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:
Matt Yglesias today responded with a post of his own to a NYT article about sports channels and cable pricing by Brian Stelter that Yglesias believed had “bad analysis.” I’m here to defend Stelter a little bit because I think Yglesias was too harsh and that Yglesias erred in his own post about the nature of cable bundling. Yglesias’ posts on cable bundling are good, and especially valuable because his Slate and ThinkProgress audiences are not the most receptive to economic justifications for perceived unfair corporate pricing schemes. In part due to him I suspect, you rarely hear econ and business bloggers calling for a la carte pricing of cable channels.
And Yglesias is certainly right that you can’t really complain about the price of your cable package, which includes the few channels you watch plus the sports channels you don’t watch, because you obviously value the channels more than the price you pay per month, even if the sports are a “waste.” He falters when he says
So since those channels are worth $60 to you, even if unbundling happens your cable provider is going to find a way to charge you approximately $60 for them. Because at the end of the day, you’re paying your cable provider for access to the channels you do watch—not for access to the channels you don’t watch. The channels you don’t watch are just there. If the channels you do watch are worth $60 to you, then $60 is what you’ll pay for them.
Continue reading →
[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 →
I’m pretty rough on all the Internet and info-tech policy books that I review. There are two reasons for that. First, the vast majority of tech policy books being written today should never have been books in the first place. Most of them would have worked just fine as long-form (magazine-length) essays. Too many authors stretch a promising thesis into a long-winded, highly repetitive narrative just to say they’ve written an entire book about a subject. Second, many info-tech policy books are poorly written or poorly argued. I’m not going to name names, but I am frequently unimpressed by the quality of many books being published today about digital technology and online policy issues.
The books of Harvard University cyberlaw scholars John Palfrey and Urs Gasser offer a welcome break from this mold. Their recent books, Born Digital: Understanding the First Generation of Digital Natives, and Interop: The Promise and Perils of Highly Interconnected Systems, are engaging and extremely well-written books that deserve to be books. There’s no wasted space or mindless filler. It’s all substantive and it’s all interesting. I encourage aspiring tech policy authors to examine their works for a model of how a book should be done.
In a 2008 review, I heaped praise on Born Digital and declared that this “fine early history of this generation serves as a starting point for any conversation about how to mentor the children of the Web.” I still recommend highly to others today. I’m going to be a bit more critical of their new book, Interop, but I assure you that it is a text you absolutely must have on your shelf if you follow digital policy debates. It’s a supremely balanced treatment of a complicated and sometimes quite contentious set of information policy issues.
In the end, however, I am concerned about the open-ended nature of the standard that Palfrey and Gasser develop to determine when government should intervene to manage or mandate interoperability between or among information systems. I’ll push back against their amorphous theory of “optimal interoperability” and offer an alternative framework that suggests patience, humility, and openness to ongoing marketplace experimentation as the primary public policy virtues that lawmakers should instead embrace. Continue reading →
“It was then, and is now, the largest merger in American business history,” notes Tim Arango of the New York Times about the AOL-Time Warner mega-merger, which happen ten years this month. And yet, as he points out in his essay, “How the AOL-Time Warner Merger Went So Wrong,” things didn’t end up going so well for this marriage:
The trail of despair in subsequent years included countless job losses, the decimation of retirement accounts, investigations by the Securities and Exchange Commission and the Justice Department, and countless executive upheavals. Today, the combined values of the companies, which have been separated, is about one-seventh of their worth on the day of the merger.
To call the transaction the worst in history, as it is now taught in business schools, does not begin to tell the story of how some of the brightest minds in technology and media collaborated to produce a deal now regarded by many as a colossal mistake.
Arango goes on to interview several of the principals involved in the deal to get their take on why things unfolded so miserably and, ultimately, came to an end this year. I highly recommend the essay because it should serve as a cautionary tale to those worrywarts who are constantly predicting that the sky is going to fall if we allow a truly free media marketplace–including freedom for firms to structure themselves as they wish. Reality usually plays out quite differently. As I argued in my recent paper, “A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC,”
The point here is not that media mergers are inherently good or always make sense. Indeed.. mergers sometimes prove to be huge blunders. But the hysteria sometimes heard before media mergers are consummated rarely bears any relationship to reality once the deals move forward. Media markets are extremely dynamic and prone to disruptive change and technological leap-frogging. Mergers are often one response to that turbulence… Given how difficult it is to predict the future course of events in this chaotic sector, humility—not hubris—is the sensible disposition when it comes to media merger policy.
I just finished Ken Auletta’s latest book,
Googled: The End of the World As We Know It, and I highly recommend it. Auletta is an amazingly gifted journalist and knows how put together a hell of good story. It helps in this case that he was granted unprecedented access to the Google team and their day-to-day workings at the Googleplex. I’m really shocked by the level of access he was granted to important meetings and officials–over 150 interviews with Googlers, including 11 with CEO Eric Schmidt and several with founders Sergey Brin and Larry Page. That’s impressive.
The book shares much in common with Randall Stross’s excellent Planet Google: One Company’s Audacious Plan to Organize Everything We Know, which I reviewed here earlier this year. Both books recount the history of Google from its early origins to present. And both survey a great deal of ground in terms of the challenges that Google faces as it matures and the policy issues that are relevant to the company (privacy, free speech, copyright law, etc).
What makes Auletta’s book unique is the way we taps his extensive “old media” world contacts and integrates such a diverse cast of characters into the narrative — Mel Karmazin (former Viacom, now Sirius XM), Bob Iger (Disney), Howard Stringer (Sony), Martin Sorrrell (WPP), Irwin Gotlieb (Group M), and even the Internet’s “inventor”–Al Gore! Auletta interviews them or recounts stories about their interactions with Google to show the growing tensions being created by this disruptive company and its highly disruptive technologies. There are some terrifically entertaining anecdotes in the book, but the bottom line is clear: Google has made a lot of enemies in a very short time.
Indeed, the book is as much about the decline of old media as it is about Google’s ascendancy. What Auletta has done so brilliantly here is to tell their stories together and ask how much old media’s recent woes can be blamed on Google and digital disintermediation in general. “If Google is destroying or weakening old business models,” Auletta argues, “it is because the Internet inevitably destroys old ways of doing things, spurs ‘creative destruction.’ This does not mean that Google is not ambitious to grow, and will not grow at the expense of others. But the rewards, and the pain, are unavoidable,” he concludes. Continue reading →
As I noted in my recent paper, “A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC,” every time a media merger is proposed we hear all sorts of silly Chicken Little predictions of impending doom. Among the more entertaining claims we hear are conspiracy theories about supposed nefarious schemes to take over the media universe and control our minds, predictions of the death of journalism or democracy, or just good ol’ fashion screw-the-consumer price hikes. But, as I showed in my paper, those predictions have always proven to be bunk once the historical record is in–which usually only takes a few years. While most media mergers do end in misery–it’s for the merging firms and their shareholders, not the public. Unforeseen technological innovations and expanding media marketplace options typically doom most media mergers, while the viewing and listening public enjoys the fruits of continued marketplace evolution.
But the critics never acknowledge any of this. And, sadly, history repeats. The media worrywarts just keep mouthing the same lines and conveniently avoid any reference to their past predictions. No one bothers looking back and trying to match up those past predictions with present day facts. I’m out to change that. I am going to attempt to keep a running inventory all the Chicken Little predictions about the Comcast-NBC Universal deal so that, a few years from now, we can look back and see how well those predictions match up with reality. I suspect that, as was true of those earlier case studies, reality will look quite different than the rhetoric we are hearing today.
To kick things off, here are some rather outlandish comments from someone who should know better — Dan Gillmor, author of the excellent 2006 book,
We the Media: Grassroots Journalism by the People, for the People, which I have cited quite favorably in much of my own work through the years. But when it comes to the Comcast-NBCU deal, Gillmor has gone off the deep end in an essay entitled, “Comcast-NBC: The Road Toward Control Over What We Create.” He argues:
A Comcast-NBC combination is brazenly anti-competitve and anti-democratic. It would give one company far too much ownership over not just professionally produced media but also the ways media consumers can receive it.
Worse, if approved, it could mark the tipping point in Big Media’s push to
take control over the Internet itself. That’s where we need to focus our attention.
But wait, there’s more… Continue reading →
I’ve just released a new PFF white paper looking at the hysteria that has often accompanied major media mergers and then taking a look at the marketplace reality years after the fact. Here‘s the PDF, but I have also pasted the entire thing down below.
_____________________________
A Brief History of Media Merger Hysteria:
From AOL-Time Warner to Comcast-NBC
by Adam Thierer
Although the pending union of Comcast and NBC Universal has not yet made it to the altar, Chicken Little-esque wails about the marriage have already begun in earnest. For example, the pro-regulatory media organization Free Press has already set up a website to complain about the deal.[1] And Jeff Chester, executive director of the Center for Digital Democracy, has called it “an unholy marriage.”[2] The fever only promises to spread once the deal is formally announced, and a lengthy fight over the deal is expected at the Federal Communications Commission (FCC) and whichever antitrust agency reviews the deal.[3]
But reality tends to play out somewhat less dramatically than the script penned by the media worrywarts. It’s worth looking back at some of the more prominent examples of media merger hysteria in recent years to understand why such panic is unwarranted, and why a deal between Comcast and NBC Universal is unlikely to lead to the sort of problems that the pessimists suggest.[4] Continue reading →
I was just digging through some old files and came across a quote that I found entertaining. Back in 2003, when he was still president and chief operating officer of Viacom, Mel Karmazin said with reference to Microsoft, AOL-Time Warner, and Comcast: “I can’t imagine being a competitor with any of these guys.” At the time, some media worrywarts made great hay of Mel’s quip and claimed, as Gene Kimmelman of Consumers Union argued at the time, that it proved how “Media moguls themselves admit their desire to avoid real competition within their industry.”
Utter rubbish. In fact, just six years after Karmazin spoke those words, Microsoft finds itself in a heated war with Google on all fronts, AOL-Time Warner has crumbled (even Time Warner Cable and Time Warner Entertainment got divorced!), and Comcast is now squaring off against telco and online video competitors that were unfathomable at the time (not to mention traditional satellite TV competitors.) In the meanwhile, Karmazin abandoned Viacom and today, as CEO of Sirius XM, is struggling to find a way to make the satellite radio universe survive the ongoing digital music bloodbath thanks to unforeseen competition from online music services and a little thing called the iPod!
It’s proof positive that media markets and digital technologies
always evolve faster than most people — even smart industry titans like Karmazin — anticipate.
Holman Jenkins has a stinging editorial in today’s Wall Street Journal entitled, “Neutering the ‘Net,” which borrows a term that my friend Randy May coined long ago to describe what net neutrality regulation will ultimately accomplish. What I like best about the Jenkins essay was the way he exposed Free Press for their hypocrisy over metering as a possible alternative approach to network management, something I documented in this piece and this piece about their new-found love of Internet price controls. Here’s how Jenkins puts it in his essay today:
The mask really slipped earlier this year when Time Warner Cable began experimenting with usage-based pricing to protect the average broadband customers from the 20% of users who create 80% of the traffic. A lobby called Free Press, the most extreme of the pro-net neutrality interests, went ballistic, calling metered pricing a “price-gouging scheme” and backing a bill in Congress to ban it.
Never mind that Free Press had previously argued just the opposite, saying usage-based pricing was a fairer way to deal with congestion than, say, by selectively slowing down file-sharing sites that gobble up disproportionate broadband capacity. Never mind, too, the irony that the net-neut campaign against the selective slowing of non-urgent traffic has left only differential pricing as a way to bring a modicum of efficiency to network usage.
Indeed. Of course, we should expect nothing less from the neo-Marxist media reformistas as the UnFree Press.
The Technology Liberation Front is the tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology.