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Tag: antitrust

Monopoly Online

Posted in biz by Adam
Posted on

The Steam problem, but everywhere else too.

With some buzz about the American Innovation and Choice Online Act (AICOA) (Congress.gov: S. 2992: AICOA), it’s important to examine what systems like app stores, marketplaces, and search engines really do and look like.

My general position is favoring competition, but I think it’s as important to ask what competition looks like in a digital space as to ask why we don’t have it. We don’t have it, and the economy and people are hurt from not having it. Anti-competitive practices don’t help, but there are frictions that are also in play.

Online distribution

What a search engine like Google, a marketplace like Amazon, and an app store like Apple’s or Google’s all have in common is that they are middlemen. The customer wants to get something or get somewhere, and they can’t just get it or go there directly. They need assistance due to the enormity of the world. So Google lets them try to find information or a resource that fits their needs. Amazon lets them seek products matching their need. Apple app store and Google app store both let them find the software for their mobiles.

The bill’s attempt is modest. It makes it illegal to engage in stacking the deck. But it doesn’t, won’t promote real competition, which is a harder problem.

If you had competition, what would it look like? You want to search for banana peels, for your banana peel collection, so you go to different engines and search each one? I do that today. I go on duckduckgo and search, and if it doesn’t turn up what I need, and I think Google might, I’ll search on Google.

For a marketplace, same thing. You want to buy banana peels, so you go on Walmart and Amazon and see who has the best prices. Or if you find the prices on Amazon too high you try Walmart as a fallback.

With the app stores, it’s worse, of course. Because there’s limited options and each phone is doing the same things differently so that there’s not compatibility across Android and iOS.

But even if you stick to marketplaces (and assume you have accounts with each, no onboarding friction), it’s still a mess to find things across multiple stores, to make multiple purchases means multiple shipments. And if there are more than two big players, how many can people reasonably go through to buy banana peels?

Isn’t the problem that these middlemen exist as middlemen? That there isn’t a broader interface that cuts through all that friction, lets you see products?

If all competition means is that a bunch of new silly names enter the market that look mostly the same as the existing firms, that seems a waste. True competition will require different firms with different and limited objectives to each. Replacing the singular middlemen with mixtures of smaller businesses that cooperate.

To make that work, though, other changes would be needed. Amazon and Walmart have efficiencies of scale, they have warehouses that can combine ordered merchandise into single shipments, they have fluid logistics that move products around the country all day and night.

And there are environmental benefits to that. There are cost benefits to that. How can you replicate it without forcing oligopoly? How can a free system do the same thing?

Of course, there are frictions. A new store means a new login, entering your data, learning a new interface. Sellers have the same problem. Each new middleman means they have to replicate their process to another, slightly different platform. If they have dozens of products and dozens of middlemen, that’s a lot of work to keep things updated. If they have to fit in with shipping logistics, that’s a whole other set of processes that get replicated.

And it’s not like the existing options work that well, anyway. Amazon product listings are an ugly mess most of the time. Google can find some things, but it fails wildly on others. And the state of mobile operating systems, much less apps, leaves them looking like toys. Major newspaper apps don’t have a find-on-page function! Something every browser has had for decades!

This bill should pass, but it will only marginally improve the broken stupidity of the status quo.

A better system would require several changes, few to law, some to business structures, and most to software. An identity system would remove onboarding. Outside of a few members-only stores, you don’t have to fill out paperwork to buy something in stores. A vendor-agnostic logistics system would allow for product listings to be added and curated separately and without a particular middleman.

Products could be provisioned to warehouses and shipped based on similar functions that middlemen perform, but without the need for middlemen to act as gatekeepers. Returns would be handled in a similar way. This would create a class of independent warehousing and logistics firms who would follow industry standards to fulfill their functions.

The state of mobiles is probably the most difficult. Proper separation of OS from userspace, with all the security concerns inherent in software, is very difficult. Mobiles are kind of crappy anyway. I’m not really sure what it will take to fix this mess. There are all kinds of simple things one imagines using the mobile for, that is either impossible or requires a lot of separate services today. The gap between the science fiction ideal of a pocket computer and the thing you can buy today is as big as the difference between the lightning bug and the lightning. And that’s not something an antitrust bill does anything to address.

Value in Television

Posted in biz by Adam
Posted on

Brief look at rental racket in cable, and the future with autonomous vehicles.

Happened to see a repost about an old (2011) report by the Natural Resources Defense Council (NRDC) finding high electrical costs associated with cable boxes. The environmental cost of rented equipment often gets overlooked, along with the economic losses it perpetrates. Mostly, renting helps the environment. But chronic/long-term renting, where the energy costs or other negative environmental factors are obscured, should not be confused with short-term, purposeful renting.

But, of course, we went down the equipment rental road with Ma Bell for decades before the government finally stepped in and ruled their scheme illegal. Today most people own their own telephones; the few that still have landlines, anyway.

Still, adoption of subscriber-owned equipment appears negligible in television. Digging around turned up a speech/statement from then-commissioner Susan Ness, 11 June 1998 (that’s 15 years ago) (see FCC: Text document: stsn816.txt). It discusses the FCC implementation of Section 629 of the Communications Act. That section charges the FCC with adopting regulations allowing consumers to replace their rented set-top boxes with commercially-available devices. That section was enacted in 1996.

To date, the adoption rate is dismal. It remains a work in stasis: the government has no ability to bootstrap markets in the manner the law dictates.

We see this pattern repeated. Industry, happy with their oligopolies (hell, just look back at Ma Bell, she never did voluntarily sell phones; it took the government breaking the company up to get it done), maintain them. And that’s what we see with cable. And that’s what we’ve seen with tobacco’s sluggish entry into the electronic cigarette market. And so on.

But given enough time, evolution takes its course. The advent of Internet Protocol video services has begun to foster new set-top boxes. New services. Although still developing, it seems clear that before long the industry that didn’t want to evolve will become extinct. Or will likely use whatever cash they have left to buy some small piece of the new industry just as their mast splinters and their sails (and sales) fall to the sea floor.

Ahoy, but a new raider appears on the horizon. We’ve been reading about self-driving cars, and that the ownership of cars will die off. That’s both good and bad, depending on how quickly an oligopoly develops. We will face the same sort of shipwreck of capitalism that cable has been. Like Michael Caine in The Island, stranded on a desert island of bloodthirsty, inbred swashbucklers.

Does the rental racket, per se, mean oligopoly? Not hardly. The oligopoly of phone and cable came not out of necessity but the desire for an extra subscriber fee. Maybe with a provision similar to the Affordable Care Act’s 80% rule (that 80% of premiums go to actual care), it could have been avoided: if all rental fees had to be at least 80% provisioned for equipment replacement/upgrade.

But for cars, as long as the fleet-ready regulations are low enough, anyone could likely purchase and maintain a vehicle that could generate revenue. That is, if the requirements for an autonomous car to be rentable are low enough (some simple quality test system, payment/route system, etc.), it will thwart the ability for some few companies to simply control the market, excluding competitors.