Re: [arch-d] <draft-lazanski-consolidation-00>

[Christian Huitema <[e-mail]>]

A specific point on the statement in the draft that "Both Christian
Huitema and Julien Maisonneuve noted concentration, which leads to
consolidation, as an effect of economies of scale and network effects in
business models in the implementation of business practices."  There are
lots of possible interpretations behind that statement, including the
classic "natural monopoly" defense of, well, monopolies. It is very
clear that both effects exist, but also that investors who explicitly
seek to achieve monopoly do not rely on those two effects alone, and
that standards have a role to play.

The network effect is in full swing with social networks. Indeed, most
of the upstarts social networks do fail rapidly, because they fail to
achieve a critical mass of users. There is a long list there, including
very well funded initiatives like Google+. The economies of scale
effects are also very visible in e-mail services. Effective e-mail
service requires big investments to manage spam. In practice, just two
providers concentrate a huge part of mail service: Google's GMail and
Microsoft's Outlook. Dismissing these effects would be very misleading.
Scale also brings knowledge, be it technical knowledge of the
application domain or the soft knowledge that comes from observing the
behaviors of a large and diverse user base. The products of less 
knowledgeable competitors will often be perceived as inferior. Network
effects and scale provide advantages to providers who achieve them, and
contribute to "naturally" maintaining dominant positions.

On the other hand, dominant positions bring lots of advantages to
whoever achieves them. In the old industries, dominant positions
translated into pricing power. For "free" services, dominant positions
translate into gigantic accumulation of data on users, monetized through
advertisements. In any case, dominant positions are known to bring big
financial rewards. Investors will push entrepreneurs to achieve them
with a variety of strategies including selling services at a loss or
encouraging competitors to merge.

I will stop there, but I have grown sensitive to the "natural monopoly"
arguments, and I wanted to clarify my position.

-- Christian Huitema

On 11/9/2020 9:09 AM, Dominique Lazanski wrote:
> Hey Mark and I have a draft on consolidation. 
>
> Protocol and Engineering Effects of Consolidation can be found
> here: https://datatracker.ietf.org/doc/draft-lazanski-consolidation/
>
> If you have any thoughts or comments, we would love to have them!
>
> Dominique
>
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