2012 — Page 20

The Kochs, Cato, and Miscalculation—Part III

by Jim Harper on April 20, 2012 · 9 comments

In previous posts about the battle for control of the Cato Institute, I’ve noted (Part I) that the “Koch side” is a variety of different actors with different motivations who collectively seem not to apprehend the Cato Institute’s value. Next (Part II), I looked at why the Koch side is fairly the object of the greater scrutiny: their precipitous filing of the original lawsuit.

My premise has been that the Koch side cares. That is, I’ve assumed that they want to preserve Cato and see its role in the libertarian movement continue. Some evidence to undercut that assumption has come around, namely, their filing of a second lawsuit—and now a third! [Update: Mea culpa—there hasn’t been a third lawsuit. Just a new report of the second one. I had assumed the second was filed in state court and thus thought this was distinct. I’m not following the legal issues, obviously, which matter very little.]

The Koch side may be “on tilt.” Lawsuit-happy, win-at-any-cost. We will just have to wait and see.

For the time being, I will continue to assume that the Koch side has the best interests of liberty in mind and explore the dispute from that perspective. I owe the world some discussion of Cato-side miscalculation—of course, there is some—but before I get to that in my next post, I think it’s worth talking about the burden of proof in the Kochs’ campaign to take control of Cato.

Only fringies will deny that the Cato Institute adds some value to the liberty movement. It does. The question—if preservation of liberty is the goal—is how well it will do so in the future. The central substantive issue in the case—there are many side issues—is how Cato will operate in the future.

Now, here’s a quick primer on public campaigns and the difference between the “yes” side and the “no” side. Continue reading →

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The Closing of the Spectrum Frontier

by Larry Downes on April 19, 2012 · 0 comments

Frederick Jackson Turner (1861-1932)

On Fierce Mobile IT, I’ve posted a detailed analysis of the NTIA’s recent report on government spectrum holdings in the 1755-1850 MHz. range and the possibility of freeing up some or all of it for mobile broadband users.

The report follows from a 2010 White House directive issued shortly after the FCC’s National Broadband Plan was published, in which the FCC raised the alarm of an imminent “spectrum crunch” for mobile users.

By the FCC’s estimates, mobile broadband will need an additional 300 MHz. of spectrum by 2015 and 500 MHz. by 2020, in order to satisfy increases in demand that have only amped up since the report was issued. So far, only a small amount of additional spectrum has been allocated. Increasingly, the FCC appears rudderless in efforts to supply the rest, and to do so in time. Continue reading →

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Spencer Weber Waller on Facebook and antitrust

by Jerry Brito on April 17, 2012 · 18 comments

On the podcast this week, Spencer Weber Waller, Professor and Director at the Institute for Consumer Antitrust Studies at Loyola University Chicago School of Law, discusses his new paper entitled, Antitrust and Social Networking. The discussion centers on the likelihood of Facebook being charged by the government as having a monopoly over the social networking market. Waller first explains antitrust law, which, among other things, prohibits monopolization to protect competition. Waller then discusses the difficulty of defining the market for social networks. He claims that Facebook is dominant in the market, but he also says there are multiple markets for Facebook’s participation, like consumer use and advertising. Waller goes on to explain how a court would analyze an antitrust violation. According to Waller, there is a two-step process involved where courts ask whether there is market power, and whether a company is doing anything with that power to interfere with competition. Waller ends the discussion by analyzing the likelihood of Facebook ever being charged with antitrust violations. Waller also briefly gives his thoughts on the recent antitrust suit filed by the DOJ against Apple.

Landline rules won’t work for telecoms, or for Susan Shaw

by Hance Haney on April 17, 2012 · 47 comments

Cecilia Kang of the Washington Post reports that

the telecom industry is forcing policymakers to re-examine what has long been a basic guarantee of government – that every American home should have access to a phone, along with other utilities such as water or electricity.

Industry executives and state lawmakers who support this effort want to expand the definition of the phone utility beyond the century-old icon of the American home to include Web-based devices or mobile phones.

The quid pro quo for a monopoly franchise was an obligation to provide timely service upon reasonable request to anyone, subject to regulated rates, terms and conditions. The Telecommunications Act of 1996 eliminated the monopoly franchise, but the obligation to serve remains in the statute books of most states. Telecom providers, aka carriers-of-last-resort (COLR), are stuck with the quid without the quo.

This has become a problem as more and more consumers are “cutting the cord” in favor of wireless or VoIP services. AT&T, for example, has lost nearly half of its consumer switched access lines since the end of 2006. However, most of the loops, switches, cables and other infrastructure which comprise the telephone network must be maintained if telecom providers have to furnish telephone service to anyone who wants it within days. Continue reading →

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Event Notice: 2nd Annual GMU Conference on Competition, Search & Social Media

by Adam Thierer on April 16, 2012 · 12 comments

The fine folks at George Mason University School of Law’s Henry G. Manne Program in Law & Economics Studies have put together another stellar agenda and lineup of speakers for their Second Annual Conference on Competition, Search & Social Media. The event will be held at GMU’s School of Law on Wednesday, May 16th from 8:00 A.M. to 5:00 P.M. Panel topics are listed as follows:

PANEL 1: Antitrust and Platform Competition in Search and Social Media (This panel will discuss issues involving market definition, network effects, and dynamic considerations when analyzing search and social media platform competition.)

PANEL 2: Search, Duties to Deal, and Essential Facilities (This panel will explore the extent to which search engines should be viewed as utilities, and whether they may have a legal duty to assist their rivals under the essential facilities doctrine as it survives after Trinko and Linkline.)

PANEL 3: The Interface Between Privacy and Competitive Analysis in Search and Social Media (This panel will explore the extent to which privacy should be germane to antitrust analysis of online search and social networks, including whether privacy can be viewed as a dimension of quality and the extent to which privacy regulation may affect competition.)

PANEL 4: Are There Workable Remedies for “Search Engine Bias”? (This panel will discuss economic, legal (including First Amendment), and practical issues surrounding potential remedies to allegedly “biased” search engine results.)

I’m honored to have been asked to moderate the second panel since it focuses on an issue I’ve been given a lot of thought to lately. (See my recent working paper, “The Perils of Classifying Social Media Platforms as Public Utilities.“)

Seriously, you’d be hard-pressed to find a better set of speakers on these topics. Check them all out here, where you can also RSVP if you’re interested.

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Antitrust & Innovation in the New Economy: The Problem with the Static Equilibrium Mindset

by Adam Thierer on April 16, 2012 · 0 comments

In this new Money Morning article, “The Antitrust Curse: What Apple Can Learn From Microsoft, IBM,” David Zeiler wonders whether the antitrust lawsuit filed against Apple and several book publishers by the U.S. Department of Justice last week could open the door to a broader case against Apple or, at a minimum, simply become a major distraction to the firm and it’s ability to innovate going forward. He uses IBM and Microsoft as case studies in this regard and notes that, “the problem with being in the DOJ’s gunsight is that it distracts management, makes the company hesitant to innovate, and blemishes the company’s public image. While antitrust woes may not have been entirely responsible for Microsoft and IBM ceding their dominant positions in tech, they were clearly a major factor,” he says. “And worse for Apple, the e-book case could be just the beginning.”

Quite right. I raised the same concern in my recent Forbes column,”Regulatory, Antitrust and Disruptive Risks Threaten Apple’s Empire,” which Zeiler was kind enough to quote in his essay. In that piece, I argued:

Even if Apple beats back [the eBooks] investigation, broader questions are being raised about the company’s power that could invite a much broader investigation. The danger for Apple is that antitrust becomes an omnipresent threat that must be factored into all ongoing business decisions. Antitrust is a particular danger to Apple because the firm is highly vertically integrated and that integration is the source of many of their innovations. As earlier tech titans like IBM and Microsoft learned, when antitrust hangs like the Sword of Damocles, every decision about how to evolve and innovate becomes a calculated gamble.

Regarding the earlier impact that antitrust Sword of Damocles had on Microsoft, Zeiler unearthed this terrific 2005 quote from Mark Kroese, a general manager of information services at the Microsoft Network, who described the impact of the MS antitrust case on innovation at the firm as follows: “Working at Microsoft today vs. five years ago is different,” Kroese said. “If anyone thinks the antitrust case hasn’t slowed us down, you’re wrong. If I want to meet with a products manager for Windows, there needs to be three lawyers in the room. We have to be so careful, we err on the side of caution. We are on such a fine line of conduct.” Regarding how antitrust chilled IBM, Zeiler cites veteran tech journalist Steve Wildstrom of Tech.pinions who noted, “Twelve years of litigation were an enormous distraction in a time of rapid technological and business change. IBM management became cautious and over-lawyered, constantly looking over its shoulder-a condition that persisted for years after the case ended. The antitrust case was almost certainly a major cause of the serious decline of IBM in the late 1980s and early 90s,” Wildstrom said.

Of course, it is impossible to scientifically determine to what degree antitrust harassment contributed to either IBM or Microsoft’s inability to innovate and adapt to the rapidly changing market conditions. And let’s be clear: both IBM and MS have found ways to rebound and innovate in other ways. But one wonders what was lost in the process as the threat of antitrust constantly loomed and potentially chilled innovative efforts that could have kept both firms on the cutting-edge. Continue reading →

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Data Transparency Coalition Debuts Today

by Jim Harper on April 16, 2012 · 3 comments

Meet the Data Transparency Coalition.

The Washington Post‘s Capitol Business blog reports this morning:

A small but growing collection of companies has formed a coalition that will push the federal government to establish a standard system by which agencies categorize their data. …

“Our members understand that if the government identified its data elements in consistent ways, there would be vast new opportunities for the tools that they are building,” Executive Director Hudson Hollister said.

Early supporters include Microsoft and data analysis and management firms Level One Technologies, Teradata, and BrightScope. I’m on their Board of Advisors. One of their early priorities will be to pass H.R. 2146, the DATA Act.

(Here’s a nit I can’t help but pick: The Post says the coalition “aims to standardize ‘big data.'” No. It’s just data.)

Follow the coalition‘s founder and executive director on Twitter @hudsonhollister, and you can Like their Facebook page, as well, to get updates that way.

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New Client of the Regulatory State Expects Results

by Hance Haney on April 16, 2012 · 122 comments

When the federal government torpedoed the AT&T/T-Mobile USA merger in December pursuant to the current administration’s commitment to “reinvigorate antitrust enforcement,” it created a new client in search of official protection and favors.

It was clear there is no way T-Mobile – which lost 802,000 contract customers in the fourth quarter – is capable of becoming a significant competitor in the near future. T-Mobile doesn’t have the capital or rights to the necessary electromagnetic spectrum to build an advanced fourth-generation wireless broadband network of its own.

T-Mobile’s parent, Deutsche Telekom AG, has been losing money in Europe and expected its American affiliate to become self-reliant. In 2008, T-Mobile sat out the last major auction for spectrum the company needs.

The company received cash and spectrum worth $4 billion from AT&T when the merger fell apart, from which T-Mobile plans to spend only $1.4 billion this year and next on the construction of a limited 4G network in the U.S. But it must acquire additional capital and spectrum to become a viable competitor.

Unfortunately, every wireless service provider requires additional spectrum. “[P]rojected growth in data traffic can be achieved only by making more spectrum available for wireless use,” according to the President’s Council of Economic Advisers. Congress recently gave the FCC new authority to auction more spectrum, but it failed – in the words of FCC Chairman Julius Genachowski – to “eliminate traditional FCC tools for setting terms for participation in auctions.”

Everyone fears it will take the FCC years to successfully conduct the next round of auctions while it fiddles “in the public interest.” That’s why Verizon Wireless is seeking to acquire airwaves from a consortium of cable companies, and why T-Mobile will do anything to stop it.

Continue reading →

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Sales Taxes Aren’t Killing Best Buy

by Steven Titch on April 13, 2012 · 2 comments

A few weeks back, now-former Best Buy CEO Brian Dunn blamed the retailer’s $1.7 billion quarterly loss and its decision to close 50 stores nationwide on the fact that its online competitors, Amazon.com in particular, “aren’t encumbered by the costs of running physical locations and in many cases don’t have to collect sales tax.”

Dunn’s comments rehash the now-familiar meme that forcing e-retailers to collect sales tax is the silver bullet to saving brick-and-mortar retailers. It gives politicians on all sides cover–for some, it’s a way to keep revenues coming in for excessive spending. For others, it’s a handy way to wave the flag for local commerce.

But slapping consumers with more taxes isn’t going to save retailing. In a short piece this week, BusinessWeek explores the fundamental shifts online retailing has created in consumer behavior. Here’s a nugget from the article:

Best Buy’s decline reflects a cultural shift that’s reshaping the retail world. All big-box stores, and Best Buy in particular, thrived in an era when comparison shopping meant physically going from store to store. The effort required of consumers was a kind of transactional friction. With the advent of mobile technology, friction has all but disappeared. Rather than ruminate with a salesperson before making a selection, tech-savvy consumers are more likely to walk into stores, eyeball products, scan barcodes with their smartphones, note cheaper prices online, and head for the exit. Shoppers can purchase virtually any product under the sun on Amazon or eBay while sipping a latte at Starbucks. For traditional retailers, that spells trouble, if not death. “So far nothing Best Buy is doing is fast enough or significant enough to get in front of these waves,” says Scot Wingo, CEO of e-commerce consulting firm ChannelAdvisor.

Certainly e-commerce created competitive problems for Best Buy, but the sales tax advantage was likely the least of them. Brick-and-mortar retailing is facing an out-and-out crisis that’s going to require creativity and innovation to solve. Taxing consumers who buy online won’t do much toward that end.

And for more, see Adam’s post on Heritage Foundation’s new report on Internet tax policy.

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The procompetitive story that could undermine the DOJ’s e-books antitrust case against Apple

by Geoffrey Manne on April 12, 2012 · 2 comments

Did Apple conspire with e-book publishers to raise e-book prices? That’s what DOJ argues in a lawsuit filed yesterday. But does that violate the antitrust laws? Not necessarily—and even if it does, perhaps it shouldn’t.

Antitrust’s sole goal is maximizing consumer welfare. While that generally means antitrust regulators should focus on lower prices, the situation is more complicated when we’re talking about markets for new products, where technologies for distribution and consumption are evolving rapidly along with business models. In short, the so-called Agency pricing model Apple and publishers adopted may mean (and may not mean) higher e-book prices in the short run, but it also means more variability in pricing, and it might well have facilitated Apple’s entry into the market, increasing e-book retail competition and promoting innovation among e-book readers, while increasing funding for e-book content creators.

The procompetitive story goes something like the following. (As always with antitrust, the question isn’t so much which model is better, but that no one really knows what the right model is—least of all antitrust regulators—and that, the more unclear the consumer welfare effects of a practice are, as in rapidly evolving markets, the more we should err on the side of restraint). Continue reading →

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