Broadcom Gets a Wrist Slap For Monopolizing Cable Box, Modem Markets

from the do-not-pass-go,-do-not-collect-$200 dept

While most folks didn't notice ahead of the holiday weekend, the FTC on Friday announced it would be giving chipmaker Broadcom a bit of a wrist slap after the agency found it had become an "illegal monopoly." In the FTC's complaint (pdf), the agency notes that Broadcom "illegally monopolized" both the cable modem/gateway and cable set top box markets by preventing its customers from buying products from other vendors. It did this by forcing both OEMs and service providers into long-term agreements that prevented them from purchasing chips from Broadcom's competitors, then bullying them if they went off script:

"These agreements required customers to purchase, use or bid Broadcom’s chips on an exclusive or near-exclusive basis. Broadcom entered these exclusivity and loyalty agreements with at least ten OEMs, including those with the most extensive engineering and design capabilities and the strongest ties to service providers. And Broadcom entered similar agreements with major U.S. and other service providers. By entering exclusivity and loyalty agreements with key customers at two levels of the supply chain, Broadcom created insurmountable barriers for companies trying to compete with Broadcom."

The charges follow similar accusations in Europe. As we've long noted, the cable set box market has long been a monopolized mess on several layers. One, on the way Broadcom controls chipsets. But also in the way that cable giants generate $21 billion annually forcing consumers to rent cable boxes that would be far cheaper to buy outright. Fortunately streaming has put a dent in at least some aspects of this problem, even though cable TV with a traditional set top box remains the dominant delivery avenue for television for now (Broadcom also provides chipsets for streaming hardware).

According to the FTC Broadcom won't be seeing any financial penalty for its efforts to monopolize the modem and cable box chipset market, but a new FTC order (pdf) bans the company from doing so moving forward (for however long the FTC can bother to pay attention):

"Under the proposed consent order, Broadcom will be prohibited from entering into certain types of exclusivity or loyalty agreements with its customers for the supply of key chips for traditional broadcast set top boxes and DSL and fiber broadband internet devices. Broadcom also must stop conditioning access to or requiring favorable supply terms for these chips on customers committing to exclusivity or loyalty for the supply of related chips. And the proposed order prohibits Broadcom from retaliating against customers for doing business with Broadcom’s competitors."

The 4-0-1 vote (new FTC boss Lina Khan did not participate) is just a small dent in a larger problem in both telecom, cable, and the shifting cable TV market. Namely the lack of overall competition in broadband (which opens the door to unnecessary usage caps and other dodgy efforts to hamstring streaming competitors), as well as persistent gatekeeper issues, like the ongoing practice of forcing consumers to shell out thousands in rental fees for crappy cable set top boxes and streaming hardware alike.

Filed Under: antitrust, cable modem, cable set top box, competition, ftc, monopoly

Stop Pretending The Trump GOP Genuinely Cares About Monopoly Power

from the gullible-and-adorable dept

Over the last year or two, a constant drumbeat has permeated tech news coverage. It goes something like this: the GOP is embracing a "populist" agenda by standing up to "big tech." The modern Trump GOP (with heroic consumer champions like Josh Hawley and Marsha Blackburn in the lead) we're told, have become stalwart opponents of monopolization, especially in tech. They're just super concerned about what this power means for free speech, especially given that conservative voices are routinely "censored" on the internet.

One problem. It's all bullshit. And there's a long line of journalists and experts who still somehow haven't quite figured that out yet. Or have figured it out but are too afraid of upsetting readers or advertisers to be honest about it.

Case in point: the New York Times, which this week explored how the GOP's interest in "reining in big tech" has stalled because "solutions" to modern tech problems could hurt revenues or don't include adequate hand-wringing over "conservative censorship":

"The Republicans’ chief objections to the report are that some of the legislative proposals against the tech giants could hamper other businesses and impede economic growth, said four people with knowledge of the situation. Several Republicans were also frustrated that the report didn’t address claims of anti-conservative bias from the tech platforms. Mr. Buck said in “The Third Way” that some of the recommendations were “a nonstarter for conservatives."

The Times, like most big outlets, proceeds from the assumption that the Trump GOP genuinely cares about reining in "monopoly power" in technology. But that gives the GOP way more credit than it has earned or deserves, and helps prop up bad faith bullshit as legitimate grievance.

For one, the GOP's breathless concerns about "monopolization" aren't apparent anywhere else. As the GOP freaks out over "big tech," for example, "big telecom" has been allowed to effectively guard the chicken house and eat the lion's share of the chickens. The GOP-controlled FCC effectively neutered itself at AT&T's and Comcast's request. Terrible job and competition killing telecom mergers have been repeatedly, rubber stamped by the GOP. Similarly there's zero evidence of any serious attempt to rein in other monopolized sectors from banking and airlines to pharmaceutical and energy.

There's also still no evidence that "conservatives are being censored." As in, none. Oddly, the New York Times can't be bothered to mention this. The lion's share of those being kicked offline are being kicked offline because they're simply...behaving like assholes on the internet. And in fact, there's far more evidence that platforms like Facebook are ignoring their own rules to protect right-wing speech because it's more profitable to let inflammatory bullshit bumble around the information ecosystem (see: Breitbart being a trusted news ally and nobody giving a damn that Ben Shapiro games Facebook systems to inflate traffic).

Here's the thing. This steady flood of shitty Section 230 bills aren't about policing monopoly power. And folks like Marsha Blackburn and Josh Hawley, who've never had a single bad thing to say about telecom monopolies, couldn't give any less of a shit about monopoly power. They do however care about political power. And the over-arching goal right now is to apply enough pressure on Silicon Valley giants that they don't start adequately policing political disinformation. Because if they do, many of the cornerstones of the modern Trump GOP (race baiting, divisive bullshit, inflammatory garbage, rampant disinformation) fall apart.

Yes, Democrats have plenty of bad ideas and frequently can be found doing nothing or making things even worse. Congress needs a reboot and fresh blood on a tragic scale. But that doesn't change the fact that the entire, multi-year GOP quest to tackle "big tech's monopoly power" has never actually been about monopoly power. It's about political power and money. It's about trying to shovel more ad revenue to accountability-immune telecom monopolies or Rupert Murdoch. It's also about preventing anybody from tackling the mountains of hateful internet bullshit that has become the cornerstone of Trumpism.

And despite countless gullible news reports and experts eager to portray GOP "big tech" pearl clutching as a good faith, earnest examination of the very real problems popping up in tech, it's simply not. And those who continue to pretend otherwise are part of the problem.

Filed Under: antitrust, big tech, gop, josh hawley, marsha blackburn, monopoly, republicans

It Was Nice While It Lasted: 9th Circuit Rejects Lower Court Ruling On How Abuse Of Patent Monopolies Can Violate Antitrust

from the wait,-what dept

Last year we had a detailed post about judge Lucy Koh's district court ruling that outlined exactly how Qualcomm abused its patents in an anticompetitive way to shake down the entire mobile phone industry for decades. This was in a case that was brought by the FTC and it was a stunning ruling on multiple accounts. First, it's rare for a court to recognize how patents and copyrights grant monopoly rights that can be abused in violation of antitrust rules. Second, it exposed a stunning degree of anticompetitive behavior on the part of Qualcomm.

Unfortunately, this week, the 9th Circuit overturned that ruling, though did so in a somewhat confused manner. Indeed, this ruling may significantly limit any kind of antitrust activity (at least in the 9th Circuit).

There are a lot of details, but the key element at stake was Qualcomm's "no license, no chips" rules. No company could buy Qualcomm chips, which were necessary for mobile devices, without licensing Qualcomm's entire patent portfolio. This snippet from the lower court ruling gives you the basics:

These high royalties reflected an unusual negotiating tactic called "no license, no chips." No one could buy Qualcomm's cellular chips unless they first signed a license to Qualcomm's patent portfolio. And the terms of these patent deals were heavily tilted in Qualcomm's favor.

Once a phone maker had signed its first deal with Qualcomm, Qualcomm gained even more leverage. Qualcomm had the right to unilaterally terminate a smartphone maker's chip supply once the patent licensing deal expired.

"If we are unable to source the modem, we are unable to ship the handset," said Motorola executive Todd Madderom in a deposition. "It takes many months of engineering work to design a replacement solution, if there is even a viable one on the market that supports the need."

That made Qualcomm's customers extremely vulnerable as they neared the expiration of a patent licensing deal. If a customer tried to negotiate more favorable terms—to say nothing of formally challenging Qualcomm's patent claims in court—Qualcomm could abruptly cut off the company's chip supply.

But, it got worse. The licensing terms for the patents required that you paid based on every device sold even if your devices did not include Qualcomm chips. Basically, even if you chose not to use Qualcomm's chips, you still had to pay for them. That seemed obviously anticompetitive, because if someone is already paying for Qualcomm's technology, why then pay another company as well?

However, the 9th Circuit rejects all of that as anticompetitive. Why? Because it says it wasn't anticompetitive, it was just hypercompetitive.

This case asks us to draw the line between anticompetitive behavior, which is illegal under federal antitrust law, and hypercompetitive behavior, which is not.

The ruling opens with a weird hagiography of Qualcomm. I mean, parts of it read straight out of a puff piece advertorial:

Qualcomm’s patent licensing business is very profitable, representing around two-thirds of the company’s value. But Qualcomm is no one-trick pony. The company also manufactures and sells cellular modem chips, the hardware that enables cellular devices to practice CDMA and premium LTE technologies and thereby communicate with each other across cellular networks.

A key part of the ruling is arguing that Qualcomm's "no license, no chip" plan in selling to OEM's is sensible because of the concept of patent exhaustion. If you don't recall, back in 2008, in the LG v. Quanta case, the Supreme Court made the correct call that patent rights "exhaust" upon sale. That is, if I sell my patent-protected widget to Company A, and Company B buys it and includes it in its contraptions, I can't then sue Company B. This makes sense because it's the same chip that was already legally purchased.

Yet, the 9th Circuit panel seems to conclude that this kind of ruling forced Qualcomm into its "no license, no chip" business model. Indeed, the panel seems in awe of such a business model -- jacking up prices and limiting competition by using the Supreme Court's rule as leverage to cut out a key part of the market.

Qualcomm reinforces these practices with its so-called “no license, no chips” policy, under which Qualcomm refuses to sell modem chips to OEMs that do not take licenses to practice Qualcomm’s SEPs. Otherwise, because of patent exhaustion, OEMs could decline to take licenses, arguing instead that their purchase of chips from Qualcomm extinguished Qualcomm’s patent rights with respect to any CDMA or premium LTE technologies embodied in the chips. This would not only prevent Qualcomm from obtaining the maximum value for its patents, it would result in OEMs having to pay more money (in licensing royalties) to purchase and use a competitor’s chips, which are unlicensed. Instead, Qualcomm’s practices, taken together, are “chip supplier neutral”—that is, OEMs are required to pay a per-unit licensing royalty to Qualcomm for its patent portfolios regardless of which company they choose to source their chips from.

But, what does Qualcomm "obtaining the maximum value for its patents" have to do with anything here? The only way to obtain maximum value for your patents is, by definition to be anticompetitive.

And here's where the ruling gets truly bizarre. It says that because the device manufacturers (the OEMs) don't compete with Qualcomm, then it's clearly not anticompetitive.

Although Qualcomm’s licensing and modem chip businesses have made it a major player in the broader cellular technology market, the company is not an OEM. That is, Qualcomm does not manufacture and sell cellphones and other end-use products (like smart cars) that consumers purchase and use. Thus, it does not “compete”—in the antitrust sense—against OEMs like Apple and Samsung in these product markets. Instead, these OEMs are Qualcomm’s customers.

Later it goes even further:

Thus, a substantial portion of the district court’s ruling considered alleged economic harms to OEMs—who are Qualcomm’s customers, not its competitors—resulting in higher prices to consumers. These harms, even if real, are not “anticompetitive” in the antitrust sense...

But... that gets almost everything backwards. First off, for years, antitrust experts have been saying the proper determination of whether or not something is anticompetitive is the impact on its customers. And here, it's clear that Qualcomm is using this bundling policy to jack up the prices (massively) for its customers. It seems like a quintessential example of anticompetitive behavior... and the court says no?

The ruling is worth reading in detail, as it bends over backwards to basically say that nothing that Qualcomm does violates antitrust law, it's all just good business to squeeze as much money as possible out of its patents. It even repeats again that since it doesn't see Qualcomm's actions hurting "competition itself" and merely just some competitors:

... the anticompetitive harm identified must be to competition itself, not merely to competitors.... The FTC identifies no such harm to competition.

Now, there is some reasonable logic to that line. Any kind of competition can harm competitors. If I market myself better than a competitor, that's harm to a competitor, but it's not an antitrust issue. But if that harm to the competitor is because of my monopoly power it's a different story. And here, that is absolutely the case.

Also, there are a few lines in here that, at the very least, might doom any attempts at bringing an antitrust case against companies like Amazon, Google, Apple or Facebook (at least in the 9th Circuit). For example, the court suggests that any new competitor entering the market proves there's no antitrust problem, no matter how well they did in that market, or whether or not they were hindered from obtaining market share through abuse of monopoly power:

The FTC’s conclusion that OEM-level licensing does not further competition on the merits is not only belied by MediaTek and Intel’s entries into the modem chip markets in the 2015–2016 timeframe, it also gives inadequate weight to Qualcomm’s reasonable, procompetitive justification that licensing at the OEM and chip-supplier levels simultaneously would require the company to engage in “multi-level licensing,” leading to inefficiencies and less profit. Qualcomm’s procompetitive justification is supported by at least two other companies—Nokia and Dolby—with similar SEP portfolios to Qualcomm’s.

In finally talking about the fact that Qualcomm is able to use its monopoly position to charge an anticompetitive surcharge, the panel basically says "nah..." because "patent monopolies are cool."

We hold that the district court’s “anticompetitive surcharge” theory fails to state a cogent theory of anticompetitive harm. Instead, it is premised on a misunderstanding of Federal Circuit law pertaining to the calculation of patent damages, it incorrectly conflates antitrust liability and patent law liability, and it improperly considers “anticompetitive harms to OEMs” that fall outside the relevant antitrust markets.

In short: because they have a government granted patent monopoly, it's okay for them to abuse that in anticompetitive ways, and we won't consider it anticompetitive. Or, another way of reading this: patent laws inherently create anticompetitive situations, and we're fine with it. And, tragically, that may be a correct reading of the law, as crazy as it is.

I guess this isn't that surprising. This has been the issue we've had with patents for ages -- that they are a monopoly. And that's why we were excited about the original ruling: finally recognizing that patent monopolies could be as abusive as any monopoly. But, here, the court is basically saying "abusing your patent monopoly is fine by us."

And, really, what this should mean is that we need to fix our patent laws, which are dangerous and harm competition. But... that seems unlikely.

Again, this kind of ruling almost certainly means phone prices will remain much higher than they would be in a competitive market for chips (which is why it's slightly frustrating that I've seen some supposedly "free market" supporters cheering on this ruling). But it might also mean that any antitrust fight against big tech just became significantly more difficult as well. As the court says:

Anticompetitive behavior is illegal under federal antitrust law. Hypercompetitive behavior is not.

Good luck figuring out which one is which.

Filed Under: 9th circuit, abuse, antitrust, competition, customers, devices, monopoly, patents, phones
Companies: qualcomm

Under Investigation For Antitrust Abuse, Trump DOJ Rubber Stamps Major Ad Industry Consolidation

from the bigger-must-be-better dept

While the Trump administration and its allies (like Josh Hawley) like to talk a lot about monopolization in "big tech," they couldn't actually care less about monopolies or their impact on competition. For example while Hawley and the Trump FCC/DOJ have made an endless stink about the power of "big tech," that's largely for performative political reasons, namely to perpetuate the utterly false claim that Conservatives are being "censored," to bully tech giants away from encryption, or to frighten them away from finally doing something about the (profitable) bigotry and disinformation problems that plague their networks.

Oddly, this performative, sometimes vindictive nonsense is often conflated with actually caring about monopoly power and reforming antitrust. You only need to look at the DOJ and FCC's mindless rubber stamping of every fleeting whim of the US telecom industry, one of the most heavily monopolized (and widely despised) sectors in technology. While T-Mobile was getting the red carpet rolled out for its competition and job killing merger with Sprint, Bill Barr's DOJ was busy hassling small cannabis companies, or filing empty-headed "antitrust" lawsuits against automakers for agreeing to limit emissions.

Studies from the likes of the Antitrust Institute (pdf) have made it very clear: the Trump administration's interest in "antitrust reform" is utterly and completely hollow. During an era when lagging antitrust enforcement needed to be meaningfully improved and reformed, the Trump administration instead began wielding antitrust as a political bludgeon to gain leverage over its enemies and dole out favors to its allies. It's mindless theater and an abuse of the law, yet it's often portrayed as serious adult policy making by many experts and the press.

Despite ongoing whistleblower investigations of Barr's politicization of antitrust, his DOJ is now rubber stamping the merger between native advertising platforms Taboola and Outbrain. EU and UK regulators have been scrutinizing the deal, arguing it will erode competition in the native advertising (read: clickbait) space, resulting in notably worse terms for already struggling publishers who face getting an even smaller share of advertising revenue:

"The Competition and Markets Authority said it has concerns the merger will result in a substantial lessening of competition and that it will investigate further unless the businesses take steps to address them...Many national and local news websites in the UK use one of the two services and the CMA said a “large proportion” of the publishers it contacted as part of its initial investigations were concerned about the potential impact of the deal."

More specifically, UK regulators say the combined companies would enjoy an 80% market share for the clickbait online recommendations market:

"Taboola and Outbrain are the 2 largest providers of content recommendation services to publishers in the UK, with a combined market share of over 80%. They supply very similar services and are each other’s main competitor. In particular, the companies’ internal documents and information received from publishers showed the strong competition between the companies.

If the merger were to go ahead, the CMA is concerned that publishers in the UK will have a reduced choice of supplier for content recommendation services. This could result in a worsening of terms for publishers and a reduction in their share of advertising revenue. A large proportion of the publishers contacted by the CMA were concerned about the impact of the deal if it goes ahead."

Many in the marketing sector have echoed those sentiments, stating the only thing the merger really accomplishes is creating a "gigantic vortex of crap":

In contrast there's been little to no serious scrutiny by the Barr DOJ, which apparently didn't spend too much time thinking about the deal's potential pitfalls:

"The Taboola-Outbrain merger had been proposed by the companies’ executives as way for publishers to monetize digital content outside of Big Tech’s monopolies. But some publishers Adweek has been talking to question how the merged company would be structured and what sort of terms it would offer publishers.

“What will be interesting is what happens to yield?” a publishing source told Adweek. “Will this be an improvement? Will the joined forces allow more yield to flow through to publishers? Or does this actually remove some competition in such a way that yield suffers? I don’t know.”

Now, maybe the Trump DOJ seriously looked at this deal intelligently and greenlit it based on adult policy making (they've yet to explain the approval). But based on what we've seen in the last year or two (like DOJ antitrust boss Delrahim using his personal phone and text message accounts to personally guide T-Mobile to merger approval, something, it should go without saying, antitrust enforcers should not be doing), that's giving them too much credit. It could really be as simple as the fact that Taboola execs told the DOJ this might potentially challenge "big tech," and that was enough for them.

That's the problem when you start abusing legal authority with reckless abandon--you lose any trust or faith in the idea that your decisions are actually being based on the data.

Filed Under: antitrust, competition, doj, monopoly, online ads

FCC Boss Ajit Pai Pretends To Care About A Prison Telco Monopoly Problem He Helped Protect

from the you're-not-helping dept

Over the last few decades, companies like Securus have managed to obtain a cozy, government-supported monopoly over prison phone and teleconferencing services. Like any monopoly, this has pretty traditionally resulted in not only sky high rates -- upwards of $14 per minute for phone calls -- but comically poor service as well. Because these folks are in prison, and as we all know everybody in prison is always guilty, drumming up enough sympathy to convert into political momentum has long proven difficult, so regulatory fecklessness has proven easy to come by.

Recent efforts to do something about it were scuttled by FCC boss Ajit Pai, whose former clients included Securus. Pai not only routinely opposed efforts by ex-FCC Commissioner Mignon Clyburn to drive change in the prison telco sector, one of his very first acts as FCC boss was to pull the rugs out from underneath his own lawyers as they tried to support those reforms in court. The suddenly rudderless FCC ultimately and unsurprisingly lost due to a challenge by Global Tel*Link, which obviously wanted the status quo to remain intact. So now, while the FCC has the authority to cap interstate calling rates, the courts have declared it lacks the authority to regulate intrastate prison calling rates.

So it was odd to see Pai take to Twitter this week to first profess his breathless support for prison telco monopoly price gouging reform (clearly not true), and then state the fact his hands are tied in terms of actually doing something about it (something he's largely responsible for):

Lawyers who actually followed this saga from gestation were.... not impressed:

Responding to complaints, Pai yesterday sent a letter to the National Association of Regulatory Utility Commissioners (NARUC), proclaiming that this is "unfortunately a problem the FCC is powerless to address," and "calling for states to take action." The same states he's ironically been trying to argue lack the authority to protect consumers from telecom monopoly harm in other areas of telecom, like residential monopolies, net neutrality, and consumer privacy.

But however bad residential telecom is, prison telecom is worse. Securus and other such companies are part of a dangerously cozy and captive market, where prisons get paid upwards of $460 million annually in "concession fees" (read: kickbacks) to score exclusive, lucrative prison contracts. In this comically absurd environment, the service pricing and quality are just about what you'd expect. Government oversight of these businesses has been virtually non-existent, despite accusations that these companies have allowed some law enforcement to monitor what should be privileged attorney client communications and that they have been embroiled in location data scandals.

Filed Under: ajit pai, fcc, legal authority, monopoly, prison calls
Companies: securus

New Study Tries, Fails, To Claim Community Broadband Is An Inevitable Boondoggle

from the sockpuppetry dept

For years a growing number of US towns and cities have been forced into the broadband business thanks to US telecom market failure. Frustrated by high prices, lack of competition, spotty coverage, and terrible customer service, some 750 US towns and cities have explored some kind of community broadband option. And while the telecom industry routinely likes to insist these efforts always end in disaster, that's never actually been true. While there certainly are bad business plans and bad leaders, studies routinely show that such services not only see the kind of customer satisfaction scores that are alien to large private ISPs, they frequently offer better service at lower, more transparent pricing than many private providers.

Undaunted, big ISPs like AT&T and Comcast have waged a multi-pronged, several decade attack on such efforts. One, by passing protectionist laws in roughly 20 cities either hamstringing or banning cities from building their own networks, often in cases where private ISPs refuse to expand service. Two, by funding economists, consultants, and think tankers (usually via proxy organizations) happy to try and claim that community broadband is always a taxpayer boondoggle -- unnecessary because private sector US broadband just that wonderful.

The latest example of the latter comes via the Taxpayer Protection Alliance, a nonprofit that insists its focus is "holding government accountable," but is routinely backed by telecom giants like AT&T, which, for obvious reasons, are eager to paint an inaccurate picture of what's actually happening. The group's latest study, "GON with the Wind: The Failed Promise of Government Owned Networks Across the Country," claims to take a look at 30 examples of community broadband networks, with the heavy implication that the majority of them have failed -- proving that community broadband is always bad and private sector broadband is always good:

"Supporters of taxpayer-funded broadband systems claim that governments (i.e. taxpayers) are needed to build these systems because the private sector simply will not. The truth is that broadband providers have spent more than $1.6 trillion since 1996 to build, upgrade, and maintain networks, resulting in a 71 percent growth in rural broadband. Internet infrastructure is in place to serve 98 percent of the country, primarily built by telecom companies. This inconvenient truth, however, has not deterred attempts to use taxpayer dollars to fund broadband boondoggles."

But the fact that private ISPs have invested a lot of money in US broadband networks isn't in dispute. There's certainly numerous parts of the country where the private sector sees something vaguely resembling healthy competition. But as US telcos give up on upgrading aging DSL lines, there's a massive swath of the country that sees a cable provider (Comcast) as their only option (aka a monopoly). Despite billions in subsidization of private ISPs, there are still 42 million Americans without access to any broadband whatsoever. Millions more can't afford expensive US service thanks to muted competition and regulatory capture, the depth of which is fairly obvious to most (especially rural) Americans.

Community broadband isn't a magical panacea, but it certainly has a role to play in shoring up coverage gaps and motivating an uncompetitive sector suffering from captured regulators. And while the TPA report makes sweeping claims about the inevitable failure of such models, their report doesn't actually prove that in the slightest. In fact, a closer examination by the Institute for Local Self Reliance (ILSR) (pdf) found that just 8 of the networks cited actually had financial issues of note:

"TPA chose 30 municipal networks to make its argument and can only accurately claim 8 out of 30 networks as failures. ILSR has previously dissected TPA’s work and found similar problems. Indeed, the fact that some municipal networks have struggled actually refutes another point frequently made in criticism of municipal networks — that they have unfair advantages. In reality, municipal networks have tended to operate in the most adverse environments, where the private sector saw little reason to invest sufficiently. They have generally succeeded despite multiple disadvantages."

Take a moment to notice that groups like the Taxpayer Protection Alliance routinely pearl clutch over community broadband, but usually have nothing to say about the $42 billion in tax cuts we recently threw at AT&T in exchange for layoffs and investment reductions. Or the countless billions we've thrown at AT&T, CenturyLink, Frontier, and Verizon over the years for fiber networks that (mysteriously!) always wind up half deployed. Somehow, taxpayer waste is only a problem when small towns and cities engage in it. Taxpayer waste on a larger, more industrialized scale is usually ignored. Why, exactly, do you think that is?

Groups like ILSR have long noted that community broadband is not a panacea; it's just another business model. Some are good, some aren't. These towns and cities aren't building these networks because it's fun or because there's nothing else that needs to be fixed locally. It's because giants like AT&T and Comcast enjoy potent monopolies across much of America, with little competitive incentive to expand or improve service in many markets. Fixing the problem is often difficult, expensive, and a political nightmare thanks to AT&T, Comcast, and Verizon legal, PR, and political opposition; that shouldn't be a surprise.

But several times now the TPA has been accused of simply ignoring data that proves the industry's thesis that these networks are inevitable failures. That appears to have happened again here, with the report even trying to insist that Chattanooga's EPB -- rated the best ISP in America by Consumer Reports just a few years back -- was somehow a failure, despite the fact that telecommunications portion of EPB’s debt has been entirely paid off, and the network is one of the most popular in America.

Similarly, while the report tries to frame community broadband as a mindless dash toward heavy taxpayer debt and disaster, it fails to note that towns and cities routinely back away from such options when they're utterly financially untenable, notes ILSR:

"Ironically, while TPA is attempting to discredit municipal networks, its own words consistently affirm that local leaders have made wise decisions with few exceptions. The introduction notes that Seattle commissioned a study in which it found the proposed plan would be too costly and risky. The city did not move forward with that plan. In other cases, TPA explicitly notes that local leaders considered a project only to wait until the feasibility improved over time. This experience is precisely why we trust local decision-makers rather than encouraging state legislatures to interfere with such complicated and intensely local decisions."

Large private ISPs, the beholden FCC, and a chorus of industry experts have long engaged in elaborate calisthenics to try and demonize community broadband networks as an inevitable, wasteful disaster. In reality they're usually not. Even if they were, there's an easy way to put these efforts to bed: start deploying faster, cheaper, better broadband to the countless pissed off communities that have been complaining about substandard private sector broadband for the better part of a generation. Don't want communities getting into the broadband business? Do a better job serving them with cheaper, faster, more widely available service.

Filed Under: broadband, competition, monopoly, municipal broadband

Marc Benioff Calls For Section 230 To Be Abolished At The Same Time His Company Is Relying On 230 To Get Out Of A Lawsuit

from the dude,-seriously? dept

I like Salesforce founder and CEO Marc Benioff, in part because he doesn't act like most tech CEOs and isn't afraid to speak his mind and actually sound fairly human, rather than a rehearsed automaton who has a gazillion PR people vetting every message. That doesn't mean I always (or even often) agree with him, but I appreciate his willingness to speak his mind. I'm even not that surprised that he's jumped on the bandwagon in calling for Facebook to be broken up, even though the reasons he cites are based on false statements that he's apparently been convinced are true (which... maybe is a little scary) or that it still remains totally unclear to me how breaking up Facebook fixes any of the problems discussed by supporters of such a plan (unless the problem is just "I don't want Facebook to exist.").

Benioff also, oddly, seems unfamiliar with how the 1st Amendment works, in claiming that Congress needs to make it against the law to lie in political ads:

In particular, Benioff took issue with Facebook's recent decision to run political advertisements from the Trump campaign which contain false claims. Benioff said there is "no question" that he would not run such advertisements if he were the head of Facebook, and called on Congress to pass legislation that would require truthful advertising on social media platforms.

There are, of course, truth in advertising laws, but those focus on commercial speech, which has been deemed to be moderately less protected under the 1st Amendment. Political speech, on the other hand, is at the top of the protected food chain, and there's no way that the Supreme Court would bless any law from Congress that would "require truthful advertising on social media platforms."

But what strikes me as really bizarre is that as part of his ill-informed attack on Facebook, he's decided to throw Section 230 of the Communications Decency Act (and, with it, free speech on the internet) under the bus at the exact moment that his own company is heavily relying on Section 230 to get out of a massive lawsuit. In that same CNN interview which generated the headlines about breaking up Facebook, he briefly addresses Section 230 as well:

One of the reasons tech platforms are able to publish such content without consequences is the law typically shorthanded as Section 230, which allows internet platform providers to moderate some content without fear of being held liable for most of what users do on their platforms.

Benioff called Section 230 "the most dangerous law on the books right now," and said it should be "abolished."

He reiterated this statement on Twitter -- a site that literally only exists because of Section 230.

This is wrong and ridiculous on many levels. Section 230 doesn't "indemnify" Facebook, it makes sure that legal liability is properly placed on the party doing the speaking, not the party hosting the speech.

And if anyone should know that, it's Marc Benioff right this very moment. As we detailed earlier this year, Salesforce is currently being sued for sex trafficking by a group of people who were trafficked on Backpage... because Backpage used Salesforce to track its customers. And, the key argument that Salesforce's very expensive lawyers are making... is that Salesforce is protected by CDA 230:

If you're unable to read that it, it shows that the core argument Salesforce is making is that it's protected by Section 230. That's in the legal filing the company made literally one month ago. In it, Benioff's lawyers highlight the importance of Section 230, and also point out that -- despite the claims of the plaintiffs in the case -- the protections of 230 clearly do not apply to content provided by 3rd parties on a platform such as Salesforce (or... Facebook).

I'm not sure if Benioff is so confused that he doesn't understand how Section 230 works, or if he's just uninformed. The fact that he uses the phrase "Facebook is a publisher" suggests, unfortunately, that he's been reading/hearing some of the nonsense about "platform v. publisher" -- a distinction that is not found in the law, but is often played up by online trolls and cranks. I thought Benioff was better than an online troll or crank, but this latest outburst suggests I may have overestimated him.

Salesforce should be able to get this sex trafficking case tossed on 230 grounds, and Section 230 is a key reason why "the cloud" and cloud services -- a space Benioff helped pioneer -- exist. For him to trash 230 and call for it to be abolished is crazy. If anything, an argument can be made that Benioff is savvy enough to know that he can afford expensive lawyers from Gibson, Dunn & Crutcher to get him out of sticky situations based on what the various Salesforce customers have done with his services -- but the many growing SaaS competitors creeping into his market... probably can't. And, hey, abusing the law to block and harm competitors. Why that sounds like an antitrust problem...

Filed Under: 1st amendment, cda 230, free speech, liability, marc benioff, monopoly, political advertising, section 230
Companies: facebook, salesforce

People Freaking Out About Amazon Copying A Shoe Are Totally Missing The Point

from the isn't-competition-good? dept

I know that tons of people are talking antitrust about the big internet companies, and Amazon is a prime target these days. So, perhaps I shouldn't have been surprised last week when there was a minor freakout, starting on Twitter, when Jeff Morris Jr., who works in the internet industry, tweeted out an angry tweet about Amazon supposedly copying Allbirds' famous shoes:

If you've somehow missed it, over the last five years or so, Allbirds merino wool shoes have become somewhat ubiquitous as the "cool shoe" to wear among various folks -- including the 44th President of the United States. Admittedly, they're nice shoes (and crazy comfortable). And, with all such things that become a fashion fad, copycats have quickly followed. Over the last few years there have been a ton of Allbirds-like shoes hitting the market. As I type this, I'm wearing shoes from Awel, that lots of people mistake for Allbirds, because they're... pretty damn similar. But there are many, many other similar shoes out there.

Jeff's tweet went viral, and once that happened, the tech press started to pick up on it. Business Insider wrote an article about it, as did Quartz, The Verge and Engadget, with most of them framing it as "evil" Amazon attacking poor little Allbirds. The Quartz article by Michelle Cheng is the most ridiculous of the bunch, with the following title: "Amazon’s Allbirds clone shows its relentless steamrolling of brands." Without proof, the article suggests that Amazon is using its sales data power to step in with its own clone shoe to undermine competition.

But... that leaves out an awful lot. Including the fact that there are tons of other Allbirds clones out there, and if you search on Amazon for "Allbirds" you actually get a bunch of other clones, and not even the Amazon one. If Amazon were truly nefariously targeting Allbirds and using its powerful data to do so, wouldn't you expect that a search for "Allbirds" on its own site would turn up their particular shoes? Nope. It turns up other ones from lots of other shoe companies, including New Balance, Under Armour, Urban Fox, Adidas, Dr. Scholl's, Keezmz, LeMouton, and lots of others.

So, it may be a fun narrative that Amazon is "targeting" Allbirds and out to crush the shoe company by offering a similar shoe in a style that has become immensely popular from dozens of shoe companies over the last five years, but it's difficult to see how that narrative actually makes sense. Indeed, the story doesn't even hold together on its own. Part of the reason why Allbirds is so popular is because of the materials and the sustainable way in which the company tries to make its shoes. The Amazon clone that has everyone up in arms isn't even all wool like Allbirds' flagship shoe is -- it's only 56% wool (and it's not even clear if it's merino wool at that).

Allbirds has successfully been beating off most of the competition not because it's the only one who can make wool shoes, but because of the overall story and framing of Allbirds itself. People are supporting the company because of the specific product it makes and the company's own reputation. It's not like most Allbirds customers are going to rush to buy Amazon's shoe instead, because even if it looks similar, it doesn't have the reputation that Allbirds has.

And, of course, all of this ignores that copying is how innovation happens. I mean, there has to be some irony in people complaining about Amazon's supposed "monopoly power" at the very same time they're arguing that Allbirds should have a monopoly on wool runners. For years, we've pointed out that copying is standard in the fashion industry, where there is limited protections from copyrights and the like -- and that's actually helped the fashion industry be more innovative, and enabled much more competition, especially from smaller firms, because many start out copying the hot fashions before being able to introduce more original brands.

Now, there might be an argument somewhere that if Amazon were deliberately using its power as a store to wipe out competitors, or to unfairly advantage its own products, that you could show "harm" from the company abusing its dominant position. But producing an inferior shoe in an incredibly popular style -- one that dozens of companies are now producing shoes in -- and then failing to heavily promote that shoe directly on its own site... doesn't seem like it's actually harming anyone. Other than, perhaps, the ability of some tech journalists to keep things in perspective.

Filed Under: copying, innovation, monopoly, shoes
Companies: allbirds, amazon

Charter Spectrum Once Again 'Competes' By... Raising Prices

from the nickel-and-dime dept

When Charter Communications (Spectrum) proposed merging with Time Warner Cable and Bright House Networks in 2016, the company repeatedly promised that the amazing "synergies" would lower rates, increase competition, boost employment, and improve the company's services. Of course like countless telecom megamergers before it, that never actually happened. Instead, the company quickly set about raising rates to manage the huge debt load. And its service has been so aggressively terrible, the company almost got kicked out of New York State, something I've never seen in 20 years of covering telecom.

Fast forward to 2019, and despite surging competition from streaming video providers, Charter is once again raising rates on numerous services. Broadband and TV services will all be seeing major price increases next month, as will the company's hardware rental surcharges and the universe of misleading fees the industry uses to covertly jack up the advertised rate post sale. That includes the company's "broadcast TV fee," which is really just a small part of the cost of programming hidden below the line in the form of a (now) $13.50 monthly additional charge:

"With this price change, you will now pay $13.50 a month for broadcast TV fees, which is up from $11.99 a month. This will add up to $162 a year to your bill just watch free over-the-air TV you could get with an antenna."

Note: that fee had already seen a $2 bump early this year.

That Charter's response to increased streaming video competition and record cord cutting is to raise rates tells you plenty about both the level of competition it sees in broadband, and the regulatory oversight of the sector. These hidden fees in particular are something the FCC (under both parties) has been happy to turn a blind eye to. Much in the same way both parties have rubber stamped a long line of telecom and media megamergers that, time and time again, have only really netted one thing: greater sector consolidation, higher rates, fewer jobs, and worse service.

Giants like Comcast and Charter have one ace in the hole when it comes to the streaming video wars to come. They are enjoying growing monopolies over broadband access thanks to the slow, steady implosion of many US telcos. That limited competition has let Comcast respond to cord cutting and streaming by imposing arbitrary and punitive usage caps and overage fees that are incurred when its broadband users use a competitor's services (say Netflix) but not their own TV offerings. This lets them simultaneously cash in on -- and hinder -- streaming competitors.

Charter's banned from doing this due to a few flimsy conditions affixed to its 2016 merger, but those conditions expire in just a few years, meaning you can expect an even fatter broadband bill over the horizon. The FCC having just effectively neutered its oversight authority over telecom at telecom lobbyist behest certainly isn't likely to help, nor is the death of FCC privacy and net neutrality consumer protections.

Filed Under: competition, consolidation, consumer welfare, mergers, monopoly, prices
Companies: charter communications, spectrum

If 'Big Tech' Is a Huge Antitrust Problem, Why Are We Ignoring Telecom?

from the ill-communication dept

Over the last week or so, Google, Amazon, and Apple have all taken a significant beating on Wall Street amidst rumblings of looming antitrust investigations by the DOJ and FTC. Google, we're told, is subject of a looming antitrust probe by the DOJ. Amazon, we've learned, is facing growing scrutiny from the FTC. Apple stock also did a nose dive on the news that it too may soon be subject to a significant new antitrust probe.

On its surface, many of these actions aren't all that surprising. After all, experts have noted for a decade than US antitrust enforcement has grown toothless and frail, and our definitions of monopoly power need updating in the Amazon era. Facebook's repeated face plants on privacy (and basic transparency and integrity) have only added fuel to the fire amidst calls to regulate "big tech."

Oddly missing from coverage from these probes is the fact that much of this behavior by the Trump administration may (*gasp*) not be driven by a genuine interest in protecting markets and consumer welfare. For one, it's hard to believe that an administration that has shown it's little more than a rubber stamp for sectors like telecom is seriously worried about monopoly power. Two, it's hard to believe an administration obsessed with nonexistent censorship is going to come at these inquiries with integrity, and not, say, as a vessel to pursue a pointed partisan persecution complex.

I've been arguing for a while that while many of the calls to regulate big tech are driven by genuine worries about monopoly power, a lot of it is being driven by the telecom sector. For years now, telecom lobbyists and policy folks have been using the anger over Facebook to covertly call for heavier regulation of Silicon Valley. You see, these telecom lobbyists, who just got done convincing the Trump administration to neuter FCC oversight of their own natural monopolies, are looking for any advantage they can get as they try to compete with companies like Google in the online ad space.

This is how former FCC boss turned cable lobbyist Michael Powell put it at a recent conference:

"Our governmental authorities need to get a handle on what kind of market power and harm flow from companies that have an unassailable hold on large pools of big data, which serve as barriers to entry, allowing them to dominate industries throughout the economy. For years, big tech companies have been extinguishing competitive threats by buying or crushing promising new technologies just as they were emerging. They dominate their core business, and rarely have to foreclose competition by buying their peers. Competition policy must scrutinize more rigorously deals that allow dominant platforms to kill competitive technologies in the cradle."

If you've watched as telecom giants have crushed every and any competitive threat by buying state and federal government, this entire paragraph should be fairly amusing to you. Powell's clients couldn't care less about anti-competitive behavior. What they do want is, again, for government to erect regulatory barriers that hamper the Silicon Valley companies whose ad revenues giants like AT&T and Comcast have drooled over for the better part of the last fifteen years. In the Trump administration they've finally found a vessel for this agenda.

The problem, of course, is there's enough legitimate bipartisan worry about the power of big tech that this little telecom sector lobbying gambit has been able to fly under the radar as the real driver of this new Trump administration push. Even with former Verizon lawyers now at the head of the DOJ (Bill Barr) and the Trump FCC (Ajit Pai). But there's a reason the Trump administration ignores telecom's monopoly and privacy issues while amplifying Silicon Valley's, and I'd argue it has a lot more to do with protectionism than a genuine worry about healthy markets.

If you were remotely serious about addressing the US' monopoly and antitrust problems, there's no way you'd simply ignore telecom. Giants like AT&T and Comcast already enjoy natural monopolies over the on ramp to the internet. They've then increasingly hoovered up countless media companies as they also position themselves to dominate the media flowing over those connections. This conflict and the potential for anticompetitive behavior sits at the heart of the net neutrality debate. Now, giants like AT&T want to become the next Google, with data harvesting plans every bit as problematic if not more so.

Yet again, notice how telecom gets a free pass by the Trump administration? Notice how Silicon Valley is demonized, but telecom's surveillance and anti-competitive gambits see zero backlash? I don't think it's happenstance that this new Trump "big tech" antitrust push comes as big telecom has asked for just such a push to aid its own competitive agenda. A lot of folks on both sides of the political aisle who'd like to see more done to rein in "big tech" seem a touch oblivious to the possibility that this new antitrust push may not be entirely in good faith.

There's a good chance these antitrust inquiries into Google, Facebook, and Apple are little more than partisan fever dreams co-driven by telecom lobbyists, yet a lot of outlets and experts are acting as if market health and consumer welfare are genuine motivators. It's entirely unclear what the Trump administration did to suddenly earn this blanket trust, but as the net neutrality fracas and trade wars have made pretty clear, it sure as hell isn't its several year track record on coherent tech policy.

Filed Under: antitrust, broadband, competition, doj, ftc, monopoly, telcos
Companies: amazon, apple, facebook, google