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Friday, December 18, 2015

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Chanson de Roland

The report, supra, describes a classic problem: Firms, here cable companies, in non-competitive regional markets for cable services, provide that service to consumers at excessive prices, what economists call excessive rents, which they can do because the markets for broadband cable services are not competitive. But the foregoing is just one insult to competition. The other, which a complainant, supra, from Georgia described, is that Comcast and its ilk who provide broadband service and content, whether it is licensed or originally produced content, can use their pricing power in ways that prevent those who offer competing content from having a fair opportunity to compete by increasing the price or availability of that competing content. Taken together these are great evils that allow those providing broadband services to unfairly diminish consumers’ welfare by charging excessive prices and to hinder, if not halt, competition from other providers of competing content.

But no economists or lawyer, who is familiar with antitrust law would despair, because they know that there are classic remedies to the forgoing evils that arise from lack of competition. First, the government and the courts can use their powers to restructure the market so that it is competitive. One way of doing that, which would also do much to restore the finances of the U.S. Post Office, would be to charter the U.S. Post Office to become a broadband ISP, with a charter to provide broadband services throughout the nation. Congress would provide the initial capital investment and subsidies for sparsely populated areas, where profitable broadband isn't possible, but then the Post Office would fairly compete as profit-making firms with existing private broadband services, but its profits would be capped at some level or return on investment and/or profit margin net of costs, with the requirement that, after capital expenditures, its prices reflect the cap on its profits.

If for some reason that solution to create a competitive market for broadband would not work or would not work in certain areas, government, here the FCC, could and should use its authority to regulate the price and other features of broadband service, wherever fully competitive markets don't exist to protect consumers and providers of competing content.

And there is a third solution: Local government can provide community broadband service to its citizens. As the Editor notes here and as he has done in the past, community broadband, i.e., when a local government builds and provides broadband service, has been quite successful here, bringing excellent broadband service at lower prices, when well executed. As for the laws of the 19 States that prohibit their local governments from providing community broadband, which are, I believe, all Republican controlled red states--with Republicans supposedly being for competition and against government regulation that hinders competition--those laws appear to be invalid as illegal interference with an FCC ruling to the contrary. So for any community in those 19 states that wants to provide community broadband, I would say take your state to the FCC and, if necessary, federal court to strike down those laws and then build your community broadband service.

The foregoing are not radical, leftist ideas but are standard remedies to correct the evils of non-competitive markets that have existed in the economic literature and the law since the days of President Theodore Roosevelt in late 19th Century, and have been authorized especially where, as here, broadband service is necessary for commerce and to live a modern life. The forgoing solutions are regular features of all regulated utilities and are routine both here and abroad.

So why aren't we implementing these solutions here to prevent price gouging and other anti-competitive behavior in the markets for broadband service here? Well, the answer to that is easy: Or corrupt political system, where lobbyists legally, though immorally and perniciously, pay for the laws and government actions that they want, won't permit it.

So I am content, because I am happy once I know the rules of the game and who owns who and who works for who. However, those of you, who are not so easily contented with greed and corruption that affects and diminishes your use of broadband Internet service for all that we use it for, may well want to hold your legislators, state and federal; the Department of Justice; the President; and the FCC responsible for failing in their duty to provide the benefits of competition to America by either restructuring markets to provide vigorous competition or regulating markets, which can't be made competitive, to protect consumers and other business from the evils of monopoly or oligopoly control of the markets for broadband service.

We are certainly getting mugged on this one.

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