Coming Soon: A Predatory, Anti-Business Federal Trade Commission?

by on February 24, 2009 · 9 comments

Even an economy in shambles shall not sway the elevation to Federal Trade Commission chairmanship of Jon Leibowitz, an interventionist-minded commissioner who, like all planners, knows better than others how markets should be structured.

In several important areas, his inclinations (judging from the cheers emanating from interest groups like PIRG and Center for Digital Democracy) lean toward substituting political “discipline” for what competitive markets offer.

He supports “opt-in” with respect to behavioral advertising, which we’ve often described as not-necessarily good for a lot of reasons. We’ll come back to this later.

He supports antitrust intervention with respect to firms like Intel (and watch out, Google), and favors destructive “conditions” on mergers. Nineteenth-century, smokestack-era antitrust, rather than withering, now seems dedicated to exploiting and hobbling large-scale transactions in ways that end up creating entities that would not emerge in free markets. Several mergers lately have resulted in such artificially constrained frankensteins, or suffered catastrophic delays. Thus “competition policy” (ha!) neuters the healthy competitive response to them that could have come about. (See my FCC comment on XM/Sirius in that regard.)

On “net neutrality,” we leap beyond whether markets are adequate to discipline errant behavior; here the starting point is the nominee’s doubt that even antitrust intervention is necessarily “adequate to the task”; thus the implication that new laws may be in order.

Let’s just take net neutrality for now. There are plenty reasons I think it’s an outrage to regulate price and access on networks and infrastructure; but just for the moment, the entire concept rests upon numerous (I often feel deliberate, in my less-charitable moods) misperceptions or misrepresentations about competitive markets and capitalism. These include but are not limited to the following: (Adapted from an FCC filing I made).

• Infrastructure companies and content companies are naturally and inherently at odds.
• Competition requires political force.
• Discrimination is bad with respect to network access, and such a thing as “non-discrimination” exists.
• Net neutrality is itself not a form of picking sides (or discrimination, as it were)
• Infrastructure companies should not control content; however, content companies, in conjunction with bureaucracies backed by legislation and regulation, should control infrastructure companies.
• Government enforced net neutrality spawns “openness”; market impulses do not.
• Communications flows (video, information, calls etc.) are maximized by neglecting, even blocking, the liberalization of and enforcement of property rights in grids.
• Networks themselves cannot be regarded as a competitive unit in any sense: only the movement of bits from point A to point B on a pre-existing network counts as competition. Networks best exist as passive husks, not dynamic forms of infrastructure wealth created, managed and duplicated in response to price signals and broader economic forces.
• “Market failures” matter, government failures do not exist (indeed, they are rarely acknowledged by the interventionist class).
• Infrastructure companies’ interest lies in not selling services, in not exploiting gains from trade with content companies whatever petty transitory jealousies may exist.
• Wall Street, rivals and consumers cannot react to discipline inefficient network management or generate new bandwidth infrastructure (I always call it “bandwealth,” but will remain passive.
• Agencies like FTC and FCC are better equipped than capital markets and a global economy to discipline ill-managed networks.
• Alternative, profit-driven modes of infrastructure organization matter less than regulating the mode that exists: User ownership of grids; liberalization of non-telecom network industries to enable wide-scale, cross-industry infrastructure consortia; “splintering” into and out of the public net by private carriers, all have little role to play and may safely be ignored.
• Moreover, regulatory interference will not undermine these alternative modes of discipline, or alter technological trajectories and the future trajectory or health of communications wealth in any harmful way.

So it’s remarkable, to me at least, that at a time when the economy needs “stimulus,” that we may now be required to divert attention to contend with a new artificial, entirely man-made and unnecessary hindrance to the expansion of the communications sector.

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  • mwendy

    Wayne, you may be premature with Jon…but then, maybe not.

    What's clear, however, is that Net Neutrality is a solution in need of a problem. And, that liberal policymaker elites see an opportunity to leverage (extort?) the buildout of b-band made my private companies, taking risk in unregulated markets (for the time being, of course) – to further their social policy agenda.

    It's hard to compete against a give away. And these are popular of late. Sad, though, that that comes off the hides of private risk takers.

  • dm

    “Coming off the hides of private risk takers” is not a problem if all risk takers risk their hides similarly, and know what they're getting into. The second law of thermodynamics comes off the hides of private risk takers, too, but they manage.

    Your list of 93 theses needs a bit more work. Surely you could make it yet more tendentious? Take, for example:

    • “Market failures” matter, government failures do not exist (indeed, they are rarely acknowledged by the interventionist class).

    Market failures do matter, yes. The nice thing about government failures is that you can do something about them.

    Others on your list seem inexplicable. For example:

    • Infrastructure companies and content companies are naturally and inherently at odds.

    I'm not sure where you're going with this. This net neutrality agnostic (though I admit to some sympathy with the view) would deny this. In fact, I'd think the denial is an important brick in the net-neutrality argument, in that infrastructure companies combining with content companies (and thus favoring one company's content over another) is one of the things that motivates net neutrality advocates.

    Then there are the things that are pretty clearly more true than not:

    • Wall Street, rivals and consumers cannot react to discipline inefficient network management or generate new bandwidth infrastructure (I always call it “bandwealth,” but will remain passive.

    Consumers in the bandwidth market suffer from a number of constraints that limit the effects of market discipline on bandwidth providers. It's not like you can hop from one bandwidth seller to another in response to changes in usage agreements and service contracts without paying some costs (or abandoning some sunk costs) to do so.

  • dm

    “Coming off the hides of private risk takers” is not a problem if all risk takers risk their hides similarly, and know what they're getting into. The second law of thermodynamics comes off the hides of private risk takers, too, but they manage.

    Your list of 93 theses needs a bit more work. Surely you could make it yet more tendentious? Take, for example:

    • “Market failures” matter, government failures do not exist (indeed, they are rarely acknowledged by the interventionist class).

    Market failures do matter, yes. The nice thing about government failures is that you can do something about them.

    Others on your list seem inexplicable. For example:

    • Infrastructure companies and content companies are naturally and inherently at odds.

    I'm not sure where you're going with this. This net neutrality agnostic (though I admit to some sympathy with the view) would deny this. In fact, I'd think the denial is an important brick in the net-neutrality argument, in that infrastructure companies combining with content companies (and thus favoring one company's content over another) is one of the things that motivates net neutrality advocates.

    Then there are the things that are pretty clearly more true than not:

    • Wall Street, rivals and consumers cannot react to discipline inefficient network management or generate new bandwidth infrastructure (I always call it “bandwealth,” but will remain passive.

    Consumers in the bandwidth market suffer from a number of constraints that limit the effects of market discipline on bandwidth providers. It's not like you can hop from one bandwidth seller to another in response to changes in usage agreements and service contracts without paying some costs (or abandoning some sunk costs) to do so.

  • mwendy

    Wayne, you may be premature with Jon…but then, maybe not.

    What's clear, however, is that Net Neutrality is a solution in need of a problem. And, that liberal policymaker elites see an opportunity to leverage (extort?) the buildout of b-band made my private companies, taking risk in unregulated markets (for the time being, of course) – to further their social policy agenda.

    It's hard to compete against a give away. And these are popular of late. Sad, though, that that comes off the hides of private risk takers.

  • dm

    “Coming off the hides of private risk takers” is not a problem if all risk takers risk their hides similarly, and know what they're getting into. The second law of thermodynamics comes off the hides of private risk takers, too, but they manage.

    Your list of 93 theses needs a bit more work. Surely you could make it yet more tendentious? Take, for example:

    • “Market failures” matter, government failures do not exist (indeed, they are rarely acknowledged by the interventionist class).

    Market failures do matter, yes. The nice thing about government failures is that you can do something about them.

    Others on your list seem inexplicable. For example:

    • Infrastructure companies and content companies are naturally and inherently at odds.

    I'm not sure where you're going with this. This net neutrality agnostic (though I admit to some sympathy with the view) would deny this. In fact, I'd think the denial is an important brick in the net-neutrality argument, in that infrastructure companies combining with content companies (and thus favoring one company's content over another) is one of the things that motivates net neutrality advocates.

    Then there are the things that are pretty clearly more true than not:

    • Wall Street, rivals and consumers cannot react to discipline inefficient network management or generate new bandwidth infrastructure (I always call it “bandwealth,” but will remain passive.

    Consumers in the bandwidth market suffer from a number of constraints that limit the effects of market discipline on bandwidth providers. It's not like you can hop from one bandwidth seller to another in response to changes in usage agreements and service contracts without paying some costs (or abandoning some sunk costs) to do so.

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