How should the Trump administration regulate the internet?
How will the Trump administration regulate the internet?
Donald Trump’s transition team has yet to issue a tech policy, and as a candidate, the business mogul has said little on the subject. On the one hand, the Republican platform called for a reversal of the FCC’s controversial 2015 decision to apply outdated utility regulations to broadband providers. But during the campaign, Trump also criticized the announced merger of AT&T and Time Warner, which he threatened to block. His team has since appointed three critics of the FCC’s net neutrality order to oversee the agency’s transition.
The truth is, no one really knows. With virtually nothing to go on, speculation about the new administration’s approach to technology (and there has been plenty of it) is mostly just hot air rushing in to fill a void.
So perhaps the best question to ask is: how should the new administration approach digital innovation?
The short answer: with caution.
The internet, media and content industries are already undergoing transformation. Look at what has happened in recent months. Shortly after the AT&T/Time Warner deal and Verizon’s impending acquisition of Yahoo, CenturyLink acquired Internet backbone provider Level 3 Communications.
Then Google Fiber announced a sudden halt to national expansion. Earlier this month, we learned that Comcast will offer direct access to Netflix through the cable company’s X1 software platform. Last Tuesday, AT&T launched an online video streaming service called DirecTV Now.
The source of all this disruption continues to be technological innovation sparked by the Internet, which gradually, then suddenly, replaced disparate networking and distribution platforms with a single digital standard. A system is now capable of transmitting data, voice, video and other content over a combination of wired and mobile communication systems.
As a result, the communications, technology and media industries are squeezed, even as their individual supply chains are pulverized and rebuilt.
Traditional media companies compete with internet streaming services that offer original content, including Amazon, Netflix, Apple, Hulu and user-produced programming from YouTube. At the same time, broadcast, satellite, cellular, cable, copper and fiber Internet service providers are seeing their separate services transform into a single infrastructure, leading some cable companies to both compete and collaborate with their own mobile offers.
But digital convergence hasn’t just changed the list of competitors. This has changed the nature of competition in these industries. The emerging information sector is now experiencing an accelerated version of what Harvard business professor Michael Porter long ago described as the “five forces,” which extend the impact of industry competition for include not only direct rivals, but also pressure from a company’s suppliers, customers, disruptive start-ups and companies offering equivalent goods using new technologies.
In the world of communications and media, these forces have been kept at bay by legal barriers dating back 100 years. But the Internet has broken down all and some of these barriers, creating a vibrant Internet ecosystem that is constantly recreating itself. The digital revolution has put the Porter model on the super-spin cycle, leaving participants in a continuous scramble to gain and maintain a fleeting competitive advantage.
Amazon, for example, has suddenly become a major infrastructure company as well as a leading provider of original entertainment content. In just a few years, Amazon Web Services has grown from supporting the enterprise’s e-commerce business to a general cloud-based platform used by almost everyone. AWS is a $10 billion company, challenging the business models of nearly every other company in the digital supply chain.
(Disclosure: Amazon CEO Jeffrey P. Bezos owns The Washington Post.)
A side effect: Legacy communications providers, as Frost & Sullivan senior analyst Dan Rayburn puts it, “don’t want to be dumb pipes anymore.” And the success of AWS in particular, says Rayburn, makes the dumb pipes even dumber.
In this context, the AT&T/Time Warner deal looks less like a simple (albeit important) combination of content and communications assets – similar to the successful merger of Comcast and NBC Universal in 2011 – and more like the next current business chapter of the former telephone company. reinvention.
Faced with intense competition in its existing broadband, mobile and TV businesses from a variety of alternatives, AT&T hopes that the acquisition of Time Warner’s film and television properties – including HBO, CNN and Warner Bros. – will not only give it better cash flow, but also more opportunities to combine its growing portfolio of assets with new innovations, particularly in mobile, to offer shared services to consumers.
These developments should all give the Trump White House pause. Why? In the final years of President Barack Obama’s administration, regulators eager to ensure their own future relevance inadvertently made matters worse. The FCC, in particular, moved quickly to cement traditional broadband and broadcast competition by limiting ISPs’ ability to offer new services in the narrow and now meaningless classifications of an outdated law. .
As industries and technology converge, growth-hungry vendors are now forced to think outside the box. The deal with Time Warner, along with Verizon’s takeover of Yahoo and Comcast’s new partnership with former adversary Netflix, dramatically highlights the unexpected results.
Similarly, industry evolution and regulatory inadequacy are at the heart of CenturyLink’s $24 billion deal to acquire Level 3 – two companies facing existential threats. CenturyLink is forced to support the dwindling phone services the company is legally required to offer, while new cloud-based technologies threaten Level 3 business internet offerings. At least together, as some analysts see the agreement, companies could leverage their remaining profits in hopes of finding a more secure place in a new pecking order.
Finally, Google Fiber’s surprise decision to withdraw from its plan to offer ultra-high-speed Internet to residential customers partly reflects the rapidly improving economics of alternative technologies, notably fixed mobile broadband networks.
But much of the cost of fiber comes from wrestling with local authorities over rights of way, construction and zoning. Navigating municipal bureaucracies, even those willing to cooperate, quickly multiplies the cost of deployment. Perhaps the biggest component of that cost is simply wasted time and unnecessary delays – factors both unknown and unpleasant to the old software-only company.
For now, at least, as Frost & Sullivan’s Rayburn notes, “content is king.” And while consumers care more about who has the programs they want than the technology that delivers them, it’s also true that regulators have put a big thumb on the scale, making broadband companies less attractive. for consumers and businesses in the future. Content may be king in part because everything else has been whittled down to a pawn.
So, as the Trump administration belatedly prepares its tech policy, the best Silicon Valley and its customers around the world can hope for is recognition that slow regulators, even with the best of intentions, can do very little. good in trying to shape a digital revolution that is already underway.
As new interns are told on their first day in the ER, “Don’t just do something. Stay there.”
© 2016 The Washington Post