
FCC says AT&T and Verizon ‘harm consumers’ with free data schemes - based2
http://www.theverge.com/2016/12/2/13820294/fcc-att-verizon-sponsored-data-letters
======
oli5679
Can someone articulate the theory of harm here from an antitrust perspective?
This practice is essentially bundling, which is practiced by many firms, from
meal deals at fast food chains to Amazon's free streaming content with a prime
subscription. In theory this could have anti-competitive motivations or just
be standard business conduct with some efficiency/extraction motivation. How
are people certain it's the first case?

~~~
josho
Your analogies sound comparable, but fall a little short when you examine the
full picture, here's why they do not quite apply.

There is limited competition for the 'last mile' infrastructure (due in part
to the significant upfront capital costs creating a network, and the
historical fact that existing infrastructure was previously a public good in
many cases--ie paid for by the gov.)

So, you can look at this from an anti-competitive monopoly perspective. If I
have a regional monopoly on the last mile infrastructure and I bundle in such
a way that it gives my new video streaming business an advantage over others
then I am illegally leveraging my monopoly to another business category. That
is illegal in the US.

Mobile is similar, except instead of copper in the ground a handful of
companies have paid for a monopoly access (or perhaps more correctly a
triopoly) to certain broadcasting frequencies.

Going back to your analogy, maybe rephrase it in terms of core infrastructure
like a public road being turned into a private good. Now, if the operator of
the private roadways started to run their own fast food restaurants and when
you buy a meal from them you get free access to the road. Alternatively, you
could buy a meal from someone else, but now you have to pay for access to the
road.

~~~
oli5679
To be clear, I'm agnostic about the competitive harm in this case (and
relatively ignorant about the market-specifics).

Here's the DOJ guidance for single firm conduct which is pretty relevant:

[https://www.justice.gov/atr/competition-and-monopoly-
single-...](https://www.justice.gov/atr/competition-and-monopoly-single-firm-
conduct-under-section-2-sherman-act)

Their discussion of the potential for harm through bundling is exactly the
foreclosure story you tell.

However, they also allude to the classic price discrimination justification
for bundling.

To give you a simple example, imagine a monopolist producing 2 goods A, B and
facing two customers 1 and 2. If the customers value the goods at (1,10) and
(10,1) then the optimal conduct for the monopolist is to price both at 10 and
sell the preferred product to each. However, if they can sell a bundle at
price 11, they can increase profits without harming customers or breaking
antitrust law. This core effect can persist with more complicated product
offerings and market structures.

Here's a good discussion of the topic by the current fed chairman:

[http://feeds.czaj.org/pub/teaching/IO/Commodity%20Bundling%2...](http://feeds.czaj.org/pub/teaching/IO/Commodity%20Bundling%20and%20the%20Burden%20of%20Monopoly.pdf)

To me, it seems challenging to differentiate between these two explanations
(and others). I'm sure the FCC have looked into this further and have a reason
for their conclusions but I'd be interested to hear it.

~~~
josho
I never thought of it from their perspective, thank you for the links.

I suppose I see it as a structural problem. That is, the company positioned
their business lines to put them in the unique position to bundle in a way
that gave them distinct market advantages. Owning the highway and distributing
goods on that same highway. In the past it didn't matter so we never saw the
conflict of interest. However, technology progressed and now the conflict is
obvious.

I wonder what do other markets do? E.g. power comes to mind. Are the
transmission lines owned by the folks that produce the power? If I understand
my local market the power producer is a separate company from the transmission
company. That was how we choose to privatize the industry. It seems telco got
a better deal during their privatization as they own both sides. The solution,
strikes me as simple (split the company into transmission and content
businesses). Obviously there is no political will to do that.

~~~
oli5679
In the UK, power is regulated by a complicated system of price controls,
profit caps and requirements to supply downstram rivals. I don't fully
understand it orhow it works in the US.

I'm sympathetic to your sentiment that Telcos seem too powerful and it could
be socially optimal to constrain them. They could well be a natural monopoly,
where price controls (or government provision) improves welfare.

I don't like your idea of splitting upstream and downstream though. An
economist called Ronald Coase once said 'whats worse than a monopoly? A chain
of monopolies..'

The idea of double marginalisation is not obvious but totally fundamental to
the topic of vertical restraints/mergers and why they are so much less clear
cut than horizontal agreements/mergers. This video is good.

[https://m.youtube.com/watch?v=2NElV61MUDE](https://m.youtube.com/watch?v=2NElV61MUDE)

------
stephengillie
Interesting that the article doesn't mention T-Mobile, who have been facing
net neutrality complains for similar acts:
[http://thenextweb.com/insider/2016/08/21/t-mobile-one-eff-
ne...](http://thenextweb.com/insider/2016/08/21/t-mobile-one-eff-net-
neutrality/)

~~~
toomuchtodo
"Both companies have recently instituted similar plans. Under the programs,
customers can use select services without having them contribute to a data cap
— a practice known as zero rating. In AT&T’s case, the FCC writes that,
despite protests from the company, its sponsored data program “strongly favors
AT&T's own video offerings” while damaging the opportunity for other video
services to compete."

T-Mobile applies its zero rating to all services that partner with it, and
does not have its own offering that competes.

------
dawnerd
I've complained to T-Mobile a lot about their policies and the responses I get
are basically "we can do whatever we want". I'm glad to see the FCC cracking
down as these companies have been walking all over them for too long now.

~~~
toomuchtodo
Conversely, I've emailed John Legere and shared with him my support of zero
rating as a long time customer, and have submitted a letter to the FCC that
I'm in favor of it for traffic management purposes when the provider doesn't
have their own competing offering.

Vote with your dollars if it bothers you. Not all traffic is created equal,
and it shouldn't be treated as such.

------
coldcode
Wait until the FCC is gutted. I wonder if we will have access to HN then.

~~~
waspleg
Completely valid comment. They've already been told to STFU until the regime
change is complete. The FCC has been awesome under Tom Wheeler. It won't last
much longer.

