David Carr’s New York Times column today on Amazon, Apple, and the book publishers is excellent. He calls the Department of Justice’s antitrust suit “the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ’N’ Groceries on Route 19 instead”:
But pull back a few thousand feet and take a broader look at the interests of consumers. From the very beginning and with increasingly regularity, Amazon has used its market power to bully and dictate. It leaned on the Independent Publishers Group in recent months for better terms and when those negotiations didn’t work out, Amazon simply removed the company’s almost 5,000 e-books from its virtual shelves…
The deal struck with Apple also allowed other players into the e-book business, including independent bookstores. Previously, Amazon’s $9.99 subprofit price was a virtually impenetrable barrier to entry for anyone who couldn’t afford to lose millions in order to gain market share. Remember that it was only after agency pricing went into effect that Barnes & Noble was able to gain an impressive 27 percent of the e-book market.
Now Amazon has the Justice Department as an ally to rebuild its monopoly and wipe out other players. If the decision to charge the publishers was good for competition, why had the stock price of Barnes & Noble dropped more than 10 percent since Wednesday?
— The Institute for Local Self Reliance and the Benton Foundation issued a report last week on three cities that have quasi-socialized broadband access in their communities, with city-owned utilities making big investments and taking on private companies.
Another gubmint boondoggle? Comcast meets the DMV? Not according to ILSR:
“It may surprise people that these cities in Virginia, Tennessee, and Louisiana have faster and lower cost access to the Internet than anyone in San Francisco, Seattle, or any other major city,” says Christopher Mitchell, Director of ILSR’s Telecommunications as Commons Initiative. “These publicly owned networks have each created hundreds of jobs and saved millions of dollars.”
Here’s an example in Laffayette, Louisiana, which has gotten a leg up in landing businesses because of its super-fast and cheap Internet:
Even before the LUS Fiber network connected a single customer, studies suggested that it saved the community millions of dollars by persuading Cox and BellSouth to hold off on several rate increases during the fiber fight in order to avoid negative publicity.
Today LUS Fiber offers one of the fastest basic tiers of Internet service in the country at an affordable rate: 10/10Mbps for $28.95. It has just announced a 1Gbps tier for $1,000 per month; prior to LUS Fiber, the cost of a gig circuit in Lafayette was at least $20,000 per month.
You wouldn’t know about this from the press, though, which has ignored the study, according to Factiva.
— Bloomberg updates us on the state of too big to fail in a nice piece:
Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did in 2008 with the Fed-assisted rescue of Bear Stearns Cos. by JPMorgan and with Citigroup and Bank of America after the Lehman Brothers bankruptcy, the largest in U.S. history.
“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.
There’s no real news here, but sometimes that’s the news.
When did the CJR become a shill for Big 6 publishing?
#1 Posted by William Ockham, CJR on Tue 17 Apr 2012 at 08:18 AM
Unfortunately, you won't read much about US broadband difficulties outside of non- journalism outlets like blogs and websites that focus on this issue:
http://www.scientificamerican.com/article.cfm?id=competition-and-the-internet
and policy analysts who ask why this issue is so skewed:
http://www.nytimes.com/2007/07/23/opinion/23krugman.html
Reason?
"The United States made the same mistake in Internet policy that California made in energy policy: it forgot — or was persuaded by special interests to ignore — the reality that sometimes you can’t have effective market competition without effective regulation."
and talking about effective regulation is out of most journalists depth. Deregulation is easy. Entire think tanks exist just to back you up on the subject of deregulation.
#2 Posted by Thimbles, CJR on Tue 17 Apr 2012 at 04:23 PM
OK, Thimbles...
It's a five-year old Krugman link this time...
So next time it's a Taibbi link, right?
Or does "rortybomb.com" come next?
Krugman's silliness is especially ironic given (as anyone with the slightest familiarity of the situation knows) that France's turnaround in broadband internet service came about throughDEREGULATION OF ITS BROADBAND INTERNET SERVICE INDUSTRY.
As for Japan, and usual, Thimbles doesn't bother to read his own links. Here's what the Scientific American article has to say, in plain English:
"A decade ago the U.S. ranked at or near the top of most studies of broadband price and performance. But that was before the FCC made a terrible mistake. In 2002 it reclassified broadband Internet service as an “information service” rather than a “telecommunications service.”
...The same is not true in Japan, Britain and the rest of the rich world. In such countries, the company that owns the physical infrastructure must sell access to independent providers on a wholesale market. Want high-speed Internet? You can choose from multiple companies, each of which has to compete on price and service.
SO.. The R E A L I T Y is that R E G U L A T I O N caused American broadband service to suck... While F R E E M A R K E T forces caused Japanese broadband service to excel.
Kinda, sorta just the precise opposite of the nonsense Thimbles is asserting.
But hey! Why let the mere truth get in the way of the liberal crack dream, right?
When sensible people defend free trade, they overestimate their opponents. They can't believe that prominent intellectuals are completely ignorant of basic economics, like Thimbles is.
But there you have it!
#3 Posted by padikiller, CJR on Tue 17 Apr 2012 at 05:18 PM
Sorry, padikiller but your interpretation of what the Scientific American story said doesn't match the facts. When the FCC chose to shift existing telcos from the category of information service to telecommunications service, it wasn't a matter of regulation or deregulation. It was a matter of moving the incumbent carriers from one set of regulations into another.
It's probably also true that a lot of the feuding that's gone on in the telecommunications realm relates back to the CLEC/ILEC wars of the late 1990s. What happened then was that the incumbent carriers chose to ignore existing FCC rules about access for competitive carriers, and the FCC opted to simply roll over instead of fighting about it. Something that didn't happen in Japan, etc.
If you spend any time in the technical backwaters of some of this stuff, it's also evident that there's a certain level of bitterness towards the phone companies in the sense that, with the exception of the original development of the C programming language and Unix at Bell Labs, the incumbent carriers haven't done all that much to advance network technologies. The original DARPA project that established the Internet was mostly a matter of building a data network that could function despite the limitations of the phone system.
It can also be argued that in some ways, the efforts at muni networks such as the one in Louisiana have the potential to be a net benefit to the free market because they open up options for other businesses. Phone companies have long operated as a public utility under a concession model because they use the public right-of-way to run lines. If a phone company abuses that concession either via poor service or bad pricing, it makes sense for a municipality to have the option to either shop for another vendor, or come up with a public alternative.
#4 Posted by Perry Gaskill, CJR on Wed 18 Apr 2012 at 03:35 AM
Perry speaks doublespeak: "When the FCC chose to shift existing telcos from the category of information service to telecommunications service, it wasn't a matter of regulation or deregulation. It was a matter of moving the incumbent carriers from one set of regulations into another."
padikiller responds: So when the FCC, a regulatory authority, issues a new regulation that Scientific American says resulted in crappy broadband service for Americans, it wasn't an act of regulation, but instead merely and act of "moving the incumbent carriers from one set of regulations into another"?
Such plain drivel.
You're doing Orwell proud.
Perry mumble on: "the incumbent carriers haven't done all that much to advance network technologies."
padikiller reponds: Yeah, except for developing digital networking, frame relay technology, packet switching, digital mutiplexing, fiber optic transmission, microwave relay (including proving that the Big Bang happened along the way) oh, and satellite transmission. Yeah, except for these and thousand other little technological nothings, the phone companies haven't done squat for us.
You haven't got a clue (and you happen to be conversing with a guy who deals with technology on a daily basis).
The simple FACT of the matter is that American broadband sucks BECAUSE it is regulated while Japanese, French and British broadband improved when their services were deregulated. PERIOD.
It's just R E A L I T Y. Deal with it. Or don't.
Either way, it isn't going anywhere.
#5 Posted by padikiller, CJR on Wed 18 Apr 2012 at 05:12 AM
@padikiller. Adopting a smarmy tone, making liberal use of the capslock key, and referring to yourself in the third person doesn't make your arguments any more convincing. It just makes you a better troll.
"Such plain drivel." - Just because you say it's drivel doesn't automatically make it so. If you're trying to provide a counter-argument, most sane people would try to explain in what way it should be considered drivel. Are you saying that the phone companies weren't moved from one set of regs to another? If memory serves, the phone companies actually wanted to be reclassified as a means of eliminating the pesky requirements for both net neutrality and having to provide access for competitive carriers.
"You're doing Orwell proud." - A typical non sequitur. Make your case by dragging out Orwell because Orwell is a buzzword for very bad things. Never mind that Orwell has nothing to do with the topic at hand. Or did you mean doublespeak without having to risk explaining yourself?
"Yeah, except for developing digital networking, frame relay technology, packet switching,..." - So if someone appears to disagree with your overall agenda, just ignore the point made. At the risk of repeating myself, there is a plausible argument that can be made that although the phone companies have been capable of great things in the past, they haven't done all that much lately. Please indicate, if you can, which of the examples you've given was newly developed within the past 20 years.
"...and you happen to be conversing with a guy who deals with technology on a daily basis" - So what? If you're a telecommunications attorney, you're going to see a certain part of the elephant; if you're an engineer, you're going to see something else. Or are we to believe that the omniscient padikiller is an expert in virtually everything there is to know about this stuff?
"The simple FACT of the matter is that American broadband sucks BECAUSE it is regulated while Japanese, French and British broadband improved when their services were deregulated." - No, it's not that simple. Some guy in Tokyo who feels like starting a phone company can't just fire up the ol' Kubota backhoe and start digging up the streets. Please name, if you can, one single country on the planet with broadband capability where the market is completely deregulated. Having a different set of rules doesn't mean you're deregulated, it just means you have a different set of rules.
"It's just R E A L I T Y. Deal with it. Or don't." - Try following your own advice.
#6 Posted by Perry Gaskill, CJR on Wed 18 Apr 2012 at 01:21 PM
@Perry:
When you write something as silly as you did, you get called on it. Put on your big boy pants.
To claim that an official act of the FCC (a REGULATORY authority) taken to REGULATE the broadband industry wasn't an act of "regulation" is just patently absurd and my Orwell reference was consequently well taken and thoroughly appropriate.
Your points are nothing more than evasive nonsense, especially your silly attempt to move the goalposts with your "what have the phone companies done for us lately" claim.
Indeed, the POINT of the Scientific American article is that broadband innovations are happening elsewhere, and NOT here, BECAUSE of the stupid FCC regulation.
Of course there is no place with total deregulation of broadband internet service. It wouldn't work for a million different practical reasons, including limited bandwidth and ownership of existing infrastructure in addition to governmental and political policy concerns. Some regulation of the industry will always be necessary just to make it work. But the FACT of the matter is that the countries where broadband service is becoming cheaper, better and utilized at the fastest rates are the countries that have deregulated their broadband industries the most.
Just look at the damned FACTS!
Romania and Bulgaria are second and third in terms of broadband speed.
Why?
DEREGULATION
THAT'S WHY
When you get the Gubmint out of any business to the maximum extent possible, GOOD THINGS HAPPEN. Innovation, Efficiency. Freedom. Choice.
Conversely, when you put the Gubmint into business more than is necessary to protect public safety and maintain free and competitive markets, then BAD THINGS HAPPEN. Sloth. Stagnation. Inefficiency. Limitation.
Finally, there are, of course, other factors in play with regard to the average broadband connection speed... Given the very low population density of the United States, our internet speeds smoke just about any other country close to the same density. American broadband service is hampered by the relatively low population density of the U.S. We are near the bottom of the the list, while Japan and the Euros are at the top. A high population density lends itself to improvements in broadband service speed.
#7 Posted by padikiller, CJR on Wed 18 Apr 2012 at 03:13 PM
OMG, the stupid... it hurts.
The reason why France has a more dynamic market in communications and health care provision than America is not because they deregulated the markets, it's because they regulate competition within the markets.
This shouldn't be hard to understand.
When you have a completely deregulated market, you get winners and losers based on market competition. The methods used to win that competition are not necessarily methods which provide benefit to consumers. When the competition is over, the consumer is often left with one choice for service at which point the consumer has no choice and the monopoly evolves into private tyranny.
(Or in the case where competitors fix prices and make agreements based on the division of market share, competition evolves into market fiefdoms within which there are private tyrannies.)
So say you have railroads which act as the connections between the production of goods and the markets where they are sold. These railroads are unregulated and compete for business. One railroad offers better coverage but must also higher rates to cover maintenance. The other railroad offers cheaper rates, but has much fewer connections, has older and less safe trains, and has badly trained staff.
The cheaper railroad can force the better quality railroad out of business through predatory pricing - forcing the good provider to cut connections, intimidating vendors into avoiding shipping using the competition - by threatening noncompliant vendors with punitive rates and refused service, buying up the necessary resources for the enterprise - like coal - and charging the competition high prices for access, making non standard rails and threatening railroad equipment manufacturers penalties if they offer service the standard rail type, demanding tax credits and public benefits denied to competitors or else you will cut those markets off, oh you can get imaginative with what a cheap railroad can do to its competition by picturing a spunky rail company run by a Walton or a Gates.
And when the rail achieves dominant market share, it can focus on raising rents on its services while minimizing costs of upkeep and reliability. What good is monopoly power if a company doesn't exploit it?
Regulated markets prevent companies from using criteria, other than customer value, from achieving market control. Regulated markets PREVENT market control and set minimum standards for service provision so that the customer base doesn't get screwed by unacceptable service purchased on the cheap. Other countries encourage market competition by putting into force market rules. America hasn't, and the American public has suffered lack of service at a high premium cost as a result.
#8 Posted by Thimbles, CJR on Wed 18 Apr 2012 at 07:49 PM
and if that was the only thing that goes wrong in an unregulated market, it would be a small tragedy, but that isn't:
http://billmoyers.com/wp-content/themes/billmoyers/transcript-print.php?post=2905
"You know? I used to tell my kids, "Why do you think a car has brakes?" And they all would say, "To stop." And I'd say, "No, a car has brakes so that you can drive fast. If you got into a car that had no brakes and you knew it, how fast do you think you would drive? You wouldn't drive very fast at all." And that's the same reason we have rules. You want the private sector to be free to be creative and exuberant and whatever, within a framework."
A market without brakes, can crash.
Especially when the market allows a take over by a dynamic like this:
"We don't care what you do. We don't care how many private jets, houses, golf courses, swimming pools, whatever you have, as long as you keep the share price going up. If share price goes down, we're going to get rid of you even if you're good.”
And managers started being scared of their stockholders and this idea of shareholder value came into being. I never heard the word "shareholder value" until the '90s. It was customers, customers, customers. How are the customers? Are we doing well? Are we losing place with the customers?"
When your customers don't matter, you're not engaged in market competition, you're engaged in market gaming and market control.
Adam Smith said that competition acts as an invisible hand as the behavior of self interested actors unintentionally creates increasing benefits for public. This only works when self interested actors are prevented from tying the invisible hand.
Self interested actors do not want competition forcing them to do increasing public good for decreasing private benefit. They do not want consumers having real market choices. Unless markets are regulated, competitors will act to prevent competition so they can use the invisible hand of necessity as a fist.
The people who talk about free markets most HATE competition.
#9 Posted by Thimbles, CJR on Wed 18 Apr 2012 at 08:07 PM
@padikiller
Here's a free market deal: I'll put on my big boy pants when you stop performing fellatio on the incumbent phone companies.
First you say, "The simple FACT of the matter is that American broadband sucks BECAUSE it is regulated while Japanese, French and British broadband improved when their services were deregulated," but then you say, "Of course there is no place with total deregulation of broadband internet service. It wouldn't work for a million different practical reasons..." and "there are, of course, other factors in play with regard to the average broadband connection speed..."
So which is it?
"Your points are nothing more than evasive nonsense, especially your silly attempt to move the goalposts with your "what have the phone companies done for us lately" claim," you say.
And...
"Indeed, the POINT of the Scientific American article is that broadband innovations are happening elsewhere, and NOT here, BECAUSE of the stupid FCC regulation."
So first you claim the idea that phone companies are not innovating is "silly" and "moving the goalposts," but then you claim that all the innovation is happening elsewhere because of regulation. Again, which is it?
Nowhere have I disagreed with the gist of the Scientific American story which was that switching from telecommunications service to information service in 2002 was a bad idea. There were a lot of people during the CLEC/ILEC wars who saw it as the incumbent carriers wanting to both have their cake and to eat it. If the FCC had made the phone companies stick to the prior rules, including access allowance to central offices by competitive carriers and wholesale pricing, things may well have gone in a different direction. Sort of like they did in Japan, etc.
You've also ignored a previous comment that the incumbent phone companies have been supportive of being classified as Title II information services. And of course they would because it allowed them to go from a more regulated environment into one less regulated. They got what they wanted, and the result is what the Scientific American story is describing.
So here comes padikiller banging the same sad deregulation drum and saying that the Scientific American story is essentially correct in describing how deregulation screwed things up but-- and here's where reality drifts away-- the solution is deregulation or "BAD THINGS HAPPEN."
Still, I'll grant that I made an error in a previous comment describing the prior shift of "existing telcos from the category of information service to telecommunications service." It actually should be the other way around. The shift back, although being considered, hasn't happened yet.
#10 Posted by Perry Gaskill, CJR on Wed 18 Apr 2012 at 08:22 PM
@Perry
You are creating a false dichotomy.
Regulation of an industry is not a two-state function. There are degrees of regulation. It is not logically inconsistent to (i) acknowledge the truth that some regulation is necessary in cyberspace and to also (ii) acknowledge the truth that the countries that have minimized regulations have seen their broadband service improve.
As for Thimble's latest blithering...
Time to toll the Reality Bell again!
Thimbles wrote: "The reason why France has a more dynamic market in communications and health care provision than America is not because they deregulated the markets, it's because they regulate competition within the markets."
Yeah... But going from NO COMPETITION with a government controlled (and partly owned) monopolistic phone company to any type competition is an of DERUGULATION.
The actual, real, non-fictitious reason that France's internet service improved is because the French put an end to the French Gubmint's phone company's monopoly on home run loops (the copper lines that run to houses from exchanges). Now private FOR-PROFIT companies can offer broadband services on these lines and guess what? Voila! Better service, expanded coverage and cheaper prices!
There's a name for this kind of thing.
It's called DEREGULATON.
The free market profit motive at work!
Again, it really is easy to overestimate the opponents of free trade. It is difficult to believe that they can be as ignorant of economics as they are.
#11 Posted by padikiller, CJR on Thu 19 Apr 2012 at 01:24 PM
"DERUGULATION"
Oh joy, I just learned a new word.
In other news, free market conservatives preserving corporate rents? Say it ain't so!
"A few years ago, the city of Wilson, North Carolina, decided that it would create its own broadband system, which it called Greenlight. The service offered speeds twice as fast as private competitors in the area for a similar price. Soon, the success of the service spread, and a number of other cities began offering municipal broadband systems that were cheaper and/or faster than private competitors’.
But state legislators — who received $600,000 in contributions from the telecom industry in the previous election cycle — reacted to the spread of these successful services by undercutting them with a bill that made it very difficult for cities to operate their own broadband systems. One provision in the bill made it illegal for cities to offer broadband services that are priced below their costs...
ALEC did not publicly say that it was behind the North Carolina bill, but the bill bears similarities to ALEC legislation. ALEC is an outspoken opponent of municipal broadband and crafts model bills to limit and kill these systems. Telecom companies like AT&T, Comcast, and Time Warner are all ALEC funders.
ALEC also unsuccessfully worked to undercut a public broadband system proposed by the city of Lafayette, Lousiana. ALEC’s Louisiana state chair (a legislator) introduced a bill that would’ve placed onerous restrictions on how the city could use fiber-optic cables to provide cheap broadband. The broadband-undercutting bill “almost word for word, matched a piece of legislation kept in the library of the American Legislative Exchange Council.” The most damaging provisions of the bill were removed before it was passed, and major telecom companies sued to try to stop Lafeyette from building its system anyway. Fortunately, they lost.
Lafayette’s public system offers Internet speeds at a whopping 750 percent cheaper than rival Cox’s service at the lowest tier. That means that if ALEC and the telecoms had succeeded in shutting down the system, life would be a whole lot slower."
#12 Posted by Thimbles, CJR on Fri 20 Apr 2012 at 01:02 PM