The following originally appeared in the January 2021 issue of the CPI Antitrust Chronicle.
The communications industries range from plain old telephone service, through broadband access, whether fixed or mobile, to cable and satellite video distribution. These industries are not exactly passé compared to the online platforms such as the search engine “market” that Google has so admirably revolutionized and may (or may not) dominate today. After all, Google search queries need a pipe to travel from us, the hopeful searchers toiling on our computers, tablets or smartphones, to Google servers. Even more important, the pipe is necessary for the return trip back to us, bringing a cornucopia of audio and video that condenses real and imaginary worlds on one small screen in ways that would have been incredible to time travelers visiting us from the twentieth century.
And so, the communications industries and online platforms need each other: the first needs the second’s content. The second needs the first’s pipes. In that sense, they are contemporaries and codependents. But the communications industries have a history longer than that of the online platforms — after all, they go back to 1876, when Alexander Graham Bell summoned Mr. Watson on the phone. With the longer history comes longer experience with analyzing and resolving competitive issues. And the communications industries afford many useful teachings for a way forward in the Google search engine case, including a way past and around the impasses and conundrums presented by the complaint filed against Google by the Department of Justice (“DOJ”).
Here are two of these lessons: be careful not to throw out the baby of the competition you want with the bathwater of the exclusivity arrangements you do not like. And, to promote competition, nurture a competitor: find a white knight or two; and give them the resources to compete.
But first, a few words about what links legacy communications and online platforms together from the perspective of competition analysis. There is a lot that does. First, they are both networks prone to market power and its exercise: each additional user of the network does not merely add a proportionate unit to a provider’s market share; it takes out disproportionate quantities of oxygen away from would-be competing networks. Second, both industries are chains of intricately connected links. In the communications industry, we have electromagnetic spectrum, wireless towers, cable or satellite platforms, broadband access pipes, and online video products or cable networks that pass through these pipes. In the online platform space, we have search engines, browsers, and operating systems. And, of course, as mentioned, each industry is a link to the other’s chain in its own right: online platforms provide increasing amounts of content for the communications conduits, which in turn provide all of the transmission capacity for that content. Vertical integration over many links of the chain also gives companies with market power over one of them one more chance to leverage that power. At the same time, a presence in one link of the chain may endow a company with the wherewithal to become a credible competitor over another link.
Continue Reading Mr. Watson, Come Here. I Want To See You: A Message From the Communications Industries on How to Promote Competition in the Online Platform Space