For CNET this morning, I have a long article reviewing the sad recent history of how local governments determine the quality of mobile services.
As it turns out, the correlation is deeply negative. In places with the highest level of user complaints (San Francisco, Washington, D.C.), it turns out that endless delays or outright denials for applications to add towers and other sites as well as new and upgraded equipment is also high. Who’d have thought?
Despite a late 2009 ruling by the FCC that put a modest “shot clock” on local governments to approve or deny applications, data from CTIA and PCIA included in recent comments on the FCC’s Broadband Acceleration NOI suggests the clock has had little to no effect. This is in part because the few courts that have been asked to enforce it have demurred or refused.
Much of the dithering by local zoning boards is unprincipled and pointless, a sign not so much of legitimate concerns over safety and aesthetics but of incompetence, corruption, and the insidious influence of outside “consultants” whose fees are often levied against the applicant, adding insult to injury. Continue reading →
On Forbes this morning, I argue that the Department of Justice’s effort to block the AT&T/T-Mobile merger signals a dangerous turn in antitrust enforcement.
While President Obama promised during his campaign to “reinvigorate” antitrust, few expected the agency would turn its attention with such laser-like precision on the technology sector, one of the few bright spots in the economy. But as Comcast, Google, Intel, Oracle and now AT&T can testify, the agency seems determined to make its mark on the digital economy. If only it had the slightest idea how that economy actually worked, and why it works so well. Continue reading →
I can’t help but think that there might be a big advantage of having the AT&T-T-Mobile merger go to court. For once, the high-profile action everyone pays attention to will occur in an antitrust forum where the decision criterion is the effects of the merger on consumer welfare, period. Regardless of what one thinks about the merger, it’s nice to see that we’ll finally have a knock-down, drag-out fight based on whether a big telecommunications merger harms consumers and competition. That’s the antitrust standard the Department of Justice has to satisfy in order to prevent the merger.
This will be a refreshing change from the Federal Communications Commission’s “public interest” standard, which allows the commission to object on grounds other than consumer welfare and demand all manner of concessions that have nothing to do with remedying anticompetitive effects of a deal. Case in point: Comcast must now offer broadband service for $9.95 per month to low-income households as a condition for getting approval to buy 51 percent of NBCUniversal. Now, I’m all for seeing low-income households get access to broadband, but subsidizing one subset of customers has little to do with mitigating any possible anticompetitive effects of allowing a cable company to own NBCUniversal. As FCC Commissioners McDowell and Baker said in their statement on that transaction, “Any proposed remedies should be narrow and transaction specific, tailored to address particular anti-competitive harms. License transfer approvals should not serve as vehicles to extract from petitioners far-reaching and non-merger specific policy concessions that are best left to broader rulemaking or legislative processes.”
In short, if AT&T wins in court, the FCC should approve the merger promptly without additional conditions.
[By Geoffrey Manne and Joshua Wright. Cross-posted at TOTM]
Our search neutrality paper has received some recent attention. While the initial response from Gordon Crovitz in the Wall Street Journal was favorable, critics are now voicing their responses. Although we appreciate FairSearch’s attempt to engage with our paper’s central claims, its response is really little more than an extended non-sequitur and fails to contribute to the debate meaningfully.
Unfortunately, FairSearch grossly misstates our arguments and, in the process, basic principles of antitrust law and economics. Accordingly, we offer a brief reply to correct a few of the most critical flaws, point out several quotes in our paper that FairSearch must have overlooked when they were characterizing our argument, and set straight FairSearch’s various economic and legal misunderstandings.
We want to begin by restating the simple claims that our paper does—and does not—make.
Our fundamental argument is that claims that search discrimination is anticompetitive are properly treated skeptically because: (1) discrimination (that is, presenting or ranking a search engine’s own or affiliated content more prevalently than its rivals’ in response to search queries) arises from vertical integration in the search engine market (i.e., Google responds to a query by providing not only “10 blue links” but also perhaps a map or video created Google or previously organized on a Google-affiliated site (YouTube, e.g.)); (2) both economic theory and evidence demonstrate that such integration is
generally pro-competitive; and (3) in Google’s particular market, evidence of intense competition and constant innovation abounds, while evidence of harm to consumers is entirely absent. In other words, it is much more likely than not that search discrimination is pro-competitive rather than anticompetitive, and doctrinal error cost concerns accordingly counsel great hesitation in any antitrust intervention, administrative or judicial. As we will discuss, these are claims that FairSearch’s lawyers are quite familiar with.
FairSearch, however, grossly mischaracterizes these basic points, asserting instead that we claim
“that even if Google does [manipulate its search results], this should be immune from antitrust enforcement due to the difficulty of identifying ‘bias’ and the risks of regulating benign conduct.”
This statement is either intentionally deceptive or betrays a shocking misunderstanding of our central claim for at least two reasons: (1) we
never advocate for complete antitrust immunity, and (2) it trivializes the very real—and universally-accepted–difficulty of distinguishing between pro- and anticompetitive conduct.
Continue reading →
Vivek Wadhwa, who is affiliated with Harvard Law School and is director of research at Duke University’s Center for Entrepreneurship, has a terrific column in today’s Washington Post warning of the dangers of government trying to micromanage high-tech innovation and the Digital Economy from above.
For reasons I have never been able to understand, the
Washington Post uses different headlines for its online opeds versus its print edition. That’s a shame, because while I like the online title of Wadhwa’s essay, “Uncle Sam’s Choke-Hold on Innovation,” the title in the print edition is better: “Google, Twitter and the Best Regulator.” By “best regulator” Wadhwa means the marketplace, and this is a point we have hammered on here at the TLF relentlessly: Contrary to what some critics suggest, the best regulator of “market power” is the market itself because of the way it punishes firms that get lethargic, anti-innovative, or just plain cocky. Wadhwa notes:
The technology sector moves so quickly that when a company becomes obsessed with defending and abusing its dominant market position, countervailing forces cause it to get left behind. Consider: The FTC spent years investigating IBM and Microsoft’s anti-competitive practices, yet it wasn’t government that saved the day; their monopolies became irrelevant because both companies could not keep pace with rapid changes in technology — changes the rest of the industry embraced. The personal-computer revolution did IBM in; Microsoft’s Waterloo was the Internet. This — not punishment from Uncle Sam — is the real threat to Google and Twitter if they behave as IBM and Microsoft did in their heydays.
Continue reading →
It remains unclear how interested the Federal Trade Commission (FTC) is in bringing a formal antitrust action against Google, but we at least know that inquiries have been made. I suspect these inquires are far more serious than whatever the agency is fishing for with its new Twitter inquires. After all, as I note in my latest Forbes column, “Google isn’t even a teenager yet (having only been founded in September 1998), but the firm’s rise has been meteoric and it has made a long list of enemies in the process. Practically every major player in the Digital Economy… is gunning for Google these days, both in the commercial and political marketplace.” In this sense, it’s not surprising the FTC might take a keen interest in the company with so many competitors complaining.
Still, I just can’t find much merit in an antitrust case against Google since, as I noted in my column, “The firm’s success seems tied to high quality products that users prefer over rival services. Importantly, barriers to entry are low: there’s nothing stopping new entrants from innovating and offering competing online services to match Google.”
Regardless, instead of arguing about the merits of an antitrust action against Google, let’s consider the more interesting, and I think intractable, question of remedies. Here’s what I had to say about that in my Forbes essay: Continue reading →
According to a report today from SAI Business Insider, “The Federal Trade Commission is actively investigating Twitter and the way it deals with the companies building applications and services for its platform.” Apparently the agency has reached out to some competing application / platform providers to ask questions about Twitter’s recent efforts to exert more control over the uses of its API by third parties. [The Wall Street Journal confirms the FTC’s interest in Twitter.]
It remains to be seen whether this leads to any serious regulatory action against Twitter by the FTC, but such a move wouldn’t necessarily be surprising considering the more activist tilt of the agency recently. It’s even less surprising considering that Columbia University law professor and prolific cyberlaw scholar Tim Wu was appointed as a senior advisor to the FTC earlier this year. When the announcement of Wu’s appointment was made, the Wall Street Journal kicked off an article with the warning, “Silicon Valley has a new fear factor.” It seems the Journal may have been on to something!
It’s impossible to know how much of an influence Tim Wu is having on the agency, but as I have noted here before, Prof. Wu is man with a healthy appetite for regulatory activism. [See all my essays about Wu’s work here.] Moreover, he’s a man who has already determined that Twitter is a “monopolist” in his November 13, 2010 Wall Street Journal op-ed, “In the Grip of the New Monopolists.”
That essay prompted a fiery response from me [“Tim Wu Redefines Monopoly“] as well as a far more reasoned essay by antitrust gurus Geoff Manne and Josh Wright [“What’s An Internet Monopolist? A Reply to Professor Wu.”] Prof. Wu was kind enough to swing by the TLF and respond to my criticisms in an essay “On the Definition of Monopoly,” which he said served as a “corrective” to my earlier essay [even though I continue to believe that what I said fairly reflected the last four decades of economic wisdom on competition policy and that it is Wu who is well off the reservation with his expansionist views of antitrust enforcement].
Regardless of what one thinks about that exchange, if the FTC
is moving forward with a case against Twitter, three practical questions need to be considered: (1) What’s the relevant market? (2) Where’s the harm? and (3) What’s the remedy?
I’ll briefly discuss each question below but should also mention that I already explored many of these issues in my essay, “A Vision of (Regulatory) Things to Come for Twitter,” so I apologize in advance for the repetition. I will then discuss all this in the context of Tim Wu’s latest law review article on “Agency Threats” and what he approvingly refers to as regulatory “threat regimes.” Continue reading →
Over at his blog, our old TLF colleague Tim Lee has been discussing the AT&T – T-Mobile merger and the ways libertarians should think about antitrust more generally. In his latest post, he pushes back against a brief comment I posted on a previous essay. You can head over to his site and read that exchange and then see my latest comment. But I thought I would also post it here for those interested.
____________
Tim… My thinking on antitrust is very much shaped by the choice between
ex ante vs. ex post regulation. How much faith should we place in sector-specific regulators to get things right through preemptive, prophylactic regulation versus allowing things to play out and then — on the rare occasions when intolerable monopolies over essential goods develop — letting antitrust regulators devise a remedy?
More than any other economic value, I care about experimentation. I am completely under the sway of the Austrian School of thinking about markets and competition as an ongoing experiment, an evolutionary journey, a discovery process. How are we to know if intolerable monopolies over essential goods will actually develop unless we let things play out?
As I argued in my critiques of the Lessig/Zittrain/Wu school of thinking, we need to be a bit more humble and have a little faith that ongoing experimentation and discovery will help us evolve into a better equilibrium. It’s during what some regard as a market’s darkest hour when some of the most exciting forms of disruptive technologies and innovation are developing. [I’ve elaborated more on this point in this lengthy discussion about Gary Reback’s recent book on antitrust.] Continue reading →
For CNET this morning, I write about the latest tempest in the AT&T/T-Mobile USA merger teapot: cellular backhaul or “special access” as its known in the industry.
Like a child sitting on Santa’s lap at the mall, Sprint CEO Dan Hesse included backhaul in his wish list of conditions he’d like to see attached to the deal. Yesterday, Public Knowledge duly confirmed that yes, backhaul is a “multiplier” problem for the deal.
(Sprint says they would like the deal blocked, but that is mere posturing. What they really want is to use the FCC’s bloated and unprincipled merger review process to sneak in as many private concessions for themselves as they can get. And who can blame them for trying? More on that in a moment.)
For those who don’t know, backhaul is the process of moving cellular traffic (voice and data) to other high-speed networks (traditionally landline copper but now including cable, fiber, microwave and local Ethernet) to transport them to their ultimate destination. As mobile use increases, of course, the necessity of reliable, high-speed backhaul to keep overall performance up becomes more critical than ever.
Continue reading →
Hanno F. Kaiser, a U.S. and EU antitrust lawyer and partner with Latham & Watkins LLP, has just released an important essay on a topic I have devoted much time to here over the years: the debate over the relative advantages of “open” vs. “closed” technological systems and the Lessig-Zittrain-Wu school of thinking about these issues.
Kaiser’s essay is entitled, ”
Are Closed Systems an Antitrust Problem?” and it appears in the latest edition of Competition Policy International. This essay is not to be missed. Kaiser’s terrific paper helps us better understand and debunk many of the myths and misperceptions that continue to riddle this debate. Here’s Kaiser’s key insight:
At bottom, the bad reputation of closed systems or walled gardens in the “open versus closed” debate is quite undeserved. Walled gardens generally benefit their environments—both in the real world and the digital realm. The primary purpose of a garden wall, after all, is to shelter plants from wind and frost, not to keep intruders out. In the protected space of the garden, flowers can grow that would not otherwise survive in the wild. Walled gardens thus deliberately create a microcosm that is different from the surrounding ecosystem. Therefore, as long as the garden does not take over the entire ecosystem, walled gardens increase, not reduce, overall diversity. From a competition policy perspective, enjoying the fruits of a walled garden is generally not a guilty pleasure.
Therefore, “as a policy matter, ‘open’ is not necessarily better than ‘closed’,” Kaiser argues, and elaborates as follows: Continue reading →
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