Siphoning dollars because they can

Paul Krugman suggests that Verizon, for example, fails to invest in its infrastructure—an investment that would benefit its customers—because the company has no need to do so. It enjoys monopoly or near-monopoly status, enabling the firm to charge “rents” without fear of competition.

At one time policymakers believed that the consolidation of companies would free the now-larger corporations to invest dollars that would improve service and boost employment. Krugman traces this thinking back to Ronald Reagan.

For Reagan didn’t just cut taxes and deregulate banks; his administration also turned sharply away from the longstanding U.S. tradition of reining in companies that become too dominant in their industries. A new doctrine, emphasizing the supposed efficiency gains from corporate consolidation, led to what those who have studied the issue often describe as the virtual end of antitrust enforcement.

Verizon and other telecommunications providers exercise monopoly power. Krugman links to a study (pdf) released by the Obama Administration that illustrates the pernicious effects of concentrated economic power. Among other things, the new “robber barons” (Krugman’s term) would be “able to milk their businesses for cash, but with little reason to spend money on expanding capacity or improving service. The result would be what we see: an economy with high profits but low investment, even in the face of very low interest rates and high stock prices.”

Of course, things could be different. And they are elsewhere. I wrote about one example here. The French have access to speedy Internet, high-quality and abundant television content, and telephone service for a mere fraction of the cost charged by Comcast for its bundled products. The contrast has much to do with the concept and reality of “common carrier.” Telecommunications infrastructure in France is open to multiple providers of both content (input) and retail services (output).

Then, again, this is America. And we have nothing to learn from others.

Paying for mediocrity

Jordan Weissmann:

As you may recall, Netflix announced its own deal with Comcast last month to improve delivery of its streaming video—after which Netflix CEO Reed Hastings published a screed about the need for stronger net neutrality protections. But every time you see one of these agreements, keep in mind that the fundamental issue isn’t so much net neutrality—the idea that Internet service providers should treat all data equally, no matter where it originates—as it is the crippling lack of broadband competition in this country. Americans pay some of the highest prices for Internet access in the developed world; in return, they get some of the most mediocre service. That’s largely because consumers only have two or three providers in their geographic area, which doesn’t give Comcast or its peers a great deal of incentive to beef up their networks (or to lower prices).

If the Netflix and potential Apple deals are any sign, it may now be especially profitable for ISPs to let their services stagnate. It’s perverse but true: The more bogged down the rest of the Web becomes, the more major content providers such as Netflix or Apple or Amazon will be paying for their own private fast lanes.

The economists call this stuff ‘monopoly rents.’

Reality imitating art

Digby writes about spy agencies and associated private contractors abusing surveillance data for an array of purposes. To paraphrase a politician, What’s the good in having all this data and not use it? But first…

Most of us, I should think, have suffered the disappointment of having a “favorite” TV show canceled. You and the pundits have judged the show brilliant or exceptional, but not enough of your fellow human beings agreed. So the network sends a pink slip, and you’re left to seethe and wonder what might have been had the series continued.

I experienced these feelings with the cancellation of Rubicon, which featured the fictional American Policy Institute. Composed of ex-spooks and a host of multiple-PhD employees, the Institute had secured generous contracts from the U.S. government to  decipher data accumulated from the Pentagon, the NSA, the CIA, and the FBI to help thwart the next terrorist attack in the immediate post-911 era. But, of course, that was not all the Institute was about.

Its head, Truxton Spangler, belonged to a cabal of extravagantly wealthy men who had known each other since childhood. His secret purpose was to use information gathered by API to create an event that the men would exploit for financial and political gain. One enterprising analyst, the star of the show, suspected that all was not quite kosher at the firm. Of course, Spangler in turn became aware of the analyst’s probing within and without the Institute, fearing that the cabal and its nefarious deeds would be exposed. During the run-up to one artificial catastrophe or another, Spangler and his off-campus henchmen would exact collateral damage on both Institute employees and key outside individuals should they threaten the identity or misdeeds of the cabal. All good stuff, but evidently lacking in overt bloodlust and car chases cherished by the masses.

Yet, as Digby tells us, this kind of misuse is happening in real life, albeit on a less egregious scale. Maybe Rubicon was axed by the NSA, and we know what happened to Caesar.

Ed is pissed

Even college professors get angry. This is one of the best all-time rants I’ve ever read, full of vinegar and vitriol nicely coated in superb humor. Here’s the conclusion:

In closing, Charter Communications, you are terrible at everything and I want all of the bad things in life to happen to you and only you. I want Jelly Belly to take your favorite flavor off the market. I want your favorite shirt to be irreparably stained. I want you to sit next to the crying baby on every flight. I want your spouses to leave you for prison pen pals with life sentences. I want your children to go to the most expensive university they can find and major in Folklore. I want you to be preoccupied at the urinal and not even notice that you’re urinating on your pant leg. I want you to get to the front of the TSA line before you realize you left your wallet at home. Most of all, Charter, I want you to plant a big sloppy kiss right on my ass.

Piss off,
Ed

Common carrier

Suppose you build an electric transmission line. Under federal law a third-party resource developer would have access to those lines to deliver his/her electricity to a retail customer connected to a distribution grid. The terms and conditions for such access would be the same is it would for the transmission provider, should it also be in the business of generating electricity. The provision is called ‘common carrier.’ In theory common carrier keeps prices down for the consumer, because it prohibits the provider from limiting supplier competition.

Likewise, governments build highways for motor vehicles. Any driver of any car or truck (with some restrictions) can enter the road and exit it. The government cannot limit access only to Chevrolets, for example.

Now we turn to the Internet, initially billed as “the information superhighway.” If it were analogous to a public road, then anyone could get on and off under the same terms and conditions as anyone else. The “pipes” (or series of tubes) would serve as “common carriers.”

In practice, common carrier works as it was intended. How do we know? Because countries like France made it so. Those who provide telecommunication services (whether phone, Internet, or TV) can upload their content to an information superhighway—regardless of who built, owns, or operates it—that will be delivered to a retail consumer, say a Parisian resident. As a result of this arrangement, the French pay a small fraction of the price that U.S. citizens pay for comparable service.

But something happened along the way of establishing rules for the Telecommunications Act (1996). The FCC blew it, failing to call Internet service providers ‘utilities,’ which would have subject them to common-carrier provisions.

For a rather angry reaction to the DC Circuit court’s decision, negating the FCC’s belated attempts to put the Internet Genie back in the bottle, read this piece in The Verge by Nilay Patel. He writes:

So, this is going to be chaos. All you’re going to hear from now on is that net neutrality proponents want to “regulate the internet,” a conflation so insidious it boggles the mind. Comcast and Time Warner Cable and Verizon are not the internet. We are the internet — the people. It is us who make things like Reddit and Facebook and Twitter vibrant communities of unfiltered conversation. It is us who wield the unaffected market power that picks Google over Bing and Amazon over everything. It’s us who turned Netflix from a DVD-by-mail company into a video giant that uses a third of the US internet’s bandwidth each night. And it is us who can quit stable but boring corporate jobs to start new businesses like The Verge and Vox Media without anyone’s permission.

Comcast and Verizon are just pipes. The dumber the better.

Always a darker side

Angela Merkel is not happy. Nor are her European counterparts as they learned that the U.S. has been monitoring and capturing their electronic transmissions, including cellphone calls, for over a decade. What possessed them to believe that their communications, however ordinary, were private? This is the U.S., after all, and we do as we damn well please. Meanwhile, we ordinary Americans present a collective shrug, since we’ve come to embrace the Internet, especially social media that allow us to share our most mundane activities. But at what cost? Who cares?

Here’s a line from a piece (subscription may be required) in the New York Review of Books, written by Sue Halpern:

But while we were having fun, we happily and willingly helped to create the greatest surveillance system ever imagined, a web whose strings give governments and businesses countless threads to pull, which makes us…puppets.