Issue 57

Antitrust, Bernie Sanders and the Hollywood experience

It's just so simple, isn't it:

Bernie  Sanders unveiled a plan Friday to expand broadband internet access as  part of a push to boost the economy and reduce corporate power over  Americans.

In his sprawling “High-Speed Internet for All” proposal, the Vermont senator and Democratic presidential candidate  calls to treat internet like a public utility. His campaign argues that  the internet should not be a “price gouging profit machine” for  companies such as Comcast, AT&T and Verizon.

Sanders’ plan  would create $150 billion in grants and aid for local and state  governments to build publicly owned broadband networks as part of the  Green New Deal infrastructure initiative. The total would mark a massive  increase over current funding for broadband development initiatives.  The proposal would also break up what the campaign calls “internet  service provider and cable monopolies,” stop service providers from  offering content and end what it calls “anticompetitive mergers.”

Regular readers will be aware that I'm extremely sceptical of grand plans to "fix" anything by effectively nationalising it. Down here in Australia we're still  paying the price for such ill-conceived plans, hastily drawn up on the  back of a bar napkin without so much as a cost-benefit analysis.

Sure,  the current broadband situation in the United States could be far from  optimal. But when determining how to improve the current arrangement,  more care needs to be taken than simply looking at the number of firms  in a given market (or perceived lack thereof) and concluding that  they're all part of a "price gouging profit machine". Given the  specificity of broadband infrastructure, large up-front capital costs  and ongoing regulatory factors that broadband providers must overcome,  it's likely that the optimal number of providers is actually relatively  small.

But back to Sanders. How is he planning to achieve his plan to nationalise broadband? Our old friend antitrust, misapplied yet again:

Sanders’  plan also outlines a broader antitrust effort against internet and  cable companies. If elected, he would use existing antitrust law to “bar  service providers from also providing content and unwind  anticompetitive vertical conglomerates.”

This policy could  potentially impact every major US carrier, particularly Comcast’s  ownership of NBCUniversal, AT&T’s ownership of WarnerMedia, and  Verizon’s ownership of AOL. “We will break these monopolies up and  closely regulate them to ensure they are providing consumers with  acceptable service, and eliminate hidden fees, surprise bills, and other  consumer-gouging practices,” Sanders said.

It's not  obvious that these companies are monopolies or that antitrust should  apply to them. It's not even clear that the mergers cited above have  moved the market away from what could be called the 'optimal' structure,  once prices and non-price variables (e.g. quality) are  considered. There is no way that Sanders has done the huge amount of  background legwork necessary to support his claims. He's just applying  his ideology to a sector that every other Democratic candidate seems to  be hating on. When you're Bernie Sanders, any perceived problem can be  solved by making it "free".

But Sanders' ideology is not the issue  here; it's the use of antitrust, yet again, to tackle the supposed  problem. Antitrust is woke again and is being horribly abused across the  developed world to beat down everything from Facebook to Comcast, with a  complete disregard of the unintended consequences that will inevitably  ensue.

On that note, there was an excellent Bloomberg article last  week about Hollywood's experience with antitrust and how it ultimately  "replaced the diverse ecology of working actors, staff writers, B-movies  and cheap tickets at second- and third-run theaters", with a  "winner-take-all system of star talent and blockbuster bets":

Today,  as a resurgent left, sometimes joined by the populist right, demands a  return to punitive taxes and blunderbuss enforcement of U.S. antitrust  laws, the Hollywood experience offers a timely reminder of how economic  crusaders can destroy what they don’t understand. By hampering  creativity and increasing risk, ill-informed antitrust action can  ultimately harm the consumers it is supposed to protect.

“Today,  not only do our metropolitan areas have many multiplex cinemas showing  films from different distributors, but much of our movie-watching is not  in theaters at all,” said Delrahim, who oversees the Justice  Department’s antitrust division.

“It is important,” he said, “for  antitrust enforcers to recognize the risks of misapplying antitrust law  in creative fields that experience significant change.”

Do read the whole thing.  One outcome of Sanders' plan, if implemented, will be to stifle  innovation in the broadband sector. Once the fixed-line broadband  network becomes utilitised, it will provide an incentive to regulators  and politicians (the de facto new owners) to prohibit competition with  that network, for example from wireless broadband. The United States is already well behind the likes of China in that space because "the broadband spectrum needed  to create a successful network was reserved not for commercial purposes  but for the military", making it "significantly slower and more  expensive to roll out than just about anywhere else", and Sanders' plan  will set it back even further.

Enjoy the rest of this week's issue. Cheers,

— Justin


The bits

Uber banned in London

This  actually happened two weeks ago but it's still newsworthy, as Europe is  ground zero in terms of misapplying antitrust toward digital  technology. Unfortunately, the rest of the world is either retaliating  or copying the European model. Consumers everywhere will be worse off as  this populist movement plays out.

Learn more:

Supply chains can move quickly

Trump's  trade war and subsequent Huawei sanctions have only been in place for  around 7 months yet already the company is American-free. Is Huawei  worse-off without American components? Absolutely. Shifting supply  chains is not costless. But with its hand forced, it has done exactly  that, and in the process has eroded some of the US' first-mover  advantage in the market for high-tech components.

Now  China's government - worried about another Huawei-type situation - is banning all government offices and public institutions to remove foreign computer equipment and software within three years. It's willing to  bear the cost of such a move to remove the uncertainty of US policy.  Essentially, the United States government has inadvertently accelerated  the very process it was trying to thwart.

Learn more:

This is disturbing

China  as a technological superpower is not a good thing. At the end of the  day the state still dominates many aspects of people's lives, especially  on the social end of the spectrum. If you think Chinese companies will  be able to say no to the Communist Party of China, think again.

Learn more:


Other bits of interest


Image of the week

Apparently the internet is now a human right

I honestly don't know what isn't considered a necessity or human right to these people any more.


This week's data breaches

"Although  surveillance tech companies tout anecdotal evidence about hundreds of  lives saved through flagging students’ online searches or private emails  about self-harm, there is still no independent evaluation of whether  this kind of surveillance technology actually works to reduce violence  and suicide."

The breaches:

That's all for now. If you enjoyed this issue, feel free to share it via email


Issue 57: Antitrust, Bernie Sanders and the Hollywood experience was compiled by Justin Pyvis and delivered on 10 December 2019. Join the conversation on the fediverse at Detrended.net.