According to this AP story, Rep. John Conyers, D-Mich., chairman of the House Judiciary Committee…
has expressed concern in a letter to Attorney General Michael B. Mukasey that the Justice Department may “rush through” an approval of Sirius Satellite Radio Inc.’s $5 billion purchase of its rival XM Satellite Radio Holdings Inc. [Conyers] also said he was “dismayed to learn” that Thomas O. Barnett, the head of the department’s antitrust division, may approve the deal “over the objections of department staff.” The Judiciary Committee oversees antitrust issues. Rep. Steve Cabot, an Ohio Republican, also signed the letter. The two members said they haven’t yet taken a position on the transaction, but urged Mukasey to “preserve your ability to personally participate in the department’s deliberations.”
Only in Washington would it be considered “rushed” to take a year to review a proposal. Absurd.
The FCC has settled on an inappropriate definition of what constitutes a competitive market. A memorandum explaining why the FCC denied the Verizon’s forbearance petition seeking deregulation in Boston, New York, Philadelphia, Pittsburgh, Providence and Virginia Beach suggested it’s because Verizon’s market share has to be less than 50% AND Verizon’s competitors must have ubiquitous overlapping networks with significant excess capacity.
While there is some evidence in the record here regarding cable operators’ competitive facilities deployment used in the provision of mass market telephone service in the 6 MSAs at issue, we find that it does not approach the extensive evidence of competitive networks with significant excess capacity relied upon in the AT&T Nondominance Orders … where the Commission has found an incumbent carrier to be nondominant in the provision of access services, it had a retail market share of less than 50 percent and faced significant facilities-based competition. (footnote omitted)
A market share in excess of 50% would justify regulation in the EU, but not in the U.S. pursuant to settled antitrust principles.
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Two commentators tried to argue that FCC Chairman Kevin J. Martin has held true to conservative principles nowithstanding recent attempts to re-regulate the cable industry. Cesar V. Conda and Lawrence J. Spiwak posited that a “pro-entry/pro-consumer-welfare mandate” is the very “hallmark of economic conservatism.” This is a bizarre statement.
“Pro-entry” is a euphemism for competitor welfare, the antithesis of consumer welfare. Competitor welfare used to be the guiding principle of antitrust law – a legacy of the populist movement. The idea was that more competitors equaled stronger competition. It’s intuitively appealing, but it confuses quantity with quality and is wrong if the competitors are inefficient. Protection of inefficient competitors is a form of subsidy.
For example, the Clinton FCC tried to jumpstart competition in telecom with a “pro-entry” policy which allowed startups to lease facilities and services below cost from incumbent providers like AT&T and Verizon. You might think that’s no big deal, AT&T and Verizon can probably afford it. But the truth is they don’t absorb such losses, they pass them on to their remaining customers.
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One of the very few positive things in the Telecommunication Act of 1996 is Section 401 (codified as Sec. 10 of the Communications Act of 1934, as amended), which requires the Federal Communications Commission to forbear from applying unnecessary regulation to telecommunications carriers or services.
Congress tucked the provision into the 1996 act to improve the chances that pro-competition regulation would be eliminated once fully implemented and no longer necessary to ensure competition.
On Friday the FCC issued a notice of proposed rulemaking requesting public comment on whether the forbearance procedure needs more procedure. Commissioner Michael J. Copps issued a statement indicating dissatisfaction with the whole forbearance concept:
Too often forbearance has resulted in industry driving the FCC’s agenda rather than the reverse being true. Decisions are based upon records lacking in data and the Commission faces a statutory deadline that requires a decision with or without such data. Perhaps most egregious is the fact that if the Commission fails to act, forbearance petitions may go into effect based upon the industry’s reasoning rather than the Commission’s own determination. All of this is to say that I do not believe that forbearance is being used today in the manner intended by Congress.
I admire Commissioner Copps’ confidence that he knows what Congress intended, but I actually sat on the Senate floor when the Telecommunications Act of 1996 was debated and the forbearance provision (which originated in the Senate) wasn’t debated at all. It was included in the committee mark, which was supported by Commissioner Copps’ old boss, the committee’s ranking member and former chairman, Senator Ernest Hollings (D-SC).
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Comcast’s decision to limit Internet traffic from the peer-to-peer software BitTorrent would be against the law if Democratic presidential hopeful Barack Obama had his way, an aide to the Democratic Senator said Thursday.
In a conference call organized by the campaign for Sen. Obama, D-Ill., high-profile technology experts Lawrence Lessig, Beth Noveck and Julius Genachowski endorsed the technology and innovation agenda that Obama released on Wednesday. Also on the lines were three Obama aides, who declined to speak for attribution.
“What I find compelling about the Senator’s [stance] is a strong commitment to Net neutrality,” said Lessig, a law professor at Stanford University, referring to the notion that broadband providers be barred from favoring business partners with speedier Internet delivery.
Obama “addresses the problem of Net neutrality in a way that could actually be enforced,” said Lessig. By contrast, Democratic hopeful Hillary Clinton “can’t stand up for Net neutrality.”
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Kevin J. Martin, politically-savvy and a highly effective chairman of the Federal Communications Commission, has a strong free-market orientation. So why would the New York Times report that the FCC may be on the verge of enacting new regulation which would:
- Force the largest cable networks to be offered to the rivals of the big cable companies on an individual, rather than packaged, basis;
- Make it easier for independent programmers, which are often small operations, to lease access to cable channels; and
- Set a cap on the size of the nation’s largest cable companies so that no company could control more than 30 percent of the market?
Martin believes “[i]t is important that we continue to do all we can to make sure that consumers have more opportunities in terms of their programming and that people who have access to the platform assure there are diverse voices,” according to the New York Times article. In other words, regulators (i.e., philosopher kings) should intervene to improve on the free market.
There are already plenty of opportunities for independent programmers to lease access to spare cable channels. The independent programmers aren’t excluded from cable networks. Making it “easier” for independent programmers to lease access to cable channels, according to one report, is code for a government-mandated rate reduction of 75 percent.
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Comcast’s terms of service and other consumer broadband service documents make no mention of any restrictions on the use of “peer-to-peer” applications like BitTorrent, or of any Internet network management.
AT&T and Time Warner Cable, two of the other big broadband providers, do mention restrictions on “peer-to-peer” services in their consumer broadband documents. Verizon Communications does not mention the phrase, according to an analysis of the four broadband providers conducted by DrewClark.com.
Unlike Time Warner Cable, Comcast fails to mention any “management,” “network management” or “reasonable network management” of its consumer broadband service in its documents.
Of the four providers, however, Comcast makes the most extensive warning to consumers against the “excess” use of bandwidth. For example, Comcast declares that the consumer “shall ensure that your use of the Service does not restrict, inhibit, interfere with, or degrade any other user’s use of the Service, nor represent (in the sole judgment of Comcast) an overly large burden on the network.”
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I want to comment on Adam Thierer’s recent paper, “Unplugging Plug-and-Play Regulation,” which makes several excellent points. Adam briefly summarized his thesis (i.e., there is no need for government “assist” in private standard-setting) here a couple days ago and generated a couple comments.
The cable industry and consumer electronics manufacturers are touting competing standards initiatives. The pros and cons of each approach, from a technology perspective, are somewhat bewildering to a non-engineer like myself. But there appears to be one clear difference that matters a lot. Adam points out that under the initiative sponsored by the consumer electronics industry,
the FCC would be empowered to play a more active role in establishing interoperability standards for cable platforms in the future. [It’s] a detailed regulatory blueprint that specifies the technical requirements, testing procedures, and licensing policies for next-generation digital cable devices and applications.
Why would ongoing assistance be required from the FCC, which mainly consists of lawyers?
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My colleague Scott Wallsten, PFF’s Director of Communications Policy Studies, has just released an excellent short essay on one of my favorite pet issues: Metered pricing as a solution to broadband congestion / traffic management issues. This is very relevant right now, of course, because of the Comcast kerfuffle regarding how the company have gone about managing BitTorrent traffic.
In his essay, entitled “Managing the Network? Rethink Prices, not Net Neutrality,” Scott points out that:
Comcast should have been more forthcoming in its response and should be more transparent about its actions. Even so, Comcast isn’t the culprit and net neutrality regulations aren’t the answer. Instead, network congestion problems caused by some people’s excessive use are a direct and predictable result of the all-you-can-eat pricing that nearly every ISP charges for broadband service.
We know that this kind of pricing gives people little incentive to pay attention to how much of the service they use. People whose electricity is included in their rent rather than metered, for example, may as well leave the lights on all day and keep their homes frigid in the summer and toasty in the winter. To be sure, some people conserve simply because they care about the environment, but most won’t since they don’t see any savings from using energy more efficiently.
It is often complicated to determine prices in network industries that have high fixed costs and low marginal costs–like broadband. As long as the cost of sending an extra bit down the pipe is close to nothing, a flat rate for unlimited use is probably efficient. In that case, the operator must cover the fixed cost of the infrastructure, but it might not be worthwhile to monitor usage. If usage costs begin to increase, however, flat rate pricing may become inefficient.
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Steven Pearlstein, a business columnist for The Washington Post, has an interesting editorial up today wondering whether Google is the next AT&T, IBM, Intel or Microsoft in the sense that, like those companies, Google might be headed for increased antitrust or regulatory scrutiny based on its marketplace success:
With its proposed purchase of DoubleClick, Google has followed suit in drawing the scrutiny of the competition police, both at home and in Europe. The reason is simple: Like its predecessors, Google shows every sign of pulling away from the pack in a market that naturally tends toward a single, dominant firm.
Pearlstein goes on to explain how Google’s business model works in layman’s terms and then points out why there is little to fear from Google’s proposed acquisition of DoubleClick:
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