In a little-noticed speech in January at a telecom conference at the University of Colorado, FTC economics bureau deputy director Howard Shelanski used a thinly veiled example to argue that a giant in online search could potentially hurt competition.
“I think we need to think more broadly on keeping an eye on possible anti-competitive discrimination … within the applications market,” Shelanski said.
A key policy question for tech antitrust regulators is how to encourage developers to continue creating new products online. That debate has largely focused on so-called network neutrality. Its proponents have argued that cable and telecom companies that pipe Internet into homes present the key potential bottleneck. If the people that make the software and content rely on Internet service providers to distribute their products to consumers, and those providers have the power to block some content, some have argued the government should prevent those networks from discriminating against any applications.
In his speech, Shelanski said this view might be too narrow to understand how competition in the market for Internet applications works. He used a “hypothetical” search giant as his example.
“If there is a hypothetical search engine, that because of various scale and network economy issues, becomes a must-have application for consumers,” Shelanski said, “then the locus of possible bottleneck discrimination possibly shifts upstream within the applications market itself.”
“So we need to think more broadly than network neutrality is currently conceived,” he said.
His argument essentially boils down to this: If a consumer would rather switch to a different Internet provider than lose access to an application like Google, the provider cannot dump Google off its network. If the provider loses that leverage, the real power lies with Google, which finds itself in a position to decide how to treat smaller applications and content providers.