Consumers in the Driver’s Seat—Oh, the Humanity!

by on April 7, 2010 · 9 comments

Yesterday, if you paid attention reeeeally carefully (1, 2, 3, 4), you probably figured out the D.C. Circuit had ruled that Congress hadn’t given the Federal Communications Commission power to regulate the Internet and that the FCC couldn’t bootstrap that power from other authority. It was a rare but welcome affirmation that the rule of law might actually pertain in the regulatory area.

But the Open Internet Coalition put out a release containing threat exaggeration to make Dick Cheney blush:

“Today’s DC Circuit decision . . . creates a dangerous situation, one where the health and openness of broadband Internet is being held hostage by the behavior of the major telco and cable providers.”

That’s right. It’s a hostage-taking when consumers and businesses—and not government—hammer out the terms and conditions of Internet access. Inferentially, the organization representing Google, Facebook, eBay, and Twitter believes that Internet users are too stupid and supine to choose the Internet service they want.

What these content companies are really after, of course, is government support in their tug-of-war with the companies that transport Internet content. It’s hard to know which produces the value of the Internet and which should gain the lion’s share of the rewards. Let the market—not lobbying—decide what reward content and transport deserve for their roles in the Internet ecosystem.

As I said of the Open Internet Coalition’s membership on a saltier, but still relentlessly charming, day: “[T]hese companies are losing their way. The leadership of these companies should fire their government relations staffs, disband their contrived advocacy organization, and get back to innovating and competing.”

  • http://profiles.yahoo.com/u/W7GGUAHBGZT25XCE56AE6S6JIM dave

    the pot calls the kettle black! for all the time i have been reading tlf the meme being pushed is that if the (presumed to be evil) government tries to enforce network neutrality it means a regulatory death for the internet (oh nos!) i submit that the tlf is guilty of the 'threat exageration' highlighted in this piece. the idea of consumers and business hammering out the terms of their sounds great except there is not much competition in large parts of the country and a duopoly in most of what's left. i just hope that congress can craft a way to extend regulatory authority of the fcc over internet providers that can prevent the internet from turning into tv (just shut up and view the web sites we say you can view)

  • http://www.williamrinehart.com/ William Rinehart

    I think a better reading of TLF would be this: When there have been egregious issues between companies and their customers, the negative press and pressure from enraged consumers has created positive change.

  • cryptozoologist

    well, just off the top of my head, no amount of bad press caused the health insurance providers to change their ways. without strong government regulation, nothing would have ever changed. while it is true that in a very few isolated egregious cases, health insurers backpedaled from decisions that made them look bad, there was not any kind systemic change that might have rendered the great healthcare overhaul moot.

  • http://srynas.blogspot.com/ Steve R.

    Jim, I think you really have three topical points. Your headline “Consumers in the Driver’s Seat—Oh, the Humanity!” is fanciful at best, which tickled my truth meter. The following headline, which is unfortunately too common, is anecdotally in the realm of reality Netflix Sells Out Its Subscribers.

    Next your write “It’s a hostage-taking when consumers and businesses—and not government—hammer out the terms and conditions of Internet access. (emphasis added) We, as consumers are a disorganized bunch lacking financial backing, so I find it hard to imagine myself being invited by any ISP to discuss the term and conditions of internet access. Come to think of it, has there ever been a case of an ISP sitting down with its customers to work out a contract? In fact the “contracts” for providing service to the customers seem to be between the corporations themselves. Apple predicted to extend exclusive contract with AT&T. (Note that the article never mentions any benefits accruing to the consumer.) Of course there is the Electronic Frontier Foundation working on the consumers behalf. But then the (ISP) companies always have this pet phrase “terms subject to change at our discretion”. Clearly the consumer is not in the drivers seat.

    You write “What these content companies are really after, of course, is government support in their tug-of-war with the companies that transport Internet content. Oh, how true. The DMCA being one of many examples. I wish you would go further into that analysis. This carries immense civil liberty implications. One of the primary ones being the ability of a third party (content industry) to force a second party (the ISP) to protect their (third party) interests. Doesn't sound like a viable free market. Also there is the proverbial free speech issue. The third party forcing the second party to deprive the consumer (first party) of their free speech.

  • Cheeky

    Steve R. wrote:
    We, as consumers are a disorganized bunch lacking financial backing, so I find it hard to imagine myself being invited by any ISP to discuss the term and conditions of internet access.

    Quite right, Steve. The great thing about adhesion contracts is that they save a lot of wear and tear on hammers, as James T. Hart begrudgingly tells us

    There is nothing unenforceable or even wrong about adhesion contracts. In fact, most businesses would never conclude their volume of transactions if it were necessary to negotiate all the terms of every consumer contract. But to say that they are “hammered out” is a bit of a stretch.

  • MikeRT

    Your example doesn't work because health insurance companies' interests are inherently opposed to the interests of their customers because you pay them rate X, but consumer resource quantity Y. Imagine if you paid Verizon $100 for FiOS, but FiOS stood to lose several hundred dollars if you consumed “$500 worth of bandwidth.” There is no such scenario with ISPs because their plans calculate in a rough equivalence between rate X and resource consumption Y and Y can never unmanageably exceed their allocations.

  • Jim Harper

    The power of exit is a powerful negotiating tool, and consumers use it all the time without even thinking about it.

  • http://srynas.blogspot.com/ Steve R.

    Jim you wrote: “The power of exit is a powerful negotiating tool, and consumers use it all the time without even thinking about it.”. This is conceptually true and a concept that I have been mulling over. It would make for a wonderful research topic. Now for the unfortunate (unproven) reality, the individual consumer has NO real negotiating power.

    1. In today's environment we are dealing with large corporations, such as Sears or Verizon. They don't care (on an individual basis) if they retain you as a customer or not. We dropped our land-line from what is now CenturyLink, they made no attempt at “retention”.
    2. Exiting is a good strategy, but there are a lot of examples that it is ineffectual. If you are simply going from one company to another with the same “Terms of Service” you have accomplished nothing. Not to mention that others are probably doing the same thing, so the company that you are currently “displeased” with is getting replacement (dissatisfied) customers from other companies. Consequently they won't eve notice your “departure”. Look at Sprint, they have been loosing (exiting) customers for over 8 years (I believe) and they are still in business!!!!
    3. In today's world economy, I believe a lot of business transactions, are actually random. Sounds ridiculous? That's why I am still thinking about how consumers make choices and in terms of “exit strategy” why it would be ineffectual for changing corporate behavior. As an example, you go to the grocery store to buy cereal and you are confronted by a wall of cereals all slightly different. What do you do, you reach out and probably take the one that has attractive advertising that apparently meets your needs. Obviously, with a cell phone purchase you will spend more time reading the “terms of service”, but the presence of many similar plans only differing in minor details makes a clear selection unattainable.

    Consumer choice is good and the free-market must be commended for providing essentially unlimited choice. But having an extremely wide choice has the unintended consequence of the consumer finally throwing-up their hands saying “I give-up, I will take that one”. Essentially a random act.

  • http://srynas.blogspot.com/ Steve R.

    Jim you wrote: “The power of exit is a powerful negotiating tool, and consumers use it all the time without even thinking about it.”. This is conceptually true and a concept that I have been mulling over. It would make for a wonderful research topic. Now for the unfortunate (unproven) reality, the individual consumer has NO real negotiating power.

    1. In today's environment we are dealing with large corporations, such as Sears or Verizon. They don't care (on an individual basis) if they retain you as a customer or not. We dropped our land-line from what is now CenturyLink, they made no attempt at “retention”.
    2. Exiting is a good strategy, but there are a lot of examples that it is ineffectual. If you are simply going from one company to another with the same “Terms of Service” you have accomplished nothing. Not to mention that others are probably doing the same thing, so the company that you are currently “displeased” with is getting replacement (dissatisfied) customers from other companies. Consequently they won't eve notice your “departure”. Look at Sprint, they have been loosing (exiting) customers for over 8 years (I believe) and they are still in business!!!!
    3. In today's world economy, I believe a lot of business transactions, are actually random. Sounds ridiculous? That's why I am still thinking about how consumers make choices and in terms of “exit strategy” why it would be ineffectual for changing corporate behavior. As an example, you go to the grocery store to buy cereal and you are confronted by a wall of cereals all slightly different. What do you do, you reach out and probably take the one that has attractive advertising that apparently meets your needs. Obviously, with a cell phone purchase you will spend more time reading the “terms of service”, but the presence of many similar plans only differing in minor details makes a clear selection unattainable.

    Consumer choice is good and the free-market must be commended for providing essentially unlimited choice. But having an extremely wide choice has the unintended consequence of the consumer finally throwing-up their hands saying “I give-up, I will take that one”. Essentially a random act.

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