Regulation and cloud computing

This item over at the Tech Liberation blog got me thinking about regulation and cloud computing. Given the underlying economies of scale and scope, it seems to me to be almost certain that we'll see concentration in the market for cloud services. Thus, is it too soon to be thinking about marketplace rules for cloud computing? After all, we haven't seen serious market abuses (that I know of). If so, is the FCC the right agency to do this? As the article points out, there is no real statutory authority to do so. On the other hand, cloud computing is a deep integration between processing and communication to provide a service, so it is easy to see how they might be tempted to move in this direction. Where would you draw the line between communications and processing in cloud computing? Sphere: Related Content

Google, Android, maps and more

I have been interested in Google's approach to business and, like others, have been a bit wary about it as well (See this search of this blog for more).  Thus, this item resonated with me, especially in combination with this item from the Washington Post (please be sure to read this follow-on from Tech Crunch in the spirit of completeness). This article over in BusinessWeek is another piece of the puzzle, I think, considering that gaming is a major profit business.

It seems clear that Google is building a platform and ecosystem. It is a for-profit corporation, so the question is not if but how this platform will be monetized, how it will compete with other platforms (Apple-centric and Microsoft-centric), and how switching costs will be imposed to deter defections from the platform. Google's interest in certain intellectual property around Android provides some evidence of this. Will monetization come from advertising revenues? Or will we see a series of user fees that will emerge after users are invested in the platform?

The questions matter because our government has historically gotten interested in platform competition and how it relates to control. These questions will be at the core of future anti-monopoly policy, I believe. Sphere: Related Content

iPhone Apps and the war for the web

There are a couple of items that have come to my attention recently that suggest change is on the way for app stores (perhaps the iPhone app store in particular):  The first comes by way of Seeking Alpha.  In it, the author cites this item from Gizmodo, which argues that, in the not to distant future, apps will be very cheap or free.  This has been a significant profit center for Apple, but may not be in the future.  The second item, from GigaOm, discusses the opaque approval process for iPhone apps which can be frustrating for developers.

Taken in tandem, the second item suggests higher than necessary transaction costs for developers (since the approval process is uncertain) and the first item suggests lower prices (tending to $0) because of competition.  High transaction costs for no profit suggests that developers will seek to monetize their investment in other ways, through advertising or through other kinds of tie-ins (where price is not $0) that are outside of the control of the app store.

But as O'Reilly points out, there are limits to this too.  Apple is not shy about blocking apps that try to escape their business model.  The O'Reilly article is interesting in that it argues for the shape of competition to come and makes the case for the tendency toward market concentration that we see in the Internet. Sphere: Related Content

More on Clearwire

I found this item over at GigaOm a worthwhile followup to my earlier article.  The article lays out the dilemma faced by Clearwire and its backers.  On the one hand is the short term market opportunity and on the other is the current competition from WiFi and the future competition from LTE. Sphere: Related Content

Economics of Wireless ISPs

In the FCC's Electronic Comment Filing System, you will find this contribution from the Wireless Internet Service Providers Association (WISPA). What is notable about this comment is that it contains useful traffic engineering and cost data. For example:

• "Middle Mile" capacity needs range from 50-260kbps per user and should be 5% of the aggregate bandwidth supplied to last mile business customers
• Second mile capacity needs range from 100-300kbps per user.  This is higher because it is averaged over fewer customers.
• Rural ISPs pay more than $200 per megabit for OCn connectiveity
• Capital expense for a Part 15 microwave is up to $10K and for a Part 101 (licensed), this cost goes up to $15-$20K.
• In the second mile, a DS3 router interface costs $8K and a fiber interface module $200.  
• One rural ISP reported paying $4K/mo for a burstable DS3 to support 250 rural customers.  This translates to $12/mo per customer for middle mile transport and limits how cheap service can be.
• For Internet service, WISPs pay from $2 to $300 per megabit per month to Tier 1 providers, depending on where they are.

There is a lot of info embedded in this paper, though it isn't in tabular form.  Instead, it is in more of an anecdotal form.  In any case, if you're interested in the economic foundations of wireless internet provision, you will find this an interesting read.

Separately, this Wiki, which describes a research project over at KU, is worthwhile reading.

Sphere: Related Content