Results tagged “vertical integration”

April 2, 2013 11:54 AM

Captive Audience: A Fairer Review than Most You've Seen

A lot of people have written "reviews" of Susan Crawford's Captive Audience, or, at least, pretended to on Amazon.  But did they really read the whole book?  I kind of doubt it.    Just check the Amazon reviews for this book--nothing but 4 and 5 stars and 1 and 2 stars (i.e., just "homers" and "haters").

If I had to offer an explanation for the polarity of reviews, I would say it's because this book is really two books.  One, the first 232 pages, is a well-done history of competition law/regulatory policy and a generally well-done attempt to give this history a modern context, using the 2010 merger of Comcast and NBC Universal.  You may not agree with Ms. Crawford, but she does offer plenty to think about.

The "other" Captive Audience, couldn't be more different, and shows especially poorly when contrasted with the scholarship that went into the bulk of the book.  The last 2 chapters are only 37-38 pages total.  Thirty pages were supposed to explain and analyze the wireless industry (technology, structure, and competition), the proposed AT&T/T-Mobile transaction, and municipal/government funded retail broadband, plus muni-funded "middle mile" wholesale transmission.  

The remaining 7-8 pages are a spaghetti-style approach to a conclusion. The author offers up several unexplained policy prescriptions based on her casual observations about the "non-cable" parts of the Internet and hopes something will stick.  In the interests of being a charitable critic, I'm going to ignore these last 2 chapters--if they weren't worth the author's time, they aren't worth ours.   


Overall: 3 stars (out of 5)


This book, or at least the first 86% of it, does a very thorough--and, at times, entertaining--job of explaining potential causes for concern resulting from a dominant provider of broadband distribution also owning at least some "must have" content.  The exercise is not merely theoretical, as Ms. Crawford contends that Comcast is the dominant provider of residential broadband service throughout its service territory.  A position that, she argues, will only be exacerbated and extended as the likely consequence of the combination of Comcast and NBC Universal, which was approved by the FCC in 2010 with paper weight conditions.
 
The two major concerns for consumers--and for society--Ms. Crawford explains, are that 1) ownership of content may raise the already-formidable barriers to entry in the broadband Internet access market--further cementing the incumbent's market power over the broadband "pipe" to the Internet, and 2) content ownership--particularly of "must have" programming, such as live local and national sporting events--will allow the integrated firm to frustrate rival content owners (by withholding access to the broadband firm's content, and (at least constructively) raising the cost to consumers of subscribing to a rival content owner.

The easiest way to avoid these potential problems, Ms. Crawford argues, is to separate broadband distribution (provision of Internet access service) from content ownership.  If Captive Audience has a consistent theme, this is it--structural separation of distribution and content.  All in all, Ms. Crawford does a good job in providing the historical context of the antitrust laws, generally, as well as the regulatory history of this particular policy prescription as it would apply to the cable/broadband industry.

Conflicted About Regulation?

It is notable that, while Ms. Crawford is frequently portrayed as a champion of regulation, her narrative of government behavior virtually throughout the existence of the cable industry, reflects frequent--if not consistent--disappointment with every level of government oversight.  Specialized regulatory agencies, like the ICC and the FCC, are subject to even greater criticism.  At times, it seems like the author is frustrated to the point of questioning whether effective regulation is even possible; hence, her "structural separation" solution. 

Other times, Ms. Crawford simply makes excuses for her disappointment with the actions of the government.  For example, when discussing the Antitrust Division's decision not to challenge the Comcast/NBCU merger, Ms. Crawford blames the Division's reticence on "conservative federal judges" who are regarded as unsympathetic to vertical merger theories. 

Is it really acceptable for the Department of Justice to surrender its role as the enforcer of the antitrust laws just because the judiciary is skeptical of vertical theories of harm?  If someone in the Division made this excuse--for not challenging a merger the Division honestly thought would harm the public--that person does not deserve to hold the public trust.  Why doesn't the author express anything other than resigned disappointment?  If, the public needs protection from Comcast--which Ms. Crawford seems to believe--then doesn't the public need faithful, courageous law enforcement as well?


*    *    *

I don't agree 100% with Ms. Crawford's analysis and conclusions, but you don't need to in order to get something out of this book, because the careful, and thorough, "prosecution" of the "Comcast case" will give you plenty to think about.  While Captive Audience generally succeeds in making the author's points, it also suffers from the fact that the reader knows--from the beginning--that the author is in pursuit of a specific conclusion.  This awareness leaves the reader with the sense that a more complete discussion has been sacrificed for the sake of this conclusion.  Thus, this reader was left with the feeling that the most interesting questions are those that go unasked.  We'll look at some of these in an upcoming blog.
 
August 5, 2010 5:41 PM

BIF-PIB Redux: Doo. Dah. Dippity!

No reason to even apologize about the fact that I haven't been blogging much recently (relative to my normal furious pace of about 1 every 10 days)--and I'm not apologizing.  I could make a lot of excuses (and, believe me, I do!).  But, hey, there just hasn't been a whole lot of FCC Policy to be blogging about.  Don't take my word for it--even Harold Feld 
says so
--and he's a prodigious blogger.  Blame Chairman Genachowski.  My personal laziness is purely coincident.

However, I do have one slightly timely follow-up point on my last post on video competition.  Earlier this week, Mr. "PIB" (Party in Back, in the mulletary sense of the term) made his appearance on the Comcast-NBC merger.  How so?

Well, Congressman Rick Boucher, Chairman of the House Energy and Commerce Committee's Subcommittee on Communications, Technology, and the Internet concluded his investigation into the Comcast-NBC Universal merger and deemed it to be not a threat to competition.  In fact, he sent letters to the Department of Justice's Antitrust Division and to the FCC, urging expeditious approval of the merger to "ensure continued consumer access to content." 

Who could argue?  After all, the antitrust and consumer protection laws were founded on the principle that the best way to ensure that consumers receive maximum access to a good or service was to let one company control as much of that market as possible.  Or maybe that was the principle on which the Hudson's Bay Company, and the British East India Company were founded.  Hmmm?  One or the other . . .  

Competition or mercantilism, toe-may-toe, toe-mah-toe . . . . No matter; the top dog on this subject matter at the House of Representatives told the reviewing agencies to fold up tent, conclude that the industry is competing like heck out there, approve the merger, and crack open a cold Bud Light!  This is some serious political cover:  the political version of "The Eagle Has Landed." 

Of course, I could always be wrong, and the reviewing agencies could continue their own investigations, and make an independent assessment of how the merger will affect competition in the markets for video programming and video distribution.  But . . . why would they bother?  It's summertime and the livin' is easy.

Now, we just sit back and watch, listen and learn, as the story unfolds about the competitive irrelevance--nay, benefits--of vertical concentration in the subscription video market.  But be careful out there, partner, with trying to make a general assumption about vertical integration in communications markets.  Woe to anyone who makes that same mistake about vertical contracts between service providers and handset manufacturers in the mobile wireless market!  The Party in Back is strictly for incumbent video providers and programmers . . .

November 27, 2009 8:52 PM

Net Neutrality: Down the Rabbit Hole (Vertical Integration Ignored)

"In another moment down went Alice after it, never once considering how in the world she was to get out again.
 
The rabbit-hole went straight on like a tunnel for some way, and then dipped suddenly down, so suddenly that Alice had not a moment to think about stopping herself before she found herself falling down what seemed to be a very deep well.

Either the well was very deep, or she fell very slowly, for she had plenty of time as she went down to look about her, and to wonder what was going to happen next. First, she tried to look down and make out what she was coming to, but it was too dark to see anything . . .

'Well!' thought Alice to herself 'After such a fall as this, I shall think nothing of tumbling down-stairs! How brave they'll all think me at home! Why, I wouldn't say anything about it, even if I fell off the top of the house!' (which was very likely true.)
"

In keeping with our Adventures in Wonderland approach to the Net Neutrality NPRM, it only seemed appropriate to keep the long quote from Down the Rabbit Hole (Chapter 1) intact--especially when discussing vertical integration.  As noted in the last post, we'll look at real harms caused by vertical integration in one market--and not addressed by the Commission--and compare these circumstances to the empty theories posited in the NPRM.

You see, so many of the potential "threats" to the public that are postulated in the world of Internet commerce are only speculative in the NPRM . . . BUT . . . the Commission is in possession of a great deal of "data driven" information on the harms to consumer welfare resulting from unhealthy vertical integration.  Where?  Why in the only communications market where prices have been escalating in both real and nominal terms since Congress passed the Telecommunications Act of 1996--the market for subscription TV services.  This is a market characterized by unchecked price hikes resulting from a lack of competition in the programming and distribution markets.  We've been over the Commission's data before, and don't need to repeat it in this post.

Suffice it to say, though, that the Commission could look back on their previous failure to pursue a "data-driven" pro-consumer approach to much steeper prices caused by vertical integration in a real industry subject to the FCC's regulation, and (rather than sound the alarm about consumer welfare concerns related to vertical integration in any Internet-related market)--like Alice--say "[a]fter such a fall as this, I shall think nothing of tumbling down stairs!"  Later on, I'll put on my Nostradamus hat and predict--but with much more specificity--why the first problem, the real, data-driven, harms to consumers in the subscription TV business--may well continue to go unaddressed, as the Commission thinks nothing of "tumbling down the stairs" of imagined vertical integration in the Internet ecosystem.

Not to beat a dead horse, but take a look at the "data-driven" chart in the post addressing the consumer harms of vertical integration ignored in the subscription television market. There is considerable concentration in both the cable programming, and cable distribution markets.  These facts have been documented in this blog in multiple posts (look at the tag cloud under "high subscription TV prices."  Moreover, according to some of the same parties supporting the Net Neutrality NPRM, this concentration is only increasing with the recently proposed Comcast-NBC merger. Comcast is already the largest single owner of cable television programming, and, unlike Internet backbone services, there does seem to be some scarcity/exclusionary value in vertical integration through ownership of cable programming, rather than simply purchasing it through contract.

Continue reading Net Neutrality: Down the Rabbit Hole (Vertical Integration Ignored)