be able to provide (and charge for) differentiated services for different
content. For the sake of our economy, it is too risky to do otherwise. |
|
At SBC, It's All About "Scale and Scope"
by Patricia O'Connell
Business Week, November 7, 2005
CEO Edward Whitacre talks about the AT&T Wireless acquisition and how he's
moving to keep abreast of cable competitors. ...
Q: How concerned are you about Internet upstarts like Google, MSN, Vonage,
and others?
A: How do you think they're going to get to customers? Through a
broadband pipe. Cable companies have them. We have them. Now what they would
like to do is use my pipes free, but I ain't going to let them do that because
we have spent this capital and we have to have a return on it. So there's going
to have to be some mechanism for these people who use these pipes to pay for the
portion they're using. Why should they be allowed to use my pipes?
The Internet can't be free in that sense, because we and the cable companies
have made an investment and for a Google or Yahoo! (YHOO ) or Vonage or anybody
to expect to use these pipes [for] free is nuts!
Why should they be allowed to use "his pipes"? Because they pay their ISP for
bandwidth, just like you and I do. And because for decades, the telephone
companies have been regulated as neutral carriers or common carriers. Unlike
other companies that invested in new technologies without a guaranteed return,
the telephone company was guaranteed a return in exchange for being regulated as
a common carrier. Now they want to leverage that investment by no longer acting
as a neutral carrier.
This issue is hot at the moment, though concerns about tiered
services have been voiced for the past decade. Now that the phone companies have
enough dark fiber in the ground for streaming video, they can deliver TV as we
used to know it in order to compete with the cable companies, who have plenty of
room in their coaxial cables for voice traffic.
Do two monopolies, a
duopoly -- telecom and cable -- make for genuine
competition?
Do those monopolies own the fiber and cable in such a way that
they can do anything they want to with it? Or has the monopoly they've been
granted given them an obligation to be neutral carriers? Over the last thirty
years, cable has been regulated as an information service and could do whatever
it wanted to with their cables. If it wanted to run company A's content but not
company B's content, no problem. The cable companies negotiated franchises municipality by
municipality. For most of the 20th century, however, the telephone company was a
regulated monopoly that was a common carrier or neutral carrier. That meant that
they had to provide the same phone service to whoever wanted it. They could
charge more for more usage, which they did when Internet companies started using
lots of bandwidth. But they could not connect me to company A when I called
company B.
In the old world, cable TV was considered totally different from
voice calls. However, the new world of the internet makes them all packets of
bits. The cable TV industry thus added broadband internet access and VOIP
services as and when they wanted to. The telephone companies, however, were
still constrained to be neutral carriers. They wanted to offer "TV" over their
fiber, so they laid the fiber, but they have left 99% of it dark because, as
common carriers, they would have to open the 99% to other companies, some of
which may compete with them. So the fiber has stayed dark.
Then in August 2005, the FCC leveled the playing field between
the two incumbents. They voted to end regulations requiring incumbent
telecommunications carriers to share their DSL broadband connections with
competitors.
|
FCC Halts
DSL-Sharing by Telcos
by Grant Gross
IDG News Service, August 05, 2005
The FCC, in a 4-0 vote, removed rules that allowed
competitors such as Earthlink to offer DSL over lines owned by the four giant
incumbent telecom carriers, often called the Baby Bells. ... Some consumer
advocates and telecom observers predicted that the FCC's decision could kill off
DSL service from small ISPs when the DSL network-sharing rules end in a year.
The FCC's decision Friday puts DSL regulation on an equal footing with cable
modem service after the U.S. Supreme Court in June rejected a challenge to an
earlier FCC decision allowing cable companies to close off their networks to
competitors.
So now that the historic agreement to exchange common carrier
status for protected monopoly status is over, the telephone companies want to
leverage the advantage they gained during those decades by tiering Internet
service. Now they can make all that dark fiber pay off.
Tiered Internet service means that some bits get fast-lane
priority -- let's say for ABC's or CBS's prime time shows or for Verizon's
"partners". And other bits -- let's say for your video or a start-up that may
compete with one of Verizon's "partners" -- get the slow lane. While there's no
denying that Verizon has the responsibility to its stockholders to try to pull
that off, there's also an argument that they got to their position of power by
accepting the terms of a regulated monopoly. And now that they're unregulated,
they want to
leverage that power to raise the barriers to entry for competition that will
threaten them or their partners.
How would you get to be a partner of Verizon? I suspect you'll
need lots of money just to be able to sit at the table to talk about it.
|
increased sophistication of
users' knowledge and skills
