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there and back again

maybe because both words end with “y”

In an an apparent confusion between the word “utility” and the word “monopoly,” the Wall Street Journal runs an opinion piece today called “The Department of the Internet” that has to be one of the most disingenuous (and incoherent) efforts to attack Net Neutrality I’ve seen in recent times. The author, currently a hedge fund manager and previously at Bell Labs/AT&T, basically explains all of the ways in which AT&T slowed down innovation, either by omission, errors of judgment, or willful blocking of disruptive technologies.

All of them because, presumably, AT&T was classified as a “utility.” I say “presumably” because at no point does the piece establish a clear causal link between AT&T’s service being a utility and the corporate behavior he describes.

Thing is, AT&T behaved like that primarily because it was a monopoly.

And how do we know that it was its monopoly power that was the primary factor? Because phone companies never really stopped being regulated in the same way — and yet competition increased after the breakup of AT&T. In fact, you could argue that regulation on the phone system as a whole increased as a result of the breakup.

Additionally, it was regulation that forced companies to share resources they otherwise would never have. In fact the example of “competition” in the piece is exactly an example of government intervention similar to what Net Neutrality would do:

“The beauty of competition is that you get network neutrality for free. AT&T cut long-distance rates in the 1980s when MCI and Sprint started competing fiercely.”

Had the government not intervened in multiple occasions (whether in the form of legislation, the Courts, or the FCC, and most dramatically with the breakup), AT&T would never have allowed third parties to sell long distance to their customers, much less at lower rates than them.

There’s more than one fallacy on the piece on how “utilities are bad”:

A boss at Bell Labs in those days explained what he called the Big Lie, using water utilities as an example. Delivering water involves mostly fixed costs. So every decade or so, water companies engineer a shortage. Less water over the same infrastructure meant that they needed to raise rates per gallon to generate returns. When the shortage ends, they spend the extra money coming in on fancy facilities, thus locking in the higher rates for another decade.

So — someone, decades ago, gave an example of the corruption of water companies to the author, and regardless of whether this “example” is true or not, real, embellished or a complete fabrication, and regardless of whether the situation is, I don’t know, maybe a little different half a century later and dealing with bits and not water molecules, it’s apparently something good to throw out there anyway. (In fact, I struggle to see exactly what AT&T could do that would be analogous to the abuse he’s describing).

Again, this is presumed, since no causal link is established in the sense that if true, the described ‘bad behavior’ is conclusively the result of something being a utility rather than, well, any other reason, like corruption, incompetence, or just greed.

To close — I’ve seen that a number of people/organizations (many but not all of them conservatives) are opposed to Net Neutrality. My understanding is that this is because of fear of over-regulation. Fair enough. Have any of them thought how it would affect them? Perhaps it’s only when it’s implemented that they will realize that their readers/customers, by an overwhelming majority, have little choice of ISPs. Very few markets have more than two choices, and almost no markets have competitive choices (ie, choices that are at equivalent levels of speed or service).

But I’m sure that the Wall Street Journal, or Drudge, or whoever will be happy to pay an extra fee to every IP carrier out there so their pages and videos load fast enough and they don’t lose readers.


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