BlackBerry CEO Wants FCC to Make Developing BlackBerry Apps Mandatory

Chen is known in the corporate world as somewhat of a turnaround artist. Blackberry needed a turnaround. That could have been why it "made sense" for him, or perhaps the 80ish million a year there paying him.

I disagree with this for a couple reasons. (The first sentence is easy to disagree with but I won't engage it as a strawman and will assume you mean it in a very narrow sense).

The reason is that I don't believe that it's purely a company's choice to create native apps, web apps, or whatever they like. Please bear with me.

In economics there is a tactic known as 'rent seeking'. A simplistic historical example is the chaining off a river and charging a rent for whomever tries to use it for shipping/travel. The entity chaining off the river may become wealthy from rent collection, but they themselves have not added wealth to the system - they've merely controlled, captured and collected the wealth that always existed in a riven anyone could have floated down had there been no chain.

Instances of rent seeking get more complicated in reality. We can simulate that in our hypothetical by assuming the that the entity chaining off the river first deepens or widens it, or that they also start renting boats or put up lighthouses.

Some of these costs are a singular investment cost - i.e. widening the river, installing lighthouses - and it's sort of suspect that for a fixed investment one should be able to collect indefinitely from it (see parallels with the credit card processing infrastructure and ISPs). The entity can always point to their having widened the river as justification and a real conversation needs to be had about rent collection.

Other costs accumulate in an ongoing manner - leasing of boats - which may appear to be fair but it does not justify the rent collection from the chain and it adds the possibility of special treatment (i.e. through regulatory capture).

What the computing services industry has figured out is:

A.) One can develop, for a mostly fixed cost, software that is sold as a service (even if it could easily instead be sold as a commodity)

B.) That in place of chaining over a river one can develop a digital ecosystem to seek rent from - Windows was successful in doing this for quite a long time

C.) That the networking and ancillary effects of consumers can be used to magnify the value of the product - put another way that value can be extracted from customers non-linearly

D.) That on digital platforms vendor lock-in, contributed to by networking effects, can be used as an anti-competitive tool

Let's take competing with Facebook for example. If you want to compete with Facebook, even if you have a superior social networking website in some capacity, you will need to have profiles for a huge number of active people - but there are essentially zero practical and legal ways to bootstrap such a competition (the Google+ saga reads almost exactly like this). That is to say people only need one place online to socialize with friends and family - the personal social networking market doesn't support ten major competitors. Even when Facebook's brand is about as toxic as you can get and outrage is high (as it spiked this past year) there can only be one major personal social network and any transition must be a violent one. Traditionally, we would call markets where only one competitor can exist a 'natural monopoly' and we socialize them.

Similar things are true of application platforms. Microsoft was hit by anti-competition lawsuits not only for bundling software with its Operating System, but also for integrating applications into its platform to give first party applications advantages over third party competitors. This is extremely true of Apple's iOS store today. Moreover, Apple (let's keep running with Apple for a moment) has ultimate executive decision about what makes it into its app store and has used this to block applications from both Google and Microsoft (who in turn did the same).

These methods of gate keeping and rent-creating are extremely popular, and in fact have been brought up (in a positive light) at every VC meeting I've had. Investors will ask how you are going to capture the market, and smile when you suggest there are network effects and show how there in customer lock-in.

Blackberry has, at this point, been elbowed out of the market. Even if they have a superior phone they will have an inferior app store (even though Apple, Android haven't built everything in their stores). They can not get a better app market because they need app developers. To get app developers they need people to use their phones. They are in a chicken-egg-paradox.

These sorts of practices elevate first-to-market privilege to extreme new heights, and turn them into forms of rent-seeking; the platforms that are invented become captured by those who build them.

Blackberry is asking for recognition that they can not compete in their own industry. Not because they aren't able to build phones or write phone software or any other sensible reason. There is a barrier to the phone market for all but a few blessed companies.

While I agree it would be nice to live in a world where everything is based upon an open standard, it's laughable at best for Blackberry of all companies to call for this. Blackberry dominated the market for years by locking other systems out, and just because they ported BBM to iOS and Android doesn't all of the sudden give them the moral high ground. If they truly cared about "application neutrality" or whatever term they coined, they should open the BBM spec and let anyone who wanted to build on top of that.