Articles by Milton Mueller

I was surprised to read a defense of the AT&T-T-Mobile merger here.

Let’s begin at the beginning and ask why this merger is happening. It’s not as if AT&T is gaining dominance the way Google gained it in search and advertising, or the way Intel did in chips: i.e., through low prices, superior products and customer loyalty. No, last time I looked AT&T was the carrier with the lowest customer satisfaction ratings, some of the highest prices and one of the weakest network performance metrics. In my opinion there is no reason for this merger to take place other than to make life easier for AT&T by reducing competitive pressures on it. AT&T seems to be driven by the following calculus. It can either grow its services and its network under the harsh constraints of market pricing and competition, or it can attempt to reduce the field to an oligopoly with tacit price controls by using its size and financial bulk to eliminate a pest who keeps downward pressure on pricing and service requirements. I think it is rational for AT&T to try to get away with the latter. I think it’s insane for free market oriented thinkers to support it.

Larry Downes can’t argue with the extremely high level of market concentration and the scary HHI measurements that the merger would produce. So he plays the game that clever antitrust advocates always play: shift the market definition. Downes argues that “both Justice and the FCC have consistently concluded that wireless markets are essentially local.” I see no citation to any specific document in Downe’s claim, but if FTC and FCC have concluded that “local” means “my metropolitan area” they are wrong.

Let’s reacquaint everyone with a very basic but pertinent fact: 93% of the wireless users in the U.S. are served by the national carriers. This number (the proportion served by national as opposed to regional providers) has generally increased over the past decade, driven by both demand-side requirements, mergers, and supply-side efficiencies. The choices of consumers have rendered a decisive verdict negating Downes’s claim. Whether it’s voice or data, people expect and want seamless national service; a small but significant segment wants transnational compatibility as well.

Increases in the scope of service will intensify as we move from a primarily voice-driven market to a data-driven market. Carriers who have to impose roaming charges and interconnection fees on their users will not be competitive. Nor will they be able to attract the interest of the cutting-edge handset manufacturers and service developers. Can you imagine Apple signing an iPhone exclusivity deal with Cricket?

It is no accident that the dominant mobile network operators have national brands and national footprints. Most Americans travel outside their metro areas at least once a month, and go places further away than that at least once or twice a year. The 93% who choose a national carrier are rationally calculating that it pays to not have to guess the service area limits of their provider. Of course, a highly budget-constrained segment of the market will accept limited local service for a lower price. To say that those smaller providers are in the same market as a T-Mobile or AT&T is not plausible. They occupy a niche. And if one allows a major merger like this on the grounds that these tiny players constitute a competitive alternative to the likes of AT&T, what are you going to say as the last of these local providers is gobbled up?

How about that “spectrum efficiency” argument? Downes, like the AT&T Corp., makes the same claim that the old AT&T made when it said there should be no microwave-based competition in long distance. As a matter of pure engineering efficiency, it is of course true that a single, optimizing planner can make better use of limited spectrum bands than multiple, competitive providers. But then, that argument applies to any and all carriers (an AT&T-Verizon merger, for example) and to any resource – that’s why it was used by the socialists of the 19th century to claim that capitalism was inherently wasteful and inefficient. Dynamic efficiencies of competition typically benefit the public more than a few allocative efficiencies. And there are plenty of ways for AT&T to expand network capacity without merging.

But there is an interesting twist to this line of reasoning. Notice how the “market is local” claim suddenly disappears. AT&T needs to take over a smaller national rival, according to Downes, so it can “accelerate deployment of nationwide mobile broadband using LTE technology, including expansion into rural areas.” Voila! Once we start talking about spectrum efficiencies and the promotion of universal service we take a nationwide perspective, not a local one. Doesn’t this obvious contradiction make anyone suspicious?

Notice also the ominous historical overtones of AT&T’s claim that it will be able to promote universal broadband service in rural areas if it has a stronger monopoly er, if it gains consolidation efficiencies. Hey, rural areas don’t have congested spectrum, do they? What’s stopping them from doing that now? If they need help to do it, where are the subsidies going to come from? Would more market power make that possible? One cannot help but ask: Is AT&T doing this to get more spectrum or is it trying to pull a neo-Theodore Vail, and promise the government that it will subsidize rural access if it has more market power?

Bottom line: this is one step too far back to the days of a single telephone company. If you support a competitive industry where one can reasonably expect the public and legislators to rely on market forces as the primary industry regulator, this merger has to be stopped. On the other hand, if you welcome the growing pressures for regulating carriers and making them the policemen and chokepoints for network control, a bigger AT&T is just what the doctor ordered.

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ICANN has posted an official “GAC Indicative Scorecard” in advance of the Feb. 28 showdown in Brussels between the Governmental Advisory Committee (GAC) and the ICANN Board. The “scorecard” is intended to identify the areas where the small number of governmental officials who participate in GAC differ from the positions developed by ICANN’s open policy development process. The scorecard constitutes a not-so subtle threat that ICANN should throw out its staff- and community-developed policies and make them conform to the GAC’s preferences. Amusingly, the so-called GAC position follows almost verbatim the text submitted as the “US position” back in January. It’s clear that the US calls the shots in GAC and that other governments, including the EU, are cast in the role of making minor modifications to U.S. initiatives.

There is one interesting modification, however. The new GAC scorecard still allows GAC to conduct an initial review of all new top level domain applications and still allows any GAC member to object to any string “for any reason.” But GAC has been publicly shamed into pulling back from the U.S. government’s recommendation that a single GAC objection, if not overruled by other governments, would kill the application. Instead, the GAC as a whole will “consider” any objection and develop written “advice” that will be forwarded to the Board. This would put such advice in the framework of ICANN’s bylaws, and thus the advice would not be binding on the board.

While it is heartening that public pressure has forced the governments to pull back from their more outrageous demands, the resulting procedure is still arbitrary and an unacceptable incursion on free expression and free markets. For a more complete analysis, see the IGP blog.

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For better or worse, my first post here is going to be a rather urgent call to action. I’d like to encourage everyone who reads this blog to register their support for this petition. Entitled, “Say no to the GAC veto,” it expresses opposition to a shocking and dangerous turn in U.S. policy toward the global domain name system. It is a change that would reverse more than a decade of commitment to a transnational, bottom-up, civil society-led approach to governance of Internet identifiers, in favor of a top-down policy making regime dominated by national governments.

If the U.S. Commerce Department has its way, not only would national governments call the shots regarding what new domains could exist and what ideas and words they could and could not use, but they would be empowered to do so without any constraint or guidance from law, treaties or constitutions. Our own U.S. Commerce Department wants to let any government in the world censor a top level domain proposal “for any reason.” A government or two could object simply because they don’t like the person behind it, the ideas it espouses or they are offended by the name, and make these objections fatal. This kind of direct state control over content-related matters sets an ominous precedent for the future of Internet governance.

On February 28 and March 1, ICANN and its Governmental Advisory Committee will meet in Brussels to negotiate over ICANN’s program to add new top level domain names to the root. The U.S. commerce Department has chosen to make this meeting a showdown, in which the so-called Governmental Advisory Committee (GAC) will demand that the organization re-write and re-do policies and procedures ICANN and its stakeholder groups have been laboring to achieve agreement on for the past six years. The GAC veto, assailed by our petition, is only the most objectionable feature of a long list of bad ideas our Commerce Department is dragging into the consultation. We need to make a strong showing to ensure that ICANN has the backbone to resist these pressures

For those concerned about the role of the state in communications and information, I can’t think of a better, clearer flashpoint for focusing your efforts. A great deal of the Internet’s innovation and revolutionary character came from the fact that it escaped control of national states and began to evolve new, transnational forms of governance. As governments wake up to the power and potential of the Internet, they have increasingly sought to assert traditional forms of control.

The relationship between national governments and ICANN, which came into being during the Clinton administration as an attempt to “privatize” and globalize the policy making and coordination of the Internet’s domain name system, has always been a fraught one. Whatever its flaws (and they are many), ICANN at least gives us a globalized governance regime that is rooted in the Internet’s technical commnunity and users, and one step removed from the miasma of national governments and intergovernmental organizations. The GAC was initially just an afterthought tacked on to ICANN’s structure to appease the European Union. It was – and is still supposed to be – purely advisory in function. Initially it was conceived as simply providing ICANN with information about the way its policies interacted with national policies.

Those of you with long memories may be feeling a sense of deja vu. Didn’t we think we were settling the issue of an intergovernmental takeover of ICANN back in 2005, during the World Summit on the Information Society? Wasn’t it the U.S. government who went into that summit playing to fears of a “UN takeover of the Internet” and swearing that it was protecting the Internet from “burdensome intergovernmental oversight and control”? Wouldn’t most Americans be surprised to learn that the Commerce Department is now using ICANN’s Governmental Advisory Committee to reassert intergovernmental control over what kind of new web sites can be created? Ironically, the US has become the most formidable world advocate of burdensome government oversight and control in Internet governance. And it has done so without any public consultation or legal authority.

Please spread the word about this petition and use whatever channels you have to isolate the Commerce Department’s illegitimate incursions on constitutional free expression guarantees.

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