Re: Monopolies

["Lewis A. Mettler" <lmettler@lamlaw.com>]

Audrie,

Your points are well taken.  Let me defend my comments a little bit and
then make an observation.

It may not be your position that broadband access should only be sold by
local monopolies, but that is clearly the position of those companies
who hold one or do not wish to wholesale cable access to competitors.

The point here is that during the build up of cable systems, local
communities were granted what is essentially an exemption to antitrust
laws permitting them to "franchise" only one cable provider in their
community.  Local authorities were simply given that power to allow only
one company access.  In many ways this made sense for the cable.  Why
dig up the streets all over town 3 or more times?  The result is that
most if not all communities in the country have no choice at all as to
their cable TV provider.  If they want cable services, they must buy
from the franchised company.  Now, we find cable companies are being
bought by AT&T, Microsoft and others not so that they can "rent" the
cable access but so that they have local monopolies for all kinds of
services including broadband access.  Now it is fine to say that a cable
company should be able to offer local phone service by the cable.  But,
it is wrong and harmful to the consumer to say "only the cable company
can do so".

Right now consumers are being harmed by cable companies simply because
consumers have no choice of their provider or line up of channels.  In
other words, you have to move if you do not like the package deal you
are forced to sign up for.  Having only a choice of basic, extended and
premium services does not create any competition at all.  That is like
giving you a choice of Windows 98 or NT but no other.

And, now the observation:  In the mid 1970's IBM, HP and Data General
were all constrained in some way or another from taking advantage of
their competitors due to monopoly power.  Interesting enough both HP and
Data General had monopoly power only within their own product line. 
But, it was sufficient to preclude competitors from offering competing
operating systems and compilers.

The point is that it is always incorrect to conclude that no monopoly
exists based solely upon a cursory review.  Right now, Apple could be
considered to have monopoly power.  Not against Microsoft in the PC
operating system market.  Clearly not there.  But, they do have monopoly
power in the Apple marketplace.  If Apple decides to bundle an
application with its OS, Apple too could have antitrust problems.  Does
a browser come to mind?  Can Apple bundle a browser (any browser) with
its OS and be free of any antitrust problems?  The answer is no, they
can not.  Why? Because their act can and would preclude competition for
that application in the Apple marketplace.  The DOJ is not focusing upon
Apple in this regard simply because Microsoft is the real problem here. 
Apple was forced to promote IE and disadvantage Navigator. So clearly
there is no intent upon the part of Apple to rub out competitors for
browsers on Apple.

But, that does not mean that Apple can not have monopoly power.  They
clearly do.  The question is whether they abuse that power or not.  This
is why the antitrust laws do not make monopolies illegal but focus upon
the conduct that actually is intended to preclude competition.  If you
do not act to preclude competition, you can have all the monopolies you
want.  In fact, patents, copyrights, trademarks, etc., are all
monopolies sanctioned by the law.

How all of this applies to broadband access is interesting.

If AT&T buys upon cable companies and further acts with the purpose of
obtaining a monopoly in broadband access, they should rightly be
constrained and required to provide wholesale broadband access to all
comers.  Let me guess, they want the local monopoly?

What they may have in San Francisco is questionable.  If 3 companies
cover the entire town (rather doubtful), then maybe AT&T does not have a
monopoly in SF.  But, San Jose is serviced only by one company the last
time I checked.  I think you will find it very rare when a consumer can
pick between 3 cable companies.

The correct direction here is to force cable companies to wholesale
their cable access so that consumers do in fact have a choice of cable
services as well as upcoming broadband access.

Clearly a fair return for the cost of the cable can be realized on a
wholesale basic without forcing all consumers to buy one service plan or
do without.  In fact, a higher return can be realized that way due to a
higher utilization of the cable. Cables are just like cars.  The more
people who can use it the higher level of use it is likely to have.  It
would be stupid to suggest that cars can only be use by one person and
they must use that car to drive to work.  Cable has the added advantage
of being able to use technology permitting multiple uses simultaneously,
right?  Autos do not permit that kind of use.  Cables do.

The result is that wire or cable based monopolies are simply not
justified whenever they can be shared.  Same with roads, canals, power
lines, etc.  Advanced technology should rightly reduce the number of
monopolies faced by consumers.

My observation is that if you represent consumers, you can not favor any
monopoly structures at all unless it is technically required.  And, I
would not look to AT&T or Microsoft to develop the technology so that
they can share their monopoly structures.  Oh no.  There is a major push
to establish monopoly positions in broadband.  There is no question of
that.  And, consumers will pay if that is permitted.

When railroads were started and cable was introduced the available
technology is very different than today.  Today, any cable company that
claims they can not easily share their cable access should be required
to sell the resource because they are falsely representing their own
technical capabilities.

Am I correct?  Or is someone going to try to prove to me that one cable
can be used for TV and internet access but only if a single company
sells both?
 
In conclusion, a consumer does not need to be a lawyer, economist nor
engineer to know when they do not have a choice of service providers.
And, it goes beyond the service itself.  TCI (bought by AT&T) charges
consumers as much as 41.66% of their monthly bill each month their
payment is late.  PG&E and Pac Bell would be hung up on the rafters if
they tried that kind of crap.  Check it out.  $5 late fee on a $12 bill.

Broadband access must be open to all.  Satellite access is primarily one
way.  DSL is limited.  It is no more necessary to force consumers to buy
broadband access from one company than it is necessary to force
consumers to buy long distance service from one company. (Strange how
AT&T is common in the discussion.)  And, very strange that Microsoft
Corporation (another monopolist) buys into AT&T.

It is okay to argue that only the cable company should have the right to
offer broadband and cable TV services, but if you are going to do it
representing the consumer, the burden of technical proof is there.

Lewis


Audrie Krause wrote:
> 
> Lewis,
> 
> According to the SF Chronicle, AT&T has two competitors laying fiber in SF
> in order to offer cable Internet access.  Since I'm neither a lawyer nor an
> economist, I'm not an expert in monopolies.  But it seems to me that if
> there are three companies providing the same service, one of them can't be
> a monopoly.  And, as Joe Shea points out, there is also DSL and wireless.
> In SF, SBC/PacBell has at least two competitors already selling DSL to
> consumers.  So there, too, consumers have choices.
> 
> Oh, and it is *not* my position that broadband access should be sold only
> by local monopolies.  Those are  your words, not mine.
> 
> Audrie Krause
> 
> >Date: Thu, 29 Jul 1999 07:31:45 -0700
> >From: "Lewis A. Mettler" <lmettler@lamlaw.com>
> >To: antitrust@essential.org
> >Subject: Re: M$ Monitor: Why You Haven't Heard From Us
> >Message-ID: <37A065D1.4E3FF3B9@lamlaw.com>
> >MIME-Version: 1.0
> >Content-Type: text/plain; charset=us-ascii
> >Content-Transfer-Encoding: 7bit
> >
> >Audrie,
> >
> >Your stand on suggesting that broadband access should be sold only by
> >local monopolies is short sighted.
> >
> >Consumers simply do not want to be limited to only two choices for high
> >speed internet access (i.e. the local cable monopoly and DSL).  That is
> >a ridiculous suggestion.
> >
> >Right now consumers have a choice of 3 or 4 or more ISPs who can provide
> >comparable service.
> >
> >Your stand would cut that down to perhaps one or two based upon who owns
> >the wires.
> >
> >That solution will never serve consumers.
> 
> --
> Audrie Krause  <<NetAction>>  E-MAIL: audrie@netaction.org
> 601 Van Ness Ave., No. 631    San Francisco, CA 94102
> TELEPHONE: (415) 775-8674     FAX: (415) 673-3813
> * * *       WEB: http://www.netaction.org      * * *

-- 
Lewis A. Mettler, Esq.(Attorney and Software Developer)
lmettler@LAMLaw.com
http://www.lamlaw.com/ ( detailed review of Microsoft antitrust trial
transcripts )
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