Global Crossing and Vulgar Marxist Political Analysis

Paul Kouroupas, a lobbyist for Global Crossing, makes a good point about network neutrality:

Why would government agencies that have historically shown a preference for the incumbent interest over the public interest all of the sudden get it right with net neutrality? Isn’t it more likely that these agencies will favor the incumbent interests when they adopt regulations implementing a vague Congressional statute? (And you know it is going to be vague because it has to be the subject of compromise in order to garner enough votes.) And won’t this lead to protracted litigation before several layers of federal courts? And don’t the Bell Companies hold the advantage in resources for this sort of war of attrition? After all, AT&T has the legal, regulatory, and political resources of the former SBC, Pacific Bell, Ameritech, SNET, AT&T and BellSouth. For those of us who remember the CLEC wars of the 1990s, any one of these former companies was a formidable foe. Now all of those resources sit under the control of one company! It doesn’t take a rocket scientist to figure out how this movie ends.

Obviously, anything a lobbyist says should be taken with a grain of salt. An interesting question is how one would apply Matt Yglesias’s “vulgar Marxist” method of political analysis to GC’s stance. In a nutshell, Matt’s theory (which he expands on here) is that when we’re unsure about the details of a complex policy issue, we should line up with the companies whose interests are most likely to be aligned with our own.

As far as I’ve read, GC doesn’t have any significant “last mile” infrastructure or other opportunities to exert serious market power. The backbone market is fiercely competitive, as is the market for the sorts of high-bandwidth business Internet connectivity and premium digital services that are GC’s specialty. You’re just not going to have a “last mile” problem when your customers have deep enough pockets to pay for laying cables over that “last mile” themselves.

GC’s major interests, as far as I can see, are twofold. First, they have a strong interest in the health of the Internet in general, since a growing Internet means more opportunities to sell people connectivity. And they obviously have an interest in avoiding burdensome red tape, since complying with that will cut into their bottom line.

It seems to me that if the pro-regulatory side’s story were right, GC would have an even more compelling interest in preventing the Baby Bells from engaging in tiering. Keep in mind that GC is what’s known as a tier one network–that is, a network that connects for free with other tier one networks, and that charges everyone else to connect to them. AT&T and Verizon are also tier one providers, and compete directly with GC. If tiering gave AT&T and Verizon the market power to force website operators to pay them for better connectivity, it seems to me they could use precisely the same tactics to force GC to pay them for connectivity. (Imagine AT&T goes to a Tier 2 provider and says “if you pay us for transit, we’ll give all your customers a discount on their QoS bills. If you get your transit through GC, your customers will have to pay extra for QoS, and they won’t like that.” A pretty potent threat, it seems.)

So unless I’m missing something, it seems to me that GC’s opposition to network neutrality regulations is evidence that either (1) GC’s management is incompetent, or (2) the pro-regulatory side’s scenario isn’t plausible. What am I missing?

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