There’s an idea prevalent in political circles that when companies get too big, they inevitably become a threat to competition and consumer welfare. Here’s an instance where the precise opposite is true.
Amazon
The 12-inch antennas on which users would receive broadband from space will be capable of handling 400 megabits of data per second. When Project Kuiper, named for Dutch astronomer Gerard Kuiper, unveils its planned pricing in the near future, the fees for using the service will likely compare favorably with those of SpaceX’s Starlink.
Needless to say, the folks who run Starlink are not wildly enthusiastic at the prospect of competition from one of the world’s biggest tech companies.
Starlink satellites headed for orbit. Project Kuiper will launch its first two prototypes later this … [+]
No doubt about it, Amazon is a behemoth, with over half a trillion dollars in sales last year. It owns all sorts of businesses beyond its well-known e-commerce and cloud computing operations, from MGM Studios to the Ring home-security system to Whole Foods.
And that’s kind of the point: if you want to compete with the likes of Elon Musk, founder of SpaceX and Tesla, you’d better have deep pockets. Amazon does, and has stated publicly it expects to spend more than $10 billion on implementing Project Kuiper. Its agreement to secure 92 satellite launches from three different providers is the biggest commercial-space procurement ever.
This is an example of where being a big tech company enables Amazon (a contributor to my think tank) to foster competition in an important emerging market. SpaceX has issued impressive projections of how much revenue broadband from space might generate by mid-decade, and Amazon is in the hunt for its share of those revenues.
There is no way that a fledgling startup could compete in this market, given the amount of investment required. Boeing
The most immediate challenge that Project Kuiper faces, though, isn’t resources but regulators. Companies that beat Kuiper into orbit, led by SpaceX, are urging the Federal Communications Commission to go slow in changing its rules for sharing spectrum in order to accommodate newcomers.
Amazon is arguing that there is sufficient capacity in the relevant spectrum bands to avoid interference by newcomers with the signals generated by existing operators. It says if the spectrum is allocated efficiently and operators share information, competition need not be destructive.
It therefore argues for a level playing field, and hints that companies like SpaceX are trying to use the existing spectrum regime to protect their competitive advantage in providing service to terrestrial users from orbit.
The SpaceX rejoinder, reflected in a February 7 filing with the FCC, complains that “a single licensee—Amazon—once again seeks to contort this proceeding to its self-interest.” It goes on to argue that Amazon is propounding an “anti-competitive rationale” for its own position by arguing that the market for internet service from space can only sustain two or three viable providers.
What Amazon’s argument actually shows is that it is taking significant risks to bring competition to an emerging market—the opposite behavior from what critics of “big tech” might have predicted.
As for the notion that Amazon is the sole licensee advancing the case for a different approach to spectrum sharing, that probably has something to do with the fact that Amazon is the only company that the FCC granted a license to in its most recent round of reviews.
The attrition rate of companies seeking licenses in previous rounds has proven to be quite high, and that undoubtedly informs the commission’s approach to new applications for licenses in key spectrum bands.
To an outsider, the spectacle of two highly successful tech companies alleging anti-competitive practices on the part of their rival is somewhat comical, but it underscores that the dynamics of the market for “non-geostationary orbit, fixed-satellite services” isn’t all that different from other sectors of the economy.
Everybody is straining for advantage, and regulators need to sort out which arrangement ultimately serves the best interests of prospective consumers.
In this case, the FCC has to protect the interests of enterprises that were early entrants to an emerging market, while also welcoming new entrants who will contribute the price and performance discipline that only competition can provide.
The fact that Amazon is willing to risk over $10 billion on getting into this new business isn’t a bad thing, it’s a positive development for anyone who believes competition is central to market-based capitalism.
All Amazon is seeking for Project Kuiper is a level playing field on which to compete. If the FCC concludes its plan poses no real danger through interference to the functioning of pre-existing providers, then of course the commission should facilitate Project Kuiper’s entry into the marketplace.
To do otherwise would violate the spirit of past policy precedents, and potentially confer a quasi-monopoly on companies that made it into orbit sooner. The Federal Trade Commission might have something to say about that.
As noted above, Amazon contributes to my think tank.
Source: https://www.forbes.com/sites/lorenthompson/2023/03/13/amazon-presses-for-level-playing-field-on-which-to-compete-with-spacexs-starlink/