Elizabeth Warren Wants To Break Up Amazon, Google And Facebook; But Does Her Plan Make Any Sense?

from the tell-us-how-you-really-feel dept

This isn't necessarily a big surprise, given that she's suggested this many times over the past few years, but 2020 Presidential candidate Elizabeth Warren has just laid out her plan for breaking up Amazon, Google and Facebook. It's certainly worth reading to understand where she's coming from, and some of the arguments are worth thinking about -- but much of it does feel like just grandstanding populism in front of the general "anti-big tech" stance, without enough substance behind it.

Twenty-five years ago, Facebook, Google, and Amazon didn’t exist. Now they are among the most valuable and well-known companies in the world. It’s a great story — but also one that highlights why the government must break up monopolies and promote competitive markets.

I find this a very odd way to open this proposal. I don't see how the first sentence supports the second. Indeed, the first sentence would seem to contradict the second. Twenty-five years ago those companies didn't exist, and if you asked people what tech companies would take over the world, you'd get very different answers. Technology is an incredibly dynamic and rapidly changing world, in which big incumbents are regularly and frequently disrupted and disappear. One of my favorite articles to point people to was a 2007 article warning of the power of a giant monopolistic social network that would never be taken down by competition. That social network? MySpace. The article briefly mentions Facebook, but only to note that it "will always be on MySpace's periphery."

Let me make my position clear on all this too: I am always supportive of greater competition, and have always been a huge supporter of disrupting incumbents, because I believe that's how we get to better innovations. But I also believe that this is rarely done by government intervention, and usually comes from new technologies and new innovations in the marketplace. For years now I've been talking about why the real way to "break up" big tech platforms is to push for a world of protocols, rather than platforms, which would push the power out to the ends of the network, rather than keeping them centralized under a single silo with a giant owner.

But I fear that nearly all of these plans to "break up" big tech actually make that harder. It doesn't open up new opportunities for a protocol-based approach, and simply assumes that the world will always be managed by giant platform companies -- just slightly smaller, and highly regulated, ones. And that might actually lead us to a much worse future, one that is still controlled by more centralized systems, rather than more decentralized, distributed protocols where the users have power.

The internet is a constant challenge with lots of new upstarts hoping to disrupt the big guys. And sometimes it works, and sometimes it doesn't. We should be wary of companies with too much power abusing that position to block competition. And I'm certainly open to looking at specific situations where it's alleged that these companies are blocking competitors, but a general position that says breaking up the internet giants seems more opportunistic and headline-grabbing than realistic.

In the 1990s, Microsoft — the tech giant of its time — was trying to parlay its dominance in computer operating systems into dominance in the new area of web browsing. The federal government sued Microsoft for violating anti-monopoly laws and eventually reached a settlement. The government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge.

Two things on this. First, Microsoft was clearly engaged in anti-competitive practices that were designed to restrict competition and harm consumers. There was clear evidence of the company proactively seeking to undermine competitors. There is (to date!) little such evidence of the same thing with the big internet companies. It is entirely possible that such evidence will eventually be found, and if that's the case, then it's reasonable to punish the companies for such practices. But, to date, all of the examples people cite as "evidence" of anti-competitive practices by the big internet companies really looks like reasonable steps to improve consumer welfare with their products (i.e., the opposite of what Microsoft was doing in the 90s.)

Second, I know some may disagree, but I find it difficult to believe that the government's antitrust case against Microsoft truly "helped clear a path" for Google and Facebook. After all, that antitrust case fizzled with the DOJ, despite "winning" the case, eventually getting basically no real concessions from Microsoft at all. The argument that some will make was that merely being involved in the antitrust case helped clear the path by (a) distracting Microsoft and forcing it to spend a bunch of resources on fighting the DOJ and (b) by making the company more hesitant to continue its historical practices, but I'm not sure there's much evidence to support either of those claims. Microsoft fell behind Google and Facebook because the company was structurally oblivious to the power of the internet, and when it finally realized the internet was important, really couldn't make the necessary shifts to be a truly internet native company. Yes, it took over the browser market, temporarily, but was easily beaten back when better browsers came on the market.

The story demonstrates why promoting competition is so important: it allows new, groundbreaking companies to grow and thrive — which pushes everyone in the marketplace to offer better products and services. Aren’t we all glad that now we have the option of using Google instead of being stuck with Bing?

Again, this seems to contradict the larger message here. If Microsoft were a stronger company, then, uh, wouldn't that mean Google had less dominance?

Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.

It may be true that they have too much power. But the way to deal with that is by encouraging more innovation. A heavily regulated market... tends not to do that.

As for Warren's actual plan, it has two steps:

First, by passing legislation that requires large tech platforms to be designated as “Platform Utilities” and broken apart from any participant on that platform.

Companies with an annual global revenue of $25 billion or more and that offer to the public an online marketplace, an exchange, or a platform for connecting third parties would be designated as “platform utilities.”

These companies would be prohibited from owning both the platform utility and any participants on that platform. Platform utilities would be required to meet a standard of fair, reasonable, and nondiscriminatory dealing with users. Platform utilities would not be allowed to transfer or share data with third parties.

So, first thing on that: passing legislation is the job of Congress, not the President. And Warren is already in Congress. So if this is part of her Presidential platform, it seems like, maybe she should start by introducing such legislation now, while she's actually in the legislative body.

Second, while "fair, reasonable, and nondiscriminatory dealing with users" sounds nice -- and is used in other things such as FRAND patent licensing -- it's not entirely clear what it truly means in these situations. Everyone likes the words "fair," "reasonable" and "nondiscriminatory," but in the context of users on a platform, does it mean that internet platforms can no longer ban trolls for harassment? Because right now there are a lot of trollish people who are insisting that being banned from Facebook, Twitter or YouTube is unfair, unreasonable and discriminatory. Indeed, this seems like a huge gift to the trolls and grifters who pretend to be "conservative" and then whine when platforms cut them off. Certainly, at the very least this would lead to a huge burst of such lawsuits, as Warren's plan allows basically anyone to sue over this:

To enforce these new requirements, federal regulators, State Attorneys General, or injured private parties would have the right to sue a platform utility to enjoin any conduct that violates these requirements, to disgorge any ill-gotten gains, and to be paid for losses and damages. A company found to violate these requirements would also have to pay a fine of 5 percent of annual revenue.

This is a recipe for insane amounts of litigation -- often vexatious litigation, just seeking to ding a company for being "unfair" in its choices.

Incredibly, this includes "search results." Warren specifically calls out Google search as a "platform utility," and says that under her plan:

Google couldn’t smother competitors by demoting their products on Google Search.

And that sounds good if Google was legitimately "smothering competitors" by "demoting their products on Google search" but there's no evidence that it does. The very nature of search is that Google is expressing its opinion by ranking the search results in the order it thinks best serves you. If it believes that your particular site is not relevant, it's going to demote it. But, under Warren's plan, if you're not showing up at the top of Google results, you can sue for massive damages. In other words, SEO-by-litigation and anyone who isn't happy with where they show up is going to sue.

Indeed, in her plan, she links to the big NY Times article about the site Foundem that has been at the center of various antitrust challenges against Google over the past decade. And, as we wrote all the way back in 2010, Foundem's argument makes no sense. The company made a shopping search engine, and insists that it was anticompetitive that Google's search engine kept dropping Foundem's site in Google's search results further and further. But the reason for that was that when people were searching on Google for products, they wanted links to actual products and not to another search engine. Foundem's search results dropped not because Google suddenly feared competition from Foundem, but because pointing users to another search engine was a bad experience for users. Back in 2009 there was a great analysis that explained why Google downranked Foundem and it had nothing to do with competition, but because Foundem was a crappy link directory (with affiliate codes attached) that was basically just a spam site hoping to live off of Google traffic.

Now imagine if every such spam company could now sue Google for not ranking high enough? Is that really the world we want?

The second part of Warren's plan is to break up already consummated tech merger deals:

Second, my administration would appoint regulators committed to reversing illegal and anti-competitive tech mergers.

Current antitrust laws empower federal regulators to break up mergers that reduce competition. I will appoint regulators who are committed to using existing tools to unwind anti-competitive mergers, including:

Amazon: Whole Foods; Zappos
Facebook: WhatsApp; Instagram
Google: Waze; Nest; DoubleClick

Unwinding these mergers will promote healthy competition in the market — which will put pressure on big tech companies to be more responsive to user concerns, including about privacy.

First of all, I should note that just recently lots of people were totally up in arms over Donald Trump supposedly trying to interfere with the DOJ's analysis of the AT&T / Time Warner merger. And I'm curious if those people feel the same way about a potential President Warren announcing ahead of time -- without any actual investigation by a supposedly independent DOJ -- that it's okay to declare that they should be broken up? It certainly seems like the same form of bogus interference, even if for different reasons. The DOJ is supposed to be an independent agency for a reason. We shouldn't cheer when Donald Trump ignores that and we shouldn't cheer when any other President or Presidential candidate does it either.

Second, while I might find myself much more supportive of a more aggressive DOJ that blocks future acquisitions by these companies, I'm not sure I see how the specifically listed divestiture plans would... do much of anything (with the one possible exception of Google/Doubleclick, which I'll get to). While I'm sure that Amazon, Facebook and Google would grumble about breaking off all of the others, for the most part, all of the listed divestitures involve companies that were mostly left alone and run as separate subsidiaries, which don't necessarily have much to do with any of those companies' core business. Sure, there might be some revenue or growth hits in spinning those off, but it doesn't really change their fundamental ways of doing business. Amazon loses Zappos? Meh. It'll still sell lots of shoes and maybe ramp up its efforts there in a way that ends up making Zappos tough to sustain by itself. Google loses Waze? Well, it already has Google Maps which probably has more users anyway.

Facebook might be a little different, since Instagram and Whatsapp clearly seem to be a key part of Facebook's future strategy, but at least for now they're pretty separate.

The Google Doubleclick one could be a bigger deal, since that is a core part of Google's business. Warren's "plan" talks about Google buying up DoubleClick as if that were done for anticompetitive reasons, and pretending that the DOJ "waved through" the deal while ignoring the monopoly issues, leaving out the fact that it happened way back in 2007 when the marketplace was very, very different, and Google's current position was far from certain. And while Doubleclick, as part of Google, may end up handling a lot of the ad serving market, there are tons of alternatives. The online ad market is crammed with tons and tons of companies. It's not difficult to find confusing maps laying out the state of the market -- and many companies are looking to take down Google Doubleclick, which is often seen as the provider of last resort (it works, but the quality is shit and the payouts are worse).

In other words, this entire plan gets headlines (duh) because so many people are (perhaps reasonably!) angry at the power of big tech companies. But, very little in the actual plan makes much sense. The "platform utility" idea will lead to massive, wasteful, stupid lawsuits. The unwinding of old mergers will involve interfering with an independent agency, and seem unlikely to do much to change the main "concerns" that Warren raises in the first place.

And, again, none of this is to say we shouldn't be concerned about big internet companies with too much power. It's a perfectly reasonable concern, but just because you want to "do something" and "this is something," doesn't mean that it's the something we should do. The way to attack the positions of these big internet companies is to enable more competition -- and you do that by encouraging alternatives in the marketplace. This is why I'm actually hopeful that some of these companies will actually start to explore an idea of moving to protocols, rather than owning the whole platform themselves, or that we'll see new protocols springing up.

Meanwhile, if Warren were truly concerned about "monopolies" and a lack of competition, why isn't her plan looking at the lack of competition in the broadband and mobile markets -- cases where we have legitimate competition problems due to bad regulatory policies going back decades?

Filed Under: antitrust, big tech, breaking up, doj, elizabeth warren, fairness, internet, platform utilities
Companies: amazon, facebook, google

EU Commission Releases Plans To More Directly Regulate Internet, Pretending It's Not Regulating The Internet

from the this-is-an-issue dept

Well, this isn't a surprise. After all, we warned you that it was likely to happen, and we helped get together folks to warn the EU Commission that this was a bad idea, but the EU Commission has always seemed dead set on a plan that they believe will hold back big successful American internet firms, while fostering support for European ones. This week they made their first move by releasing details of some of their plans. This is all part of the "Digital Single Market" plan, which, in theory, makes a ton of sense. The idea is to knock down geographical regulatory barriers on the internet, such as geoblocking. And the first part of the EU's plan is right in line with that idea and makes perfect sense. It talks about getting rid of geoblocking and also making cross-border delivery of packages easier and less expensive -- basically making e-commerce work better. That's all good.

But it's the second part that is concerning, and that's where they start talking about updating "audiovisual rights" and the regulation of "online platforms." The audiovisual rights stuff is getting most of the press attention, because of silly rules like requiring video platforms to promote more European-created content.

Currently, European TV broadcasters invest around 20% of their revenues in original content and on-demand providers less than 1%. The Commission wants TV broadcasters to continue to dedicate at least half of viewing time to European works and will oblige on-demand providers to ensure at least 20% share of European content in their catalogues.

This is a silly protectionist measure that we've seen in various countries for TV for ages and it's a joke. If you want more people viewing European content have them make better content. Forcing content on people because it's "from Europe" isn't going to make anyone want to watch it if it sucks. It will also, of course, make life more difficult for new entrants who will have to make sure that enough of their content meets this arbitrary standard.

But the much more concerning stuff involves the regulation of the internet. Now, yes, the EU Commission basically tries to bend over backwards to say that this isn't about creating new regulations for the internet. And also to claim that they're not changing the "intermediary liability" regime as laid out in the E-Commerce Directive that is a decent, if unfortunately weaker, version of US intermediary liability protections, saying that platforms aren't responsible for actions of their users. But... there's a big "but" after those claims, and it basically undermines those claims. You can read the following and see them swearing no new regulations and no changes, but the four bullet points and the details buried in them suggest something entirely different:

Today's Communication on platforms does not propose a new general law on online platforms, nor does it suggest to change the liability regime set by the e-Commerce Directive.

The aim is to make sure that platforms can be created, scale up and grow in the European Union. To reach this goal we need a functioning Digital Single Market where online platforms (both startups and established market operators) are not hampered by heavy regulation.

Online platforms are already subject to EU legislation such as consumer and data protection rules, and competition law. New initiatives will only be taken to tackle any specific problems identified and only if it is established that better enforcement of existing rules is not sufficient to address these.

In our approach to online platforms, we will be guided by the following principles:

• a level-playing field for comparable digital services
• responsible behaviour of online platforms to protect core values,
• transparency and fairness for maintaining user trust and safeguarding innovation,
• open and non-discriminatory markets in a data-driven economy.

Let's go one by one. First the "level playing field." This is a popular line, but it's kind of meaningless. What does it even mean? Some companies are going to be more successful than others, or use different business models or strategies. And those, by their very nature, create a different kind of playing field. We should be worried when the government is arguing for tilting the playing field one way or the other. For example, in earlier discussions about this, there were arguments that YouTube's model was unfair, but Spotify's model was fine. Why should the government favor one over the other?

Also, within the details, they make it clear that, despite what was said above, this is about extending new censorship regulations to platforms. "Data protection" regulations include things like "the right to be forgotten." Recognize that when reading this:

In the new e-Privacy Directive the Commission will consider, for example, extending data protection obligations currently applicable only to telecoms companies to platforms.

The next one is the big concern, because it's so... broad: "Ensuring that online platforms behave responsibly." What does that mean? Who determines what's "responsible?" Because you have the RIAA and MPAA insisting that "responsible" means vast censorship of platforms to block anything that might even remotely be infringing. Or you have the FBI insisting that "responsible" means keeping log files for a really long time and not encrypting stuff (or encrypting it with holes in it). There's a lot of wiggle room within "behaving responsibly" that should be a cause for concern.

And, indeed, it looks like the EU Commission is buying the MPAA/RIAA's view of what "behaving responsibly" means:

In the third quarter of 2016, the Commission will propose a copyright reform package aiming to achieve a fairer allocation of value generated by the online distribution of copyright-protected content by online platforms providing access to such content.

This is a fairly loud dog whistle to the RIAA. In the past few months the RIAA has been going on and on about what they're ridiculously calling the "value gap" in online platforms. In short that "value gap" is that internet companies are making lots of money... while record labels are not. To them, that's because of some sort of unfairness in the law. To most everyone else it's because the markets have shifted, and the record labels failed to adapt. And, really, if we're talking about unfair markets and "fair allocation of value" why didn't anyone complain through the 70s, 80s and 90s when the laws were so tilted that the labels basically got all of the "allocation of value" while the actual artists got stiffed?

And, of course, despite the EU Commission initially saying that there would be no impact on the intermediary liability protections in the E-Commerce Directive, they pretty quickly walk that back in the details:

In relation to the liability regime of online intermediaries established by the e-Commerce Directive, the Commission will assess:

• the need for guidance on the liability of online platforms when putting in place voluntary measures to fight illegal content online [starting in the second half of 2016], and
• the need for a formal notice-and-action procedures [after taking due account of the updated audiovisual media and copyright frameworks].

Got that? So now the government will be pushing for "voluntary measures" to take down content. But since it's the government looking into it, it's not so voluntary, is it? And then a "notice and action procedure" which means "notice and takedown." In the US, obviously, we have that for copyright, which has created a massive censorship regime, but we don't have such a setup for other kinds of content. The EU, generally, does have a sort of notice-and-takedown for things like defamation, and it looks like that may expand.

Oh, and then the ever amorphous censorship of "hate speech," which no one ever seems to define clearly:

In addition to revised audiovisual media rules, the Commission will further encourage coordinated EU-wide self-regulatory efforts by online platforms in tackling illegal content online. The Commission is currently discussing with IT companies on a code of conduct on combatting hate speech online.

Sure, I dislike hate speech as much as the next guy, but attempts to suppress hate speech tend to lead to straight up government censorship or as a way to attack speech governments don't like.

Next up, we've got: "Fostering trust, transparency and ensuring fairness." Yup, there's that "fairness" again. Obviously, fostering trust and transparency are actually things I'm very, very supportive of. But I'm not clear on what the government needs to be doing here, when there are often good ways for the market to do that itself. Companies that are more transparent generate more trust by themselves. And many new platforms rely on public trust to actually provide any value. So, sure, I don't want fake reviews online either, but isn't that something that platforms can handle by themselves?

The Commission will encourage industry to step up voluntary efforts, which it will help in framing, to prevent trust-diminishing practices (in particular, but not limited to, tackling fake or misleading online reviews) and monitor the implementation of the self-regulatory principles agreed on comparison websites and apps.

So, while we applaud the idea of doing away with geoblocking, as well as the general principles of fairness, trust and transparency, it's extremely frightening to think about what the government has to do in this arena at all, since almost all of the suggested ideas are wide open to abuse in the form of just attacking platforms the government or legacy industries don't like, rather than focusing on what actually creates the most value for the public.

Filed Under: content, copyright, eu, fairness, intermediary liability, internet, openness, platforms, regulations, transparency

Grammy's Can't Get Streaming Or Audio Right, But Assure You That Free Spotify Is Kinda Like ISIS

from the say-what-now? dept

We already wrote about how CBS fucked up internet streaming of the Grammy's on Monday night, but a few folks have sent in the various stories about how Grammy's boss Neil Portnow did his now annual whine about how evil tech companies don't pay musicians enough, and how if we don't start giving musicians more money ISIS will win and the 12 year old who just performed on piano might starve or something. The crux of his talk was to whine that when people stream a song it might earn those associated with the music "a fraction of a penny" and somehow that's unfair:

"So, what does hearing your favorite song mean to you?" asked Neil Portnow, the president of the National Academy of Recording Arts and Sciences, which awards the Grammys.

He then explained that when people use streaming-music services, the artists and others behind those songs earn "a small fraction of a penny" per song.

"Isn't a song worth more than a penny?" he asked, as the audience cheered. "You bet. Listen, we all love the convenience and we support technologies like streaming that connects us to that music. But we also have to make sure the creators and artists — like Joey over there — grow up in a world where music is a viable career."

Behind him as he said this, was this fabulous clip art visual aid (seriously, can't the Grammy's come up with something a little better as a graphic?) And, yes, there was a weird reference to ISIS and the Paris attacks as a reason for paying musicians more. While there may have been applause inside the theater, the line seemed to flop everywhere else:

...did the RIAA guy just slam Spotify and ISIS in the same sentence?? #GRAMMYs

— ToddInTheShadows (@ShadowTodd) February 16, 2016

grammys have now turned into a spotify attack ad

— josh lewis (@thejoshl) February 16, 2016

Oh my god. This anti Spotify ad at #GRAMMYs is so ridiculous.

— Christina Warren (@film_girl) February 16, 2016

Oh the #GRAMMYs just took a turn down anti-streaming. Doesn't Joey deserve more than a penny? C'mon Larry & Mark!

— Danny Sullivan (@dannysullivan) February 16, 2016

What would the Grammys be without Neil Portnow berating a portion of its audience?

— Chris Barton (@chrisbarton) February 16, 2016

Not sure what that guy at the Grammys is talking about—when I was a kid CDs were 8 for a penny and artists did great pic.twitter.com/FA91DwI5vV

— Dan McQuade (@dhm) February 16, 2016

Of course, the whole penny thing is misleading and ridiculous. It's emotional bullshit that Portnow is using because the truth makes the recording industry who pay his salary look terrible. And it's this: streaming actually pays artists more per listener than other forms of music acquisition. Multiple studies have shown that when you figure out the cost per listen, streaming is higher than radio, CDs or paid downloads. Sure a fraction of a penny sounds like a small amount, but the missing implicit suggestion is that the streaming companies like Spotify are making much more than that per stream. They're not. Spotify pays significantly more than half of their revenue towards licensing (and often the reason musicians aren't getting paid is because the record labels are keeping most of it from the artists.

It also ignores how free streaming services have actually helped bring revenue back into the music industry by decreasing piracy rates drastically and getting people to move to legal options. Demanding ever higher rates only serves to cause these kinds of companies to fail. And all that will do is drive people back to totally unauthorized services where artists and copyright holders don't get any money directly.

Of course, this is the way things always work for the legacy recording industry. They see a new technology -- a technology they didn't support, don't understand, and fought against initially -- suddenly making them some money and they start demanding more and more and more until they kill the golden goose. They do this over and over again. Remember how ringtones were suddenly making the industry money? They kept demanding more money for them, and no one cares about ringtones any more. Or how about music video games? Once again, the record labels started insisting that they weren't getting paid enough, and look at what happened to those games?

It's one thing to negotiate different payment structures, but the constant whining and bullshit about "fairness" when "fair" appears to be something like 200% of any revenue any music tech company makes is beginning to wear a bit thin, don't you think? Once again, these are the same people who fought tooth and nail against any of these technologies, and now that they actually got built AND are helping the industry and musicians actually make some money, these same talking heads whine that it's not enough? Really? Go build your own damn technology service, and you'll quickly discover that it's not that easy. And then maybe they'll stop whining with bullshit claims. But that seems unlikely. The whining never ceases. And yet they call fans "entitled"?

Filed Under: fairness, grammy's, neil portnow, rates, royalties, streaming
Companies: spotify

UK Court Tells Online Mapping Company It's Not Illegal For Google To Also Offer Online Maps

from the it's-called-competition dept

It's still somewhat strange to me to see how badly some companies react to basic competition. Yes, sometimes that means companies lose, but it doesn't automatically make any and all competition unfair. An online map company, StreetMap.Eu sued Google a few years ago, claiming that Google's entrance into the online mapping world, and specifically including maps in search results, was unfair competition. However, the UK High Court has now, rightfully, rejected such a claim. The basis of the ruling seemed rather straightforward:

But the judge ruled that the introduction by Google of the new-style Maps OneBox in 2007 was "not reasonably likely appreciably to affect competition in the market for online maps".

The judge added that, in any event, Google's conduct was " objectively justified".

StreetMap's director Kate Sutton, however, is insisting that the company will appeal and says the whole thing is "unfair."

"The decision is unfair for small businesses," Sutton said, and added that StreetMap would attempt to appeal against the judgment, which found that Google's search dominance had not directly harmed competition in the UK's online mapping market.

I'm kind of curious what Sutton thinks is the appropriate remedy here: that no larger company should ever be allowed to offer services useful to consumers, which might somehow be "unfair" to smaller competitors? I'm a huge supporter of more competition in innovative services, but that should be driven by what's best for consumers, not what's best for small companies. Besides, plenty of small companies figure out how to innovate and take on large companies. The fact that her company has chosen not to do so is not Google's fault. Hell, Google itself, when it showed up entered a very crowded market and was laughed at for being such a small player in a market dominated by established companies. And what happened there?

Filed Under: antitrust, competition, consumer benefit, fairness, innovation, online maps, uk
Companies: google, streetmaps

With Fixed Costs And Fat Margins, Comcast's Broadband Cap Justifications Are Total Bullshit

from the pay-more-for-less dept

For a while Comcast tried to pretend that its slowly-expanding usage cap "trials" were about managing network congestion. At least until leaked Comcast documents, the company's top engineer, and the cable industry's top lobbyist all confirmed that justification was bullshit (caps don't really help manage congestion anyway). Since then, Comcast has veered away from any hard technical explanation for the glorified price hike, instead focusing on the ambiguous claim that these new "flexible" pricing models bring "fairness" to the broadband industry.

To sell this evolved line of horse excrement, Comcast CEO Brian Roberts recently proclaimed the company was simply trying to create a more "balanced relationship" with its customers. After all, Roberts told attendees of a recent conference, broadband is just like electricity and gasoline:

"We don’t want anybody to ever not want to stay connected on our network, but just as with every other thing in your life, if you drive 100,000 miles or 1,000 miles, you buy more gasoline. If you turn on the air conditioning to 60 vs. 72, you consume more electricity. The same is true for usage, so I think the same for a wireless device. The more bits you use, the more you pay."

The problem with that narrative? Broadband is absolutely nothing like gasoline or electricity, because for major ISPs' like Comcast -- the price it pays for bandwidth remains relatively fixed despite usage, so whether an individual user consumes 300 GB or 400 GB doesn't impact Comcast's bottom line in the slightest. Meanwhile, with Comcast customers paying some of the highest prices in any developed nation, any Comcast earnings report will show you that Comcast's broadband margins remain plump; more than capable of paying for necessary infrastructure upgrades several times over.

That there's no financial or technical justifications for fixed-line usage caps is a point made time and time again, and really can't be repeated often enough. As the CCG Consulting POTs and PANs blog recently noted, Comcast really faces two primary costs when it comes to providing you bandwidth: transit and raw bandwidth. And in both instances, these costs are not only immensely manageable thanks to Comcast's huge size, but by and large remain static:

At Comcast’s size they either have a direct physical presence at each major Internet POP or they have an arrangement with some carrier who does. Due to their sheer size, I have to imagine that Comcast’s cost for transport on a per-megabit basis is lower than anybody else in the industry other than maybe AT&T, who is one of the owners of the Internet structure.

Transport can be a major cost for an ISP that operates a long distance from a major POP. I have small ISP clients that spend between $10,000 and $20,000 per month on transport, which is a lot if you only have a few thousand customers. But for Comcast this cost has to be minuscule on a per customer basis. And the cost is fixed. Once you buy transport to a market it doesn’t matter how much bandwidth you shove through the pipe. So this cost doesn’t increase due to customer usage.

The analysis goes on to note that Comcast's other major cost, raw bandwidth, is probably around $2 per subscriber, and also remains largely fixed:

"An ISP’s total cost for an Internet port is based upon the average of the busiest times of the month. For instance, a small ISP might use 500 raw megabits of aggregate usage on most evenings, but if their customers have a few nights per month where they use 700 megabits, then the ISP pays for that larger amount for the whole month.

The interesting thing about this pricing structure is that the ISP pays the same every day of the month whether the customers are using the data or not. The cost to Comcast wouldn’t change if any one customer, or even all of the customers in a city, were to use more data, as long as that usage doesn’t create a new fastest day of the month.

Admittedly, Comcast's costs get more complicated given it sells transit and gets paid by companies like Netflix for direct interconnection. But the point remains that, by and large, its bandwidth costs largely remain fixed, and despite significant growth, companies of Comcast's size are paying less today for raw bandwidth than they were ten years ago. And they're pulling in more money than ever. Despite claims of an exaflood, the revenues Comcast makes on broadband far, far exceed the money Comcast needs to spend on network infrastructure.

The bottom line is there's simply no financial or technical justification for what Comcast is doing. The only reason Comcast is imposing usage caps is to impose glorified price hikes on noncompetitive broadband markets, to unfairly skew the playing field in favor of its own services, and to protect legacy TV revenues from Internet video. Every other excuse the company bandies around is utter and complete drivel, designed to pander to a public that believes bandwidth pours from a magical, elven spigot buried deep in the Earth.

Filed Under: brian roberts, broadband, broadband caps, data caps, fairness
Companies: comcast

With 12% Of Comcast Customers Now Broadband Capped, Comcast Declares It's Simply Spreading 'Fairness'

from the not-really-helping dept

Comcast continues to expand its usage cap "trial" into the company's less competitive markets, hitting these lucky customers with a 300 GB monthly usage cap. These users also now face a $10 per 50 GB overage fee should they cross this arbitrary limit, and in a new wrinkle -- have the luxury option of paying a $30 premium should they prefer to dodge these usage allotments altogether. To the non-lobotomized among us, Comcast's intention is obvious: drive up the cost of broadband to help counter the inevitable loss of TV revenues caused by Internet video.

With Comcast's usage cap "trial" slowly creeping past around 12% of the company's customer base, Comcast's slow stranglehold over the uncompetitive U.S. broadband market appears to have finally gotten the attention of outlets like the Associated Press. Having been forced to give up the bogus claim that usage caps are necessary due to congestion years ago, Comcast can only try and defend the practice to the AP by insisting it's an issue of "fairness":

"About 8 percent of all Comcast customers go over 300 GB, the company says. Data caps really amount to a mechanism "that would introduce some more fairness into this," says Comcast spokesman Charlie Douglas."

Except there's nothing fair about it. A tiny fraction of Comcast customers are absolute gluttons (we're talking dozens of terabytes), and Comcast could easily nudge those users toward business-class lines without imposing an entirely new pricing structure. Instead, Comcast customers who used to enjoy pricey but unlimited data are suddenly facing usage restrictions and significant additional fees. And indeed, judging from some of the customers the AP spoke to, most users can see through Comcast's bullshit justification:

"Matthew Pulsipher, 23, lives in the Atlanta metropolitan area and decided to pay Comcast's extra fee for unlimited data to support his family's streaming of shows from Netflix and Amazon Prime Video. But he's not happy about it. "I think the idea of limiting your usage is absolutely insane," Pulsipher said. "It would make sense if the cap was 2 terabytes, but 300 is just low enough to punish streaming."

All Comcast's doing here is taking advantage of a lack of broadband competition to price gouge a captive audience. And while only 8% may cross the cap now, Comcast clearly hopes to have usage caps in place before Internet video (and 4KTV, and virtual reality cloud-driven gaming) hit critical mass. It just hopes if it moves really really slowly -- and pretends it's an agent of altruism -- most people will be too stupid to notice what's happening.

Filed Under: broadband caps, data caps, fairness, price discrimination
Companies: comcast

DailyDirt: Is It Really That Hard To Cut A Cake?

from the urls-we-dig-up dept

Life is filled with small problems. Some more important than others. Mathematicians have attempted to solve some of these conundrums, and apparently one somewhat popular task is cutting things up. Here are just a few (useful?) examples of math applied to the task of cutting a cake.

• This video demonstrates how to cut a cake in a way that maximizes the amount of moist cake that can be eaten if the cake isn't eaten in a single sitting, but over the course of days. This is actually a pretty sad way to eat a cake, assuming you have no friends or don't want to share your cake so that you have to eat it all by yourself. [url]
• If you've ever heard of the Banach-Tarski Paradox, you might think it should be possible to cut up a cake in such a way that you never run out of cake. The proof relies on the Axiom of Choice, but too bad real cake isn't infinitely divisible. [url]
• Everyone knows the classic "you cut, I choose" method for cutting up a cake fairly between two people. Not everyone knows the method for cutting a cake fairly between n number of people.... [url]

If you'd like to read more awesome and interesting stuff, check out this unrelated (but not entirely random!) Techdirt post via StumbleUpon.

Filed Under: axiom of choice, banach-tarski paradox, cake, distribution problems, fairness, food, math, proofs

House Judiciary Committee Denies That Its SOPA Hearing Is Stacked In Any Way

from the beltway-delusions dept

We've already discussed how the deck is completely stacked in favor of SOPA at the House Judiciary Committee meetings. Considering they invited five folks who are already in favor of the bill, and only one against, you'd think that this was undeniable. But in the intellectually dishonest vortex of Congress, where apparently you can deny reality and stick your tongue out at anyone who calls you on it, a nameless Judiciary Committee staffer has insisted that nothing could be further from the truth, and the hearings are perfectly well balanced.

�Throughout the legislative process, we have met with groups and companies with different views on how to address rogue websites. Earlier this year, the Committee held a hearing on the problem of rogue websites at which the public interest group perspective was represented by the Center for Democracy and Technology. We also heard from Floyd Abrams�a well-known constitutional scholar�who affirmed that the Stop Online Piracy Act is constitutional under the first amendment and provides sufficient due process. And tomorrow, we will hear from a representative of Google, which opposes legislative efforts to rein in rogue websites. Assertions that the legislative process has been stacked against the opposition are inconsistent with the facts.

�This bill has strong bipartisan support in the House Judiciary Committee. The theft of America�s IP costs the U.S. economy more than $100 billion annually and results in the loss of thousands of American jobs. We must protect America�s intellectual property from rogue websites. The Stop Online Piracy Act helps stop the flow of revenue to rogue websites and ensures that the profits from American innovations go to American innovators.�

Very little in that statement is true or accurate. First of all, Floyd Abrams is hardly a representative of the public -- as his outreach was on behalf of the MPAA. And, at the same time over 100 law professors, practitioners and scholars -- including many of the brightest names in the field -- have written a letter disagreeing with Abrams (and they did so on their own behalfs, not for a client). It's really incredibly sleazy for the committee to suggest that Abrams' testimony here is somehow part of the other side's views.

Separately, as we explained, Google is hardly the only voice speaking out against this bill, and putting them on the panel is the most cynical of moves by the committee. After all, they've been trying to pretend that only Google is upset about this bill, so putting Google as the sole "against" speaker, makes them easier to marginalize. Even worse, while it appears that Google shares some of the concerns of others lined up against this bill, its concerns are fairly specific to Google. It's unlikely to address the concerns of tons of other technology companies, content creators, innovators and the like. And, on top of that, there are no consumer, public or human rights organizations at the hearing.

This is the most insane part of all. Remember, copyright's sole purpose is to benefit the public. To have no one representing the public is the ultimate travesty, and the ultimate insult to the very core of copyright law.

Only inside the beltway does "bipartisan" matter. And, for what it's worth, the bill also has strong bipartisan opposition as well. This isn't a partisan issue. Whether it has bipartisan support or opposition only matters in the board games in the minds of Congressional staffers who think this is a game of red vs. blue, rather than mucking with the actual economy.

Finally, as for "the theft of America�s IP costs the U.S. economy more than $100 billion annually and results in the loss of thousands of American jobs" that's bullshit again. First of all, it's infringement, not "theft." That the "House Judiciary Committee" gets this basic terminology wrong again shows how they're insulting copyright law. Second, the $100 billion number has been debunked so many times -- including by the Government Accountability Office -- that it's really shameful to even bring that number up, and shows that the depths of intellectual dishonesty going on here. They'll cite any debunked number to prove a point.

Let's face facts: the Judiciary Committee is simply too afraid to hear from those who oppose the bill, because we have the facts, the public and the law on our side. And when you're trying to ram through a bad bill, Congress has no time for anything like that. So it sticks its head in the sand and pretends that's the way the world really is.

Filed Under: fairness, hearings, judiciary committee, reality, sopa

House Judiciary Committee SOPA Hearings Stacked 5 To 1 In Favor Of Censoring The Internet

from the what-are-they-afraid-of dept

Apparently the folks behind SOPA are really scared to hear from the opposition. We all expected that the Judiciary Committee hearings wouldn't be a fair fight. In Congress, they rarely are fair fights. But most people expected the typical "three in favor, one against" weighted hearings. That's already childish, but it seems that the Judiciary Committee has decided to take the ridiculousness to new heights. We'd already mentioned last week that the Committee had rejected the request of NetCoalition to take part in the hearings. At the time, we'd heard that the hearings were going to be stacked four-to-one in favor of SOPA. However, the latest report coming out of the Committee is that they're so afraid to actually hear about the real opposition that they've lined up five pro-SOPA speakers and only one "against."

Why is the Judiciary Committee so afraid to hear the concerns of the wider internet industry?

The five "pro" speakers are the Register of Copryights, someone from the MPAA, someone from Pfizer, someone from MasterCard, and someone from the AFL-CIO. The choice of MasterCard is deliberate, since Visa is against the bill -- because Visa recognizes that supporting a bill that requires them to cut off customers based on accusations of infringement is going to be a huge burden, and one that isn't good for their own customers.

Furthermore, the "one" against SOPA is going to be Google. This is a strategic choice, because the pro-SOPA folks know that Google is easy to dismiss on this topic, because they'll claim (not accurately) that Google just wants to profit from infringement. Google is already under a lot of scrutiny in Congress, and so it makes it much easier for pro-SOPA supporters to say that "ah, the only opposition is Google." And, yet, that's not true. Companies throughout the tech and internet industries have expressed concerns. Facebook, Twitter, Mozilla, eBay and over 160 startups have all come out against the bill. This isn't "just a Google issue." This is an issue of the entertainment industry trying to change the fundamental legal and technical framework for how the internet has functioned -- and in doing so, creating tons of liability and compliance costs for the part of the economy that is growing and has been creating jobs. Just because Hollywood is jealous, doesn't mean that they should get to use Congress to punish the industry that's doing well.

Either way, it's quite stunning that the Committee has decided to go so far in stacking the deck, and it shows just how unwilling they are to hear the real concerns about the bill.

Filed Under: copyright, fairness, hearings, industry, lamar smith, sopa
Companies: afl-cio, google, mastercard, mpaa, pfizer

Could Collection Societies Help Up-And-Coming Artists With A 20/80 Distribution System?

from the one-idea dept

It's no secret that I'm not a fan of music collection societies in general. I tend to think that once they get the right to collect they begin to abuse that power in ways that actually harm musicians and songwriters more than help them. That's because once they're given a right to demand payments, they continually look to expand that right: covering more areas and increasing the amount they can demand.

While, at first, that might seem like a good thing for the musicians and songwriters they represent, what many don't take into account is the wider repercussions and unintended consequences. For example, by making music more expensive to play, they actually take away a lot of the incentive for many places to play music -- thereby cutting down on promotional venues for certain artists. This has hit coffee shops and other small venues especially hard, and that's quite a problem since so many musicians actually get their start performing at various open mic nights. The second problem, of course, is in distribution. How do these collection societies accurately distribute money. By their very nature, they really can't track how often songs from less-well-known artists and songwriters are played, and so they often just focus on bigger acts -- effectively taking money that should go to smaller artists and giving it to bigger artists! If you catch representatives from those groups off-guard, they even seem willing to admit that, such as the time that a BMI exec responded to such criticism from a songwriter who wasn't getting paid: "I would like to tell him is that he needs to write a hit song."

Andrew Dubber has been thinking about this issue, and is wondering if there might be a slightly better solution that would help up-and-coming artists. His idea is that these collection societies should take 20% of their overall pot of money, and divide it equally among the lower 80% of the musicians and songwriters who are members. It wouldn't be that much money, but it would give them all some money. The remaining 80% of the collection revenues would still be handed out as usual, using whatever techniques the collection societies use to figure out who gets what. My first reaction on hearing this is that it would get people to sign up for a chance at "free money," making it something like a welfare system for musicians. But, Dubber points out in the comments that in order to qualify, you'll still need to have a song that was used somewhere else. You can't just say you're a musician.

I'm still not totally convinced that this would work, and I'm also not convinced that the collection society setup is even worth saving at all. But if such societies are going to be around (and it's almost certain they're not going anywhere), then we might as well look at ways to make them actually help more musicians, rather than simply propping up the top of the top, while holding back new comers.

Filed Under: collection society, distribution, fairness, music