Do Comcast and Verizon Really Compete with Apple, Google?

One can argue that the recent agency agreements signed between Verizon and Comcast, Time Warner Cable, Cox Communications and BrightHouse are deals that could reshape the nature of local access competition in the U.S. market.

Some will argue that deals signal a division of effort that has the cable partners focusing on landline services while Verizon handles the wireless business, without a formal merger between the companies.

Call it what you like, one might make the argument that, essentially, the firms are carving up "spheres of influence."  One would be harder pressed to make the argument that Verizon thereby avoids investing in the latest generation of access technology. Verizon already has done so, in nearly all its markets, with a couple of major exceptions.

But rhetorical flights of fancy and feints always are part of the game when such deals require any sort of finding that the deals are "in the public interest." We are likely to hear at least some of that as the Federal Communications Commission weighs its approval of spectrum transfers that are not formally part of the agency agreements.

Skeptics will be watching for signs of a long-familiar tactic, namely misdirection. "Look there, not here," is essentially a tactic sometimes used in such campaigns.

Some might say that is at work when the partners seriously argue the deals are necessary so they can better compete with the likes of Google and Apple.

Ignore for the moment the issue of whether participants in any ecosystem successfully can take over roles held by other key participants. There are reasons enough to doubt the success they could potentially have on that score.

Ignore for the moment the potential impact on local access or wireless competition. Consider only the issue of access providers arguing they need to, and will, compete with their application and device partners.

If serious, that implies the device and application providers will have even more incentives than they already do to reinforce the loosely-coupled way they work with access providers. In simple business terms, "if you try to minimize me, I will try to minimize you."

That is not to say areas of overlap will exist at the edges. Access providers have been app providers in the past. Access providers sometimes have dabbled in the device arena.

App providers do offer features and services that are competitive with, and displace, some service provider apps.

But one has to wonder. If channel conflict continues to escalate, and if in fact four major mobile service providers suppliers actually are too many for the U.S. market to support, long term, whether currently "unthinkable" courses of action might become practical.

No industry in the U.S. economy seems to pile up free cash more than the application provider business. Apple alone has enough excess cash that it has started to pay dividends.

It is true that no major application or device manufacturer really "wants" to be a service provider. On the other hand, firms such as Apple famously are concerned about securing their supply chains. And "access" might someday be seen as a more-vital part of an application or device supply chain.

So, potentially, access providers and app and device providers could wind up competitors rather than collaborators. There is a dynamic tension in the ecosystem. Whether that becomes a destabilizing tension is yet to be seen.