Technology and monopolies

Separation anxiety

A free-marketeer wants more government intervention. Odd

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Readers' comments



The author of this article confuses the government picking winners with the government establishing rules to foster competition. The state is notoriously incompetent at the first but it's the only institution able to do the latter, an essential function for efficient markets. If that is what Wu demands then his view is perfectly consistent. The antitrust laws the article's author calls for instead belong to the same class as Wu's "Separation Principle": It is not picking winners but fostering competition.

Bundling content, its distribution and playback devices prevents consumers from mixing and matching the best solutions in each category. Instead, in most cases they will have to settle with an inferior product in at least one category. That would clearly be a market failure. Moreover, bundling hampers competition. Wu is right to call for countermeasures.

The author's claims that separation would have "a huge economic cost" and that the iPhone was only possible as a bundle are unsubstantiated and not convincing. The same is true for the implication that it would be difficult for the state to police the separation. On the contrary, the lines between content, distribution and devices are exceptionally clear.


Wu has his interpretation of this backwards. The establishment of a few large individual firms is a sign that a sector is maturing and that competition is just beginning to kick off.

Small entrepreneurial companies' major struggle is to establish a new market niche, not to compete against one another. Once a sector is well-established, then you start to see companies directly compete with each-other head-on. These are two different processes. Opening a new market niche requires entrepreneurial zeal, risk-taking on a budget, and thinking outside of the box. Competing directly with other firms requires managing massive amounts of resources and manpower, and making incremental (rather than categorical) improvement.

In an established sector, it benefits consumers to have large companies maneuvering and managing massive resources. In an unestablished sector, it benefits consumers to have small companies thinking outside the box.


The following statement by your editor is simply ludicrous:


What is especially innovative about the Apple iPhone ? It is just a smartphone, albeit with a nice design and screen, but there were many before it, like Palm. Apple has once more been using its marketing prowess successfully to push the product to consumers, but that does not make it innovative. Apparently, your editor has been taken in by Apple's slick marketing.


Anti-trust law ? Isn't that what was supposed to separate Microsoft's OS and apps businesses before Microsoft destroyed their apps competition ?



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