Who Has "Freedom of Speech?"

Facebook's latest issues with privacy and transparency obviously raise key questions about the role of trust in social networks or any other apps funded by advertising. 

Less obvious are other questions about ad-supported technology companies in general, especially as the advertising revenue model virtually requires creation and delivery of content, information or communication capabilities. 

Media includes "communication channels through which news, entertainment, education, data, or promotional messages are disseminated." That includes every broadcasting and narrowcasting medium such as newspapers, magazines, TV, radio, billboards, direct mail, telephone, fax, and internet. 

That means Facebook--despite its traditional assertions, meets current definitions of media, in addition to being a technology company. That also implies--perhaps demands--that Facebook's content be treated as "media.

One phrase traditionally expressing such freedoms is freedom of the press, especially in the context of U.S. law. The U.S. Constitution guarantees the freedom of the press (among other core freedoms) in its First Amendment. 

"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances."

To be sure, different media have different degrees of First Amendment protection. Traditionally, newspapers and magazines (print media) and arguably internet forms of such media have had the greatest degree of protection. Broadcasting (radio and TV) have had more regulation and obligations (children's programming, content restrictions and "diversity" or "balance" requirements). 

Since data services of all types (computing, storage, transmission) have been non-regulated, new internet apps such as Facebook have been in a category akin to newspapers and magazines. 

Linear video (modeled originally on cable TV) has had regulation similar to broadcasting in some ways. 

Former utilities such as telcos once were not considered media, but regulated as monopoly common carriers. All that makes no sense these days, as telcos and cable companies are in a number of businesses, ranging from internet access to communications to media. 

Some of us would argue that Facebook and other ad-supported apps that rely on content delivery and advertising as the business model, as well as Netflix and other streaming services, have First Amendment free speech protections. 

What that means is a new issue. Though it is not always understood, there are rival "free speech" issues always at stake. The original thinking was that the right of free speech belonged to the speaker (person or entity). 

As a practical matter, that meant people (citizens) as well as "owners of printing presses" and their customers. In other words, the "right of free speech" or "freedom of the press" (both separately protected, as well as the free exercise of religion) belonged to the "speaker," not the "listener." 

In other words, one way to explain the right is that it protects the right of a speaker, not the rights of the listener or hearer or reader. 

Over time, it got more difficult, as broadcasting medium regulation added some "listener" rights, such as "diversity of voices" or "fairness" or "mandated programming for children" and also some restrictions on content (language, nudity). 

By definition, that means we always have conflicting rights at play. Whose rights are to be protected, those of speakers or those of listeners? And to the extent there is conflict, where must the fundamental rights be protected? 

There is no simple answer, though some would likely note that, on balance, it is speaker rights, not "listener" rights, that have to be protected, when there is a clash.

That also is a current issue, given the seeming willingness of university administrations in the United States to seemingly favor "listener" rights as opposed to "speaker" rights. 

"Free speech" becomes almost meaningless if it is abridged by rules seemingly catering to "listener rights" not to hear messages with which they disagree. 

This might seem abstract. It is not, and will be obvious as our "regulation" of services such as Facebook is considered. There are opportunities to protect and enhance freedom, or to restrict freedom. A fundamental issue will be "whose rights are protected." 

This is not a new issue, though it remains a profoundly important issue. And there is no simple, easy, clear cut answer. 

Vertical Integration Might be Necessary Now

The news that Google is considering getting into the business of in-flight internet access illustrates one important aspect of the internet ecosystem, namely that growth opportunities have participants looking at different roles within the value chain.

To be sure, vertical integration has high value for consumer-facing participants: platform, access or app.  

To be sure, internet access as a product has value only as internet applications exist, just as app providers depend on widespread internet access adoption to create their own revenue models, while platforms depend on the ubiquity of both access and apps.

That has key implications for notions of proper antitrust and vertical integration efforts. If business strategy--and in some cases survival itself--hinges on either vertical integration or movement into new parts of the value chain, then it does not make sense to take antitrust action “too soon.”

By blocking expansion moves (vertical integration or across the value chain), regulators could choke off growth needed to offset declines or maturation of existing roles within the ecosystem.

That is most clear for internet access, voice, messaging and mobility suppliers, which face declining or mature markets in all those core areas.

source: A Saghaeian

source: Strategy+Business

When Measuring Metrics Change, Watch Out

One has to be careful when analysts start using new and non-standard metrics for measuring market gains. So when a new metric of locations “passed or addressed” starts to be heard, one has to remain cautious about using any such figures in comparison to the traditional ways of measuring “homes or locations passed.”

Such non-standard terms have in the past been used when markets are changing fast, but also where financial meaning and sustainability are unclear. One good example was the concept of "voice grade equivalents" (VGEs) used in the turn of the century competitive telecom industry.

That concept was used in an effort to show account growth when bandwidth, rather than voice circuits, began to become the important revenue driver. The problem was that a voice" circuit and a "bandwidth" service had quite different revenue implications. One no longer hears the term "VGE" used.

So it is useful to recall such precedents when using terms such as "locations addressed."

The term "location passed" has a specific meaning: a location has the ability to buy products from a service provider because the network already is built. That is important because it places a limit on the number of potential customers. A service provider, in other words, can fulfill a new service request at a location because the network actually exists to serve that location.

The notion of “premises addressed” is different. That term refers, according to a new report, as a location “located within x number of meters of a network.” That is different from the notion of a location “passed.”

Such “addressed” locations might be feasibly connected to the network, but are not actually “passed.” That concept likely grows from the competitive business services business, where the business model includes both “passed” locations and additional locations that can be profitably connected from existing facilities, but are not directly passed.

A new report by the Independent Networks Cooperative Association (INCA) and Point Topic suggests non-traditional service providers of “superfast internet access” (not telcos or cable TV operators) in the United Kingdom get about 21 percent take rates in areas where they can actively market their services.

“Superfast” is defined as downstream speeds of 30 Mbps or more.

The report does not count satellite, 4G, white space or leased line infrastructure accounts as part of the total subscriptions.

It is unclear whether the surveyed service providers are mostly the third or second provider of internet access services in their markets. A take rate of 20 percent would be notable even in a two-leading-supplier market (BT plus the “altnet”), but would be even more significant in a three-provider market  (service is available from suppliers using the BT network--retail or wholesale--and Virgin Media and a third facilities-based supplier).

source: INCA

The point is that caution is called for, whenever new metrics are introduced.

Facebook Now Says it is "Responsible" for Content on its Site

Facebook and Google often have claimed they are not media companies and do not exercise editorial control over content their users post. Now Mark Zuckerberg, Facebook CEO says the firm is responsible for user content, and therefore Facebook is a media company.

That is a change, and a change that will change the way Google and Facebook have to operate in the future, as both firms will likely have to spend more time and money exercising editorial control.

There are lots of issues here, including the thorny issue of how to ensure that neither platform is acting as a content censor of lawful and protected speech, even as both might act to better police language or content that is not protected speech.

Up to this point, none of the ad-supported platforms with scale (Google, Facebook, Twitter) have done an outstanding job promoting protected speech, while acting more directly to ensure some semblance of fairness and accuracy.

Ironically, as technology services and apps traditionally have been virtually always unregulated, a shift to “media” regulation, though carrying new responsibilities still will allow Facebook and others to claim the same editorial freedoms as do newspapers, magazines, radio and TV stations or other content networks.

Those who want to apply heavy-handed regulations on Facebook and others now will have to contend with the fact of First Amendment protection. That might carry with it responsibilities greater than Facebook and others have faced as providers of data services (no regulation), but also protects Facebook from more-intrusive forms of content regulation.

That does not mean Facebook and others cannot implement community standards, in the same way that broadcast TV voluntary complies with some standards relating to speech and other restraints on content.

This a matter quite separate from other calls to apply antitrust to such firms as Facebook, Google, Apple or Amazon.

Calix Seeks Faster App Development with Infosys Deal

Fixed network access platform provider Calix has partnered with Infosys to increase its ability to develop new custom apps for the AXOS system.

The deal allows Infosys to develop and deliver new software modules for the AXOS platform, without service provider customers necessarily having to wait for the internal Calix developer team to do so. Such abstraction and virtualization is among the touted benefits of network functions virtualization.

Though much will hinge on what service provider customers ask for, it might be reasonable to suggest that end user apps are not going to be top of mind. Instead, service providers probably will look to create new apps designed to help them run their businesses more effectively.

The reason is simply that few--if any--telco-created consumer apps have gained traction and scale. Video entertainment might be one area where this remains possible, but in few other areas have telcos gotten scale where it comes to consumer apps.  

source: S. Saravanan  

Many believed mobile operators had platform advantages where it came to mobile app stores, for example. That has largely proven not to be the case. And the overall trend is growing revenue for third party over-the-top app providers.

source: World Economic Forum

How Big is Market for Untethered Internet Access?

You might think it is easy to quantify the size of the consumer internet access market in rural areas of the United States or elsewhere. It is harder still to estimate the size of that market that potentially could be supplied by untethered access platforms of all types.

For starters, the actual size of the rural untethered access opportunity can vary wildly based on one’s assumptions. Is the market “all homes in rural areas” plus “some homes in suburban and urban areas that have slow speeds” or both?

Is the potential for untethered access the same once 5G launches, making mobile platforms reasonable product substitutes for fixed access in many cases? If so, what percentage of cases are we talking about?

How much market share might untethered platforms take away from fixed network providers?

Even estimates of rural need vary. Some 23 million people in rural areas of the United States are said to have no access to a fixed network, though nearly all have satellite access from at least two providers.

From a service perspective, “locations” matter more than “people at those locations,” since facilities have to be build to reach fixed locations such as houses. And that number is itself dependent on assumptions about housing stock, end user demand, pricing and speed offers.

By some estimates, 14 million U.S. locations have slow service from cable or telcos or are not served at all. That includes urban and rural locations.

Few of those locations actually have no fixed network service. On surveys of availability, about one percent of respondents say they do not have the ability to buy internet access services from any fixed services provider.

That implies, on a household base of 126 million, that about 1.3 million locations actually have zero fixed network access. The point is that market sizing estimates that postulate 23 million or more “unserved” people actually represent a rather small percentage of locations, and it is locations that must be served (mobile actually serves “people”).

Also, one problem is definitional. Some studies people who choose not to buy or people who do not wish to use the internet as “not able to buy internet access.” There is a difference between people who choose not to buy a product that is available and people who want to buy, but cannot.

U.S. internet access adoption is about 82 percent. If there are 126 million U.S. households, perhaps 95 percent of which are occupied, then 100-percent adoption would imply about 120 million locations buying internet access. That might imply a reasonable saturation level of demand at about 107 million households, or nearly the level that might be reached in 2021.

In other words, 107 million households might be the saturation level for fixed network platforms (untethered options include mobile, fixed wireless, satellite, balloons, unmanned aerial vehicles, blimps).

Of course, demand does not exist at that level. Some households (perhaps five to 10 percent simply do not wish to buy). And some percentage of households (growing in number) buy alternatives such as mobile internet access.

source: SNL Kagan

The point is that we are entering a period when older assumptions about market segments will have to be revised. Mobility-based platforms are going to take more share. Fixed wireless is going to take more share. A range of new platforms likely will emerge, also taking some share from existing providers.

Under such conditions, it is not unreasonable to expect a general shift of market share from fixed networks to untethered platforms of several types.

Should Google, Facebook, Amazon, Apple Be Broken Up?

If all you have is a hammer, every problem looks like a nail. So it is with a list of problems at Facebook, Google, Apple or Amazon that, it is said, only antitrust action to "break them up" can fix.

Privacy, algorithms, "tying a new service to an existing service" and promotion of a general climate of innovation are valid issues to debate and consider. But none of those issues is necessarily a problem that antitrust action can fix, sustainably.

If network effects exist (and everybody agrees they do exist), then bigness cannot be helped. Over time, firms that best supply consumer demand will get big, and become more profitable, than all other firms without requisite scale.

So here's the question: Can we repeal the “laws” of economics that suggest scale economics and network effects often matter for internet-based firms?

A network effect (also called network externality or demand-side economies of scale by economists) occurs when the value of any specific product or service grows with the number of people using it.

So here is the problem in a nutshell: an industry where network effects exist will always favor larger networks. Small networks simply will not have sustainable profit potential; large networks almost always will have large profit potential.

That is why many believe “platforms” are so important. Platforms are simply examples of nearly-ubiquitous scale. A market so competitive that no single provider has requisite will, over time, reform itself into one or two scale providers who are able to take advantage of the network effect.

source: Evergreen

In a  winner takes all market the best performers are able to capture a very large share of the rewards, and the remaining competitors are left with very little. That is an example of network effect.

Our “problem” is that the internet itself--and the competition it enables--seems to create such winners.

In fact, winner take all markets seem quite common across industries affected by the internet.

The percentage of total revenue at publicly-traded U.S. corporations earned by the top 100 firms was 53 percent in 1995, for example, growing to 84 percent over the next two decades.

In other words, scale seems to matter more than it used to, when price transparency, logistical systems and other barriers prevented more-robust competition.

source: Consultancy

Are there problems with Google or Facebook’s practices around privacy and algorithms? Yes. Can those problems be resolved without antitrust? Probably.

But as calls to break up Google, Facebook Apple and Amazon are  growing more numerous, it is fair to consider a couple of contentious assertions, among them the notion that our traditional understanding of antitrust law is outmoded.

Specifically, even if “consumer protection” has been the rationale for past efforts to reign in monopoly, now “competitor protection” essentially is urged as the new standard.

To be clear, competitor success is the mechanism for consumer welfare benefits, so it is not crazy to say antitrust action is required to promote and protect consumer welfare.

But the proponents of new antitrust action (breaking up Google, Facebook, Apple and Amazon) focus on “social or political” impact of bigness rather than “economic impact” of bigness.

But some will argue that such social or political criteria are not the appropriate reasons to apply serious economic remedies.

But that has to be argument, after all, as even the new antitrust partisans admit “Google's dominance of the web-search market has no direct effect on consumer prices; we consumers get to use its service for free.”

So why take action? Not for such economic reasons. “The lack of competition in search means that Google has enormous power over what we see and access on the internet, and critics have charged repeatedly that it's used that power to favor its own services.”

So the new antitrust advocates are using the “media concentration” argument (“protect many voices”) argument for dismantling companies, not consumer harm.

That is important. It means the rationale for potential antitrust action is, in fact, not direct consumer harm but “competitor protection.”

Antitrust advocates admit that “Facebook's dominance of the social-networking market doesn't affect the price consumers pay; like Google, it offers its service for free.” So consumer harm cannot be demonstrated.

“But from the widespread dissemination of fake news to the leaking of profile data on likely more than a billion users, there are big problems related to Facebook's enormous size.”

Yes, there are issues--and important issues indeed--to be solved here. But antitrust does not solve them.

The “big is bad” proponents have to deal with scale economies, which is why bigness has happened across the application and internet ecosystem in the first place. Simply, in industry segments where value grows with the size of the network, bigness is an inevitable foundation for economic success.

If we “break up” the firms with scale, all the new contenders will simply continue competing until, again, some new provider with the requisite scale emerges. Scale means both lower costs, higher revenues and higher profits. That is just the way scale economics (network effects) work.

One can agree or disagree on what we are trying to accomplish with antitrust protections.

Some argue it is about “protecting smaller suppliers in the market,” “promoting innovation by breaking up big dominant firms,” or some other objective explicitly aiming to help new firms and small firms take market share from a few big firms.

Others will argue antitrust is about protecting consumer welfare first and foremost. Where consumer welfare is harmed, then antitrust remedies might make sense, and those remedies always involve limiting the dominance of leaders in any market.

But harm to consumer welfare remains the key test, and that is true even where network effects, scale economies and network externalities exist. And that harm still has to be demonstrated in tangible ways related to excess or “monopoly” profits (economic rent).

If we have issues with privacy or algorithms, those can, and should, be dealt with. But if economic harm, requiring antitrust action, cannot be demonstrated, that is the wrong solution to the wrong problem.