DISQUS

Tom:

Damn, you beat me to it! Great analysis. I don't think WiMax and LTE are dead, however. They make good supplements in a package with other communications tools. They also will work better in certain environments. What it will do is drive away the value that derives solely from spectrum access. Right now, licensees get a certain boost from being the only ones who can do mobile wireless. Once white spaces technology is deployed, the availability of a best efforts access provider will force licensees to work for a living.

My observation is that the right is far more obsessed with the supposed conspiracy of the left to reinstate the Fairness Doctrine than any actual conspiracy to reinstate the fairness doctrine could ever be.

You do know the Supremes have nothing to do with this, yes?

I've been wanting to post on this for awhile. I actually don't think it's a NN problem, although I do think it raises some privacy concerns.

As I've said repeatedly, I'm not sure abot a great many things on network neutrality. No one possibly can be. The market is too new, and the relevant data either not yet available or difficult to collect.

The question, as I argued at the FTC last February, is what do we do in an uncertain world? Given the known variables, including the natural incentive for profit maximizing firms to maximize profit at the expense of users (if not disciplined by the market), I come down on the need for prophylactic regulation.

Reasonable minds can differ, in the face of the unknown, on the proper course. But the notion that doing nothing is the preference in the absence of certainty is, to me, a bias unsupported by historical evidence. Failure to take action can be as determinative and as much of a disaster as taking action when patience is required.

If I am right, then waiting for disaster to become clear means it will be too late to salvage or communications platform which is critical to our economy and our ability to govern ourselves in a democratic society. Of course, the counter argument is that, if I am wrong, then regulation may throttle the development of the internet and bring the disaster I fear. Ain't public policy a lark! But it should, I would hope, instill in all of us a bit of humility and a willingeness to debate the issue.

HDTV is causing issues, particularly for DBS. DBS is in a bad place for the increased bandwidth because it is very difficult for them to increase bandwidth with new technologies. Even when they get relief from the FCC and ITU in the form of putting more birds in the sky, that is hugely expensive and subject to all kinds of problems (such as fnding launch availability). And DBS suffers from the "carry one, carry all" requirement for must carry in local TV markets.

Cable and Telco face fewer problems. Cable has digital pairing technologies that allow them to recapture capacity on digital systems, which is one reason they are migrating to all digital. It is cheaper than building out fiber. Verizon already has fiber, and I am given to understand that they reserve enough capacity for their video product that they have no issues on this score. AT&T; is harder to call, since U-Verse is apparently having general issues unrelated to HDTV.

Adam, as always a pleasure. But you should teach your friend Ricky better manners. Or at least ask that he back up the arrogance with some substance. As noted above, the guy can't tell the difference between take rate and churn. I mean, come on! Not to mention that the current flap hardly had an impact on customer behavior this early.

Granted I'm rooting for Verizon, because only if the market rewards Verizon will we ever see fiber to the home deployed. But it won't happen if customers can't adequate judge the package.

a) It's Harold. Possibly Hal. Not Harry. My assumption from your use of Richard is you prefer Richard.

b) Ah yes, the use of national statistics while completely ignoring the realities on the ground. Another ideological devotee of the Gods of the Marketplace without regard to the realities on the ground. Meanwhile I suggest you go read the GAO reports on MVPD competition for the last several years -- pay particular attention to the 2002 and 2003 Reports.

Oh, and why not go read the last dozen or so quarterly profit statements on DirecTV and DISH, particularly their churn rates and the delightful time they were forced to restate subscriber rates in 2002?

Rich ol' boy ol' son, there's a REASON that AT&T; is looking to buy DISH and vice versa. It's the same reason that Murdoch wants to sell DIRECTV -- which he affectionately refers to as the "turd bird." Hint-- It's not because they are winning the cable fight. As someone who has actually plowed through the minutia of the numbers on MVPD competition for the last few years, I can assure you that DBS (and I'm a very happy DIRECTV customer) is nice, but it ain't a patch on cable.

Because, Oh Economic Wise One, how do you explain that while Comcast and the other incumbent cable cos were supposedly facing all that fearsome DBs competition, they were able to both increase the price they charged their subscribers AND increase profit per subscriber? When I studied Econ low these many years ago, I learned that in a competitive market, a provider is limited in its ability to raise price. The market of true market power, therefore, is the ability to raise price regardless of actual cost, because there is no need to pass the savings onto the customer.

Mind you, I am hopeful that the telcos will give the cablecos a run for the money. If I invested in the industry (I don't for conflict reasons) I would have bought Verizon stock in late '05 early '06. Fiber to the home is the winning choice (despite your apparent comfort with letting Comcast win by lying to its customers -- Richy baby! Don't you believe in an efficient market? Shame on you!) But the telcos have many advantages over DBS, like being in every home already and an ability to do bundles that increase switching cost. OTOH, the telcos are crippled by the fact that they must terminate cable calls. If it were up to me, we'd either repeal Sections 201 and 202 of the Communications Act or do a better job enforcing Section 628, because the current system gives cable a regulatory edge over telco. But hey, that rant is for another time.

c) Rates of uptake are not churn -- "Dude." You're just impressing me more by the minute. When last I checked, the broadband market was relatively immature. Heck, we barely have a majority of people with internet in the home, let alone broadband. So if Comcast's rate of _increase_ declines and Verizon and AT&T; rates of uptake increase, then t means that they are closing the gap and capturing more of the customers that don't have either broadband service.

That's good, but not great. Because if you think this proves that we get the actual benefits of competition, think again. For you, this may just be about keepin' score. But from a public policy perspective, it's about achieving a desired result. (Hint: It's laid out in Section 1 of the Communications Act.) So lets even pretend we have achieved duopoly and customers switch back and forth between them (which, as I observed above, you have not yet even come close to proving, Ricky). What sort of duopoly is this market? As anyone who actually makes it through the 201 Econ knows, even a Duopoly market can be complex, with behavior ranging from effective monopoly to a state indistinguishable from multiplayer competition. You got the math to demonstrate what market this is? Over the long haul? Given the ude of bundled products and other externalities. Well then Hell Man! Why ain't you picking up one of them little ataboys from Stockholm?

I would urge you to educate yourself, but I'd settle for your learning some manners from your politer co-bloggers. I dropped by because Adam Theirer asked me to post some comments to this blog I'd mentioned in email, and because Jim Harper manages spirited debate without being a condescending ass. Sadly, it gave me a rather sorry set of expectations - Ricardo. But, if you're going to be a pompous ass, at least try to tel the difference between take rates and churn in an immature market so that you don't confuse the ability to capture new customers with the ability to actually take customers from a rival. They really do have different real world consequences.

I will confess I am surprised at the treatment of the disclosure issue as a relatively minor issue. How do you expect an efficient market to emerge if Comcast can -- for months -- mislead its customers as to the nature of its practices.

Even under the best of explanations, Comcast is managing its traffic in a way that renders a particular application (BitTorrent) far less usable than Comcast has actively led customers to believe. Verizon has invested billions to upgrade to fiber on a theory that the majority of customers want access to high-bandwidth services like BitTorrent. Comcast has bet that customers will tolerate certain forms of traffic management. In an efficient market, the provider that bet right gets rewarded with more customers. Either Verizon starts attracting enough business away from Comcast that Comcast changes its architecture, or Verizon stops its expensive upgrades to fiber. Or the market provides enough business for both.

But allowing Comcast to use "security" as an excuse to actively mislead customers by refusing -- even when explicitly asked -- to state clearly that an application such as BitTorrent might be targeted effectively nullifies Verizon's multi-billion dollar investment. How will the market ever achieve an efficient price, or the other pro-consumer benefits of an unregulated market, if consumers cannot properly reward or punish providers?

A few caveats on the competition picture, however.

1) Comcast did not actually lose customers, as I understand the article. Rather, the rate of uptake has slowed. That's interesting, but is not a sign that competition disciplines the market. For competition to work effectively, customers must actually be willing to switch to a rival service. For comparison, I would observe that Comcast and other cable operators have not lost substantial subscribers to DBS, although DBS gained substantial subscribership nationally for many years. The impact on the rates charged by major providers with minimal, however, because DBS providers tended to pick up customers from rural systems or new subscribers. Thus, while DBS gained, this MVPD competition did not produce the effects policy makes had expected.

2) Another possible explanation, as observed by Comcast itself, is the increasingly difficult overall financial circumstances. The number of people actually losing their homes, and therefore their cable and broadband connections, has hit high enough levels to directly impact systems (particularly Comcast, given its huge geographic coverage). Also recall that we are talking a slowdown in uptake, not a subscriber loss. So even those not getting evicted my simply be deciding that dial up remains a suitable option.

Just from curiosity, are you only objecting to the C Block "open access," or do you also object to the license size and adoption of anonymous bidding.

Oddly, given our usual disagreements, you may find my post about this on the publicknowledge blog interesting.
http://www.publicknowledge.org/node/1150

Must dispute the charge of "fallacy of asymetric idealization" (although it is a term I must remember). I do thank you for spotting the typo (corrected). As you observe, spelling is not a strong suite.

To make clear (as I have tried to do in other posts): regulation is a tool of public policy. There are many tools of public policy. Market incentives are also a tool of public policy. It is a good tool, as far as it goes. So is regulation-- for its purposes. Government subsidy is another tool: usefull for the appropriate job.

All these tools are useful where appropriate in somne cricumstances and absolutely destructive in others. A chain saw if great for cutting down trees and lousy for surgery. A scalpel is good for surgery and awful for cutting down trees.

Libertarians, as far as I can determine, regard reguation as an intrinsicly lousy tool for everything, and justify this by pointing to the places where it is used inappropriately. (My experience is that Libertarians, being human beings, also suffer from asymetric idealization.) Many also consider it impossible or unjustifiably arrogant for government to even imagine that it should set economic policy (beyond certain limited catagories such as protecting property rights).

It's not an intrinically irrational view. But it carries costs. My frustration and associated mockery comes in with the refusal to acknowledge the associated costs and trade offs of the Libertarian philosophy v. a New Deal-type maximizing collective welfare philosophy which sees a considerable role for government policy.

The accompanyingsource of frustration is the belief that we are talking economics, rather than political philosophy. To claim that, as a general rule, relying on market forces maximizes consumer welfare if a defensible position -- albeit one with which I disagree. But to ignore evidence that exclusive reliance on market forces fails to maximize consumer welfare in the face of explicitly evidence to the contrary is to move from economics to political philosophy.

As with many things, it becomes a trade off on what do you fear more.

Public choice theory is important, but so is the predictable behavior of profit seeking firms in markets with limited competition and where the market is subject to consumer lock-in based on network effects and switching costs.

Given that we have had about 30 years of regulation of the internet and the networks that carry that traffic, and it produced excellent results, I prefer to risk the dangers of regulatory capture to the certainty of rent-seeking behavior by quasi-monopolists. Also, others have pointed out, we are now (with experation of the "phase in" period from last years dereg order) entering a world of intrusive government mandates like CALEA (supported by incumbents because they impose costs on new entrants and small competitors) with no restraint on the ability of dominant firms to exercise market power on upstream providers and downstream customers.

If you are curious in a general rebuttal of the argument that public choice theory demonstrates that regulation is invairiabley worse, please see my post "Outsourcing Big Brother" at http://www.wetmachine.com/totsf/item/440

Saw your net neutrality post asking why no one commented on this post, so I took a look. Good writing, but I reach rather different conclusions on the basis of the same evidence. Rather than recapitulate a score or so of posts over the last several months on spectrum reform and network neutrality, I shall simply invite you to check out my blog, Tales of the Sausage Factory, for a different perspective.