Unregulated Competition Hurts Innovation and Consumers

This analysis comes from that bastion of Communist thought, the Financial Times. John Gapper compares Europe, where GSM was mandated by government, and the US, where anyone who rented the spectrum could use whatever standard they wanted, giving us providers with GSM and CDMA.

He quotes a 5 year old article from Wired:

Once the marketplace was allowed to work, it quickly converged to CDMA, which proved to be superior. CDMA is ascendant in America. More important, it's the foundation for the next generation of cell phone technology - 3G - since it turned out to be the only technology capable of making the leap to fast and capacious wireless data transmission. Had the US government mandated a standard, by contrast, it would undoubtedly have picked TDMA or GSM, since those were the dominant technologies at the time. And then we wouldn't have CDMA leading the way to 3G today.

Certainly, it is good to read such a deeply held faith in the marketplace leading to its own advancement.

Of course, it would help if it were not 180° wrong. As Mr. Gapper states:

I am afraid that history has not been kind to this argument. Europe has stayed ahead of the US in mobile telephony, and in 3G services. Having one technology standard has spurred competition among network operators and handset manufacturers while competition in the US has been stymied by a proliferation of technologies.

In truth, he is only partly right. US mobile technology deployment, and for that matter US broadband suck because this is what the unfettered free market leads to.

The Europeans mandated a single standard, and have prevented carriers from locking in customers. From a purely profit perspective, there is more money in making your customers captive than there is in providing them a superior and innovative product.

That's why local phone carriers and cable companies spent their money on lobbying, and creating limited products that require you to purchase all or nothing. To quote Willie Sutton, it's where the money is.

They are monopolists by necessity....There is only so much in the way of wire or cable you can place in a city, so the last mile is necessarily a monopoly or duopoly, and they spend their money on protecting this, not on benefiting the consumer.