Anti-trust in the digital economy: The new incumbents

THE NEW INCUMBENTS
Anti-trust in the digital economy

Camille Mendler
Principal Analyst
Informa Telecoms & Media

June 2012

www.informatandm.com The New Incumbents: June 2012 @cmendler
© All rights reserved

2012: A year
of anniversaries 100th Anniversary
Sinking of the Titanic

200th Anniversary
Birth of
Charles Dickens

60th Anniversary
Queen Elizabeth II’s
coronation


Here’s one
that’s been
forgotten 30th Anniversary
Modification of Final Judgment


A landmark
anti-trust
settlement

Leads to break up of
The Bell System

By 1984, seven RBOCs arise
Picture: Flickr/Hiddenpower


Then, AT&T’s
incumbency
was deemed
harmful AT&T’s
vertically
integrated
organization
had
stifled competition

(notably in long-distance communications and telecom equipment)
Picture: Flickr/Jenkinslawlibrary


Now, anti-trust
focuses elsewhere

“Accumulating data about you
isn't just a strange hobby
for these corporations.

It's their whole business model.

And you are not their client.
You are their product.”

U.S. Senator Al Franken
Speech to the American Bar Association
March 29, 2012


While
telcos decide
what’s core Brands
Spectrum O&M

R&D Wholesale

Cloud
Billing
Streamlining
activities Over
Analytics the Top

Verticals Payments

Access M2M
Customers
Picture: Flickr/roger.karlsson


Non-telcos
are collecting
digital assets

(in 1982)
World’s largest World leader World leader
private company telecom equipment digital search

Let’s compare ‘incumbents’ past – and present Picture: Flickr/dsearls


Innovation
arsenals

1982
Patents 20,000 30,000 24,500

Owned Bell Labs Ericsson Labs via Motorola Mobility
(now Alcatel-Lucent) and acquisitions alone
asset

Related Software
asset
and services
No
asset World’s 5th largest Examples: Google search,
software company; Android, BigQuery, Chrome,
Inventions include owns AT&T spinoff Google+, GoogleApps,
UNIX, C++ Telcordia Google Talk

Hardware
Western Electric World’s largest World’s 4th largest
equipment division mobile network equipment server manufacturer
vendor


Network
infrastructure

U.S
1982 white space
Spectrum spectrum
database
administrators
(approval pending)
Builds, operates
mobile networks

Owned Fiber
asset
Developed Builds, operates Metro, long-distance,
Related optical laser fiber networks sub-sea fiber assets
asset

No
Wi-Fi
asset
Bought Wi-Fi Metro Wi-Fi networks
vendor BelAir in U.S. and Nairobi, Kenya
Technicolor
Satellite Broadcast
services
division
World’s 1st comms Satellite backhaul O3b satellite system
satellite, Telstar 1 services (launching 2013)


Consumption
enablers

1982
Devices

Western Electric, LG-Ericsson, Motorola Mobility
American Bell ST-Ericsson, M2M
Device Connection
Platform
Owned
asset Content
Related
Examples : YouTube,
asset Content distribution Google TV, Google Earth,
services with Akamai Google Play, StreetView
No
asset Advertising

Admarket platform AdWords, AdSense

Payment
$ IPX multimedia
brokering & Ericsson
Wallet payment system
Google Wallet


Less
is now
more
1982
Employees
104,525 32,467

1,040,000

Revenue
per employee
*adjusted for inflation $156,538* $278,210 $1,167,339

Who’s most
successful?

1982*

Revenue $162.8 $30.2 $37.9
billion billion billion

Market cap $131 $27.5 $192
billion billion billion

ROIC 10% 9.8% 18.8%

*adjusted for inflation

World population
touched

12.8% 14.3%
2.6%*
* in 1982

108 million 900 million 1 billion
subscribers via managed networks unique visitors per month
(also 4 million enterprises on GoogleApps)


In 1982, AT&T
won a sweetener
to break up The Personal Computer
‘Man’ of Year for 1982

A move into computers*

A new age of
Personal Communication
was dawning

* It failed.


Now, personal
communication
is the anti-trust
issue
European Union Argentina

Search, Search,
advertising advertising

United States South Korea
Search, Search,
StreetView Android
Wi-Fi ‘slurping’

India UK
Online StreetView
advertising Wi-Fi ‘slurping’


Vertical
integration
isn’t evil

The world’s
What matters most valuable
is how company
has a
it’s managed controlled
ecosystem

It’s also fighting
an anti-trust lawsuit
alleging price fixing
of e-books Picture: Flickr/Leo Reynolds


The digital economy
is expanding
As machines join the ‘conversation’

New
privacy
challenges

in a post-PC world

Different
tastes
are evident Telcos become
more virtual

Digital
content
Bon
appétit!
Device makers
Personal offer virtual goods
devices

Internet firms
become Network
infrastructure
more physical
Picture: Flickr/free range jace


Can
regulators 1. Need for velocity
keep up? 33 years to settle the AT&T-DoJ suit;
11 years for Microsoft-EU suit

2. Wider scope
Diversity of virtual assets (eg: new gTLDs)
Today’s
anti-trust 3. Defining abuse
challenges Unaligned policies (eg: EU vs US)

4. Who to protect
Consumers and/or competitive firms

2012 will be as important
for anti-trust as 1982
Picture: Flickr/dgray_xplane


Market
observations
• Value creation
Concentrated in social, mobile & virtual assets

• Value enablers
Physical assets remain critical

• Regulatory bias?
Virtual asset focus for Internet firms
Physical asset focus for telcos & hardware firms

• Stakeholder roles
Blurring in a multi channel, multi platform world


Anti-trust in the digital economy: The new incumbents

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