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Regulatory Comments It has been said that sometimes the best way to know the weather, is to step outside. For the FCC, it is time to take that first step outside into the reality of competition in the mobile marketplace.
It has been said that sometimes the best way to know the weather, is to step outside. For the FCC, it is time to take that first step outside into the reality of competition in the mobile marketplace. The mobile market stands as one of the few bright spots in the economy, limited primarily by severe constraints on its chief asset: spectrum. Verizon has decided to undertake what any prudent business would do—obtain those inputs necessary for its continued growth.
Critics of the proposed transaction lament the concentration of more spectrum in the hands of one of the industry’s biggest players. But this implicit equation of concentration with harm to consumers is unsupported and misplaced. Concentration of resources in the hands of the largest wireless providers has not slowed the growth of the market; the problem is that growth in demand has dramatically outpaced capacity. Meanwhile, whatever the claimed merits may be of other, smaller companies holding this spectrum (as the deal’s opponents seem to want), that theoretical deal is not before the Agency, and the Commission is precluded from evaluating this deal in light of that hypothetical alternative.
While the FCC undeniably has authority to review the license transfers under the Federal Communications Act, its purview to review transactions is intentionally limited in substantive scope, and the Commercial Agreements that the deal’s opponents want to bootstrap into the FCC’s review are outside of it. Whether those agreements have anticompetitive effect is properly the province of the Department of Justice and their effect on competition is best measured under the antitrust laws, not by the FCC under its vague “public interest” standard. Indeed, if the FCC can assert jurisdiction over the Commercial Agreements as part of its public interest review, its authority over license transfers will become a license to regulate all aspects of business—duplicating merger review by the DOJ, but under a standard of review that lacks any clear limiting principles and analytical rigor. This is a recipe for certain mischief.
In the final analysis, the mobile wireless telecommunications services market is not concentrated to the extent that anticompetitive effects would result from this transaction. At the same time, the need for all competitors, including Verizon, to obtain sufficient spectrum to meet increasing demand is so large that the transfer this deal contemplates of unused spectrum from companies with no means to deploy it to a company that has demonstrated itself to be one of the most significant in the industry is plainly in the public interest and should be approved.
TOTM Economists recognize that the source of sustainable, private-sector jobs is investment. Due to measurement problems with investment data, however, it is sometimes easier to link . . .
Economists recognize that the source of sustainable, private-sector jobs is investment. Due to measurement problems with investment data, however, it is sometimes easier to link a byproduct of investment—namely, adoption of the technology made possible by the investment—to job creation. This is precisely what economists Rob Shapiro and Kevin Hassett have done in their new study on the employment effects of wireless investments.
Read the full piece here.
TOTM Regulated firms and their Washington lawyers study agency reports and public statements carefully to figure out the rules of the road; the clearer the rules, . . .
Regulated firms and their Washington lawyers study agency reports and public statements carefully to figure out the rules of the road; the clearer the rules, the easier it is for regulated firms to understand how the rules affect their businesses and to plan accordingly. So long as the regulator and the regulated firm are on the same page, resources will be put to the most valuable use allowed under the regulations.
TOTM Yesterday, AT&T announced it was halting its plan to acquire T-Mobile. Presumably AT&T did not think it could prevail in defending the merger in two places simultaneously—one . . .
Yesterday, AT&T announced it was halting its plan to acquire T-Mobile. Presumably AT&T did not think it could prevail in defending the merger in two places simultaneously—one before a federal district court judge (to defend against the DOJ’s case) and another before an administrative law judge (to defend against the FCC’s case). Staff at both agencies appeared intractable in their opposition. AT&T’s option of defending cases sequentially, first against the DOJ then against the FCC, was removed by the DOJ’s threat to withdraw its complaint unless AT&T re-submit its merger application to the FCC. The FCC rarely makes a major license-transfer decision without the green light from the DOJ on antitrust issues. Instead, the FCC typically piles on conditions to transfer value created by the merger to complaining parties after the DOJ has approved a merger. Prevailing first against the DOJ would have rendered the FCC’s opposition moot.
TOTM Geoff Manne’s blog on the FCC’s Staff Analysis and Findings (“Staff Report”) has inspired me to come up with a top ten list. The Staff Report relies . . .
Geoff Manne’s blog on the FCC’s Staff Analysis and Findings (“Staff Report”) has inspired me to come up with a top ten list. The Staff Report relies heavily on concentration indices to make inferences about a carrier’s pricing power, even though direct evidence of pricing power is available (and points in the opposite direction). In this post, I have chosen ten lines from the Staff Report that reveal the weakness of the economic analysis and suggest a potential regulatory agenda. It is clear that the staff want T-Mobile’s spectrum to land in the hands of a suitor other than AT&T—the government apparently can allocate scare resources better than the market—and that the report’s authors define the public interest as locking AT&T’s spectrum holdings in place.
TOTM Yesterday, the editorial page of the New York Times opined that wireless consumers needed “more protection” than that afforded by voluntary agreements by the carriers and existing . . .
Yesterday, the editorial page of the New York Times opined that wireless consumers needed “more protection” than that afforded by voluntary agreements by the carriers and existing regulation. The essay pointed to the “troublesome pricing practices that have flourished” in the industry, including Verizon’s alleged billing errors, as the basis for stepped up enforcement. As evidence of a lack of wireless competition, the editorial cites several indicia, none of which is persuasive.
TOTM Economists have long warned against price regulation in the context of network industries, but until now our tools have been limited to complex theoretical models. . . .
Economists have long warned against price regulation in the context of network industries, but until now our tools have been limited to complex theoretical models. Last week, the heavens sent down a natural experiment so powerful that the theoretical models are blushing: In response to a new regulation preventing banks from charging debit-card swipe fees to merchants, Bank of America announced that it would charge its customers $5 a month for debit card purchases. And Chase and Wells Fargo are testing $3 monthly debit-card fees in certain markets. In case you haven’t been following the action, the basic details are here. What in the world does this development have to do with an “open” Internet? A lot, actually.
Popular Media Milton Mueller responded to my post Wednesday on the DOJ’s decision to halt the AT&T/T-Mobile merger by asserting that there was no evidence the merger would lead to “anything . . .
Milton Mueller responded to my post Wednesday on the DOJ’s decision to halt the AT&T/T-Mobile merger by asserting that there was no evidence the merger would lead to “anything innovative and progressive” and claiming “[t]he spectrum argument fell apart months ago, as factual inquiries revealed that AT&T had more spectrum than Verizon and the mistakenly posted lawyer’s letter revealed that it would be much less expensive to expand its capacity than to acquire T-Mobile.” With respect to Milton, I think he’s been suckered by the “big is bad” crowd at Public Knowledge and Free Press. But he’s hardly alone and these claims — claims that may well have under-girded the DOJ’s decision to step in to some extent — merit thorough refutation.
Scholarship Abstract The Federal Communications Commission’s Network Neutrality Order regulates how broadband networks explain their services to customers, mandates that subscribers be permitted to deploy whatever . . .
The Federal Communications Commission’s Network Neutrality Order regulates how broadband networks explain their services to customers, mandates that subscribers be permitted to deploy whatever computers, mobile devices, or applications they like for use with the network access service they purchase, imposes a prohibition upon unreasonable discrimination in network management such that Internet Service Provider efforts to maintain service quality (e.g. mitigation congestion) or to price and package their services do not burden rival applications.
This paper offers legal and economic critique of the new Network Neutrality policy and particularly the no blocking and no discrimination rules. While we argue the FCC‘s rules are likely to be declared beyond the scope of the agency’s charter, we focus upon the economic impact of net neutrality regulations. It is beyond paradoxical that the FCC argues that it is imposing new regulations so as to preserve the Internet’s current economic structure; that structure has developed in an unregulated environment where firms are free to experiment with business models – and vertical integration – at will. We demonstrate that Network Neutrality goes far further than existing law, categorically prohibiting various forms of economic integration in a manner equivalent to antitrust’s per se rule, properly reserved for conduct that is so likely to cause competitive harm that the marginal benefit of a fact-intensive analysis cannot be justified. Economic analysis demonstrates that Network Neutrality cannot be justified upon consumer welfare grounds. Further, the Commission’s attempt to justify its new policy simply ignores compelling evidence that “open access” regulations have distorted broadband build-out in the United States, visibly reducing subscriber growth when imposed and visibly increasing subscriber growth when repealed. On the other, the FCC manages to cite just one study – not of the broadband market – to support its claims of widespread foreclosure threats. This empirical study, upon closer scrutiny than the Commission appears to have given it, actually shows no evidence of anti-competitive foreclosure. This fatal analytical flaw constitutes a smoking gun in the FCC’s economic analysis of net neutrality.
