Award Winning Blog

Tuesday, September 14, 2021

Challenging a NYT Column Singing the Praises of Platforms and Dismissing Their Network Effects

The September 4, 2021 edition of the New York Times contains an article written by Professor Jonathan A. Knee entitled Network Effects are Overrated.  The author generally dismisses as benign, or ineffectual just about anything platform intermediaries have undertaken, despite the prevailing view that these ventures impose significant costs and benefits on consumers and society.

Professor Knee appears to dismiss the ability of platform operators to lock in subscribers and create incentives for more consumers to “get on the bandwagon.”  He also dismisses any sense that high market shares reflect a “winner take all” sweepstakes in play. Apparently, the ability to accrue scale efficiencies is not the same thing as exploiting network effects, the ability to expand the subscriber base at low incremental costs.

Professor Knee has great optimism in the ability of market entrants to capture market share and for consumers to vote with their eyes, ears, and pocketbooks and churn out of dominant platforms such as Netflix, Google, Facebook, EBay, PayPal, Uber and others.

The column curiously ignores one of the fundamental characteristics of platform intermediaries: the ability to profit from operating in a two-sided market serving both downstream consumers and upstream advertisers, data analytics firms, election meddlers, purveyors of disinformation, government surveillance agencies, and vendors.

Broadband platform intermediaries have unprecedented opportunities to get multiple bites of the apple as exemplified by Google’s ability to sell advertising, but also generate fees as the auctioneer of ad placements.  Put another way, platform intermediaries can spread fixed costs and accrue positive network effects while also generating multiple profit centers up and down a complete market “food chain.” 

Previous platform intermediaries had limited opportunities to exploit both sides of a market without jeopardizing profits.  Fior example, cable television operators and newspaper owners had to calibrate both advertising and subscription rates to maximize profits.  Attempts at gouging typically would reduce overall profits as consumers and advertisers pursued better value propositions.

Lastly, some readers of this blog may remember with fondness how Word Perfect software offered a better user experience than Microsoft Word. That notwithstanding, network effects over time forced people like me to get on the Word bandwagon, because sticking with Word Perfect guaranteed conversion and compatibility hassles.

Never underestimate the power of firms able to exploit network effects, economics of scale, and access to both sides of an integrated platform marketplace.

Walmart The Price Gouger

When it comes to pricing, the conventional wisdom considers Walmart the regular low price leader, much like Southwest Airlines.  Think again.

These companies are no less willing to exploit gouging opportunities when available.  

Consider this rip off.  In June Walmart charged 50 cents for a gallon of spring or drinking water that my wife prefers when traveling.  Apparently, chlorinated water can wreck your bacterial balance among other bad things. A few days ago, Walmart charged 67 cents for this product, a 11+ percent increase reasonably attributable to pandemic costs, etc. 

Now Walmart is charging 98 cents, nearly a 100% increase.  

Walmart would be hard pressed to provide any cost plus basis for such a substantial increase in price in such a short period of time.  Sadly, there appears to be no way the so-called marketplace can discipline and punish such price gouging as insufficient numbers of people will cote with their feet and seek the 80 cent option available at Food Lion.

In this greedy, rip off, make up for lost profits environment, buyer beware,


Monday, September 6, 2021

What Rat You Out Smartphone Surveillance Do You Support?

At law school, I learned about the slippery slope of changing fact patterns that typically trigger a change in analysis and which side of a case I support. Sometimes the process is called a parade of horribles as the circumstances grow ever more problematic.  Such a continuum runs for wireless technologies essential for carriers to provide service, but also able to engage in unprecedented and largely unregulated surveillance, tracking, mining, and money making.

Readers of this blog understand that cellular radio carriers need to monitor continuously the location of every subscriber with their handsets on.  Such tracking provides the basis for knowing how to route an inbound call to a subscriber and when to provide service (what used to be called dialtone) to a subscriber seeking to make an outbound call. The slope becomes both slippery and increasingly horrible as tracking technologies offer new profit centers for carriers, smartphone manufacturers, platform intermediaries, content providers, social networks, data analytical firms, marketers, advertisers and more.  These stakeholders typically do not pay consumers for access to data about wireless subscribers’ locations, conversations, texts, messages, app uses, etc.

At best, the quid pro quo involves an exchange of something “free,” but not without cost to the consumer.  At worse, consumers receive nothing, may not even know about what takes place and may suffer from the intrusion of privacy, revealed preferences, and analysis that tilts a market transaction in favor of the firm having acquired and analyzed surveillance data.

I hope that readers neither accept the notion that broadband users have no reasonable expectation of privacy, nor do they have anything to fear about data mining.  The miners repeatedly emphasize how they take pains to anonymize the data they collect.  Yet, we should know by now how easy it is for data analytical firms and marketers to identify individuals and know more about us than what the data protection promises claim to safeguard.

It is quite easy for data mining to rat out someone, because they know where we are and how we use our smartphones.  The domestic terrorists/patriots (depending on your politics) should have known that an operational smartphone in their possession regularly records their location, the destination of their calls and texts, and what apps were used.  This is evidenceavailable to law enforcement authorities.  In most instances, the carrier and the manufacturer of the smartphone willingly cooperate with authorities, often without expecting a search warrant. The slippery slope starts in the reasonable law enforcement/national security zone, but quickly moves into territory most of us do not support. 

Just who is doing the rating out?

If you, like most, support the use of wireless metadata, call records, etc. for law enforcement, what do you think about congressional or state legislatures using these surveillance technologies for investigations?  This data can identify who aided and abetted the crimes committed by others on January 6, 2021.  Some people, not physically located at the Capitol, may have actively conspired to execute the carnage.  

What rat you out surveillance technologies violate a reasonable expectation of privacy, and the right to be left alone?  Appreciate the irony that while we might agonize about whether and how these concepts support or block congressional investigations, data miners typically have no constraints, because the terms of service grant a free reign.


Monday, August 16, 2021

Tracking Inconsistent Zigs and Zags in Telecom Policy Research

Sponsored researchers surely embrace Oscar Wilde’s view that “consistency is the last refuge of the unimaginative.”  Why bother building a multi-year record of empirical evidence when there are ample publishers and even appellate court judges (and their law clerks) waiting for intellectual support no matter how suspect.

Just now, I am seeing how both wireless and wireline carriers have unleashed a torrent of inconsistent advocacy research.  On one hand, the conventional wisdom dished from this group and their sponsored researchers was the “fact” that network neutrality and other regulations directly and negatively impact investments made in infrastructure.  Former FCC Chairman Amit Pai made a point to repeat this assertion early and often and it became gospel truth, so much so that cherry-picked and quite questionable “research” became the foundation for the appellate court affirmance of the Restoring Internet Freedom Order.

Now, circumstances and motivations have changed with the Covid pandemic offering a true test whether carriers have made sufficient plant investment, both under the disincentivizing network neutrality regime and free of it.  No one has convinced me that a single regulatory or degregulatory initiative substantially impacts carrier investment decisions one way or the other, particularly because of far more impactful factors such as interest rates and the normal ebb and flow of technological development cycles.  

Carriers did not close their wallets when network neutrality rules were in force.  That is corroborated by ample current evidence—now touted by the carriers-- that during the pandemic, U.S. carriers were able to meet rising demand for bandwidth.  If the carriers had scrimped on investment, because of the horrendous burdens imposed by network neutrality, how could their networks show such resiliency and ability to accommodate significant increases in subscribership and bandwidth requirements? It shows me that the need to stay competitive and to install new technology, such as 5G, trumped any incentive to forestall investment to make a regulatory and public policy statement.

Additionally, carriers cannot credibly oppose municipal broadband networks and expanded universal service subsidies if they persist in spreading the gospel that network neutrality forced underinvestment.

We no longer hear that consumers do not want, and will not pay for something better than 25 megabits per second download speeds and 3 megabits per second upload speeds.  We no longer hear that carrier networks are woefully underfunded and unable to satisfy consumer requirements. Such assertions now would support the case for market failure and the need for taxpayer funded networks, because the carriers have no interest in building.  Of course, now that Covid has unleashed a torrent of new universal service money, who can dispute the premise that incumbent carriers want to tap the gravy train.

By the way, the new FCC has yet to reinstitute network neutrality, but I am not seeing any new evidence of substantial increases in network investment by carriers still freed from the unconscionable burdens previously imposed.

Who needs consistency?


Thursday, June 10, 2021

When a Confirmed Reservation Means Nothing of the Sort


A few hours before the time for delivery of a rental car, a local rep called to renege: no apology, no explanation, no offer to mitigate damages; nothing but nastiness.

I'm confused about the email Enterprise previously sent me about a "confirmed" reservation.  What would a reasonable person understand confirmed reservation to mean?  Perhaps a better question: what prevented Enterprise from blocking rentals it knew (or should have known) that no vehicle would be available?

This shameful episode has absolutely nothing to do with force majeure that absolves a contracting party from liability for abrogating a contract.  How could Enterprise not consider the impact of Covid recovery and chip shortages?

Enterprise can fail to perform duties in a contract it created with impunity, but in most transactions, "no show" consumers have to incur 100% of the financial loss. You miss the flight, you lose.  You cannot make it to the concert, tough.  How can Enterprise not suffer any consequences for its negligence . . .dare I say fraud?

Libertarian economists typically would answer by suggesting the company would suffer revenue declines and an even worse reputation.  Maybe not, particularly when lax antitrust law enforcement allows markets to concentrate.

Enterprise can have a cavalier attitude toward misrepresenting rental car availability, because the company suffers no significant penalty for its contemptable behavior.

For what it's worth: shame, shame, shame on Enterprise Rent-A-Car.

I do not feel better, and I will be without transportation of any sort for 4 days as my wife uses our single vehicle to care for an ailing parent.  So much for cutting my CO2 load.


Monday, May 24, 2021

And on the Left: Preciousness With a Dash of Sanctimony

             Regular readers of this blog know that I have clear contempt for snark and deliberate mistruths propagated by newspapers whose authors ought to know better.  The Wall Street Journal regularly fails to satisfy a basic smell test when a writer, for example, tries to convince that wireless carrier market concentration promotes competition, and no household could ever need triple digit (100+ megabits per second) transmission speeds.

             Being an equal opportunity curmudgeon, I want to take to task the New York Times for the lesser offense of pomposity.  It appears that this “newspaper of record” has an unconditional style book requirement that every acronym must explicitly represent a single word, in sequence.

             For example, before revising an article using an acronym for megabits per second, the Times dutifully used m.p.s. See https://www.nytimes.com/2021/05/17/business/infrastructure-rural-broadband.html.  How precious.  Everyone else in the world uses the following Mbps or mbps.  See, e.g., https://www.wsj.com/graphics/faster-internet-not-worth-it/. 

            In a revision to the article, the Times now spells as megabits per second each time it is used rather than use m.p.s.

             The Wall Street Journal complies with the proper acronym, even as it wraps itself around empirical evidence and statistics that it infers as proving that “households are paying a premium for services they don’t need.”  Right on the acronym, but try telling a family of 4, each streaming video at the same time, that they could not possibly need platinum service.

             A pox on both their houses.

 

           

Sunday, May 16, 2021

Infrastructure Ransomware Targets Are Not Victims

            Companies, like Colonial Pipeline, accrue rich margins for the essential service they provide.  Whether by regulator-granted monopoly franchise, being first to market, or operating in what appears to be a dull, low growth business, infrastructure companies have become complacent.  Having sunk substantial funds in the ground, they rarely perceive the need to make significant, additional investments in such areas as network security. 

             Infrastructure companies owe their customers and the nation a duty of care that includes ongoing efforts to protect their networks from harm, including remote access by criminals and government agents intent on mischief, extortion, espionage, or terrorism.   This duty should be baked into the mindset of infrastructure managers, instead of the conventional wisdom that they can generate higher annual Christmas bonuses, stock prices, and share dividends by scrimping on research, network security enhancements and efforts to protect their investments from now predictable hacking. 

             If someone breaks into your locked car, by smashing a window, the court of public opinion and insurance companies, typically consider you a crime victim, worthy of sympathy and support.  On the other hand, if you kept the car unlocked, or inadvertently left your electronic door opener in the vehicle, compassion and reimbursement evaporate. 

             Colonial Pipeline and other mission critical service providers know that they must keep their networks locked and secured.  Scrimping on these tasks does not pass the smell test, nor does an assertion that infrastructure providers are helpless and have no ability to guard against bad actors who can succeed in hacking networks, often by simply duping employees to click on a credible looking link that triggers a download of malware. 

             As for telecommunications infrastructure, Congress, the Executive Branch, and the Federal Communications Commission recognize both the importance and vulnerability of the broadband networks.  However, they have emphasized the need to blacklist companies and order the removal of equipment by telephone companies, rather than concentrate on comer protection. The FCC relies on mostly anecdotal evidence that Chinese equipment can provide “back door” access for surveillance, espionage, service outages and disruption of equipment supply chains. 

            No one in the federal government appears concerned that private and public harms can result not only based on the nationality of equipment manufacturers, but also from failure of network operators to strengthen network security.  A substantial, long standing body of law, case precedent and commercial best practices imposes a high duty of care by telecommunications carriers and even providers of services whose content rides along the carriers’ transmission conduits. 

             Instead of placing the burden squarely on telecommunications carriers, the FCC appears to think it can solve national security problems by targeting foreign governments.  This strategy offers no protection against sabotage executed via equipment manufactured by domestic companies and friendly, foreign ventures. 

             The FCC has a longstanding, policy of relying on market forces to meet consumer wants, needs, and desires.  Consumers have near complete freedom to attach devices, such as Wi-Fi routers and cable modems, to telecommunications networks.  The only qualifier: the attached device cannot harm the network.   

             What about the potential for the network to cause harm to the user?  Despite blacklisting several Chinese carriers and equipment manufacturers, consumers remain vulnerable to network harm.  Worse yet, the network provider incurs no liability for such harm, and even if its lax attitude toward network security facilitated the harm.  No law currently exists that even imposes the duty to notify subscribers quickly about hacks and stolen consumer data. 

             Apparently bad stuff happens to infrastructure and the provider has no responsibility even to make reasonable efforts to anticipate and minimize harm. 


Sunday, April 25, 2021

Side-by-Side Truth and Mistruth in the Wall Street Journal

             Even as the Wall Street Journal continues to provide important news reporting, its opinion pieces grow ever snarkier and more deceitful.  In the April 23, 2021 edition, readers will see varying degrees in the representation of the truth contained in two opinion pieces, each referring the American Civil Liberties Union.

             In an opinion authored by the Editorial Board,  the Journal notes that the ACLU, true to its longstanding mission, has joined conservative groups in opposing legislation in California requiring organizations qualifying as charities to disclose the identity of their contributors.  (See https://www.wsj.com/articles/donor-disclosure-arrives-at-the-supreme-court-11619217816).

           In this opinion, one could infer that the Journal authors see the ACLU as fair minded, still willing to take controversial and perhaps counterintuitive sides in litigation.

             In another opinion piece in the same online edition, (see https://www.wsj.com/articles/how-to-have-more-police-shootings-11619213893?mod=trending_now_opn_1), Holman W. Jenkins, Jr. appears to suggest that any arrested person risks death by resisting, even after police have subdued the arrestee.  Did Mr. Jenkins imply that any degree form of resisting arrest entitle police to punish the arrestee, seemingly with no constraint? 

             Mr. Jenkins also even parts company with his usually like-minded editorial writers at the Journal, at least insofar as his perception of the ACLU.  Unlike the Editorial Board opinion noting the ACLU remains an advocate, even for conservative-championed privacy and First Amendment freedom, Mr. Jenkins characterizes the current ACLU as “lately morphed into a pro-censorship promoter of progressive causes.”

             Has Mr. Jenkins concluded that he should continue to target and vilify the ACLU even when it shares his views?

Wednesday, April 21, 2021

Can You Hear Me Now?—The Wireline Edition

Regardless of the business cycle and overall economy, tradespeople in my rural enclave follow a different drummer.  Most work when they feel like it and never seek to maximize income.  There’s often a leisure pursuit worth prioritizing: the start of the hunting or fishing season, a county fair, a family event. It drives me crazy when year after year a scheduled premises visit does not happen, and calls do not get returned.

Today sets a new low point.

After agreeing on terms for the replacement of PVC conduit and wire between my septic tank and basement alarm, (a long story about rural living) both the electrician and excavator have balked at doing the job.  Apparently there are more lucrative uses for their time, or they have concluded the offered rate simply was too low.  There’s a State College surcharge for everything based on the assumption that all residents are rich and can afford to pay more than residents in other, nearby locales.

Today, the electrician claimed the phone line was bad when I called him  A landline-to-landline call was bad?  I don’t think so.  I offered to call him back, at which point he hung up on me.  A 70 year old retiree sinks to gutless, passive aggressiveness.  Why not tell me: “I don’t feel like doing the job,” or even “I bid too low and will do the job only if you pay me more.”

He couldn’t do that, instead offering some lame and quite dishonest complaint about telecommunications line clarity . . . to someone who knows about toll grade, wireline technology.

Throughout my career, soon to end in retirement from Penn State, I have framed my work ethic based on a simple credo: “Anything worth doing, is worth doing well.”  

Apparently, the generations have merged and can’t be bothered.


Friday, February 19, 2021

Fun With Math: How the Wall Street Journal Doubles Down on Vilifying Green Power Generation

            Just about everyone, with some complicity in the Texas power shortage, persist in blaming green power sources for failing at the worst possible time.  The Wall Street Journal has doubled down with more math purporting to prove wind power failures caused all ills.  See https://www.wsj.com/articles/texas-spins-into-the-wind-11613605698.

            The Journal Editorial Board reports that while wind power represents a lot less than 42% of the total electricity generating capacity in Texas, during the calamity, its share of currently online and used capacity rose to 42% of the total.  Then its share declined severely to 8%.  It appears that the Board wants everyone to conclude that wind power generation failures caused the power shortfall in light of the difference between 42% and 8%.

            Shamelessly the Wall Street Journal and ever other oil and gas boosters are blowing smoke.

            How could a niche power player end up delivering 42% of current production capacity in Texas?  Might other sources of power have failed miserably to operate at peak demand?  Put another way, how could wind power become such a major source of electricity without the usual producers suffering extraordinary outages?  Wind power market penetration rising from about 10% to 42% occurs only if other generation technologies cannot maintain their market share by generating electricity commensurate with current demand.

            The Journal conveniently ignores the fact that oil and gas generation of power failed so substantially that a minor alternative source became essential.  Additionally, all the blame shifters cannot seem to wrap their brains around the concept of making power generation of all sorts resilient in both hot and cold weather extremes.  Both legacy and new power generators can operate in these environments had producers made the necessary investment. 

            In Texas, investing for extremely rainy and cold days apparently is not worth the cost, until it is. 

            Penny wise and pound foolish.

             

           

Wednesday, February 17, 2021

Did the Wall Street Journal Deliberately Lie to Vilify Reliance on Wind Power?

             Today, the Editorial Board of the Wall Street Journal reports that wind power represents 42% of the currently generated power in Texas and that freezing weather reduced output to 8%: “The problem is Texas’s overreliance on wind power that has left the grid more vulnerable to bad weather. Half of wind turbines froze last week, causing wind’s share of electricity to plunge to 8% from 42%.” See https://www.wsj.com/articles/the-political-making-of-a-texas-power-outage-11613518653.

            Does 42% strike you as an overestimate?  Multiple sources report that the current generating capacity from wind power in Texas actually represents about 17.4-25%.  See https://comptroller.texas.gov/economy/fiscal-notes/2020/august/ercot.php; https://www.expressnews.com/business/article/Wind-overtook-coal-as-a-power-source-in-Texas-15875284.php; https://www.statesman.com/story/news/2021/02/14/historic-winter-storm-freezes-texas-wind-turbines-hampering-electric-generation/4483230001/.

            The Journal and Texas Governor  Greg Abbott (see https://nymag.com/intelligencer/2021/02/what-gov-greg-abbott-gets-wrong-about-texas-power-failures.html) appear hellbent on blaming green power generation for the outages in the state.  Such a convenient and false target.  Might the lack of regulations requiring back up power have played a role?  How about the creation of an independent power grid manager with virtually no interconnection with backup power sources?  Who needs consumer safeguards-even for an unquestioned public necessity—when the marketplace can solve any and all problems?

            Yet another example where rather than try to determine the truth, people who know better see the advantage in creating false statistics to “prove” a point.

            Lies, damn lies and statistics.  Maybe the the authors wrote 24% and the numbers got reversed.  Of course, the Wall Street Journal would never lie to make a point.

 

 

 

 

Friday, January 22, 2021

Network Neutrality: Cause and Effect

Perhaps you might join me in wondering how sponsored researchers managed to convince FCC Chairman Pai and others that network neutrality regulation singularly caused a near immediate drop in infrastructure investment by U.S. carriers.  How do you isolate the variable of “regulation” from, for example, the investment cycle in migrating from 4G to next generation 5G wireless plan.

Set out below, are two FCC charts that track capex incurred by the major U.S. wireless carriers from 2010 to 2019:

            S

 






Source: https://www.fcc.gov/20th-mobile-wireless-competition-report-quick-facts

 From 2010 to 2019, the FCC toggled between imposing network neutrality requirements and eliminating them. For purposes of our direct comparison of a regulatory or deregulatory action and subsequent impact on investment, keep these years in mind:

 2010, the FCC approved the first FCC Open Internet Order creating network neutrality rules and regulations; 2014, the D.C. Circuit partially reverses the FCC on grounds that some of the network neutrality requirements imposed common carrier duties on private, non-common carriers; 2015, the FCC respond to the appellate court reversal with the 2015 Open Internet Order reclassifying broadband Internet as Title II regulated common carrier telecommunications service; 2016, the D.C. Circuit defers to the FCC and largely upholds the Commission; 2017-2018, the Ajit Pai led FCC signals its priority in reversing the 2015 Open Internet Order and does so in 2018 with the Restoring Internet Freedom Order.

Does wireless carrier investment correlate up or down with the changing regulatory regime? It sure does not look like it to me.  Even stakeholders, when communicating with buy side Wall Street analysts, emphasize competitive necessity and the business cycle for next generation network investment. 

Regulation does not matter significantly, until it becomes the sole predictor of investment in a different forum.          

 

Local Broadcast Market Concentration Promotes More Local News Operations?

            At the eleventh hour, the Ajit Pai-led FCC released an economic study examining the impact of market size and concentration on the number of local news operations.  See Kim Makuch & Jonathan Levy, Market Size and Local Television News, OEA Working Paper 52 (rel. Jan. 15, 2021); available at: https://docs.fcc.gov/public/attachments/DOC-369214A1.pdf.  While the authors explicitly stated that “this paper does not analyze the total quantity of local news (i.e., number of hours, which has been rising or its content,” I am certain that had Chairman Pai retained his position, he would have relentlessly touted the paper as unimpeachable, empirical proof that further concentration in the broadcast marketplace serves the public interest. 

             I appreciate that well financed and profitable media ventures can exploit scale economies and the efficiency possibly accrued. Ventures with deeper pockets can afford to hire staff to create local content.  Long ago, Bruce Owen in a book he wrote (Television Economics) and elsewhere explained how mergers and market concentration can actually generate more program format diversity.  Rather than duplicate a format, a radio station can generate higher revenues by opting to offer a new format, rather than duplicate one already available.  Arguably, format proliferation contributes to a generous sense of what qualifies as “diversity.”

             One can readily count the number of radio formats, e.g., talk, adult contemporary, oldies, news, etc.)  However, counting truly independent local news providers is a far more daunting task than the paper implies, or what Chairman Pai would claim.

             While I am math challenged, I infer from the paper that one can count additional local news providers and that larger markets can support more local news dissemination.  However, the authors extrapolate that point to assert the possible counterproductive impact of current FCC rules limiting further concentration, with existing rules that establish a floor in terms of the number of broadcast voices a single market must have to warrant consideration of a proposed acquisition and usually prohibit mergers of stations that both have local market share in the top 4 of all stations.

             The paper counts the number of broadcast local news operations with a simple yes or no assessment.  Does the station offer local news, or does it not? 

             The question whether a station offers local news is different from whether it constitutes a new and independent source of local news.  The paper’s counting process does not differentiate between truly local and repurposed content made to look local.  Would it surprise you that some so-called local content is reality is centrally produced material lightly edited to appear local?  Have we forgotten how Sinclair Broadcasting issued “must run” edicts to its stations mandating the local dissemination of content created at the Mother Ship?  See https://www.nytimes.com/2017/05/12/business/media/sinclair-broadcast-komo-conservative-media.html.

             In the worst case scenario, the Makuch & Levy paper could be cited by advocates to bolster a finding the paper never intended to reach and surely did not offer empirical proof. Once again, we get a relentless cascade of “proofs” that market concentration promotes competition and all things good, even if the counting process becomes partisan and politicized.  Would the paper count as a net addition in local news operations a simulcast, or rebroadcast of a news program aired by another station with common ownership?  Would the paper count a station that has no net increase in employee numbers, but manages to generate a news program by cobbling together video press releases, content from the Mother Ship and clips from another local station having the same national owner?

             Recently, Gray Broadcasting filed a Friend of the Court brief in the Prometheus case showcasing how it acquires local market laggards and upgrades their news operations with much commercial success.   See https://www.supremecourt.gov/docket/docketfiles/html/public/19-1231.html.  I helped write a brief challenging the premise that market concentration promotes localism and the proliferation of video on demand content from Netflix and others warrants the relaxation of ownership rules in light of robust competition (scroll down the Supreme Court link to the Dec. 23, 2020 Brief amici curiae of Media Law and Policy Scholars).

             Sadly,  stakeholder advocacy, economic models, wishful thinking and results-driven decision making convert conjecture into gospel truth.  Former FCC Chairman Pai masterfully convinced a lot of people with an endless assertion that network neutrality created a multi-billion dollar reduction in infrastructure investment.  If he says it long enough and frequently enough, it becomes true even though, for example, the recently released 2020 Market Competition Report shows stable wireless plant investment even after the FCC eliminated the network neutrality investment disincentive.   See 2020 Communications Marketplace Report,  GN Docket No. 20-60, Fig. II.A.26, Wireless Capital Expenditures by Provider 2016 – 2019, 38 (rel. Dec. 31, 2020); available at: https://docs.fcc.gov/public/attachments/FCC-20-188A1.pdf.

             Yet again, a reminder that there are “lies, damn lies and statistics.”  

 

 

 



Thursday, December 24, 2020

Supreme Court Friend of the Court Brief

 


    I accepted the invitation to help write a Friend of the Court brief in the Supreme Court's consideration whether the FCC can further relax limits on broadcast ownership concentration.  I tried to Keep It Simple when explaining the difference between "must see" live television and on-demand Netflix.  Copies available upon request.

Friday, November 27, 2020

Academic Award Tombstone Just Like Deal Closing Collectible

             Years ago, when I worked as a lowly Associate at private communications law firms, I pondered the meaning of Partners’ small Lucite tombstones commemorating an initial public stock offering, or the closing of a financing or acquisition deal. 

             Some Associates may have gotten a tombstone, but I never did . . . until quite recently.

             In the mail this week I received a tombstone commemorating my first place academic paper at the 2020 Association for Education in Journalism and Mass Communications, Law Division annual conference.


             Just now, I am reminded of vanity and the psychology concept of cognitive dissonance: how lawyers and academics alike toil endlessly for meaning and validation.  

Sunday, November 22, 2020

Why Would a Fundamental Economic “Rule” Not Apply?

Textbook economics doctrine considers gospel truth the need for sellers to reduce the price of a product or service when demand shrinks, or supply increases.  Even as downward prices may be sluggish and sticky, a new equilibrium eventually settles at a lower price.

O.K. we get this: the fundamental interaction of supply and demand.  For example, gasoline prices drop when supply increases, e.g., from fracking, and when demand drops, e.g., when a pandemic thwarts private and commercial travel.

How and why would AT&T consider itself exempt from the absolutism by raising rates despite substantially reduced demand generated by new, cheaper competitive alternatives, cord cutting and cord shaving? See https://arstechnica.com/information-technology/2020/11/att-raises-directv-prices-again-amid-customer-losses-and-possible-sale/.

Perhaps AT&T, like Comcast, has assessed the premium television market and expects substantial reduction in the total number of subscribers, but with retention of a core audience with greater tolerance for price increases.  I cannot see AT&T purposefully reducing subscribers at a time when it seeks a buyer, unless it does not care about price sensitive consumers.

There are market countervailing marketing strategies such as the decision by a perfume vendor to raise price perhaps to make the product appear more exclusive and upscale.  In this scenario—if actually true—the perfumer strives to brand differentiate and join the exclusive ranks of the top shelf vendors.  I do not see  how AT&T can make its content exclusive and super-premium, because the company has both statutory duties and Time Warner-merger conditions requiring it to provide access even for its “must see” programming such as HBO and CNN.  

Establishing a $130 monthly subscription rate does not strike me as a winning proposition, but then again how did skinny bundles get so pricy? 


Tuesday, October 27, 2020

NewTMobile and the Real World Reluctance to Spend Sleepless Afternoons Innovating and Competing

On a day when the FCC spews platitude after platitude in response to three substantive issues remanded to it by a reviewing court (see RIF Order on Remand), I am reminded of the Keep It Simple Stupid (“KISS”) principle. Banks get robbed, because that’s where the money is.  Firms merge, because they perceive opportunities to make more money.

It’s that plain and simple, no matter how many millions of dollars are spent explaining how reducing competitive numbers will spur innovation, lower prices, increase employment, etc. Remarkably, time after time, judges somehow ignore the obvious profit incentive and concentrate on lofty notions that mergers present a win/win proposition for the companies involved and the public.

Let’s take a look at Judge Victor Marrero’s approval of TMobile’s acquisition of Sprint: TMobile Sprint Merger Appoval.

   The Judge summarily rejected any assertion that NewTMobile will abandon its maverick, innovator and “uncarrier” mission.  He envisioned the company as bolstered and invigorated: a “company reinforced with a massive infusion of spectrum, capacity, capital, and other resources, and chomping to take on its new market peers and rivals in head-on competition.”

In reality, New TMobile presents itself primarily as the “best” 5G option with no reference to lower rates for subscribers, any innovation solely available from it and anything listed as a sure thing by Judge Marrero.  The Judge was extremely confident that “against a backdrop of T-Mobile's longstanding business strategy as the self-styled maverick and disruptive Un-carrier, it would be counter-productive, even self-defeating, for New T-Mobile soon after the merger to fail to invest, innovate, and improve network speed, capacity, and quality, or to refrain from offering products incorporating the most advanced technologies, enhanced content, and improved service plans, and ultimately to lower prices, as market dynamism would demand and more reliably predict.”

Where is the unleased multidimensional spurt of competitiveness?  TMobile’s advertisements and web page harken back to the time when carriers claimed you were the best, because they claimed to offer better odds for an uninterrupted connection and more signal strength bars in more places.

Typically, the conduit offered by a telecommunications carrier represents something largely fungible: there really is not much that a carrier can differentiate in terms of dial tone and  data link.  The difference lies in price and other ways to enhance the consumer value proposition like that offered by old TMobile: roaming without price gouging, carrying forward unused minutes and data, lower prices.

Bottom line: TMobile comes across as nothing better—and possibly less—than it was pre-merger.

“Same as it ever was.”


Friday, October 16, 2020

Freedom of Speech Hypocrites

Conservatives’ whining about a liberal bias in social media strikes me as hypocritical.  When Fox et al receive criticism about a conservative bias, defenders rally around the First Amendment and libertarianism.  Fox can be as biased and censorious as it wants to be.  Fox can serve as a conduit for Russian disinformation so long as the company does not act maliciously, or grossly negligent.  Fox can target, vilify and disparage.  The New York Post can come up with a questionable “October Surprise,” clearly intending to help re-elect President Trump.

These very same First Amendment advocates expect social networks like Facebook and Twitter to serve as neutral conduits, without any “right” to censor, curate or manage uploaded content from subscribers.  Really?  Conservatives loath efforts by a Democrat-led Federal Communications Commission to impose “network neutrality” obligations on Internet Service Providers.  The Republican majority at the FCC championed deregulation as “Restoring Internet Freedom.”

Now, conservatives want to impose a fairness mandate on social networks who apparently have no First Amendment rights in curating, filtering and algorithmic monitoring.  Settled “SUPER PRECEDENT” recognizes a First Amendment right to curate, filter and monitor content.  Librarians do that,  so do web-based news aggregators and surely Fox, the New York Post and yes, the New York Times as well, do that when they deviate from a commitment to  best practices in journalism.  Additionally, a nonpartisan majority provided web carriers and content distributors significant immunity from liability when providing a conduit for harmful content.  This “safe harbor” helped incubate the Internet, particularly when it was technologically infeasible to monitor the torrent of traffic.

In prior blog entries, I have noted that algorithms make mistakes, including the refusal to issue me a credit card in light of my “insufficient credit experience.”  I will readily acknowledge that the algorithms and staff assessments of social networks may overshoot, or undershoot the mark in curation.

I will never accept the view—conservative or liberal—that ISPs, social networks and telecommunications networks have to assess the political consequences of allowing, or blocking specific content.  Do we really want a regulator or judge to second guess decisions made to allow or block content without allowing the conduit operator to assess the veracity and compliance with the terms of service?  

Have conservatives lost respect for the “sanctity of contract”?  Do they really think the Constitution supports revocation of social networks’ management of the content they disseminate?

Chilling.


Tuesday, October 13, 2020

5G Public/ Private Partnerships Versus Auctions

            A remarkable battle pits the Defense Department and the FCC/Congress on the best strategy to activate 5G wireless spectrum in the quickest time. Uncharacteristically, DoD wants to partner with the private sector in a 5G network that the private player builds and shares with Defense Department users who offer nothing more than an agreement to share previously dedicated, exclusive-use radio spectrum.  See https://www.wsj.com/articles/pentagon-opens-door-to-5g-network-shared-with-civilian-cellphones-11600686874.  AT&T cut a similar deal for a 5G network offering first responders prioritized access.  See https://www.firstnet.com/.  In both instances, private carriers secure access to spectrum on an expedited basis without having to compete in a usually much more costly and possibly more time consuming auction.  Government spectrum users get access to cutting edge telecommunications simply by agreeing to use new technologies that make sharing and prioritization of access doable.

            I cannot overemphasize the change in attitude by Defense Department spectrum managers who for generations could not tolerate the “national security risk” in having to share spectrum with other users.  The first crack in that attitude arose when launch companies succeeded in offering discounts for multiple-satellite payloads from both the private and public sectors.  Now, the DoD gladly accesses a turnkey 5G wireless network for nothing more than an agreement to share it with private users.  How progressive.

            Ironically, some federal government officials consider public/private partnerships a subversion of the marketplace, bordering on the S word: socialism.  Might their contempt result from the likelihood that less scarce 5G spectrum might fetch lower FCC auction proceeds?  Worst yet, I wonder if some stakeholders seek and benefit from an overall shortage of next generation wireless spectrum.

            If the paucity of spectrum became a glut, carriers could not longer charge above market rates.  Existing licensees, like the Dish Network, would have to “put up, or shut up,” no longer able to avoid fines for failing to install and operate the networks they touted as essential, but never got around to building.  Maybe the FCC would get serious about promoting facilities-based competition from new wireless carriers, by imposing caps on further warehousing by incumbents and by opening up new spectrum access options on an expedited basis. 

            Curiously, the FCC has no problem making public Wi-Fi spectrum available for use by private carriers, free of charge.  Would the FCC actually play it straight and honestly by promoting market entry by new carriers to match, or exceed the competitive pressure removed when TMobile acquired Sprint and lost its maverick disposition?

            Yet again, I see a massive gap between rhetoric and reality.  Libertarian free marketers appear unable to see the public interest benefit in public/private partnerships?  They would rather have the government ration and auction spectrum, no matter how long it takes?  Let’s add another p-word to the mix: pragmatism.

           

Friday, October 9, 2020

Recent Publications

During these challenging times, on good days I managed to make progress on my research and writing agenda:



I'm glad to send you copies.

Tuesday, September 15, 2020

Misrepresentations in the Rat You Out Economy

            Most readers over the age of 30 probably know the meaning of “rat you out.”  In crime movies and elsewhere, someone discloses to law enforcement and other authorities the crimes and indiscretions committed by someone else. The rat saves himself from criminal prosecution, or something less hazardous, such as embarrassment.

            We live in a rat you out economy where just about every commercial and even presumed private transaction has an informant with a financial incentive to disclose any and all wants, needs, desires, interests, locations traversed, political affiliation and even crimes that law enforcement would never uncover.   Even trusted intermediaries reserve the option in their service agreements, for which consumers have no option other than “take it or leave it.”  In this world, cellphone carriers can leverage their need to track subscribers’ locations not just to maintain reliable service, but also to create new profit centers from the sale of locational information to willing buyers. 

            A curious example: a political party wanted to know the identities of frequent visitors to Roman Catholic churches.  Despite carriers claims that they anonymize subscriber location information, data analytics firms can use multiple sources to identify individuals, frequenting the churches.  With this amalgamated information, a political party opposed to abortion can target like-minded voters through locational data generated by cellphones, collected by wireless carriers and mined by other data analytics firms.

            Plenty more intrusive, risky and potentially deadly rat you out scenarios exist given the ease in which cellphone location data can identify travel patterns.  A bail bondsman might have an easier time finding someone who ignored a court appearance, but so too can a spurned spouse or lover track and potentially harm the rejecting former partner.

            Bear in mind that consumers have to accept such privacy intrusions and surveillance as part of the cost in participating wireless commerce.  Verizon and other carriers reserve the option of monetizing location data, without discounting service, or the cost of the smartphone.  Wireless carriers accrue real monetary benefits as do Internet firms that offer something “free,” provided subscribers agreed to one-sided terms and conditions. Clearly, the value proposition experienced by consumers contains both benefits and costs.

            If you agree to the last sentence above, perhaps you might see the problem in the relentless campaign by sponsored researchers and policy advocates to remind us about all the upside with nary an acknowledgement about the downside.  A recent consumer surplus love fest was expressed in a Wall Street Journal op-ed bemoaning antitrust scrutiny of large technology firms; see https://www.wsj.com/articles/the-misguided-antitrust-attack-on-big-tech-11600125182.  The authors tout the wondrous monetary savings and life enhancements generously offered by Big Tech firms.  Remarkably, the authors make no reference to offsetting financial benefits transferred from consumer to vendor.  They do not seem to comprehend how the rat you out economy works: consumers benefit from something offered freely, or at less cost, but only if they allow valuable commercial surveillance to occur. 

            I will readily acknowledge that consumers might still come out ahead in a final accounting that offsets benefits with costs, but the authors apparently do not want you to know that negative offsets exist.  Even if the authors had mentioned offsetting costs, they might have dismissed them as insignificant. 

            In the broader world of politics and global business such false accounting joins the rate you out economy.  Apparently the espionage in the surveillance by Huawei, ZTE and TikTok is a perilous threat to national security, but the enhanced value proposition from Big Tech deserves a major Thank You! with no need for antitrust scrutiny.

Why Spend More Than $6.25 Billion on a Company that Primarily Resells Your Service?

  You might wonder why Verizon would pay a hefty premium to buy the U.S. wireless resale flavors of America Movil’s TracFone.  See  https://www.fool.com/investing/2020/09/14/verizon-buys-tracfone-from-america-movil-for-625-b/.  I’ll start with reference to the name of the acquired company.

Verizon gets more than a remarkably profitable revenue stream from TracFone’s 13+ million prepaid—presumably low margin--wireless subscribers. Verizon adds 13 million consumers whose commercial (and private) activities are increasingly subject to extensive surveillance.  Verizon’ ability to track the phones of 13+ million new customers has the potential for substantially adding revenue well beyond the relatively paltry monthly payments for resold cellphone service.

Perhaps belatedly, Verizon recognizes that it has less to gain in targeting and pitching the few higher margin, post-paid wireless subscribers than in acquiring a vast treasure trove of new consumers available for targeting and pitching lots of products and services.  Smartphones have become trackable devices for location-based marketing, data collection and mining and cross-promotion.

Verizon has implemented a part of Amazon’s strategic planning.  Amazon sells Kindles and Fire tablets, probably at a small loss.  The company easily recovers its investment as consumers owning Amazon devices typically become higher volume purchasers than consumers who interact with the company via other devices.

I learned the hard way about Amazon’s cross promotional strategies when I purchased an Insignia smart television set conveniently pre-loaded with a host of Amazon applications.  What I did not know was the miserly 4 Gigabyte memory capacity of the set, 75% of which Amazon occupied while denying set owners the ability to delete any of the pre-loaded apps.  Worse yet, Amazon prevents most competing and alternative apps from being downloaded to external memory inserted into a USB port.  How clever.  I inadvertently have become largely captive to Amazon content, or to ventures willing to pay Amazon for undeletable app installation.

Verizon realizes that it too can surveil (yes, another word for track) and relentlessly market to a captive customer base.  Better yet, Verizon—unlike Amazon—does not even have to discount the tracking device.  Cellphones monitor user locations so that subscribers can make and receive calls, etc. Additionally, this essential function of wireless service easily transitions to commercial surveillance and profitable marketing to third parties by wireless carriers. Bear in mind that the nonnegotiable, “take it or leave it” wireless service contract reserves for the carriers all sorts of subscriber data monetization options—at no additional compensation to the subscriber. 

Verizon gets two additional revenue streams from its TracFone acquisition: 1) cross promotion of its services to 13 million new subscribers and 2) revenues from third parties willing to pay for marketing access.  In a nutshell, Verizon has less interest in the monthly revenue stream from pre-paid wireless access than from the variety of additional revenue streams it can generate by having a large new customer base to surveil and market.

Heretofore Verizon appeared disinclined to promote resale for fear that it would cannibalize higher margin post-paid service, despite AT&T’s successful Cricket venture.  Verizon still may have limited interest in resale revenue streams, aside from the ample new ancillary revenues likely to accrue.


Thursday, September 10, 2020

Game, Set and Match: How the Cable Industry Generated Billions by Making Their Set Top Boxes Irreplaceable

             This week the FCC tacitly admitted that it lacked the willpower, intellect and courage to mandate a competitive market for cable set top boxes.  See https://www.fcc.gov/document/fcc-closes-navigation-device-proceeding.  The Commission could not get a grip for nearly two decades, despite a congressional mandate (Communications Act of 1934, Sec. 629, codified at 47 U.S.C. § 549(a)) and a longstanding Carterfone policy clearly favoring the sovereign right of consumers to attach electronic device like telephones, modems, fax machine, and Wi-Fi routers.

            The cable industry managed to differentiate set top boxes from other consumer electronic devices.  Somehow, someway, these kludgy, heavy, power hungry devices were so, so complicated and so, so vulnerable to copyright piracy that the typically, much heralded marketplace could not be trusted to offer alternatives.  Instead, the cable industry, in league with an overly trusting FCC, came up with an oversized computer chip that would provide the basis for one-way consumer access to some, but not all of the functions the lionized set top box could provide.  Adding insult to injury, the cable industry initially insisted that a company technician had to insert the CableCard and consumers had to pay a monthly fee for the privilege of renting the card.

            Predictably, cable subscribers took the path of least resistance and continued to rent set top boxes.  Even now, the cable industry has over 190 million set top box installations in the U.S.  That substantial installed based—even diminished by churn and broadband-delivered options—tells us that the multi-decade rip-off continues. 

            The FCC emphasizes that technological innovation and changes in video consumer behavior supports its surrender. Perhaps cable subscribers do not even know they have to pay monthly rentals for set top boxes.  I do not know anyone pleased with the interface, with the exception of recent Comcast options.

            The lesson here: use every tactics to stall, delay, obfuscate and complicate to prolong the status quo.  Even FCC Chairman Ajit Pai, 2016, wanted to see competitive alternatives to a cable industry monopoly, but alas, he never got around to acting, instead thwarting an earlier Democratic initiative. 

            I wonder what he meant by the following:

As someone with three set-top boxes in my home, I share the frustrations felt by millions of Americans across this country. These boxes are clunky and expensive, and I feel the pain each and every month when I pay my video bill. And as an FCC Commissioner, I know that the current set-top box marketplace is the product of an intrusive regulatory regime. Something has to change. What should that change look like? What should our aim be when it comes to this marketplace? What would be best for consumers? My view is pretty simple. Our goal should not be to unlock the box; it should be to eliminate the box. If you are a cable customer and you don’t want to have a set-top box, you shouldn’t be required to have one. This goal is technically feasible, and it reflects most consumers’ preferences—including my own. https://docs.fcc.gov/public/attachments/FCC-16-18A1.pdf (p.61).

 

 

Friday, August 28, 2020

Timely Insights From Conversation with a Nautical Buoy Tender Nearly Forty Years Ago

             Once upon a time, when many of us regularly traveled by air, I took pleasure in striking up conversations with amenable, fellow passengers.  I have fond memories of insightful chats, one of which has particular resonance just now.

            Enroute to or from Florida, I learned about the life of a buoy tender based on a remote Bahamian island.  While I suspect, such facilities no longer require an on-site manager, my travel buddy hinted that the defense and intelligence community—and not just the Coast Guard—needed someone able to keep certain radio links up and running 24/7.

            The logistics of maritime telecommunications interested the techno geek in me, but what matter more triggered my academic training in communications theory, such as agenda setting, persuasion and manipulation.  Living for weeks alone in a remote part of the surprisingly large expanse of Bahamian islands, the buoy tender offered a one person study in the effects of frequent consumption of one—and seemingly only one—type of media.  Forty years ago, satellite radio did not exist and the buoy tender did not know about, or cared to pursue the plentiful options via shortwave radio.  Television and FM radio signals from Florida or Bahamian towns did not reach him and he had only a few video tapes in possession.

            Only one technology provided reliable access: AM radio.  Curiously, only one program format satisfied him: conservative, talk radio.  With lots of time on his hands, the buoy tender listened to one right wing pundit after another.  The hours of consumption had a profound effect.  This guy lived and breathed conservative doctrine, with a plentiful blend of conspiracy theories, including how the so-called Trilateral Commission was nearing success in achieving global domination.

            I’m thinking about this conversation now, because I see how people with far more diverse content options nevertheless can and do gravitate to a narrow sliver.  My communications scholar friends talk and write about “selective perception and retention.”  Now, media consumers have to perform less work to search for, and receive their preferred content. Social networks do the work for them.  While my travel buddy, over time, gravitated to a particular sliver of content, algorithms and machine learning serve it up without any search costs, or effort.

            The buoy tender could have pursued sports talk radio, oldies music and a variety of alternatives to political talk radio.  Forty years ago, he had to make daily actions to tune a particular AM channel at a specific time, so-called appointment radio.  Now, Facebook and other social networks make the appointments for us, anytime, anywhere, via many devices and with no limitations on availability.

            I am growing increasingly concerned that we have “improved worse.”

Tuesday, August 25, 2020

Learned Helplessness: How The Wall Street Journal Could Not Find a Way to Make Timely Delivery of Its Product

Much to the chagrin of my liberal wife, I have subscribed to The Wall Street Journal for over thirty years.  Today I canceled my subscription, because the Journal could not find a way to restor on time deliveries.  Of course, it blamed the U.S. Postal Service, but the problem preceded the most recent cutbacks.

On repeated calls to off-shore customer service representatives, I received assurance after assurance that the problem was temporary and fixable. Absolute fabrications.  As best I can understand it, this “Diary of the American Dream” cannot reach lots of people in the hinterland (six miles from Penn State University) on the same day of publication.  The Journal wants me to migrate to a screen, just like Verizon wants its copper wire holdouts to embrace wireless.

Call me old fashioned, but I so prefer the feel, serendipity and reliability of papered news and wired telephony.  I accept no substitutes, because they are inferior, not matter what one hears.  Yes, a broadband delivered edition provides hyperlinks and wireless can integrate fixed and mobile applications.  But there are far more downsides.  Consider 

         The experience of reading the Sunday New York Times as a newspaper versus maneuvering on a screen.

The Journal appears quite willing to risk the occasional subscription cancelation as a small cost relative to the upside savings in not having to spend sleepless afternoons trying to get their product delivered on time.  Apparently, Down Jones is powerless—simply unable—to secure timely delivery of a product that quickly rots.

I am unworthy of their fresh news.


Wednesday, August 5, 2020

Walking on Egg Shells, Failing a Litmus Test and Shown the Door

FCC Commissioner Mike O’Rielly probably will leave the FCC far sooner than anyone would have anticipated a few days ago.  See https://www.wsj.com/articles/white-house-nixes-fcc-nominee-who-questioned-bid-to-regulate-social-media-11596556660. The President had nominated him for a second term with only one legislator in any way agitated.  Republican Oklahoma Senator Inhofe held up a vote in light of Commissioner O’ Rielly’s support for a 5G competitor with plans on using radio spectrum near GPS frequencies, but sufficiently separated to avoid the potential for interference.  See https://spacenews.com/inhofe-blocks-nomination-of-fcc-commissioner-over-ligado-order/.

The FCC established a 23 MHz “guardband” separating the proposed Ligado wireless service and GPS position location frequencies.  That safeguard apparently was not enough for incumbent government and private users, absent some major cash inducement.  See  https://arstechnica.com/tech-policy/2020/05/millions-of-gps-devices-at-risk-from-fcc-approved-5g-network-military-says/.

Commissioner O’Reilly and I can agree to disagree on many issues, including his antipathy directed at the International Telecommunication Union; see e.g., https://www.fcc.gov/news-events/blog/2016/01/15/2015-world-radiocommunication-conference-troubling-direction.  Nevertheless, I deplore his shabby treatment and the state of telecommunications planning in the United States.  The Wall Street Journal and I uncharacteristically agree that “[i]n saner times few on the right [or left] would dispute . . . [the] points” he made.

Commissioner O’Reilly’s cardinal sin: expressing discomfort with an initiative by President Trump and the National Telecommunications Administration (part of the Commerce Department) to make the FCC a congressionally authorized regulator of Internet content.  See  https://www.ntia.gov/fcc-filing/2020/ntia-petition-rulemaking-clarify-provisions-section-230-communications-act.  NTIA wants the FCC to interpret Sec. 230 of the Communications Decency Act as conferring direct jurisdiction to investigate whether Internet Service Providers and platform operators, such as Facebook, can lose a liability exemption for unmoderated content passing through their networks.

On a bipartisan basis, most people agree that Sec. 230 does not give the FCC any sort of jurisdiction.  Even if it did have some hook, the Commission deems Internet access off limits, as a largely unregulated information service.  Previously, few on the Right or Left would ignore the First Amendment value in depriving government of any role in adjudicating fairness and sanctioning debatable media bias.  Could NTIA and the FCC find a way to sanction anti-conservative bias, but have no grounds to punish Fox for pro-conservative bias on its web site?

Commissioner O’Reilly has to walk on eggshells lest he upset the President and Executive Branch officials.  Apparently, his appointment to an independent, regulatory agency, created by Congress, accords him little insulation from litmus tests and quick dismissal.

Sad.

Hipster and Geriatric Antitrust Doctrine

Relentless concentration in broadband and other industries, coupled with ever increasing market power, has triggered more interest in antitrust law and policy.  Predictably, this increased scrutiny generates questions about the viability of case precedent and the empirical “proof” supporting policy.  It also encourages advocates—with a political agenda—to argue for maintenance of the status quo, or substantial change.

The “stay the course” camp sees no need to change doctrine, despite the Internet’s ascendency and the significant difference between “bricks and mortar” commerce and e-commerce.  These mandarins disparage advocates for change and dismiss anything new as “hipster,” undisciplined and wrong.  They have received millions of dollars to spread their gospel, early and often.

The insurgent group plays into the hands of status quo thinkers when their progressive goals subverts, subordinates, or ignores the core mission of antitrust law: to remedy market failures generated by single companies or cartels who use market dominance, conspiracies and other bad actions to harm competition and consumers.  Insurgents also muddy their message when they combine normative goals, inherent in antitrust enforcement, with public policy objectives well outside the antitrust enforcement mission.

A pox on both houses!  The mandarins act as though Chicago School doctrine operates as unimpeachable law.  They see no need to recalibrate and modify based on changed circumstances.  They make no distinction between downward price trends in bricks and mortar markets and the perception of “free” and enhanced value proposition from broadband-mediated services that require no cash payment, but extract great and sellable value from data mining.
The insurgents play into the hands of the mandarins when they lack the discipline and intellectual rigor needed to show the wisdom in incremental adjustments based on changed circumstances.  They become easy targets by pushing normative goals, baked into the antitrust regime, into a progressive, social policy agenda.

I seethe when reading arrogant, inflexible, hubristic and condescending hipster antitrust critiques.  I dismiss as naive, undisciplined and ineffectual the insurgents’ wish list for antirust enforcement.  The incumbents may not win on points, but they appear to have won in courts, legislatures and classrooms.  They have powerful and rich incumbents underwriting their academic work.  That investment has paid handsome dividends.

For example, the FCC and Justice Department continue to approve mergers and acquisitions that trigger “Defcon4” alerts about extreme market concentration.  Somehow, basic economics about market power and concentration do not matter if sponsored researchers can show how consumers theoretically benefit.

One can easily declare a winner when judges and their clerks, well versed in Chicago School doctrine, cannot understand that “free” does not mean without significantly high  individual and social costs.

Sunday, July 26, 2020

When Economist-Created “Rules” and “Laws” Do Not Work or Are Forgotten



            Having frequently chatted with economists and read many textbooks and articles on economic subjects, I marvel at the absolute certainty in answers offered to various thorny questions.  Economists like to create rules and laws that provide certain solutions, if only the public and politicians followed their lead.

            It should come as no surprise that absolute economic gospel truth fails both in terms of practical application and even adherence by economists.  Suddenly a firm rule has exceptions, or an economist conveniently forgets the widespread acceptance of the rule.  This dismissive attitude greatly contrasts with the conventional attitude that economics is a legitimate science. And of course, economists know best.

            Several questions about economic doctrinal certainty and amnesia come to mind having read a New York Times article on sponsored briefings of foreign antitrust enforcement agency officials.  See https://www.nytimes.com/2020/07/24/technology/global-antitrust-institute-google-amazon-qualcomm.html.  In Big Tech Funds a Think Tank Pushing for Fewer Rules. For Big Tech, Daisuke Wakabayashi reports that firms, such as Amazon, Google and Qualcomm contribute six figure sums for antirust law and policy briefings organized by institutes and foundations affiliated with George Mason University’s Antonin Scalia Law School.

            Have both teacher and student forgotten one of the most fundamental rules of economics that “there is no such thing as a free lunch”? The article reports on the high quality and cost of the venues hosting the conferences and the meals served.  Such opulence juxtaposes with the conferences I pay to attend.  I am used to rubber chicken, or self-catering in places like Dallas in August and Louisville in March.  Next month, I will participate in a virtual conference and still had to pay $250 for the opportunity to present an academic paper via Zoom.  Obviously, I hang out with wrong class of people.

            Who, other than the sponsors and the sponsored organizers and participants, can ignore the no free lunch rule?  There’s a quid pro quo here, not that there’s anything illegal about it. What unnerves me is the apparent obliviousness of all involved to a straightforward rule of economics and human behavior.

            While apparently exempt from the no free lunch rule, organizers of the conferences surely do not forget to preach the gospel certainty of Chicago School antitrust policy.  This economic doctrine, now widely embraced by judges and their law clerks, proscribes sanctioning any behavior—no matter how much it concentrates a market or bolsters the market power of an incumbent—if some enhancement of consumer welfare occurs.  Chicago School devotees concentrate on consumers’ out of pocket costs and point to declining, or zero costs as proof positive that a particular market is thriving.  They conveniently ignore offsetting costs like that occurring in the broadband mediated marketplace when platform operators mine data and sell the surveillance data to advertisers and data analytics firms.  Oh, and let us not forget the costs to society when privacy, trust, belief in the rule of law and confidence in the integrity of elections become questionable.

            The Chicago School doctrine has become unimpeachable, no doubt validated and revalidated in the numerous free conferences sponsored by stakeholders who fund non-profit academic institutes that organize law and economics conferences.  Some of these events reimburse all travel expenses and pay several thousand dollar honorariums to speakers and paper presenters.  Sweet indeed.

            What is unsweet and intellectually questionable in my view is the apparent adamancy with which Chicago School acolytes embrace the doctrine, even as they ignore the free lunch rule. Anyone who dares to suggest modification or exceptions to the Chicago School rules is branded an advocate of “Hipster Antitrust,” as though their insights were nothing more than trendy, undisciplined analysis.

            I will stop with one more question about seemingly unquestionable economic rules: if demand substantially drops for a good or service and the incremental cost to serve one additional customer is tiny, then why do the airlines refrain from sizably discounting fares?