Resistance is Futile

Tim Wu on the state of the wireless market:

Who would have guessed that Apple—onetime victim of IBM and Microsoft—would today be an agent and symbol of industry consolidation? I don't know that it's fair to say this is Apple's fault. A telephone monopoly has been the norm for most of American telecommunication history, except for what may turn out to have been a brief experimental period from 1984 through 2012 or so. Like the short British experiment with republican government under Oliver Cromwell, it may be that telephone monopolies in America are a national tradition. In this larger story, the iPhone matters just as one of the last nails in the coffin of Bell's would-be competitors.

Brutal, but true. AT&T and Verizon cleaned house in the FCC's recent 700 MHz auction and appear to be scooping up spectrum and independent carriers faster than they can consume them. Sprint has been driven, in its desperation, into a last ditch joint effort with Clearwire, Comcast, Time Warner, Google, and Intel to offer an alternative data network -- a high stakes gamble that faces numerous business and technological obstacles. T-Mobile, the only other nationwide wireless carrier seems content to slowly sink into irrelevance. If the Sprint gambit fails, AT&T and Verizon will stand alone atop the wireless market. And even if it succeeds, the three viable national wireless networks will, by no coincidence, be under the control of the same four entities that have established total dominance over wireline voice, video, and data service in the United States: AT&T, Verizon, Comcast, and Time Warner. Either way, the mass extinction of competition in the American telecom marketplace is all but complete. To make matters worse, on the wireline side Comcast and Time Warner have few (if any) overlapping markets, and the same is true of AT&T and Verizon. To the extent that consumers prefer quadruple play offers (voice, video, data, and wireless), a proposition all the major carriers are betting heavily on, the vast majority of consumers will have only two options, if that. What has befallen the telecom market over the past 10 years is a disaster.

While we can only hope that help will be on the way once Democrats (hopefully) take over the White House and the FCC, it may be too little too late. To undo what has been done would require drastic measures. It would mean breaking up these big four, forcing some open access regime on them, or (best of all) forcing a separation of their physical network assets from their content and service delivery businesses. Any of these options would entail a major battle fought simultaneously on political, legal, and regulatory planes that, in all likelihood, would take the better part of a decade to play out. I doubt even an enlightened Democratic government would have the stomach for that. The only real alternative will be for the FCC to increasingly re-regulate these businesses. When the market cannot enforce discipline on providers of necessary services, regulators have to step in and assume the task. Net neutrality will only be the beginning...