Competition

Microsoft has been warned by Commissioner Neelie Kroes of the European Union that there are some features it should not bundle into its new operating system (see, e.g., “European regulator warns Microsoft about new operating system“ from European Business News Online). The EU’s competition directorate has already decided that competition could be costly and involve risk for Microsoft’s competitors. Yes, it sounds ridiculous — but essentially that’s what it is. Kroes’ warning may indicate that Microsoft is losing its freedom to innovate and in effect will now be required to obtain preapproval from the EU for any new product design. If so, the EU could be doing to Microsoft what the FCC did to the Regional Bell Operating Companies by Read More ›

One of history’s great propaganda experts believed that if you repeat a lie often enough it becomes the truth. A lot of politicians follow this advice. The Consumers Union and the Consumer Federation of America endlessly wave the same bloody shirt of higher phone rates. The latest incantation is: “If approved, [the] merger [between AT&T and BellSouth] will lead to higher local, long distance and cell phone prices for consumers across the country.” This is absurd because AT&T and BellSouth do not compete against each other for local or mobile phone services. And any competition between them in long distance is de minimis. The consumer groups see these companies as potential competitors. They have argued unsuccessfully for years that antitrust Read More ›

A survey conducted by the American Consumer Institute documents significant consumer savings as a result of the statewide franchise legislation enacted in Texas. For example: “The benefits claimed by those who switched were very substantial. According to the survey, customers that claimed benefits from switching to a competitor saved, on average, $22.50 per month on their cable bill, and those switching to any provider saved, on average, $22.27 per month. This suggests that price competition is occurring among the providers. For these customers, the savings represented approximately a 30% decrease in price, which is nearly identical to the FCC’s estimate of 27% lower price per channel in competitive markets (footnote omitted). From this, we can safely assume that the new Read More ›

House Energy & Commerce Chairman Joe Barton (R-TX), along with Reps. Chip Pickering (R-MS) and Fred Upton (R-MI) have an alternative plan in mind for cable franchise reform, according to this afternoon’s National Journal’s Technology Daily ($). Like the Dingell plan, the Republican vision includes a national franchise according to which new entrants would pay the customary 5% franchise fee to localities. But the Republican is superior in two critical respects: No build-out requirement. No requirement to negotiate with local franchise authorities as a pre-condition to obtain a national franchise. It may sound counterintuitive, but the absence of a build-out requirement is actually better for consumers because it reduces investment risk. Tens of billions of dollars are necessary to extend Read More ›

A draft franchise reform proposal authored by Ranking Member John Dingell (D-MI) of the House Energy & Commerce Committee, details of which were reported in today’s Communications Daily ($), increases the likelihood that final legislation would: Allow new video entrants to avoid in-kind contributions to cities (currently averaging approx. 3% of gross revenues) on top of the customary 5% (of gross revenues) fee, Would give the new entrants 10 years to provide their service to every household, and Allow the incumbent cable operator to opt in to the streamlined process as soon as the new entrant has a 15% market share. Dingell, who has traditionally defended the cities on franchise issues — and intends to do so again — reportedly Read More ›

This week’s hearing on local franchising in the Senate Commerce Committee was breathtaking. Senator after senator expressed doubts about the wisdom of subjecting new entrants to the cable franchise process. Consumer advocates generally supported the phone companies. The same day, a group of 6 Republicans and Democrats on the committee signed a letter stating that Congress should reform the franchise process. “I think the stars are aligned,” noted Senator Jay Rockefeller (D-WV). One gets the impression that the cable industry hasn’t been paying attention for the past 25 years, as they take positions and employ arguments that monopolists have used in the past with little-to-no success (see, e.g., Deal of the Century: The Breakup of AT&T [1987], by Steve Coll). Read More ›

On deregulation: “It is ironic that cellphone service is widely available at low cost [in India] because it was regarded as a luxury and therefore left to the market, while electricity is hard to obtain because it has been regarded as a necessity and therefore managed by the government.” –Former Council of Economic Advisors Chairman Martin Feldstein, writing in the Wall Street Journal, Feb. 16, 2006. * * * On net neutrality: “with or without a new law, the FCC will affect the future in a major way by its approach to the question of broadband’s openness. Sometimes called net neutrality, the question of openness is multidimensional. It is hard to define and harder to answer. Chairman Martin and his Read More ›

Yesterday the head of the trade association representing most of the nation’s telephone companies testified that telephone companies will not block, impair or degrade what consumers and vendors can do on the Internet. “Today, I make the same commitment to you that our member companies make to their Internet customers: We will not block, impair, or degrade content, applications, or services. That is the plainest and most direct way I know to address concerns that have been raised about net neutrality.” –Walter B. McCormick, Jr. President and Chief Executive Officer United States Telecom Association February 7, 2006 As a practical matter, a voluntary commitment is significant because it is a de facto standard by which the actions of individual companies Read More ›

Microsoft’s work group server competitors claim they can’t keep up with the complexity of Microsoft’s product upgrades.

“We are, in many fields, ten years behind Microsoft. And the lag is growing with every new step Microsoft takes”

according to Volker Lendecke of the Samba Users Group, an organization dedicated to free software that anyone can copy.

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Great Wall Street Journal article (sub. req.) demonstrating the absurdity of making telecom companies go through the silly process of local video extortion, er, franchising that cable TV companies had to endure 25 years ago. Here’s the lede: Last year Verizon Communications Inc. lawyers went to city hall in Tampa, Fla., for permission to offer television service over the phone company’s new high-speed network. City officials presented them with a $13 million wish list, including money for an emergency communications network, digital editing equipment and video cameras to film a math-tutoring program for kids. Frustrated, Verizon officials suspended their talks and decided to try another tack. The company soon persuaded Temple Terrace, a small neighboring community, to roll out the Read More ›