MUD, video and antitrust

Intensely local. Bell Atlantic and SBC have created a marketing alliance with DBS companies to move video, illustrating how granular telecom marketing is becoming. (See the story by New Media Editor Vince Vittore on page 6 of our March 9 issue.)

Bell Atlantic will target all residential customers in its territory. SBC will focus strictly on MDUs (multi-dwelling units).

Going back to the birth of the Bell System, when the mother of all network operators snatched the densely packed big cities and left less densely populated areas for the Independents, carriers have recognized the power of locally targeted marketing efforts. In the '80s, local focus sharpened again as CAPs laced dense business centers with fiber networks to rocket corporate traffic onto long-distance networks.

In the '90s, many CLECs vector the business market one building at a time. The plan is to sign up everyone in a fertile building, then move on to the next. Incumbents, meanwhile, think in terms of areas. Incumbents are surgeons carving with knives, while CLECs use lasers. This strategy gives CLECs serious advantages over the incumbent:

* Economics (bonding investment with revenue lowers costs and prices, and promotes return)

* Flexibility to deploy the latest technology at the next building

* Freedom to economically upgrade existing users with newer technologies

* Customized service sets tailored to a highly defined user community

* An opportunity to build stronger, service- and support-based relationships with customers.

SBC's video strategy moves the front from the business to the residence and from traditional services to video, but it follows the same principles and enjoys the same advantages.

SBC may or may not be selling must-see TV, but it is offering must-see telecom marketing.

As digital technology becomes more scalable, as intelligence becomes more flexible and as demand for bandwidth becomes more variegated, intensely localized marketing will become the norm, not just for savvy new competitors but for all competitors.

Antitrust metrics. DOJ antitrust friars must feel like they've died and gone to heaven. No such luck, however. They still languish in the lower realm. But they are busier than ever in the information industry.

The determined friars labor diligently. Too bad they lack a meaningful definition of what exactly constitutes an antitrust violation in the information industry.

When does market behavior move from being competitive to anti-competitive and warrant an antitrust investigation? Is market share the standard? How much is too much? When is the appropriate time to measure?

Consider Microsoft. In the Senate, Microsoft was spanked because of its market share in several markets, including Internet browsers. Netscape Napoleon Jim Barksdale adroitly equated market share and monopoly in his testimony. Until recently, Netscape dominated the young Internet browser market. Not anymore, however. Should the DOJ have stepped in two years ago to ensure that Netscape wouldn't choke the nascent market? Obviously that wasn't necessary.

Consider WorldCom. The DOJ worries that, with MCI aboard, WorldCom will choke the Internet backbone market because the two currently are market share leaders. But like browsers, this new Internet market is exploding. Capacity is being built so swiftly and by so many companies that any market share measurement has merely momentary significance.

Isn't the thought father to the sin of monopoly? If so, the friars can correctly conclude that, truly, everyone born is a sinner.

But demonstrating motive clearly isn't sufficient. Presumably every competitor wants to be the market share leader. Another way of putting it is to say that every competitor would like to add the next profitable customer who comes on the market no matter how many customers it already has.

If market share is not the right measure, what is? Two criteria should be used: pricing a service below cost so no one can profitably enter the market and forming agreements with second parties whose purpose is to prevent any third party from entering the market.

The friars have plenty of important work to do. For example, bundling (in both the PC and telecom industries) can raise antitrust questions irrespective of the market share of the bundler. But the friars err when they reduce their job to measuring market share.

Which market? If only the MDU, or multi-dwelling unit, was known as the multi-unit dwelling, or MUD. Then competitors could fight to be big in the MUD market. And a dirty business it would be....