Background…

In recent years, a set of politicians, academics, regulators, and activists have called for more stringent antitrust scrutiny of companies perceived to be threats to democracy simply by virtue of their size. Today, the brunt of these criticisms target so-called “big tech” companies (see here, here, and here).

But…

There is little evidence to support the contention that more concentrated markets lead to less democratic outcomes. Furthermore, the fears of private economic power expressed by advocates for more forceful antitrust tend to elide the genuine threat of state coercion. This is at odds with key principles of liberal democracy, such as the rule of law and freedom from arbitrary state interference.

Read the full explainer here.

Abstract

Policymakers, commentators, and academics have called for a Great Reset, a deepseated overhaul of the organization of the global economy. Some suggest that management theory needs a reset of its own. We argue that Great Reset proponents fail to appreciate the power of markets to bring about desirable social outcomes and are overly sanguine about what governments can do to alleviate alleged market failures. These views also drive the increasing enthusiasm for stakeholder governance, an increased government role in innovation, and the call for new metrics for assessing outcomes, all part of the Great Reset narrative. And yet, concentrating more decision power in the hands of governments, implementing diffuse metrics, and diluting effective ownership can hamper the functioning of markets, encourage crony capitalism, and reduce the resources that are available for dealing with grand challenges. Existing management theory provides powerful tools for understanding the benefits and costs of alternative institutional arrangements; abandoning these tools will push management theory to the sideline in policy debates.

A recent viral video captures a prevailing sentiment in certain corners of social media, and among some competition scholars, about how mergers supposedly work in the real world: firms start competing on price, one firm loses out, that firm agrees to sell itself to the other firm and, finally, prices are jacked up. (Warning: Keep the video muted. The voice-over is painful.)

Read the full piece here.

Abstract

In the United States, once people have been convicted of a crime—or, in many cases, even arrested for a crime—those people are marked for life in a way that allows states to deny them the right to earn a living in the profession of their choosing. In this short brief, we discuss the US incarceration rate, the collateral consequences to economic freedom as a result of conviction and arrest, and potential avenues for reform.

Abstract

Academic investigators have used behavioural economics, a method developed originally to study consumers and their sentiments towards products, to study matters of public policy. A recent article in the European Journal of International Law – ‘What Is Wrong with Investment Arbitration? Evidence from a Set of Behavioural Experiments’ – gives a detailed summary of a series of experiments performed in order to study public sentiment towards investment arbitration. The investigators, Maria Laura Marceddu and Pietro Ortolani observe that public sentiment improves towards the outcome of a dispute settlement procedure when survey respondents are told that the procedure was a ‘court’ with tenured judges, and it worsens when they are told that it was ‘arbitration’ with temporary appointees. From their observations, Marceddu and Ortolani conclude that an international investment court, such as that which the European Union promotes, is a good idea. We suggest, however, that a further inquiry should investigate in greater detail public understanding of what qualities the individuals who serve as judges or arbitrators ought to display, as distinct from the institutional format in which dispute settlement takes place.

Abstract

We study trade-offs faced by multiple-system operators (MSOs), the gatekeepers in the provision of internet service, when setting prices and quality for internet access and TV service. In response to improvements in over-the-top video (OTT), MSOs choose between accommodating OTT to share in the surplus it provides consumers, or steering consumers towards TV. We augment the standard mixed bundling model to show that in some cases MSOs have incentives to steer consumers towards TV, but that these incentives vary with the available pricing tools. We then estimate the distribution of model parameters using household panel data on subscription choices and internet usage. Our estimates imply that if MSOs can set different prices for different internet content, under many cost circumstances MSOs discount the OTT usage price. Furthermore, we find that the ability to charge prices based on internet usage strengthens the MSOs’ incentive to improve OTT quality.

Introduction

We thank the Federal Communications Commission (FCC) for the opportunity to offer these reply comments on the Further Notice of Proposed Rulemaking (FNPRM) in the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment.

Ensuring that broadband connectivity is deployed effectively and efficiently to all Americans is among the FCC’s most important priorities. As Chair Rosenworcel has observed:

We are about to invest billions in high-speed infrastructure nationwide. It’s essential that we have policies in place that make sure these dollars are used in a cost-effective way and that pole attachment policies facilitate, rather than impede, broadband buildout.[1]

The Infrastructure Investment and Jobs Act (IIJA) allocated $65 billion to help the Commission and the National Telecommunications and Information Administration (NTIA) facilitate further deployment and adoption.[2] Private investment in broadband networks also continues to grow, with $2 trillion spent since 1996, including $86 billion in 2021 alone.[3]

This attention and funding could be wasted, however, due to roadblocks that stand in the way of deployment and threaten to reduce the efficacy of federal investment. Inflation remains at very high levels, which diminishes the practical reach of IIJA funds. Moreover, NTIA has signaled its interest in promoting policy goals that may divert some funding away from targeting the needs of the unserved.[4] Given this backdrop, it is crucial that the Commission exercise its authority to remove barriers to deployment.

In this proceeding, we believe that means seeking reform and clarification of inefficient pole-attachment rules that lead to cost overruns and deployment delays.[5] The docket includes numerous comments that document various ways utility-pole owners sometimes shift costs onto attachers.[6] What’s more, several different types of pole owners are subject to FCC jurisdiction in this area, multiplying the problems across many different bargaining parties, including providers such as incumbent local exchange carriers, privately owned public-utility providers, and investor-owned poles.[7]

The aim of pole-attachment rules should be to equitably assess costs in a way that ensures the attachment process does not inefficiently serve to extract rents.  As the Commission notes, the Wireline Bureau focused on these potential inefficiencies when it “clarif[ied] that it is unreasonable and inconsistent with Section 224 of the Communications Act, the Commission’s rules, and past Commission precedent, for utilities to impose the entire cost of a pole replacement on a requesting attacher when the attacher is not the sole cause of a pole replacement.”[8] In short, a rule that unilaterally imposes replacement costs on a given attacher—while potentially expedient from an administrative perspective—is unlikely to provide an economically optimal outcome. At the same time, depending on the condition of the pole, shifting all or most costs onto the pole owner may also be inadvisable.

With that in mind, a strict “sole cause” standard for determining the resolution of pole replacements is likely inefficient. As we discuss below, such standards can lead to hold-up and hold-out problems that negatively affect broadband deployment. We believe the current formula can be refined to ensure that deployment funds aren’t unjustifiably captured as rents. As others in the docket have maintained,[9] the formula should be adjusted to ensure that the allocation of pole-replacement costs more closely reflects the incremental costs and benefits to each of the parties.

In particular, the allocation should account for the depreciated value of the pole being replaced, as well as the incremental costs and benefits of larger and newer poles to pole owners, incumbent attachers, and anticipated future attachers, as well as the incremental costs to pole owners of early replacement. The remainder of this comment summarizes these considerations and offers some broad recommendations.

Before discussing our view of how to amend the pole-replacement-cost formula, we would like to express again our support for the idea commonly voiced in the docket that pole-replacement disputes should be placed on the Accelerated Docket. As many commenters note in the record, delays in resolving pole disputes can seriously delay or entirely jeopardize some deployment projects.[10]Fundamentally, the focus of this proceeding—as well as most of the federal funding that has been devoted toward expanding broadband—regards how best to connect locations that are far out on the cost curve. Delays are very costly and reduce the number of households served. Encouraging disputes to be settled in a timely fashion can only help to close the digital divide.

Download the full comments here.

[1] Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment (“FNMRPM”), FCC 22-20 (Mar. 16, 2022) https://docs.fcc.gov/public/attachments/FCC-22-20A2.docx.

[2] Drew Clark, Commerce Department’s NTIA Releases Details for Funds Distributed Under IIJA, BroadbandBreakfast (May 13, 2022) https://broadbandbreakfast.com/2022/05/commerce-departments-ntia-releases-details-for-funds-distributed-under-iija.

[3] 2021 Broadband Capex Report, USTelecom (Jul. 18, 2011) https://ustelecom.org/research/2021-broadband-capex-report.

[4] Kristian Stout, To Close the Digital Divide, Broadband Infrastructure Funds Must Be Spent Efficiently, Truth on the Market, (May 27, 2022) https://truthonthemarket.com/2022/05/27/to-close-the-digital-divide-broadband-infrastructure-funds-must-be-spent-efficiently.

[5] NCTA notes in its petition that, in hard-to-connect rural areas, as much as 25% of a project’s cost could be attributable to pole-attachment disputes. Petition of NCTA for Expedited Declaratory Ruling, In the Matter of Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84 (Jul. 16, 2020), at 5-9, available at https://www.ncta.com/sites/default/files/2020-07/071620_17-84_NCTA_Petition_for_Declaratory_Ruling.pdf. Pole owners dispute this number. For example, AT&T says that only 0.35% of requests it received resulted in the need for replacement. Robert Vitanza, David Chozempa, & David Lawson, Comments of AT&T (Corrected), AT&T (“AT&T Comments”) at 7-8 (Jun. 29, 2022) https://www.fcc.gov/ecfs/search/search-filings/filing/ NCTA, on the other hand, says about 8% of requests might need pole replacement. Ultimately, this is an empirical question the Commission needs to resolve. That said, the IIJA and BEAD programs are overwhelmingly focused on those households that are underserved and who are, by definition, more expensive to connect. Thus, it can be possible both for AT&T to be correct generally that pole-attachment disputes are rare, as well as for NCTA to be correct specifically about the extent of the problem in rural areas when pole replacements are needed.

[6] See, e.g., Thomas Cohen, Re: Ex Parte Filing of the American Cable Association on Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket No. 17-84, Kelley Drye & Warren LLP (Mar. 26, 2018) https://www.fcc.gov/ecfs/file/download/ACA%20Poles%20Ex%20Parte%203-26-18%20(FINAL).pdf?folder=1032633296362 (“…utilities often fail to provide any explanation for the significant increases in project costs on the final bill and do not provide the information necessary to challenge the reasonableness of the make-ready charges. Mr. Shawn Beqaj (Armstrong) provided examples where a utility charged a new attacher for the correction of preexisting safety violations caused by others or for overdue improvements designed to bring poles into compliance with utility regulations”); Kris Anne Monteith, Declaratory Ruling By the Chief, Wireline Competition Bureau, Federal Communications Commission, (Jan. 19, 2021) https://www.fcc.gov/ecfs/search/search-filings/filing/106282945908521 (“A California fiber ISP whose mission is to bring fiber broadband networks to rural and remote areas experienced serious time delays and a large increase in project expenses when an investor-owned utility revealed that hundreds of its poles in some very rural and remote areas did not have test and treat survey inspections in a decade or more. This caused substantial delays in bringing broadband service to unserved communities during the COVID-19 pandemic. Further, this high pole failure meant that the project expense forecasts were too low, and so the return on investment went from 7-9 years upward to a level that made the project almost uneconomical.”); Matthew M. Polka, Thomas Cohen, & Ross J. Lieberman, Comments of the American Cable Association on the Notices of Proposed Rulemaking, American Cable Association (Jun. 15, 2017) https://www.fcc.gov/ecfs/file/download/ACA%20Infrastructure%20NPRM%20Comments%20(FINAL).pdf?folder=1061666240361 (“…an investor-owned utility in Minnesota charged Mediacom to fix violations on poles to which Mediacom had been attached for 20 years caused by the utility moving its equipment during pre-make-ready inspections for a new attacher.”); Rick Chessen, Neal M. Goldberg, Steven F. Morris, & Maria Browne, Petition for Expedited Declaratory Ruling, NCTA – The Internet & Television Association (Jul. 16, 2020) https://www.ncta.com/sites/default/files/2020-07/071620_17-84_NCTA_Petition_for_Declaratory_Ruling.pdf (“ComEd refused to permit Crown Castle to attach to poles that had been ‘red tagged’ by ComEd until Crown Castle first pays to replace or reinforce those red tagged poles, even though the conditions that caused the red tag status existed prior to and are unrelated to Crown Castle’s proposed attachment.”); Christopher L. Shipley & Andrew Mincheff, Comments of INCOMPAS, INCOMPAS (Jun. 27, 2022) https://www.fcc.gov/ecfs/search/search-filings/filing/10629168805842(“INCOMPAS’ member IdeaTek, which operates in rural Kansas…has been allocated 100 percent of the replacement costs on applications that require make-ready and pole replacement, with no consideration given to the enrichment and benefit this confers to the utility or the current value or condition of the pole.”)

[7] See Public Notice: States that Have Certified that They Regulate Pole Attachments, Federal Communications Commission (Mar. 19, 2020) https://docs.fcc.gov/public/attachments/DA-20-302A1_Rcd.pdf. Note that this only applies across the 23 states that have not certified that they regulate pole attachments. Id.

[8] FNMPRM ¶ 2

[9] See, e.g., Re: WC Docket No. 17-84 – Accelerating Wireline and Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, Connect the Future Coalition (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/e595c759-afb8-4e7d-a10f-35373238e59f?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; Elizabeth Andrion & Maureen O’Connell, Comments of Charter Communications Inc., Charter Communications (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/355be4d0-4729-48d4-807a-640c5645c3e9?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; James E. Dunstan, Comments of TechFreedom, TechFreedom (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/4a3c5f41-de6e-4da5-a973-fd18d2ef9f39?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b.

[10] See, e.g., Ross J. Lieberman, Brian Hurley, Thomas Cohen, & Edward A. Yorkgitis Jr., Comments of ACA Connects on Second Further Notice of Proposed Rulemaking, ACA Connects (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/085b9a94-c9a3-41a0-975e-dbdd4bc7969f?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; Randolph J. May, Seth L. Cooper, & Andrew K. Magloughlin, Comments of the Free State Foundation, Free State Foundation (Jun. 27, 2022) https://freestatefoundation.org/wp-content/uploads/2022/06/FSF-Comments-%E2%80%93-Accelerating-Wireline-Broadband-Deployment-by-Removing-Barriers-to-Infrastructure-Investment-062722.pdf; Steven Morris, Victoria Goldberg, Maria Browne, & David M. Gossett, Comments of NCTA – The Internet & Television Association, NCTA (Jun. 27, 2022) https://files.fcc.gov/ecfs/download/9391ec57-88c4-43c1-8f5c-b8af2b23a626?orig=true&pk=cb77b2ec-1a58-dbc6-139b-ad192cfd5d9b; Matthew M. Polka, Ross J. Lieberman, Thomas Cohen, Edward A. Yorkgitis Jr., & J. Bradford Currier, Comments of the American Cable Association on the Notices of Proposed Rulemaking, American Cable Association (Jun. 15, 2017) https://www.fcc.gov/ecfs/file/download/ACA%20Infrastructure%20NPRM%20Comments%20(FINAL).pdf?folder=1061666240361 (“MetroNet…has been waiting more than a year for approval of applications for 160 pole attachments because the one employee responsible for reviewing applications was out on extended medical leave.”)

Abstract

The growing economic importance of technical standards has heightened the need for a better understanding of why they succeed or fail. While existing literature has scrutinized the role of public governance, particularly in the realms of regulation, antitrust, and intellectual property, to date legal scholars have largely overlooked the role of private organizational and contractual lawyering in determining the path of technical standardization.

In this Article, we explore this dimension through a case study of the effects of private organizational governance and contracting practices on the fortunes of a nascent Internet security standard. The standard, known as Resource Public Key Infrastructure (“RPKI”), is designed to increase the trustworthiness of information about Internet routing. Through analysis of private organizational and contractual documents, semi-structured interviews with participants in the Internet operations industry, and attendance and participation in key industry conferences, we gained an embedded perspective on the role that private lawyering played in shaping would-be adopters’ perceptions and decisions regarding the technical standard.

According to our interviewees, contract and organizational bureaucracy mattered greatly. Notably, we found that the terms of contractual agreements prevented some potential adopters from experimenting with the technology and deterred others from proposing that their organizations adopt the technology. This was due to the perceived costs of involving organizational lawyers in technology-adoption decisions. In addition, contract terms deterred actors from increasing the functional value of the standard via complementary innovation and the development of complementary information services. Remarkably, even the basic mechanisms for presenting and assenting to contract terms chilled prospects for adoption. Regarding organization, we found that stark differences of governance and mission between key North American and European nonprofits contributed to different patterns of adoption. Taken together, these findings reveal the continuing importance of old-school transaction-cost engineering even in the most technical realms of Internet operation and standardization.

Abstract

Why do some legal disputes fail to settle?  From a bird’s eye view, the literature offers two categories of reasons.  One consists of arguments based on informational disparities.  The other consists of psychological arguments.  This paper explores the psychological theory.  It presents a model of litigation driven by risk preferences and examines the model’s implications for trials and settlements.  The model suggests a foundation in Prospect Theory for the Mutual Optimism model of litigation.  The model’s implications for plaintiff win rates, settlement patterns, and informational asymmetry with respect to the degree of risk aversion are examined.