Category Archives: Duopoly

T-Mobile Lobbying: $700K in Q1 2008

michelle-persaud.jpg T-Mobile hasn’t made the news like AT&T, Comcast, and Cox for violating net neutrality, but has nonetheless been busy lobbying behind the scenes:
WASHINGTON – Telecommunications carrier T-Mobile USA Inc. spent nearly $700,000 in the first quarter to lobby on spectrum matters and other issues, according to a disclosure report.

T-Mobile, which is owned by German telecommunications company Deutsche Telekom AG (nyse: DT – news – people ), also lobbied the federal government on legislation involving wireless taxes, privacy and various consumer protection issues.

The company, the nation’s fourth largest cellular carrier, also lobbied lawmakers on the issue of “Net neutrality,” or the principle that all Web traffic be treated equally. Some Internet providers want to charge content providers extra to get their Web sites to load faster. Lawmakers have proposed legislation to make Net neutrality the law of the land.

— T-Mobile spent $700,000 lobbying in first quarter, Associated Press, 05.30.08, 5:26 PM ET

The T-Mobile lobbyist pictured is Michelle Persaud, former Democratic staff council for the House Judiciary Committee.

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Payola for the Duopoly

up-need_to_know.jpg ISP meddling with net neutrality could unite indy musicians and record labels against the duopoly:
For the music business, the failure of net neutrality presents several big problems. Musicians are at the vanguard of digital distribution of music files, video files, and other space-gobbling content. Traffic throttling will almost certainly result in placing severe limitations on the amount and kind of content musicians can put out there — and it’s pretty likely that musicians will then be forced into partnering with businesses that have fewer limits and greater access, no doubt for a fee, to get their gear online. Another issue is that, as covered recently in this column, we are seeing a whole new universe of music-related business models, and we need to see some predictability in terms of licensing methods and how artists and copyright owners get paid. One of the most compelling proposals is that P2P music sharing should be rendered commercially viable and copyright-legal by the imposition of a blanket license that would be paid at the gate (i,e., through the ISPs). Institutionalized throttling would take this plan out at the knees.

Another problem is that record labels, distributors and retail chains who are already in desperate jeopardy can’t compete with ISPs and cellular providers who, having launched their own music stores, have all the incentive in the world to steer music consumers to their own services rather than open the pipe for folks to shop elsewhere.

— Net Neutrality, By Allison Outhit, Need to Know, June 2008

This observation comes from Canada, where current attempts by some to pass legislation similar to the U.S. Digital Millenium Copyright Act (DMCA) has suddenly gotten noticed as a path to something music lovers have seen before:
McKie is referring to proposed changes modelled on the American Digital Millennium Copyright Act (DMCA), which call for a much heavier-handed approach to interpreting what kind of content uses are protected by copyright. At the same time a Canadian DMCA would accord “safe harbour” status to service providers to shelter them from a potential onslaught of copyright litigation provided they act quickly to block infringing and illegal actions on their networks. A Canadian DMCA could impact net neutrality by putting police power in the hands of the networks, while providing ISPs with strong incentives to prefer privately-negotiated content distribution deals over the chaos of user-generated traffic. The bottom line is that musicians have come to rely on the net as their number one go-to distribution and marketing tool. The net got that way by being neutral to all comers. Whether you were a platinum seller on Universal, or a couple of unknown basement-dwellers, your video had an equal chance of going viral. Without net neutrality, all the good pipe will get eaten up by whoever has the power to make the deal. Which sounds a lot like the payola days all over again.
Yep, that’s what we’ll get if we don’t have net neutrality: payola for the duopoly.

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Porter’s Five Forces and Net Neutrality: What If Distribution Channels are Open?

brief.jpg Here’s a take on why telcos so adamantly oppose net neutrality:
The eager and almost rabid application of Porter’s “Five Forces” (Supplier Power, Customer Power, Threat of New Entrants, Threat of Substitute Products, Industry Rivalry) to technology products and services has bred an entire generation of MBAs in marketing positions dedicated to developing and maintaining closed systems and closed hardware platforms. This is particularly egregious in the case of business models that are effectively based on distribution channels. In conventional analysis there is nothing wrong with making your living on distribution channels. Remember, that in 1979, when Porter developed the Five Forces framework, distribution channels were highly expensive to create and maintain and, owing to these costs, constructing them effectively presented a significant barrier to entry. Your product didn’t even have to be particularly good, because the threat of substitutes was reduced via the difficulty and expense of the competition actually getting those substitutes (however good they might be) to your customers. Suppliers, if they wanted access to your customer base as a proxy to sell their raw materials, had to go through you. New entrants had to build an entirely new distribution channel. Customers were stuck. You owned the market. But you had to guard this distribution channel carefully. And you had to make sure you hadn’t forgotten something simple and critical. That’s not part of a conventional Porter analysis. But why would it be? Conventional distribution channels are quite physical, antique and boring.

— The Five Forces/Circles of Hell, a Private Equity Professional, Going Private, 27 April 2008

The article goes on to detail how Blockbuster used the old Porter model of closed distribution channels and Netflix used an existing open distribution channel: the U.S. Postal Service.

To spell out the telco connection:

Continue reading →

Positive Externalities: What Yoo Ignores

frischmann.jpg It turns out Prof. Chris Yoo has been rebutted by legal scholars before:
Our article directly replies to a series of articles published by Professor Christopher Yoo on this topic. Yoo’s scholarship has been very influential in shaping one side of the debate. Yoo has mounted a sophisticated economic attack on network neutrality, drawing from economic theories pertaining to congestion, club goods, public goods, vertical integration, industrial organization, and other economic subdisciplines. Yet he draws selectively.

For example, his discussion of congestion and club goods is partial in that he ignores the set of congestible club goods that are most comparable to the Internet – public infrastructure. Yoo focuses on the negative externalities generated by users (i.e., congestion) but barely considers the positive externalities generated by users (he simply assumes that they are best internalized by network owners). Yoo appeals to vertical integration theory to support his trumpeting of ‘network diversity’ as the clarion call for the Internet, but he myopically focuses on the teaching of the Chicago School of economics and fails to consider adequately the extensive post-Chicago School literature. And so on.

In our article, we explain the critical flaws in Yoo’s arguments and present a series of important arguments that he and most other opponents of network neutrality regulation ignore.

— Network Neutrality and the Economics of an Information Superhighway: A Reply to Professor Yoo, BRETT M. FRISCHMANN, Loyola University of Chicago – Law School; Fordham University – School of Law, BARBARA VAN SCHEWICK, Stanford Law School, Jurimetrics, Vol. 47, 2007, Stanford Public Law Working Paper No. 1014691, Stanford Law and Economics Olin Working Paper No. 351

Hm, “positive externalities generated by users” as in participation and ad hoc content creation.

The authors also address David P. Reed’s point that competition is not the holy grail of networking:

By focusing only on the market for last-mile broadband networks, Yoo not only neglects the importance of unfettered application-level innovation for realizing economic growth and the role of a nondiscriminatory access regime in fostering the production of a wide range of public and nonmarket goods. His argument also neglects other ways to solve the problem of broadband deployment that would not impede competition and innovation in complementary markets.

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Freedom v. Market Mythology

art_brodsky.jpg Here’s a question that answers itself:
…what is it about individual freedom that “conservatives” like the Spectator and Armey don’t like?

To be fair, the debate is larger than the Spectator and Armey. Most congressional Republicans oppose the idea of giving consumers freedom on the Internet. They take shelter in their anti-government, anti-regulation rhetoric, preferring to allow Internet freedom to apply to the corporations which own the networks connecting the Internet to consumers, rather than to consumers themselves. There could, of course, be a larger discussion about the meaning of “conservative” and Republican, and whether the two are synonymous.

(To be fairer still, it’s not only Republicans. Many a Democrat also speaks out against Internet freedom. They don’t have the fig-leaf of misbegotten ideology to hide behind, as they largely back worthwhile government action in many other areas. They are simply servants of corporate and/or union interests. The question applies equally: What about freedom don’t they like?)

— Why The ‘Right’ Gets Net Neutrality Wrong, Art Brodsky, HuffingtonPost, Posted May 5, 2008 | 10:21 AM (EST)

The clue is “servants of corporate … interests”. (Unions occasionally get into this act; corporations much more frequently.) And it’s not simple greed for corporate lobbyist money or kickbacks or the revolving door: many politicians and people really believe the “free market” will solve all problems. That’s the origin of the doctrine of “market failure” that has pervaded all U.S. federal departments and agencies. Nevermind that when it’s a major airline or automobile manufacturer or, even worse, a financial institution such as Citibank, these same people support all sorts of governmental market manipulations and bailouts. We’re talking mythology here, kind of like the “rational actor” myth of economics.

Brodsky digs into the misconceptions behind this myth:

[Peter] Suderman’s analysis: “In fact, not only were all of these companies [eBay and Google] born in an era with no mandated net neutrality, it’s utterly unclear that a lack of neutrality would’ve impeded them in any way whatsoever.”
That is not how it happened. This is how it happened: Continue reading →

Blocking Civil Suits: Telecoms Lobbied White House Hard for Immunity

burgess07-1a.jpg Well, it seems the telcos are a bit worried about those lawsuits:
The Bush administration is refusing to disclose internal e-mails, letters and notes showing contacts with major telecommunications companies over how to persuade Congress to back a controversial surveillance bill, according to recently disclosed court documents.

The existence of these documents surfaced only in recent days as a result of a Freedom of Information Act lawsuit filed by a privacy group called the Electronic Frontier Foundation. The foundation (alerted to the issue in part by a NEWSWEEK story last fall) is seeking information about communications among administration officials, Congress and a battery of politically well-connected lawyers and lobbyists hired by such big telecom carriers as AT&T and Verizon. Court papers recently filed by government lawyers in the case confirm for the first time that since last fall unnamed representatives of the telecoms phoned and e-mailed administration officials to talk about ways to block more than 40 civil suits accusing the companies of privacy violations because of their participation in a secret post-9/11 surveillance program ordered by the White House.

At the time, the White House was proposing a surveillance bill—strongly backed by the telecoms—that included a sweeping provision that would grant them retroactive immunity from any lawsuits accusing the companies of wrongdoing related to the surveillance program.

— Just Between Us, Telecoms and the Bush administration talked about how to keep their surveillance program under wraps. by Michael Isikoff and Mark Hosenball, TERROR WATCH, Newsweek, Apr 30, 2008 | Updated: 6:09 p.m. ET Apr 30, 2008

It’s sad to see professional military men like Lt. General Ronald L. Burgess, Jr., Office of the Director of National Intelligence, shilling for an administration that is so blatantly protecting itself and big corporations against justice for its own wrongdoing. White House stonewalling over first the existence of these documents, and now, since a judge ordered them to reveal that, release of the documents, isn’t about any “war on terror”. It’s about protecting lawbreakers and control of the people: Continue reading →

Hamlet in DC: To Legislate or Not to Legislate, That is the Question

EdwinBoothasHamlet.jpg The U.S. Senate takes up net neutrality again, to legislate or not to legislate:
At a Senate Commerce Committee hearing entitled “The Future of the Internet” on Tuesday, Democratic politicians argued for passage of a law designed to prohibit broadband operators from creating a “fast lane” for certain Internet content and applications. Their stance drew familiar criticism from the cable industry, their Republican counterparts, and FCC Chairman Kevin Martin, who said there’s no demonstrated need for new rules, at this point.

— Net neutrality battle returns to the U.S. Senate, by Anne Broache, C|Net News.com, 22 April 2008

Some of the senators seemed to think the Comcast debacle indicated there was need for legislation:
“To whatever degree people were alleging that this was a solution in search of a problem, it has found its problem,” said Sen. John Kerry (D-Mass.). “We have an obligation to try and guarantee that the same freedom and the same creativity that was able to bring us to where we are today continues, going forward.”

Kerry is one of the backers of a bill called the Internet Freedom Preservation Act, chiefly sponsored by North Dakota Democrat Byron Dorgan and Maine Republican Olympia Snowe, which resurfaced at the beginning of 2007 but has gotten little attention since. A similar measure failed in a divided Commerce Committee and in the House of Representatives nearly two years ago.

Unsurprisingly, Martin says he doesn’t need a law to enforce, because he can make it up as he goes along: Continue reading →

Revisionism by PRI

pri.jpg This is amusing:
The attempt to force network neutrality on wireless carriers will result in disaster and is based on faulty assumptions, including one that there ever was neutrality on the Internet, according to a newly released analysis from the Pacific Research Institute (PRI).

— Researcher Rebukes Wireless ‘Net Neutrality’ Advocates, NewsBreak, Telecomweb – USA, 26 March 2008

Well, I guess that waves away all the well-documented steps the FCC took to strip away common carrier status from each facet of Internet provision

You have to register to read the rest at Telecomweb, but PRI has more, including this rather amusing claim: Continue reading →

WSJ Fears Innovation: Net Neutrality As Internet Wrecking Ball

andy_kessler_color_headshot_small.jpg Apparently this WSJ opinion writer couldn’t actually argue with Ed Markey’s net neutrality bill, so he made up a straw man:
Imagine a town that has all sorts of gasoline pipelines running by it but only one gas pump. Rationing is inevitable. So are price controls.

Everyone gets equal amounts, except of course first responders like police and ambulances, which should get all the gas they want. And, well, so should the mayor. And if you can make a good business case that you work 60 miles away, you can file paperwork and perhaps pull some strings for more gas. How about those kids hot-rodding around town who can’t drive 55? They get last dibs, and maybe we can sneak in some gas thinner to slow down their engines and not waste gas.

— Internet Wrecking Ball, By Andy Kessler, Wall Street Journal, February 25, 2008; Page A15

What’s especially amusing about this strawman is that it’s what the duopoly is planning as they do away with net neutrality, except it’s not first responders or governments that will get favored bandwidth: it’s Hollywood. Meanwhile, Markey’s bill doesn’t say any of that. It doesn’t include any regulation at all.

Kessler invokes Orwell:

This is the essence of the Ed Markey’s (D., Mass.) Orwellian-named Internet Freedom Preservation Act of 2008, which would foist network neutrality on the wild and woolly Internet.
Kessler maybe wasn’t around in the earlier days of the Internet, or he would know that net neutrality is what we used to have, until it got chipped away starting in about the year 2000, as the FCC failed to enforce the Unbundled Network Elements (UNE) of the Telecommunications Act of 1996, and reclassified cable modem access as an information service in August 2002, wireline broadband in August 2005, and wireless broadband in March 2007. The FCC stripped common carriage status from Internet provision, something never done before in the U.S. So what Markey’s bill is actually trying to do is to preserve the freedom the Internet used to have before the present administration and the duopoly systematically tried to do away with it. That’s the opposite of Orwellian: that’s the plain truth.

If Kessler did know Internet history, or had been around when we were making it, he would know not to write things like this: Continue reading →

Internet Freedom Policy Act

markey-photo.jpg Rep. Ed Markey (D-MA) and Rep. Chip Pickering (R-MS) have introduced the Internet Freedom Preservation Act of 2008, which will amend Title I of the Communications Act of 1934 to say Internet freedom, commerce, innovation, participation, and speech are the policy of the United States. It’s interesting what this bill does not say. It doesn’t specify any regulations, so that those who oppose net neutrality don’t have a leg to stand on when they say net neutrality is all about regulation. It doesn’t say “net neutrality”: it says “freedom”, “marketplace”, “innovation”, and other positive benefits. (I think I’ll take a cue from Commissioner Copps and start referring to Internet freedom.) It doesn’t say “consumers” except a few times, including once where that word is immediately qualified by
(i) access, use, send, receive, or offer lawful content, applications, or services over broadband networks, including the Internet;
Let’s see, if “consumers” can send their own content, applications, and service, they’re not really consumers in the traditional sense, now are they?

This is all very nice, in that Markey and Pickering apparently get it about what Internet freedom is about. However, why does this bill have no teeth, unlike Markey’s bill of last year or the Snowe-Durgan bill before that? Continue reading →