FCC following EU precedent

The FCC has settled on an inappropriate definition of what constitutes a competitive market. A memorandum explaining why the FCC denied the Verizon’s forbearance petition seeking deregulation in Boston, New York, Philadelphia, Pittsburgh, Providence and Virginia Beach suggested it’s because Verizon’s market share has to be less than 50% AND Verizon’s competitors must have ubiquitous overlapping networks with significant excess capacity. While there is some evidence in the record here regarding cable operators’ competitive facilities deployment used in the provision of mass market telephone service in the 6 MSAs at issue, we find that it does not approach the extensive evidence of competitive networks with significant excess capacity relied upon in the AT&T Nondominance Orders … where the Commission has Read More ›

FCC no free market ally

Two commentators tried to argue that FCC Chairman Kevin J. Martin has held true to conservative principles nowithstanding recent attempts to re-regulate the cable industry. Cesar V. Conda and Lawrence J. Spiwak posited that a “pro-entry/pro-consumer-welfare mandate” is the very “hallmark of economic conservatism.” This is a bizarre statement. “Pro-entry” is a euphemism for competitor welfare, the antithesis of consumer welfare. Competitor welfare used to be the guiding principle of antitrust law — a legacy of the populist movement. The idea was that more competitors equaled stronger competition. It’s intuitively appealing, but it confuses quantity with quality and is wrong if the competitors are inefficient. Protection of inefficient competitors is a form of subsidy. For example, the Clinton FCC tried Read More ›

Podcast on patent reform and FreeConference v. AT&T

This week in the Tech Policy Weekly podcast, Jerry Brito, Drew Clark, Tim Lee and I discuss patent reform, FreeConference’s antitrust suit against AT&T and e-voting. On patent reform, I observed that the momentum for fundamental reform reminds me in some ways of the eagerness for telecom reform in the mid 1990s. The Telecommunications Act of 1996 created many problems, demonstrating the inevitability of unintended consequences. Meanwhile, the Supreme Court has stepped up to the plate and has a chance to recalibrate the patent system without major reform. I’d like to see what the Supreme Court does, and hope Congress takes it’s time. A long time. I’m not sure what to make of FreeConference v. AT&T. As Tim Lee points Read More ›

EU vs. Intel

Staff at the European Union’s Competition Directorate are recommending formal charges against Intel, according to the Wall Street Journal. At the heart of the EU case are AMD’s allegations that Intel withholds rebates from computer makers when they buy too many AMD chips. “It is simply a coercive tactic,” Tom McCoy, AMD executive vice president for legal affairs, said this month. Forbes is reporting that AMD’s complaints include the offering of rebates to computer manufacturers for shutting out AMD and allegations that Intel has engaged in predatory pricing aimed at keeping AMD’s competing CPUs (central processing units) out of the market. Intel denies these charges. This could just be negative spin for volume discounts. Intel, or any other firm, offers Read More ›

Status of merger conditions unclear

Jonathan S. Adelstein

AT&T’s opponents may not get everything they thought they had from the FCC’s review of the AT&T/BellSouth merger. The process was a disgrace, as I discussed here and elsewhere leading up to the final decision. No federal or state regulator identified any competitive or public interest harms, yet Commissioner Jonathan S. Adelstein and Commissioner Michael J. Copps leveraged the process to deliver cash to state and local officials, unwarranted discounts to AT&T’s competitors and 3,000 previously outsourced positions to the labor unions.
AT&T also volunteered to maintain “a neutral network and neutral routing in its wireline broadband Internet access service,” subject to certain limitations. I argue that a nondiscrimination principle applied to the Internet would outlaw the partnership, bundling and pricing strategies that are the basis for all advertising efforts (see, e.g., this and this).

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What should McDowell do?

It may not entirely be Commissioner Robert M. McDowell’s fault that the AT&T/BellSouth merger is languishing at the FCC despite the fact the Antitrust Division of the Department of Justice has already concluded it poses no significant threat to competition. After all, as McDowell pointed out in a recent statement, his four colleagues managed to approve the recent SBC/AT&T merger without him. But the analogy isn’t useful. Back then, many in Washington thought telecommunications legislation appeared to be moving through Congress and all sides had high hopes for their agendas. Everyone realizes the legislation is now dead, and this merger is the only opportunity on the horizon to enact a net neutrality nondiscrimination principle and prop up the unsustainable CLEC Read More ›

Net neutrality doesn’t belong in AT&T/BellSouth merger

In the present merger review, Commissioner Michael J. Copps and Commissioner Jonathan S. Adelstein demanded that the FCC conduct what they euphemistically call a “thorough review” even though there is virtually no competition between AT&T and BellSouth. With practically no overlap in the present operations of the two companies, by definition there can’t be an increase in market concentration of any significance. That doesn’t matter to Copps and Adelstein, who view a leisurely review process as more likely to yield concessions from applicants AT&T and BellSouth. This merger is about visceral impressions (Copps and Adelstein claim it would “represent one of the largest mergers in history”), plus it’s a chance to advance dubious proposals that probably couldn’t survive the process Read More ›

AT&T/BellSouth merger: No competitive significance

The Antitrust Division, led by Assistant Attorney General Thomas O. Barnett, subjected the AT&T/BellSouth merger to the traditional antitrust analysis and concluded that no it would not harm competition. On the residential side of the market, AT&T is virtually nonexistent, or, as the Antitrust Division put it, of “limited and declining competitive significance.” On the business side, there is some slight competition. Competitive Local Exchange Carriers are arguing this justifies re-regulating “special access” and imposing baseball-type arbitration on access negotiations between AT&T and its smaller rivals. How significant is the competitive overlap betwen AT&T and BellSouth that supposedly justifies new regulation? Although AT&T’s specialty is large business customers, it can provide services over its own facilities to only a small Read More ›

More on the conspiracy theory nonsense

The Wall Street Journal has a good editorial on the subject of an antitrust conspiracy theory involving some of the biggest telecom companies, which I have talked about here and here. Markets can behave in unison — think of airline tickets or gas prices — without necessarily engaging in anticompetitive behavior. And that’s as it should be. If the threshold for bringing antitrust conspiracy suits is lowered to the point where, well, you need no direct evidence of an actual conspiracy, then the sky’s the limit for the plaintiffs bar. And as Justice Breyer’s comment makes clear, a lot more than the cost of phone service would be at stake. The Journal also observes — correctly, I believe — that Read More ›

Conspiracy or rational business judgment?

Why didn’t the Baby Bells compete with one another when Congress ended their exclusive franchises in 1996? Each possessed the necessary expertise and vast resources. The FCC was most eager to help. Did the Baby Bells conspire to carve up their territories in order to maintain their respective monopolies? In Bell Atlantic Corp. v. Twombly, counsel for Twombly allege that they did, though they can’t cite any direct evidence. The Supreme Court heard oral arguments yesterday. Counsel for Twombly are alleging, for now, that a conspiracy can be inferred. Their logic is it would have been in the Bells’ self-interest to compete. And they even told Congress they would. But they didn’t. Each fought to get in the long-distance market Read More ›