Virulent Word of Mouse

September 17, 2011

Smartphone patents and platform wars

Firms in the smartphone market have been suing one another over patent violations. I cannot recall any other platform war that involved as many intellectual property disputes.

Look, society grants patents as part of trade-off. A patent enhances the incentives to generate new invention by giving the inventor a temporary monopoly. That trade-off should never be far from the top of the discussion. Let me say that another way: Artificial monopolies are clearly bad for the economy. There is no reason to grant them unless society gets something in return, such as more invention.

It is easy to speculate that something is amiss. Was society still on the good side of this trade-off when a non-practicing entity sued RIM-Blackberry for hundreds of millions of dollars, even though the dispute involved patents invented by someone who never got close to putting them into a viable business? Was society on the right side of this trade-off when a consortium spent four billion dollars for patents in bankruptcy court from Nortel, a firm that made some very bad bets during the dot-com boom and had run itself into the ground? Was society on the same side of the trade-off when Google felt so cornered that it bought Motorola for its patents, and, after it was announced, very few analysts saw any reason to point that Google also received tens of thousands of talented engineers as part of the deal?

This is a way of introducing a recent article, “Owning the stack: The legal war to control the smartphone platform.” I recommend it. It appeared in Ars Technica. It brought considerable clarity to events by explaining the actions and motives of various players in the recent patent wars involving smartphones. It was written by James Gimmelman at NYU law school, and recommended to me by David Laskowski, a student from a prior class at Kellogg (Thanks David!).

This post passes on that recommendation and offers a few comments.

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June 22, 2011

The Open Internet Order

After a year of hearings and considerable public discussion, the Federal Communications Commission (FCC) adopted the Open Internet Order on December 21, 2010.

Fireworks flared on the blogosphere almost immediately. Net neutrality advocates cried that the order betrayed and sold-out sacred principles, while Tea Party supporters heaped scornful criticism at government activism. Both sides made intemperate and grim forecasts about the Internet’s future.

Levelheadedness left the political sphere as well. Pushed hard by Tea Party sympathizers, the House of Representatives passed House Joint Resolution 37 in April 2011, largely along party lines, disapproving of the order. As of this writing, the Senate hasn’t yet taken up the measure. President Obama promises to veto it.

Frankly, this conversation needs a calm and considered middle ground, not utopian visions abutting practical considerations. The Internet has never lacked government oversight, and Internet participants have occasionally compromised on neutrality to function. There are subtle economic issues to debate here, and simplistic absolutes don’t contribute much to finding reasonable economic solutions. (more…)

March 12, 2011

The Internet and Innovation: My Testimony to Congress

A couple days ago I had the privilege and pleasure to testify before the House Sub-committee on Communications, Technology and the Internet, which is part of the Committee on Energy and Commerce in the House of Representatives.

Broadly speaking, the topic was net neutrality. That is what the newspapers said.

Frankly, I hesitated to testify. I am always happy to talk with any government analyst who calls, irrespective of party affiliation. Congressional testimony is different, however, especially in this topic, which tends to yield more heat than light. Moreover, I am neither advocate nor opponent for net neutrality — at least as that phrase commonly gets used in US political debate. Why should I be a neutral voice in someone else’s political fight?

Ah, but I could not say no. Even with reservations, there still exists a professional obligation to show up. It is the right thing to do. Also, and I will admit to this, I was excited.

One other thing made it easy. The hearing did not concern the entire net neutrality debate. It concerned a rather specific question, something called House Resolution 37, which disapproves of the Open Internet Access Order issued by the FCC last December. If passed, the entire order would not take effect — not its provisions for transparency, blocking and discriminatory traffic.

I had testified at the FCC hearings leading up to to the order, and  had testified in favor of transparency provisions, for example. That made it easy. Such a blanket resolution — getting rid of everything — looked like throwing out the baby with the bath water. To me this resolution did not make sense.

One other broad motive shaped my views. I believe there actually is a big economic question on the table, and it gets lost in the popular debate. I hoped to bring attention to that. In a nutshell, if there is anything a government might be able to do, it might be able to foster economic growth by nurturing entrepreneurship on the Internet.

Those expectations were naive (of course), but we will get to that below. Anyway, that is why I agreed to come.

This post will share what I learned about how the existing political debate filters this topic.  Below is a copy of my oral testimony, and a link to my written testimony. After that comes many  observations about what sort of questions arose at the hearing. I hope others find this insightful and useful.

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December 16, 2010

Cheap Shots Aimed at Scientists: A Political Movement?

Filed under: Editorial,Short observations — Shane Greenstein @ 5:28 pm

In a prior post I described a politically motivated cheap shot aimed at a computer scientist at Northwestern. I looked closely at the circumstances that fed the situation. I concluded that the charges lacked merit.

Was that an isolated example? No, it was not. In this short post, I point towards another recent example with many similar features.

Look, people differ in their priorities, and that is why governments have policy issues to debate. What we observe here, however, is not a rational policy debate about the governance of science. Rather, we are observing a debate characterized by cheap shots, misleading headlines, and juvenile argumentation.

This is bad news for anyone who values the contributions of science to the US economy.

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September 12, 2010

Two politicians, a research Proposal, and a cheap shot.

Filed under: Considering topical questions,Editorial — Shane Greenstein @ 4:21 pm

The last time I checked in on John McCain he was giving a very classy concession speech after he lost the presidential election.  There was something very inspiring in the grace with which he handled losing.

So I reacted with disappointment when I heard of McCain’s latest actions. As I will explain below, these are not classy.

Specifically, along with Senator Tom Coburn, in August McCain issued a report that took a cheap shot at a professor’s research at Northwestern, the university where I work, calling his most recent research proposal a waste of money. This post has one primary purpose: to explain why the charges lack merit.

It is possible to go further, so I will. The research is in a technically complex area of frontier computer science. This post argues that the critique of it involved a deliberate and juvenile misreading of the research.

It is possible to have a cynical reaction to Coburn’s and McCain’s report — to excuse it as one of the games politicians play. But McCain’s classiness actually gets under my skin in this case. It does not seem to be unrealistically idealistic to want him to show some class in his actions. Is it too much to expect a classy Senator not to debase public discussion with cheap shots that lack merit?

There is, in addition, a deeper and more subtle point behind these events. This example illustrates one of the strengths of the US research system, namely, the extensive use of peer-review. As I will point out below, peer-review insulates much of US research from the shenanigans of politicians, even formerly classy ones who gave in to the temptation to take a cheap shot. This example gives some clues as to why such insulation keeps the US research system free from such interference, and maintains its status as one of the best in the world.

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July 13, 2010

Early Adopter, Enthusiast, or Pioneer? A User’s Guide to Technology Lingo.

Filed under: Editorial,Entrepreneurship,Essays,Managerial challenges in evolving markets — Shane Greenstein @ 1:43 pm

My wife glanced at the front page of the Sunday Chicago Tribune. Without looking up she said “Hey, this is what you study.”

The headline screamed in black, blue and green “The Early Birds.” Below it a sub-heading asked provocatively, “What is it about the new thing that makes us want it so bad? And why are some people more likely than others to take that first leap?

This is not the sort of headline or topic one sees in the Chicago Tribune every day, and certainly not on the front page with any regularity. I wondered if the newspaper had been sold to Wired or Techcrunch, and I had just missed the news.

I checked the online edition of the Tribune. It gave the article a headline with more tension, “Me-first Mentality” it screams, followed by “Early Adopters, whether of new smart phones, electric cars or solar panels, help clear a path for mainstream consumers.

My wife was just looking out for me. She knows that I am always looking for well-written articles for my MBAs. Needless to say, I do not get them from the Tribune often, but I would be perfectly happy to do so. The source does not matter as much as the content. I am happy to show an article to students if the news article illustrates the concepts of the class and illustrate the concepts in real world settings.

So I read the article. Sorry to say, it does not make the cut. It is an entertaining article, but not an informative or enlightening one.

I was going to leave at that, but I could not get the errors out of my head. The errors were so basic, so fundamental, and ultimately so maddening. More concretely, the article does not properly draw sharp differences between an enthusiast, an early adopter, and a pioneer. It also has a side note about technology orphans, but does not label the topic properly.

To be fair to the reporters, it is not as if they could look up the definitions in Websters dictionary. These words are the lingo of technology markets, and that is a specialty, to be sure.

At the same time, I would hate to see the type of mushy definitions found in this news article fall into common use. At the risk of sounding like a pedantic curmudgeon, this post explains where the article went wrong, and why it matters. In brief, getting a few definitions straight helps navigate an otherwise confusing technology landscape.

There is one other reason you might read this post. If you have ever found yourself in the middle of a conversation conducted by technology nerds, you may have noticed these terms. They get thrown around regularly. Perhaps you were too embarrassed to ask for definitions then. Perhaps this post can help you understand what the nerds were talking about.

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May 12, 2010

The Simple Economics of broadband regulation

There is a simple economic rationale behind the FCC’s recent announcement, made last week by Chairman Julius Genachowski, on May 6th.The FCC had to act. The costs of not acting were too great.

Here is why. Broadband carriers have strong economic incentives to provide services that compete with the applications of others. Yet, those same broadband carriers carry the data of all those applications. These carriers face what is often called “mixed incentives”, and until recently all carriers were forbidden from acting on them. Genchowski wanted to keep things that way, but an appellate court made that hard to do.

Let me make the issue concrete. Just ask your neighbor what they would think of the following: Would they be angry if Comcast blocked Skype from operating and told all users they had to go through an approved vendor of IP telephony? Would your neighbor be unhappy if Google slowed down when the search concerned local car dealers because AT&T broadband had a local search service on which local car dealers advertised? Would your neighbor be frustrated if they could not go to Hulu, but instead had to go to the approved TV distributor who worked with Verizon?

Look, none of that has happened yet, but that is because it was forbidden by regulators until a few weeks ago. It is not anymore, and that illustrates what any sensible regulator should fear. They should fear slowly slouching towards a situation where the mixed incentives of carriers gets in the way of delivering services over the Internet. Households have gotten used to having unrestricted choice online of innovative services, and there would be a minor revolt if narrow firm self-interest got in the way of that.

I have no axe to grind with carriers, so let me say that more positively. The country has benefited from allowing carriers freedom to innovate and build, and that was so up to a point, painting a bright line in one clear place, limiting the discretion of carriers to interfere with anybody else’s innovative services.

More to the point, the present limitations have fostered an innovative ecosystem. Software vendors and Internet hosting companies have developed a range of innovative services in anticipation of (1) better infrastructure on which to run it, and (2) sending their applications across broadband lines that behave the same way everywhere.

In other words, application vendors do not worry about which carrier delivers the data to which homes because carriers are not allowed to act on their mixed incentives. Knowing that, application developers innovate in all sorts of ways that users enjoy.

Those simple economics explains quite a bit of regulatory action. If you look beyond all the posturing and public relations, it is not surprising the FCC feared what would happen if it permitted no legal restraint on carrier action.

To be sure, the FCC’s own explanation of its announcement is — *um*, how do I say this nicely? — confusing in its details. Many commentators have tried to figure out the legal subtleties, focusing on legal nuances about what the new regulations will do or will not do. I have yet to read a simple summary (and that is a worrisome).

More to the point, it is fine for commentators to gripe about legal definitions, but I think all the commentary must acknowledge the most primary economic motivation at the heart of the action: the FCC had to clearly signal that it would try to erect a new regulatory mechanisms for enforcing limitations on carriers’ mixed incentives.

That is the point of my post. There were two economic reasons to take action, and both point towards limiting mixed incentives. One has to do with the incentives to act on mixed incentives today, and the other has to do with the long term trends of the evolutions of the network, which reinforces incentives to act on mixed incentives tomorrow.

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February 11, 2010

The Next Chapter at Google

Once upon a time, a couple of smart fellows perceived a technological and business opportunity. They founded a firm, leaving academic programs. They worked hard, caught a break, and began living an economic fairy tale. Their new company grew, making profits every year, even during difficult economic times. The firm hired with abandon, taking its pick from among the best talent.

After a dozen years, the firm’s hallways overflowed with a lively entrepreneurial spirit. Seasoned executives and sophisticated technical staff had ample cash to explore almost every ambitious idea.  For the next dozen years, the firm’s managers aspired to undertake something audacious and ambitious—to build the most innovative firm of all time.

Who does this economic fairy tale describe? It describes two firms: Google in 2010 and, by ticklish coincidence, Microsoft almost 20 years earlier.

Can history repeat itself? Surely not. Past events at Microsoft cannot forecast with precision what Google will do tomorrow.

It is tempting to scratch this itch, nonetheless. Comparing two leading firms at the crest of their teen years could generate insights into why (and how) Google’s fairy tale might or might not reach a happy ending. (more…)

November 19, 2009

A network of platforms

The Internet has been called a “network of networks.” Although the phrase once had meaning, it is misleading today. It does not reflect how commercial behavior has shaped the Internet’s evolution.

Leading firms and their business partners view the commercial Internet through the same lens they view the rest of computing. To them, the Internet is a market in which to apply their platform strategies.

That is my point. The commercial Internet should be called a “network of platforms.”

This might sound like a philosophical rather than a pragmatic observation, but hear me out. Most firms and users are better off with platforms than without. Yet, if the behavior of prior successful platforms predicts the future, problematic issues will inevitably arise.

This will take some explaining.

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October 17, 2009

This just in, something is wrong with Wall Street

Filed under: Editorial — Shane Greenstein @ 10:29 am

Please forgive the irony in the title. But I just felt like expressing sarcasm because – Ha! — many professional economists have begun to notice something is wrong with Wall Street.

Better late than never, I guess. (more…)

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