Government endorsement of technology standards

As reported yesterday on ZDNet, the European Commission is considering whether to officially back DVB-H as the "preferred" European Union standard for mobile television. This has been percolating for quite awhile (from at least July of last year, as gleaned through a quick Google search), so it's not exactly "new" information.

As reported yesterday on ZDNet, the European Commission is considering whether to officially back DVB-H as the "preferred" European Union standard for mobile television. This has been percolating for quite awhile (from at least July of last year, as gleaned through a quick Google search), so it's not exactly "new" information. An official decision favoring DVB-H, however, would require that all member states mandate support of the new standard, likely through licensing regulations that require owners of wireless spectrum to provide support at least for "official" EC protocols in devices that use that spectrum.

One can to a certain extent see why European regulators might believe that an officially mandated standard is the best approach. Europe was ahead of the pack when it came to mobile phone adoption, with usage numbers vastly surpassing other regions, particularly the United States. This lead helped to turn European wireless companies into technology leaders, and made European wireless brands such as Nokia, Ericsson and T-Mobile into companies with globally-recognizable brands. GSM, the mobile standard used throughout Europe, was similarly mandated by governments. This would lead one to believe that early standardization on DVB-H would yield similar results.

I think, however, that the EC exaggerates the effect that standardizing on GSM had in Europe. GSM, in my opinion, had little to do with Europe's lead in mobile phone adoption. That is due to the fact that Europeans tend to be spaced much closer together than other parts of the world. This ensured that more customers were served with each cell phone tower installed, creating a "bang for the buck" advantage that accelerated rollout throughout Europe (a region that, due to its wealth, could better afford early cell phone rollout than other more densely-packed nations in Asia).

Likewise, mandating a single standard such as GSM throughout Europe is like mandating that all people in a business meeting speak at least a common language. That tends to happen on its own.

Europeans travel to other European countries just as residents of New Jersey travel to other American states. A telecommunications company that created a state-specific technology island would find that its population would swiftly shrink to zero as inhabitants moved to companies with greater reach.

Besides questioning the need for such mandates, I also question the value of government deciding what is "best" while a debates are still ongoing with respect to technology options. France's experience of the "minitel" is an instructive example. Minitel was a technology that preceded the Internet by many years, bringing some of the benefits of that Internet (e.g. directory services, basic directions, email-like services, etc.) to French customers years before the Internet did the same for the rest of the world. French concentration on minitel use, however, caused the country to be an Internet laggard for years. When I arrived in Switzerland in 2000, French statistics of Internet usage were a third of what they were in the rest of Europe.

The lesson, in other words, is that picking the wrong winner can be extremely costly in the long term. Governments aren't usually that good at picking winners, not because they are stupid, but because it is all but impossible to gather sufficient information to represent all the interests of buyers and sellers in a market.

I have some comparative experience of the European and American markets which influences my stance on this, as I spent five years living in Europe (and as an American, spent even more time in the United States). Yes, it was nice that my phone would work on any network anywhere on the continent (though as I said, that was likely to be the case, anyway), but roaming charges made that of questionable benefit. Though the EC has acted to reduce those charges somewhat, it is still noticably more expensive (my Vodafone IE prepay still runs down ridiculously fast while roaming in London). This reduces the likelihood that the typical European will see much value in continent-wide DVB-H service, as roaming costs that are an all-but-certainty will likely prove prohibitive.

In general, mobile charges are much more expensive in Europe than in the United States, where large voice call minute allocations are common as part of subscription plans (the accidental effect of which is, in my opinion, to reduce SMS usage in the United States). Further, America didn't standardize on one telecommunications standard throughout the country. That has not in any way reduced my ability to use my CDMA-based Verizon phone anywhere in North American (yes, Verizon works in Mexico and Canada). Verizon offers that reach not because they must, but because that is what customers expect and demand in a market dominated by the more common GSM technology (GSM-based AT&T has a larger network than Verizon).

If the results are the same from a reach standpoint, why does it matter whether or not governments mandate a standard? Quite simply, because if given a choice between my CDMA-based Verizon personal mobile and my GSM-based AT&T business phone, I will choose Verizon every time. Verizon's voice quality is 100 times better than AT&T's, and I find that it works, as the ad says, "in more places" than anyone else's offering.

Yes, Verizon is evil (though it's worth noting that they have been working on becoming much less evil of late; they also no longer make me sign up for a new 1 year plan if I want to change my minutes allocation), but then again, ALL TELECOM COMPANIES ARE EVIL. Blame it on a legacy of state-protected monopoly status which has created a culture that believes they are entitled to soak customers as much as they want, combined with a tendency among network-owning companies to build walls around users in order to generate more revenue from them (as a point of comparison, consider the frustrating balkanization of IM networks).

But I digress. It's better, I think, to let companies use whatever technology they want, and let natural market forces figure out how best to satisfy consumer demand for service that reaches beyond regions and borders. If America hadn't taken a hands-off approach, Verizon wouldn't have offered its service using CDMA. That wouldn't have created a "better" market, and might even have led to less competitive churn as companies were given less scope within which to differentiate themselves.