In 1998 the U.S. Department of Justice filed suit against Microsoft Corporation alleging that the company used its market dominance over computer operating systems to implement abusive practices that harmed consumers. At the time, fear of Microsoft was rampant and the case was filled with sound and fury. Like Macbeth’s famous soliloquy, however, the fears of Microsoft’s dominance of the technology industry signified nothing.
The regulators back in 1998 maintained a static vision of the computer and technology market; when in fact these markets are notoriously dynamic. Today’s competitive losers become tomorrow’s economic titans. In the case of Microsoft and the OS wars, one of the competitors that were being harmed by Microsoft was none other than Apple Computer (aka Apple)!
While Microsoft was defending itself against the onslaught of regulators obsessed with yesterday’s technology, Steve Jobs of Apple was inventing the future; as was Larry Paige and Sergey Brin of Google, and Mark Zuckerberg of Facebook. Today, Apple, along with many other companies that did not even exist back in 1998, has sparked a technological revolution in the computer and technology markets. And, these Internet 2.0 and new technology companies are now thriving while Microsoft is facing existential questions.
The Microsoft experience provides valuable lessons for regulators struggling to find the correct policy framework to match the new market realities across the technology industry today. The technology revolution that dethroned Microsoft has created explosive demand for high-speed Internet connections – both fixed and wireless. Meeting this demand requires the additional deployment of advanced networks, faster speeds for consumers, affordable prices, and expanded access to and adoption of broadband technologies.
Relying on the same static notions that blinded regulators during the late 1990s, however, some critics are arguing that the only way to achieve these goals is through greater regulation of the providers, and by government manipulation of the marketplace. In its more extreme form, some of these critics (e.g. Susan Crawford, Tim Wu and New America Foundation) would see parts of the high-tech world regulated as if it were a public utility.
The calls for new and expansive regulations on the broadband industry are misguided attempts to expand the current top of the line technology to more people at lower costs. These arguments typically start with an over-exaggerated assumption – that the U.S. is losing the global broadband performance competition. But, we are not.
In fact, many parts of the U.S. have world class connectivity and speed. If each individual state was treated as a unique country for the sake of the global connectivity competition, the US occupies eight of the top ten slots in the broadband connectivity ranking.
Additionally, the data that paint a “connectivity problem” fail to consider the services provided by wireless connectivity. If you incorporate wireless connectivity, however, the number of households without broadband access in 2011 would not be the 7 million households estimated by the FCC; it would be about 2 million to 5 million households.
And, the ability for wireless technologies to have a significant impact on the connectivity story is exactly what should be expected in the dynamic technology industry, given that many consumers are choosing to connect through mobile devices. Rapid innovations and the rise of new players continually disrupt the broadband industry creating new consumer and business services and expanding those services to wider and wider audiences.
Broadband providers – both fixed and wireless – compete for each and every consumer’s time; gone are the days of providers flexing their muscles for market share. New players, such as Aero, Hulu, Netflix and others have upended the traditional approach of Internet providers.
Critics of the broadband industry consistently under-appreciate the benefits generated from these new and different types of competitors, viewing the market from the silos of the past. They also under-appreciate how technologies that are unimaginable today can change the entire industry’s dynamic tomorrow.
It is due to these crucial oversights that these critics want to see greater government regulation of the broadband industry. Treating the vibrant 21st century broadband industry as a government regulated industry akin to the 1950s Ma Bell or the modern day Postal Service is a sure way to thwart the very services and coverage the industry’s critics covet
The technological landscape will be continually evolving at an increasing pace. Antiquated regulatory structures, like those applied to Ma Bell, will lock-down the U.S. broadband industry and push the U.S. technology sector, a current global leader, toward becoming a global laggard.
The best path forward is a regulatory structure that recognizes the true nature of competition in the broadband ecosystem. And, just like with the OS wars of the late 1990s, that competition can (and likely will) come from unexpected sources. The policy environment should empower such technological revolutions. Doing so will only expand the myriad of benefits that the broadband industry is already generating.
* Wayne Winegarden, PhD is a Senior Fellow at the Pacific Research Institute and a Contributing Editor to EconoSTATS at George Mason University.