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Podcast: Remember FAANG?

by on May 10, 2022 · 5 comments

Corbin Barthold invited me on Tech Freedom’s “Tech Policy Podcast” to discuss the history of antitrust and competition policy over the past half century. We covered a huge range of cases and controversies, including: the DOJ’s mega cases against IBM & AT&T, Blockbuster and Hollywood Video’s derailed merger, the Sirius-XM deal, the hysteria over the AOL-Time Warner merger, the evolution of competition in mobile markets, and how we finally ended that dreaded old MySpace monopoly!

What does the future hold for Google, Facebook, Amazon, and Netflix? Do antitrust regulators at the DOJ or FTC have enough to mount a case against these firms? Which case is most likely to have legs?

Corbin and I also talked about the of progress more generally and the troubling rise of more and more Luddite thinking on both the left and right. I encourage you to give it a listen:

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Impressions from the DOJ Workshop about Section 230

by on February 26, 2020 · 1 comment

Last week I attended the Section 230 cage match workshop at the DOJ. It was a packed house, likely because AG Bill Barr gave opening remarks. It was fortuitous timing for me: my article with Jennifer Huddleston, The Erosion of Publisher Liability in American Law, Section 230, and the Future of Online Curation, was published 24 hours before the workshop by the Oklahoma Law Review.

These were my impressions of the event:

I thought it was pretty well balanced event and surprisingly civil for such a contentious topic. There were strong Section 230 defenders and strong Section 230 critics, and several who fell in between. There were a couple cheers after a few pointed statements from panelists, but the audience didn’t seem to fall on one side or the other. I’ll add that my friend and co-blogger Neil Chilson gave an impressive presentation about how Section 230 helped make the “long tail” of beneficial Internet-based communities possible.

AG Bob Barr gave the opening remarks, which are available online. A few things jumped out. He suggested that Section 230 had its place but Internet companies are not an infant industry anymore. In his view, the courts have expanded Section 230 beyond drafters’ intent, and the Reno decision “unbalanced” the protections, which were intended to protect minors. The gist of his statement was that the law needs to be “recalibrated.”

Each of these points were disputed by one or more panelists, but the message to the Internet industry was clear: the USDOJ is scrutinizing industry concentration and its relationship to illegal and antisocial online content.

The workshop signals that there is now a large, bipartisan coalition that would like to see Section 230 “recalibrated.” The problem for this coalition is that they don’t agree on what types of content providers should be liable for and they are often at cross-purposes. The problematic content ranges from sex trafficking, to stalkers, to opiate trafficking, to revenge porn, to unfair political ads. For conservatives, social media companies take down too much content, intentionally helping progressives. For progressives, social media companies leave up too much content, unwittingly helping conservatives.

I’ve yet to hear a convincing way to modify Section 230 that (a) satisfies this shaky coalition, (b) would be practical to comply with, and (c) would be constitutional.

Now, Section 230 critics are right: the law blurs the line between publisher and conduit. But this is not unique to Internet companies. The fact is, courts (and federal agencies) blurred the publisher-conduit dichotomy for fifty years for mass media distributors and common carriers as technology and social norms changed. Some cases that illustrate the phenomenon:

In Auvil v. CBS 60 Minutes, a 1991 federal district court decision, some Washington apple growers sued some local CBS affiliates for airing allegedly defamatory programming. The federal district court dismissed the case on the grounds that the affiliates are conduits of CBS programming. Critically, the court recognized that the CBS affiliates “had the power to” exercise editorial control over the broadcast and “in fact occasionally [did] censor programming . . . for one reason or another.” Still, case dismissed. The principle has been cited by other courts. Publishers can be conduits.

Conduits can also be publishers. In 1989, Congress passed a law requiring phone providers to restrict “dial-a-porn” services to minors. Dial-a-porn companies sued. In Information Providers Coalition v. FCC, the 9th Circuit Court of Appeals held that regulated common carriers are “free under the Constitution to terminate service” to providers of indecent content. The Court relied on its decision a few years earlier in Carlin Communications noting that when a common carrier phone company is connecting thousands of subscribers simultaneously to the same content, the “phone company resembles less a common carrier than it does a small radio station.”

Many Section 230 reformers believe Section 230 mangled the common law would like to see the restoration of the publisher-conduit dichotomy. As our research shows, that dichotomy had already been blurred for decades. Until advocates and lawmakers acknowledge these legal trends and plan accordingly, the reformers risk throwing out the baby with the bathwater.

Relevant research:
Brent Skorup & Jennifer Huddleston, The Erosion of Publisher Liability in American Law, Section 230, and the Future of Online Curation (Oklahoma Law Review).

Brent Skorup & Joe Kane, The FCC and Quasi–Common Carriage: A Case Study of Agency Survival (Minnesota Journal of Law, Science & Technology).

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The Pacing Problem and the Future of Technology Regulation

by on August 10, 2018 · 0 comments

[first published at The Bridge on August 9, 2018]

What happens when technological innovation outpaces the ability of laws and regulations to keep up?

This phenomenon is known as “the pacing problem,” and it has profound ramifications for the governance of emerging technologies. Indeed, the pacing problem is becoming the great equalizer in debates over technological governance because it forces governments to rethink their approach to the regulation of many sectors and technologies.

The Innovation Cornucopia

Had Rip Van Winkle woken up his famous nap today, he’d be shocked by all the changes around him. At-home genetics tests, personal drones, driverless cars, lab-grown meats, and 3D-printed prosthetic limbs are just some of the amazing innovations that would boggle his mind. New devices and services are flying at us so rapidly that we sometimes forget that most did not even exist a short time ago. Continue reading →

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Some thoughts on the T-Mobile-Sprint merger

by on April 30, 2018 · 5 comments

Mobile broadband is a tough business in the US. There are four national carriers–Verizon, AT&T, T-Mobile, and Sprint–but since about 2011, mergers have been contemplated (and attempted, but blocked). Recently, the competition has gotten fiercer.  The higher data buckets and unlimited data plans have been great for consumers.

The FCC’s latest mobile competition report, citing UBS data, says that industry ARPU (basically, monthly revenue per subscriber), which had been pretty stable since 1998, declined significantly from 2013 to 2016 from about $46 to about $36. These revenue pressures seemed to fall hardest on Sprint, who in February, issued $1.5 billion of “junk bonds” to help fund its network investments. Analysts pointed out in 2016 that “Sprint has not reported full-year net profits since 2006.”  Further, mobile TV watching is becoming a bigger business. AT&T and Verizon both plan to offer a TV bundle to their wireless customers this year, and T-Mobile’s purchase of Layer3 indicates an interest in offering a mobile TV service.

It’s these trends that probably pushed T-Mobile and Sprint to announce yesterday their intention to merge. All eyes will be on the DOJ and the FCC as their competition divisions consider whether to approve the merger.

The Core Arguments

Merger opponents’ primary argument is what’s been raised several times since the 2011 AT&T-T-Mobile aborted merger: this “4 to 3” merger significantly raises the prospect of “tacit collusion.” After the merger, the story goes, the 3 remaining mobile carriers won’t work as hard to lower prices or improve services. While outright collusion on prices is illegal, they have a point that tacit collusion is more difficult for regulators to prove, to prevent, and to prosecute.

The counterargument, that T-Mobile and Sprint are already making, is that “mobile” is not a distinct market anymore–technologies and services are converging. Therefore, tacit collusion won’t be feasible because mobile broadband is increasingly competing with landline broadband providers (like Comcast and Charter), and possibly even media companies (like Netflix and Disney). Further, they claim, T-Mobile and Sprint going it alone will each struggle to deploy a capex-intensive 5G network that can compete with AT&T, Verizon, Comcast-NBCU, and the rest, but the merged company will be a formidable competitor in TV and in consumer and enterprise broadband.

Competitive Review

Any prediction about whether the deal will be approved or denied is premature. This is a horizontal merger in a highly-visible industry and it will receive an intense antitrust review. (Rachel Barkow and Peter Huber have an informative 2001 law journal article about telecom mergers at the DOJ and FCC.) The DOJ and FCC will seek years of emails and financial records from Sprint and T-Mobile executives and attempt to ascertain the “real” motivation for the merger and its likely consumer effects.

T-Mobile and Sprint will likely lean on evidence that consumers view (or soon will view) mobile broadband and TV as a substitute for landline broadband and TV. Much like phone and TV went from “local markets with one or two competitors” years ago to a “national market with several competitors,” their story seems to be, broadband is following a similar trajectory and viewing this as a 4 to 3 merger misreads industry trends.

There’s preliminary evidence that mobile broadband will put competitive pressure on conventional, landline broadband. Census surveys indicate that in 2013, 10% of Internet-using households were mobile Internet only (no landline Internet). By 2015, about 20% of households were mobile-only, and the proportion of Internet users who had landline broadband actually fell from 82% to 75%. But this is still preliminary and I haven’t seen economic evidence yet that mobile is putting pricing pressure on landline TV and broadband.

FCC Review

Antitrust review is only one step, however. The FCC transaction review process is typically longer and harder to predict. The FCC has concurrent  authority with the DOJ under the Clayton Act to review telecommunications mergers under Sections 7 and 11 of the Clayton Act but it has never used that authority. Instead, the FCC uses its spectrum transfer review authority as a hook to evaluate mergers using the Communication Act’s (vague) “public interest standard.” Unlike antitrust standards, which generally put the burden on regulators to show consumer and competitive harm, the public interest standard as currently interpreted puts the burden on merging companies to show social and competitive benefits.

Hopefully the FCC will hew to a more rigorous antitrust inquiry and reform the open-ended public interest inquiry. As Chris Koopman and I wrote for the law journal a few years ago, these FCC  “public interest” reviews are sometimes excessively long and advocates use the vague standards to force the FCC into ancillary concerns, like TV programming decisions and “net neutrality” compliance.

Part of the public interest inquiry is a complex “spectrum screen” analysis. Basically, transacting companies can’t have too much “good” spectrum in a single regional market. I doubt the spectrum screen analysis would be dispositive (much of the analysis in the past seemed pretty ad hoc), but I do wonder if it will be an issue since this was a major issue raised in the AT&T-T-Mobile attempted merger.

In any case, that’s where I see the core issues, though we’ll learn much more as the merger reviews commence.

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Dick Thornburgh Is Mistaken: The New DOJ Spectrum Recommendation Is Inconsistent with Its Prior Approach to Mobile Competition

by on June 11, 2013 · 0 comments

The Department of Justice has suddenly reversed course from its previous findings that mobile providers who lack spectrum below 1 GHz can become “strong competitors” in rural markets and are “well-positioned” to drive competition locally and nationally. Those supporting government intervention as a means of avoiding competition in the upcoming incentive auction attempt to avoid these findings by highlighting misleading FCC statistics, including the assertion that Verizon owns “approximately 45 percent of the licensed MHz-POPs of the combined [800 MHz] Cellular and 700 MHz band spectrum, while AT&T holds approximately 39 percent.”

Sprint Nextel Corporation (Sprint Nextel) recently sent a letter to the Federal Communications Commission (FCC) signed by Dick Thornburgh, a former US Attorney General who is currently of counsel at K&L Gates, expressing his support for the ex parte submission of the Department of Justice (DOJ) that was recently filed in the FCC’s spectrum aggregation proceeding. The DOJ ex parte recommends that the FCC “ensure” Sprint Nextel and T-Mobile obtain a nationwide block of mobile spectrum in the upcoming broadcast incentive auction. In his letter of support on behalf of Sprint Nextel, Mr. Thornburgh states he believes the DOJ ex parte “is fully consistent with its longstanding approach to competition policy under Republican and Democratic administrations alike.”

Mr. Thornburgh is mistaken. The principle finding on which the DOJ’s new recommendation is based – that the FCC should adopt an inflexible, nationwide restriction on spectrum holdings below 1 GHz – is clearly  inconsistent with the DOJ’s previous approach to competition policy in the mobile marketplace. Both the FCC and the DOJ have traditionally found that there is no factual basis for making competitive distinctions among mobile spectrum bands in urban markets, and the DOJ has distinguished among mobile spectrum bands only in rural markets. Continue reading →

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FCC Commissioner Rosenworcel’s Speech on Spectrum Policy Reveals Intellectual Bankruptcy at DOJ

by on May 24, 2013 · 0 comments

This week at CTIA 2013, FCC Commissioner Jessica Rosenworcel presented ten ideas for spectrum policy. Though I don’t agree with all of them, she articulated a reasonable vision for spectrum policy that prioritizes consumer demand, incorporates market-oriented solutions, and establishes transparent goals and timelines. Commissioner Rosenworcel’s principled approach stands in stark contrast to the intellectually bankrupt incentive auction recommendation offered by the Department of Justice last month. Continue reading →

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New Paper on Wu’s “Separations Principle” & the War on Vertical Integration in the Tech Economy

by on October 16, 2012 · 0 comments

[UPDATE 4/30/13: This article was subsequently published in Volume 65, Issues 2 of the Federal Communications Law Journal in April 2013. The links below now point to the final FCLJ version.]

The Mercatus Center at George Mason University has just released a new paper by Brent Skorup and me entitled, “Uncreative Destruction: The War on Vertical Integration in the Information Economy.”  Brent, who is the research director for the Information Economy Project at the George Mason University School of Law, and I have been working on this paper since the Spring and we are looking forward to getting it published in a law review shortly. The paper focuses on Tim Wu’s “separations principle” for the digital economy, something I’ve spent some time critiquing here in the past. Here’s the introduction from the 44-page paper that Brent and I just released:

Are information sectors sufficiently different from other sectors of the economy such that more stringent antitrust standards should be applied to them preemptively? Columbia Law School professor Tim Wu responds in the affirmative in his book The Master Switch: The Rise and Fall of Information Empires. Having successfully pushed net-neutrality regulation into the policy spotlight, Wu has turned his attention to what he regards as excessive market concentration and threats to free speech throughout the entire information economy.To support his call for increased antitrust intervention, Wu explains his view of competition in the information economy—a view that deviates substantially from current mainstream antitrust theory. Continue reading →

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Apple, eBooks, Antitrust, Consolidation & Copyright

by on April 11, 2012 · 17 comments

So, the Department of Justice has formally filed suit against Apple and several major book publishers claiming collusion over eBook pricing. Let’s say Apple and the publishers are guilty as charged and in violation of our nation’s antitrust laws. Here’s my opinion on that: So what? What Apple and the publishers are doing here is trying to find a way to sustain creative works in an era when copyright law is slowly dying. As I noted here in a post yesterday, I take no joy in reporting the fact that property rights for intellectual creations no longer function effectively. I wish they did still work, but they are failing rather miserably in an age of highly decentralized digital dissemination. Moreover, I am not prepared to see government go to absurd enforcement extremes in an attempt to make intellectual property rights work. But, that being said, something needs to sustain and cross-subsidize cultural creations in an age of mass piracy. I have increasingly come to believe that consolidation of content and conduit (or devices) is a big part of the answer. Alternatively, some sort of informal collusion among cultural creators and information distributors may be the answer.

Apple and the publishers have figured that out and come up with a plan that keeps intellectual works flowing while making sure that the creators behind them get paid. At a time when copyright critics always say “just find a better business model” Apple and the publishers did just that. But now Department of Justice officials say that business model should be forbidden. That’s crazy.  If we’re going to let copyright die, we should at least grant more pricing and deal-making flexibility to the creative community to structure business arrangements that might give them a lifeline.

But won’t such deals give publishers and other creative artists and industries more pricing power that will help them keep prices up artificially? Yes, of course! That is the whole point! God forbid we actually have to pay something to cultural creators. Ain’t that a scandal. But here’s a news flash: That’s what copyright law was all about, too. It was about helping creators put some fences around their “property” to help them maintain some degree of pricing power for goods with zero marginal cost. The scheme worked brilliantly for many years. It spawned a vibrant marketplace of ideas and helped America become the leading exporter of expressive works on the planet. But now the effectiveness of traditional copyright is fading rapidly. Industry consolidation, cross-promotions, pricing deals, and so on, will increasingly be the “better business model” some will turn to.  So, are we going to allow it? Or will critics just keep mouthing “go find a better business model” and have the government step in every time they don’t like the one industry chooses?  I say let experimentation continue.

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The Spectrum Argument Lives, Debunking Letter-Gate, and Why the DOJ Is Still Wrong to Try to Stop the AT&T/T-Mobile Merger

by on September 2, 2011 · 615 comments

Milton Mueller responded to my post Wednesday on the DOJ’s decision to halt the AT&T/T-Mobile merger by asserting that there was no evidence the merger would lead to “anything innovative and progressive” and claiming “[t]he spectrum argument fell apart months ago, as factual inquiries revealed that AT&T had more spectrum than Verizon and the mistakenly posted lawyer’s letter revealed that it would be much less expensive to expand its capacity than to acquire T-Mobile.”  With respect to Milton, I think he’s been suckered by the “big is bad” crowd at Public Knowledge and Free Press.  But he’s hardly alone and these claims — claims that may well have under-girded the DOJ’s decision to step in to some extent — merit thorough refutation.

To begin with, LTE is “progress” and “innovation” over 3G and other quasi-4G technologies.  AT&T is attempting to make an enormous (and risky) investment in deploying LTE technology reliably and to almost everyone in the US–something T-Mobile certainly couldn’t do on its own and something AT&T would have been able to do only partially and over a longer time horizon and, presumably, at greater expense.  Such investments are exactly the things that spur innovation across the ecosystem in the first place.  No doubt AT&T’s success here would help drive the next big thing–just as quashing it will make the next big thing merely the next medium-sized thing.

The “Spectrum Argument”

The spectrum argument that Milton claims “fell apart months ago” is the real story here, the real driver of this merger, and the reason why the DOJ’s action yesterday is, indeed, a blow to progress.  That argument, unfortunately, still stands firm.  Even more, the irony is that to a significant extent the spectrum shortfall is a product of the government’s own making–through mismanagement of spectrum by the FCC, political dithering by Congress, and local government intransigence on tower siting and co-location–and the notion of the government now intervening here to “fix” one of the most significant private efforts to make progress despite these government impediments is really troubling.

Anyway, here’s what we know about spectrum:  There isn’t enough of it in large enough blocks and in bands suitable for broadband deployment using available technology to fully satisfy  current–let alone future–demand.

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No Facts, No Problem?

by on March 22, 2011 · 0 comments

[Cross-Posted at Truthonthemarket.com]

There has been, as is to be expected, plenty of casual analysis of the AT&T / T-Mobile merger to go around.  As I mentioned, I think there are a number of interesting issues to be resolved in an investigation with access to the facts necessary to conduct the appropriate analysis.  Annie Lowrey’s piece in Slate is one of the more egregious violators of the liberal application of “folk economics” to the merger while reaching some very confident conclusions concerning the competitive effects of the merger:

Merging AT&T and T-Mobile would reduce competition further, creating a wireless behemoth with more than 125 million customers and nudging the existing oligopoly closer to a duopoly. The new company would have more customers than Verizon, and three times as many as Sprint Nextel. It would control about 42 percent of the U.S. cell-phone market. That means higher prices, full stop. The proposed deal is, in finance-speak, a “horizontal acquisition.” AT&T is not attempting to buy a company that makes software or runs network improvements or streamlines back-end systems. AT&T is buying a company that has the broadband it needs and cutting out a competitor to boot—a competitor that had, of late, pushed hard to compete on price. Perhaps it’s telling that AT&T has made no indications as of yet that it will keep T-Mobile’s lower rates.

Full stop?  I don’t think so.  Nothing in economic theory says so.  And by the way, 42 percent simply isn’t high enough to tell a merger to monopoly story here; and Lowrey concedes some efficiencies from the merger (“buying a company that has the broadband it needs” is an efficiency!).  To be clear, the merger may or may not pose competitive problems as a matter of fact.  The point is that serious analysis must be done in order to evaluate its likely competitive effects.  And of course, Lowrey (H/T: Yglesias) has no obligation to conduct serious analysis in a column — nor do I in a blog post. But this idea that the market concentration is an incredibly useful and — in her case, perfectly accurate — predictor of price effects is devoid of analytical content and also misleads on the relevant economics.

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