Tuesday, October 12, 2010

Still Waiting for a Reason to Apply Open Internet Regulations to Mobile Broadband

In its comments on the FCC’s recent Public Notice asking whether open Internet regulations should apply to mobile broadband, WCAI explodes the myth that open Internet regulations are necessary to subsidize mobile device and applications makers.
WCAI demonstrates in its comments that the device and applications segment of the mobile market is a hotbed of innovation, competition, and industry growth:

• There are at least 33 companies manufacturing more than 630 unique devices for the U.S. market.
• There are currently 11 companies producing OS for the mobile devices segment, none of whom is vertically integrated with a mobile broadband service provider.

• Entirely new types of devices are being created, including the Apple iPad and the Kind e-reader.
• The mobile applications market is experiencing annualized growth rates of up to more than 500 percent.

The data presented by WCAI clearly indicates that there is intense innovation and competition in the applications and devices segments and that there is no discernable market failure in these segments.

Open Internet proponents nevertheless believe regulations are necessary to ensure applications entrepreneurs can “innovate” without “first seeking the permission” of a network operator. In the absence of some market failure, however, “seeking permission” is merely a euphemism for paying market-based rates for use of the network. And there is no basis for believing that device and applications developers are unable to fully participate in the mobile market.

The argument that mobile network operators should be subsidizing mobile applications providers is nonsensical given the relative entry costs of these two market segments. The cost of entry into the applications market is so low that an entrepreneur can earn a living as an independent mobile software developer working out of the home. In comparison, Clearwire’s entry into the mobile broadband service provider market has required billions of dollars in capital. Given this huge disparity, it seems clear that, if the Commission were to subsidize mobile broadband investment, it ought to subsidize investment in the network – and not in devices and applications.

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