Award Winning Blog

Wednesday, January 17, 2018

Drunk on Deregulation

In this time of intellectual, political and philosophical rigidity, I embrace eclecticism and flexibility. I have suffered in the marketplace for funding and invitations to speak at conferences, because I don’t fit into one single camp. I combine salt and fresh water economics, as well as views on the marketplace from both political party templates.

I consider intellectual nimbleness a virtue, even as the current political and regulatory climate imposes litmus tests.  I am not alone: even some Chicago School economists have started to consider whether ventures can profit from predatory pricing as may be occurring when Internet platform intermediaries like Amazon postpone profit maximization to acquire more shelf space and market share.  For true believers, this is anathema, because they can’t conceive of a venture having the patience and ability to forego near term profits for greater future gains.

Throughout my intellectual mix, two guiding principles remains key: 1) find the truth and 2) identify how consumers benefit, or suffer from any government initiative.  What’s so wrong with these drivers?  Even ideologues like FCC Chairman Ajit Pai see some benefit in government and regulation. I expect him to make a taxpayer-financed grand tour of Hawaii’s Diamond Head, an extinct volcano now home to several military, emergency and governmental outposts.

On other days, the Chairman appears drunk on the prevailing Chicago School ideology that cannot identify any good in government.  See Jeff John Roberts, Network Neutrality: The FCC Chair is Drunk on Ideology, FORTUNE (Dec. 15, 2017); available at:  Such blind trust in the marketplace ignores several inconvenient truths.

Corporations, Subject to FCC Oversight, Pursue Greedy, Knucklehead Strategies

While marketplace purists consider the marketplace completely able to impose self-discipline, in reality company managers come up with truly foolish initiatives which seemed so clever at the start.  Use a search engine with key words like Verizon + FCC + fine and you will see a rather tawdry record where even high visibility ventures have engaged in shameful conduct apparently to squeeze out a few more million. 

Consider this strategy in the context of aggressive lawyering, research sponsorship and mandatory arbitration contract terms that foreclos consumers’ legal redress.  It took 3 years for Verizon to acknowledge that maybe it could have inserted a second screen on certain cellphones to confirm that a subscriber really wanted to launch an Internet session instead of an inadvertent pressing of a poorly placed button.  Today the Big 4 wireless carriers insist on a definition of “unlimited” that does not match the usual expectation.  

Let’s not forget that Comcast considered it strategically advantageous to lie to the FCC and to stonewall rather than fest up that the company was sending reset commands to frustrate peer-to-peer networking.  Let’s remember that Verizon found ways to disable tethering and all wireless carriers disabled Wi-Fi access until they realized they could offload traffic using that preinstalled feature in most cellphones.  Have we forgotten the numerous instances where major companies like AT&T and Verizon allowed, if not sanctioned the “cramming” of false, unauthorized additional fees and charges?

Regardless of Party Majority, the FCC Regularly Engages in Results-Driven Decision Making

We need an FCC that seeks the truth, not a preconceived outcome for which Commission staff “interpret” evidence to support that finding.  Does anyone think the Pai-led FCC objectively considered the facts and reached positions 100% opposite what the Wheeler-led FCC identified?
With great pride and solemnity, Chairman Pai has announced the creation of an economic analysis group well qualified to conduct the cost/benefit analyses he endorses.  

Does anyone think economists are any less likely to selectively interpret evidence and doctrine using a results-driven template?  So the marketplace can self-regulate, except when it doesn’t.

Safe travels and Aloha Chairman Pai.