Award Winning Blog

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?


Sunday, July 19, 2020

Tolerating Hubris at the New York Times



            While I am in the tilting at windows and then giving up mood (see entry on how Instagram will not help eliminate an impostor: http://telefrieden.blogspot.com/2020/07/what-do-facebook-and-outdoor-swimming.html), let us consider my multi-decade experience notifying the New York Times of unquestionable publishing errors.

            For some unknown reason, my bucket list includes persuading the Times to acknowledge a publication error about which I informed them.  I have identified five errors, most recently a report on a United Kingdom government Covid-19 employment subsidy reported as being paid in Euros, not Pounds.  See  https://www.nytimes.com/2020/07/12/business/the-week-in-business-what-a-biden-economy-could-look-like.html and scroll down to Looking to Britain.

            Other reported errors include:

The use of interbank exchange rates minus 2% for estimating tourist costs while traveling abroad by numerous article in the Sunday Travel section;

A report in the March 1, 2020 Sketchbook that the MEV-1 satellite repair vehicle will latch onto the Intelsat 901 bird for a few day and not the anticipated five years; see https://www.northropgrumman.com/space/space-logistics-services/mission-extension-vehicle/; https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/;  https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/;

The failure to update national average gas prices to reflect a 30+ cent drop during the severe economic downturn as the pandemic took effect; and

The failure to update the sea water temperature chart in the weather section (a March, 2020 trip to the Outer Banks of North Carolina had temps in the 60s not 50s as reported).

            The Times never acknowledged any of the mistakes.  I did have one instance where staffer, with righteous indignation, reported the use of the “official” interbank rate as discounted 2%.  I tried to explain that private travelers never get a bank rate, much less a further 2% reduction.  But of course what would I possible know that this guy did not already know?  Some time later, the Times stopped reporting the actual exchange rate used to estimate a tourist costs. 

            Over the years I have reduced by Times bucket list goal from a published op-ed, to an official correction prompted by my notification.  This small dose of humble pie reminds me of a life lesson: Lower your expectations.  Lower them a second time and be pleasantly surprised that things turn out better than anticipated.

            Good advice.





What Do Facebook and Outdoor Swimming Pools Have in Common?



            You do not have to be a public figure for someone to hack your social network account and attempt to charm your friends into doing something foolish like financially seeding a grant proposal.  It happened to me and the odds favor an impostor targeting you regardless of the likely payout.

            My experience with Instagram all but eliminates any expectation that Facebook, Twitter and others will make any significant effort in customer care.  They operate an attractive nuisance that entices us, sometimes with quite harmful outcomes.  The “bricks and mortar” equivalent are outdoor swimming pools that, without safeguards like fencing, act as a magnet for unsuspecting kids and childish adults who cannot swim while intoxicated.

            Someone with far too much time to waste found a way to access one or more contacts lists of mine, outside of Instagram, and then contact people via Instagram masquerading as me.  Some friends noticed the substandard English and the odd reference to academic grant seeking.  Perhaps having gained their trust, the impostor would hit them up for some sort of financial underwriting.

            I am glad to see that several reported this abuse to Instagram, but they purposefully and cynically dropped the ball.  No one from Instagram contacted me, not even a bot, or scripted messenger.  I still do not know if the impostor continues to masquerade as me under an account such as rmf21211.  For my part, after more effort than it should take, I found the well hidden form to fill in, presumably to launch an investigation by Instagram.  Facebook/Instagram requires a jpeg photograph of the victim holding some form of official identification.  I dutifully send a picture of me holding my passport page containing the required information to confirm I am the one being hacked.

            Instagram eventually sent me a scripted response stating that they could not start an investigation in light of the material I sent.  I resent the phot with greater pixel resolution only to receive the same rejection from the same “person.”

            I have now learned that millions of Instagram subscribers get hacked and follow the reporting protocol only to have Facebook reject the required picture, or find some other way to do nothing.  Here’s a link outlining how it is nearly impossible to get Facebook to do something constructive:  https://www.wired.com/2016/01/what-happens-reporting-instagram-accounts/.

            Additionally, I foolishly thought I was corresponding with a real person who rejected my photo.  Of course it was a bot: Facebook lacks the personnel and commitment to employ enough people to resolve hacks and impersonations.  The surely have the financial resources, but consciously opt out. 

            Why?  Because Facebook management knows that most people will deal with the inconvenience and return to the fold quickly.  That probably would not happen if you got food poisoning at a bricks and mortar restaurant.  You would call and complain to a person.  You would post critical comments on web sites.  You would never return to that restaurant.

            In the world of social networking sites, Facebook has won the “winner take all” sweepstakes.  They do not have to commit sufficient resources to customer care.  They can program bots to reject complaints, particularly for someone like me who shut down his account.

            It was easy for me to throw in the Instagram towel.  I will miss the cute pictures of pets and the beautiful pictures of bread, etc.  However, I do not have years of pictures posted and fond memories associated with Instagram posts.

            Lucky me.

Tuesday, July 14, 2020

Racing for the Covid-19 Cure at a Leisurely 14,400 Bits Per Second

One of my recurring pet peeves lies in the continuing use of facsimile machines by medical and education professionals. See https://www.nytimes.com/2020/07/13/upshot/coronavirus-response-fax-machines.html.  To this day, patients receive a copy of a faxed document containing blood test results, because the testing company does not always have a digital connection with a doctor’s office.  Even digitally savvy Penn State still relies on faxed expense receipts in many instances.

Never underestimate the cost, hassle, delay and waste when a fax transmission is required.  This 1960s technology combines a slow speed optical scanner with a very slow speed analog modem.  At a time when we measure digital transmission speed in the millions and even billions of bits per second, most fax machines transmit at a rate of 14,400 bits per second, or less.  It can take one minute or more to transmit one page of text and diagrams even as we have grown accustomed to digital bit rates streaming 30 or more high definition video frames per second.

How can such a dichotomy in applied technologies persist?  Put another way, why do we tolerate the continuing use of analog technology that slows the transmission of essential medical data, such as covid-19 test results, to 1960s performance levels?

The answer lies in cost and inertia.  Converting to a digital, high speed data sharing network presents a major inconvenience that no one wants to handle, despite the near immediate benefits.  The possibility exists that doctors’ and universities’ offices might have to deal with days of being virtually incommunicado. The actual out of pocket cost for the conversion pales in comparison to the long term efficiency gains.

Perhaps this awful pandemic will convince decision makers to approve long overdue information processing and telecommunications upgrades.  Why compound the time needed to secure an appointment to take a covid-19 test with avoidable delays in receiving the results?

Wednesday, July 8, 2020

Buy American: From Cars to Wireless to Apps

            It’s hard for me to equate patriotism with the international trade concept of comparative advantage.  Somehow consumers should abandon the best value and quality proposition in a commercial transaction if the creator lacks U.S. citizenry.  I understand the view that domestic employment matters, but should U.S. consumers bear the possibly severe financial consequences of their government’s efforts to handicap foreign competitors? 

             Is every Walmart customer an economic traitor?

            Years ago, domestic car unions, manufacturers and politicians wanted consumers to think twice about buying foreign made vehicles.  See https://www.npr.org/2017/02/23/516787778/auto-workers-union-to-launch-buy-american-campaign  Now the patriotism litmus test applies to wireless networks, https://www.nytimes.com/2020/06/30/technology/fcc-huawei-zte-national-security.html

            I cannot understand where to draw the line between legitimate national security and foreign espionage concerns versus thinly veiled market protectionism.  The FCC hasn’t helped with its recent determination that Chinese telecommunications equipment manufacturers Huawei and ZTE pose acute national security threats:   https://www.fcc.gov/document/fcc-designates-huawei-and-zte-national-security-threats.  The FCC relies heavy on conjecture, circumstantial evidence and anecdotes.  That may suffice, but a strategy of handicapping foreign market leaders also constitutes a factor in light of the Commission’s multifaceted campaign to reclaim 5G market “leadership.”  See https://www.fcc.gov/5G.

            I suggest our government officials slow down and consider the consequences of their existing and prospective actions.  A downward spiraling trade war appears possible and rarely does anyone benefit from a “beggar thy neighbor strategy”.  See https://www.investopedia.com/terms/b/beggarthyneighbor.asp.

            Similarly, I suggest we take a deep dive on the concept of punishing Chinese government data mining and analytics made possible by U.S. consumer subscriptions to Tik-Tok.  How is this form of governmental surveillance substantially worse than similar tactics of private ventures?  Why do the governments of Russia and other adversaries get a pass if the risk to elections, civil society and trust is arguably equivalent?

            Closing the U.S. market to ventures offering a better mousetrap seems misguided, because it insulates domestic ventures from having to compete robustly and strive to enhance the value proposition of their goods and services.  I don’t support spying by foreign commercial ventures serving as agents for their governments, but I don’t want our nation to further disengage at great expense to its citizens.

Sunday, May 10, 2020

U.S. Passes a Key Resiliency Test, But Let’s Not Get Carried Away


            In the good news department, we have ample evidence that U.S. Internet Service Providers recently have accommodated peak demand exceeding 20%+ of normal highs.  Excellent. Old timers might recall that in the legacy telephony world, exceeding the “busy hour” evidences a properly sized network.

            Proper network sizing to handle peak demand provides empirical proof that, where available in the U.S., broadband carriers have not scrimped on capital expenditures in “sunk” plant.  I believe ISPs throughout the world strive to properly size their networks and to install current generation equipment.  The ability to do so depends on lines of credit, the cost of capital and revenue projections—not the existence or absence of any specific regulatory mandate.

            What troubles me greatly is the false extrapolations made from evidence of network resiliency.   Scholars and regulators—who should know better—extend the achievement of resiliency into “proof” or confirmation of various regulatory and economic doctrines.  An example: thanks to the elimination of network neutrality, capex has risen so that the U.S. can handle Covid-19 driven demand increase, but Europe cannot. Another one: U.S. widespread fiber optic cable deployment has achieved best in class network performance.  All sorts of self-congratulatory, “mission accomplished” blather.

            Network resiliency has no direct link to a single deregulatory initiative, nor does it confirm universal accessibility and affordability.  From my perch in rural Pennsylvania, neighborhood broadband speeds have declined somewhat, especially during the new busy hours when lots of neighbors have several simultaneous, full motion video streams going.  However, I am glad to endorse the conclusion that networks have held up, despite demand surge.

            Evidence of broadband network resiliency juxtaposes with an inconvenient truth: lots of people cannot access properly sized networks, because this essential, “mission critical” plant does not extend into their rural locales, or they cannot afford service even where available.  There are plenty of people in my community who drive near a school or library to access Wi-Fi, because they have no at home option beyond costly satellite service, or a quickly exhausted cellular data plan.  Many people make do exclusively with smartphone-delivered broadband, even though the handset screen provides an inferior interface compared to a personal computer or tablet with keyboard.

            It’s probably a real good idea to take down the “Mission Accomplished” banners.

Tuesday, April 7, 2020

Migration From Wireless to Wired Networks During the Pandemic--It's More Than the Squint Factor

One small silver lining in the Covid-19 virulent cloud: an unsponsored and truly unbiased empirical test whether wireless broadband networks offer a direct competitive alternative to wired broadband.  The answer is clear: No.  Not even close.  Despite all the happy talk and sponsored researcher advocacy, broadband consumers understand the financial incentive to use Wi-Fi access to wired broadband wherever available.  When homebound consumers have access to wireless broadband access via their smartphones and wired broadband access via personal computers and Wi-Fi, they opt for the latter.  It makes sense both in terms of the user experience and the pocketbook.
Since 2017, FCC Chairman Pai brazenly has asserted that wireless broadband networks constitute a direct competitive alternative to wired options.  Here’s an example:
“I think we are increasingly going to see that wireless is not this ‘imperfect substitute’ for wired connections. . . .It is going to be the dominant means, the preferable means, by which people access the Internet.” Eggerton, Pai: Wired, Wireless Appear Very Competitive To Him https://www.multichannel.com/news/pai-wired-wireless-appear-very-competitive-him-412652.
This assertion supports his longstanding goal of deregulating early and often on grounds that the marketplace forces discipline and self-regulation without the need for government involvement.  If the FCC can determine that broadband access nears ubiquity, then the need to seek a remedy for “universal access” problems no longer exists.  Section 706 of the Telecommunications Act of 1996 requires the FCC to assess broadband accessibility and remedy inadequacies.  The FCC, and Chairman Pai in particular, has stated “mission accomplished,” having concluded since 2018 “that advanced telecommunications capability is being deployed on a reasonable and timely basis.”  See 2019 Broadband Deployment Report, ¶2; available at: https://docs.fcc.gov/public/attachments/FCC-19-44A1.pdf; and the 20th Wireless Competition Report to Congress (2017); https://docs.fcc.gov/public/attachments/FCC-17-126A1.pdf (concluding that the wireless marketplace is robustly competitive).
            If the FCC has done its job fully and fairly, without bias and a preordained result in mind, it stands to reason that more hours at home would increase broadband consumption, but would not significantly shift the allocation of time between available broadband options, absent statistically significant reasons to do so. 
Today’s New York Times contains a credible analysis of broadband recent broadband consumption patterns; see https://www.nytimes.com/interactive/2020/04/07/technology/coronavirus-internet-use.html.  The Times reports both significant increases in broadband consumption and a shift from app-based access via smartphones to dot com, web site access via computers.  The authors of the article simply attribute the shift to eye squint reduction: why view Netflix on a smartphone screen when a high definition television is available?  This makes absolute sense, but there are other factors in play, particularly given the fact that smartphone users also can create a wireless broadband “hotspot” and “sling” video content to their television sets.
If you are still with me, I’ll offer several additional factors that explain the migration from wireless to wired broadband access at home and possibly help dispel recurring myths (mistruths) about the current broadband marketplace in the U.S.
Near 100% Smartphone Market Penetration Does Not Translate into Smartphone Use Anytime and Anyplace

            Most smartphone owners ration their broadband use, quite mindful that exceeding a data plan, using the device too often, or trying to log on during congestion at the closest tower will have harmful and possibly costly impacts.  Data plans establish a broadband consumption ceiling, which if exceeded will result in degraded service—so called throttling—and in some cases termination of service. A deep dive on the service terms and conditions of “unlimited” data plans typically reserves to the carrier the option of discontinuing service to so called bandwidth hogs.  Even less consumptive subscribers face the throttling if they unintentionally seek service at a time and from a tower where the carrier determines congestion exists.
            The wireless consumer response to the Covid-19 also shows that poor subscribers are reluctant to use their handsets for broadband, even for remote access to school lessons.  See, e.g.,
https://www.nytimes.com/2020/04/06/us/coronavirus-schools-attendance-absent.html.  There seems to be plenty of instances where rural access does not exist, or frequently gets congested and where families cannot afford to pay, despite the remote education opportunities available.
            Unlimited Access Does Not Mean Without Limitation and Adverse Consequences
            Wireless broadband subscribers have come to understand that carriers use the term unlimited to mean limited.  How else could AT&T, for example, offers at least three flavors of broadband access; “Unlimited Starter;” “Unlimited Extra;” and “Unlimited Elite.”  Is anyone surprised that the small print imposes limits to unlimited consumption?  See https://www.att.com/plans/unlimited-data-plans/.
            The Disconnect Between the 5G Promised Land and Now
            There may come a day when 5G offers a rising tide for all ships, thereby eliminating the need for data plan caps, network neutrality, wired broadband connections and the old school terrestrial Public Switched Telephone Network.  That time is not now.  Where the rubber meets the road right now, wireless subscribers have to make do with 4G networks that can experience congestion, especially now with rising peak demand, are metered and rationed and have serious limitations on broadband performance.
            Just now, the 5G solution appears overhyped in terms of likely performance enhancements, time to market and cost.  5G handset prototypes appear to generate more heat and deplete batteries faster than previous models and some current service trials have actual signal propagation far less than anticipated and advertised; see, e.g.,   : https://arstechnica.com/gadgets/2019/07/the-latest-barrier-to-5g-speeds-the-summer/; https://venturebeat.com/2018/07/30/huaweis-first-5g-phone-reportedly-guzzles-power-needs-big-heatsink/. McKinsey and Company, a major global consulting firm, reports that consumers cannot expect significant 5G commercial service to start until 2022 at the earliest; see https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/cutting-through-the-5g-hype-survey-shows-telcos-nuanced-views. Lastly, the first 5G rate plans cost more.
            Inconvenient truths.

Friday, April 3, 2020

Lies, Damn Lies and Wall Street Journal Editorials



            By way of full disclosure, I should report that I subscribe to the Wall Street Journal and benefit from its news reporting.  However, my mental and emotional wellbeing also benefits if I ignore obvious mistruths in countless editorials and columns, particularly ones about telecommunications and the Internet.   I have wasted countless hours trying to set the record straight when some ideolog misrepresents the truth to make some intellectually dishonest point.

            Imagine that: fake news and untruths from the Wall Street Journal.

            Today’s mistruth, on pA16 (Faster Internet Is on the Way): “American’s working at home would be in a much worse position in this pandemic is the Obama [Network Neutrality] rules were still in place.”

            Editorial writers at business publications know—or should know—that variation in regulatory scope and even so-called regulatory uncertainty has limited, if any, impact on the need for capital expenditures and a venture’s decision to make the inevstment.  Put another way, whether the FCC does or does not impose Network Neutrality rules has no major impact on a carrier’s incentive and need to invest in infrastructure.

            Does anyone truly and honestly believe that wireless carriers in the U.S. would take a “pass” on 5G investment if the FCC still had open access requirements?  Let me restate something obvious: carriers invest out of competitive necessity and when technological innovations provide opportunities for more revenues and consumer satisfaction.  Network Neutrality rules might motivate carriers might try to grab spectrum at auction for less money, but doing so only provides evidence that the rules possibly might dampen profitability, not investment incentives. 

By the way, any profit dampening would have little impact on the incentive and ability of U.S. wireless carriers to make necessary investment.  For years, Sprint’s major investor, Japan’s  Softbank, and TMobile’s Deutsche Telekom made necessary investments.  Failing to do so would risk ruin, including the billions of dollars in “sunk investments.”

            I’m skeptical whether Network Neutrality would reduce carrier revenues and profitability.  Even FCC Chairman Ajit Pai never got around to explaining how Network Neutrality rules would deprive carriers of robust, revenue streams.  It was all about less incentives for investment, innovation and employment.

            Ironically, the fact that U.S. wireless carriers have managed to accommodate increased demand supports my premise.  The coronavirus would have stimulated demand regardless of whether “Obama rules” or “Trump Rules” were in effect.  The Journal editorial writers surely can make no credible argument that wireless carriers somehow would be unable or unwilling to satisfy wireless network demand.  A carrier either makes a network investment, or not, based on anticipated demand and expectations of growth in that demand.  No one believes that Network Neutrality rules would have stifled consumer demand for more bandwidth and greater transmission speeds.  The opposite seems more likely.

I have never been a Network Neutrality “true believer,” but some positive outcome seem crystal clear.  Wireless carriers have maneuvered through a rising tide of demand to the benefit of everyone, not just an exclusive group whose rate plan qualifies them for preferred access to scarce network resources.

Perhaps someday the Journal editorial writers will understand the difference between public access to a service akin to a basic necessity and a surcharge to jump the queue at a Disney theme park ride.

             

Sunday, March 1, 2020

The New York Times Errs in Coverage of Satellite Life Extension


Every once in a while, I spot an error in The New York Times and dutifully report it.  I have never received confirmation, much less a correction, even when I detected woefully wrong foreign currency conversions in the Travel section.  I did get a snarky email suggesting that I could not possibly have grounds to dispute the Times’ use of the inter-bank rate plus 2%.  Call me crazy, but travelers typically receive conversion well below the inter-bank rate.  The 2% figure should have been a reduction.

Recently, the Times reporters have not done an adequate job learning and explaining how the Intelsat 901 satellite will achieve a usable life extension from the Northrop Grumman MEV-1.  While future repair satellites will replenish so-called station keeping fuel inside the tanks of the satellite targeted for repair, the current MEV-1 latches onto the satellite and stays there for five years.

As explained by the manufacturer of MEV-1 (Northrop Grumman):

"MEV is designed to dock to geostationary satellites whose fuel is nearly depleted. Once connected to its client satellite, MEV uses its own thrusters and fuel supply to extend the satellite’s lifetime. When the customer no longer desires MEV’s service, the spacecraft will undock and move on to the next client satellite." See https://www.northropgrumman.com/space/space-logistics-services/mission-extension-vehicle/

The Sketchbook on page 3 of the Sunday March 1, 2020 edition incorrectly reported that the satellites will "part" in a month.  

If the Times reporters had done their homework more thoroughly, they might have come across accounts in Space News: "MEV-1 will remain attached to Intelsat-901 and use its own thrusters to keep the satellite properly oriented in orbit." See: https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/


The MEV-1 takes over the functions of pointing the Intelsat satellite correctly down to earth and also that the MEV-1 will use its thrusters to keep the Intelsat satellite in the proper orbital parking place:

"The next day Northrop Grumman moved MEV-1 next to Intelsat-901 and docked with the satellite using a capture mechanism that went “through the throat” of Intelsat-901’s apogee engine, Anderson said." (also from Space News: https://spacenews.com/northrop-grummans-mev-1-servicer-docks-with-intelsat-satellite/.

I am pretty sure I will not hear from a real person acknowledging and correcting mistakes in this newspaper of record.   What could I possibly know better than the Times reporters?

Friday, February 21, 2020

The Odds for New TMobile to Morph into TMobile on Steroids?



            Reading the District Court decision approving the merger of TMobile and Sprint (see https://cdn.vox-cdn.com/uploads/chorus_asset/file/19712093/show_temp__6_.pdf), I am reminded of how much antitrust law relies on informed predictions of future market performance.  Judge Victor Marrero concluded that the plaintiff state Attorneys General failed to meet their burden of proving that the merger would materially harm consumers and competition.  In effect, the Judge bought the assertion that New TMobile will more aggressively compete and innovate than what the two stand-alone companies could muster, i.e., that the whole would be greater than the sum of the parts.

            This comes across as a leap of faith, substantially challenged by a hindsight review of market consolidation in other markets.  Let’s look at commercial aviation in the United States, with attention to how Southwest refined its business plan and strategy after several mergers involving both the company and other airlines.  Put more simply, is Southwest still the maverick in the same vein as TMobile?

            The answer to this question addresses how bulked-up companies, like Southwest and New TMobile, respond to a concentrated market.   Will they continue seeking to chisel additional market share from legacy carriers, possibly at the expense of profit margin, share price, average revenue per user and year-end bonuses, or will they “take the foot off the peddle”?

            In Southwest’s case, tweaks to their business plan show a reduced value proposition for consumers--what economists call consumer welfare.  Part of the reduction, results from a maturing company, but arguably a larger part results from adjustments that enhance the company’s bottom line with “nickle and dime fees.”  While Southwest has opted to continue offering checked baggage at no additional cost, the company has joined with other airlines in charging new fees that can significantly increase consumer’s total out of pocket costs. Southwest did not initiate these “enhancements,” but a concentrated market, where all other carriers charge these fees, makes it easy for the former maverick to join the group. See, e.g., https://www.forbes.com/sites/danielreed/2019/02/21/all-grown-up-as-it-approaches-50-southwest-is-dealing-with-mature-airlines-kinds-of-problems/#7031f97f7a7e; https://www.mcall.com/news/nation-world/mc-southwest-airlines-no-longer-cheapest-0505-20150505-story.html; https://www.fool.com/investing/2018/12/01/cost-creep-at-southwest-airlines-will-help-its-riv.aspx.

            I do not share Judge Marrero’s breathless optimism that the TMobile-Sprint merger benefits competition and consumers.  Can anyone come up with examples where industry consolidation has enhanced the value proposition for consumers?  Channeling Sarah Palin, how’s that concentrated airline industry working out for you?

Tuesday, February 11, 2020

TMobile-Sprint Merger Approved and 144 Million U.S. Subscribers Will Pay Dearly


            News of a reviewing District Court’s approval of the TMobile-Sprint merger has arrived today.  See. e.g., https://www.wsj.com/articles/u-s-district-judge-expected-to-rule-in-favor-of-sprint-t-mobile-merger-11581376688.  I’m sure the decision will conclude how much the combination will enhance competition, apparently more so than what the two companies individually could offer.

            This conclusion does not pass the smell test.  The court will note what a great competitor TMobile has been and how unviable Sprint will be in the middle to longer term.  OK, that observation makes sense and I’ll go one step further to note that Sprint recently has offered some of the best deals for consumers that the company probably could not continue to offer over time.

            I part company with the likely conclusion made by Judge Victor Marrero that the combined company will have every incentive to become even more competitive and innovative than what the two unaffiliated firms have generated and even what TMobile would generate even if Sprint were to falter and eventually exit the market.

            Let us step back and answer a fundamental question no one seems willing to pose and answer: why do companies seek to merge?  Answer: to make more money, enhance value for shareholders, possibly compete and innovate less because a more concentrated marketplace does not necessitate “sleepless afternoons.”

            The merged TMobile-Sprint has far greater incentives to accept its third among equals status than to work hard to chisel at the market dominance of AT&T and Verizon.  Why bother shaving margins when AT&T and Verizon offer rates generating some of the highest Average Revenue Per User (“ARPU”) and margins in the world.  None of the U.S. carriers want us to know this, but if you travel abroad, you can easily find month-to-month service for half the U.S. average rate.

            Why would TMobile want to upset the apple cart when, post-merger, it can generate higher revenues and profits using AT&T and Verizon’s margins as an umbrella under which it can offer slightly lower rates and call it a day?  In other words, TMobile has little incentives to start a price war.

            Lastly, I am quite leery of the logic in replacing Sprint with Dish entering a mature market solely as a reseller of Sprint and TMobile pre-paid, no-contract brands, coupled with a now extended deadline to have real skin (money) in the game.  Dish has an uncanny ability to acquire spectrum, do nothing with it, secure an extended deadline to buildout a network and then seek to sell it to another company more willing to invest in plant. 

            Will Dish provide salvation for consumers in the long run?  I doubt it.  In the short run, the 144 million plus subscribers in the U.S. can expect to pay more for less “unlimited” service.