June 20, 2006  ·  Lessig

So Gary Reback, who was one of the important initial actors pushing the government to focus on the Microsoft case, has been focusing on telecom mergers. He’s been pushing what’s called as a “Tunney Act” proceeding (on behalf of a group called “Alliance for Competition in Telecommunications”) to review phone mergers. (The Tunney Act used to be meaningless, but in 2004 was amended to give it teeth. Reback’s case is the first under the new act).

Apparent there are now allegations that SBC and Verizon forced the deals through DoJ when the designee for head of antitrust was on Senatorial hold for too activist an enforcement bent. DoJ cleared the deals and the hold was lifted. DoJ then ignored the amended Tunney Act and let the companies close the deals even before the judge did the Tunney Act review.

This is sleazy stuff, and it forms the real basis for being concerned about the games the network owners would play if free to play games. The really striking part of this (to me, a constitutionalist) is how the legislative branch keeps passing laws that the executive branch just ignores. And why ignore the laws? Corporate influence. That’s what this case reeks of.

The key briefs in the filing are here:

Memo in support of ACTel’s notion to be Amicus (see especially 7-15)

Supplemental brief (see especially 7, 11)

Gov’t Reply

ACTel’s reply

I can’t say anything about the ultimate merits here, though I do know Reback and respect him, and if had to bet, would bet with him. BUt the allegations here are exactly the stuff that motivates the Net Neutrality movement.

  • three blind mice

    And why ignore the laws? Corporate influence. That’s what this case reeks of.

    indeed, professor lessig, corporate influence is on both sides of any debate in america. the question is whether or not corporations will appeal to customers or to “activist” judges.

    it is amusing to see this happening in, of all places, america. too many people arguing over too few pipes….

    in our flat in stockholm, we three blind mice are forced to choose among three DSL providers, three cable providers, three GSM/GPRS providers, and two 3G providers each competiting to bring an IP connection to our laptop.

    the solution perferred by socialist “old” europe has been to deregulate and let the market build more pipes.

    the “pro-competitive” solution in america is to build more government regulation (strangulation.)

    btw, the brief written by the alliance for competition in telecommunications – who we assume receives no corporate money – reads as though it was written by an angst-filled teenager:

    “the two largest local telephone monopolists…. aided and ebetted by the current administration…

    …telecommunications behemoths

    When the monopolist Microsoft stated its intention to charge a “vigorish” – the slang term for a bookie’s or loan shark’s cut – on every transaction over the internet…

    …phone companies’ power grab….

    a brief based on facts and appealing to logic would not need the adjectives and statements of the obvious:

    it is evident that SBC and Verizon have an insatiable appetite to gain market power…

    corporations desirous of gaining market power! in america! outrageous.

  • http://poptones.f2o.org poptones

    I too have a multitude of DSL providers to choose from here in the US – but let’s be realistic: having a multitude of DSL providers to choose from when the only way to actually connect point A to point B is with ONE set of wires owned by the people who just happen to be offering their own DSL serivce is… well, a little like being able to choose any color car you like just so long as it is black.

    Much as it pains me, I have to say NOT having DSL in this area – or having the only choice be some badly mangled version like that provided by the bells – would probably be, in the long term, a GOOD thing – because it would provide more incentive for others to compete in the race for that last mile. Wireless meshes are fine if you live in the desert or the city, but today’s 802.whatever stuff is pretty useless here in the humid southeast for anything beyond room to room or fixed connections via very high gain antennas (ie it’s not just a cheap card or dongle, it’s a matter of stringing very expensive coax to a rooftop antenna – and paying someone to install and set this all up).

    It would be utterly stupid for an internet provider to intentionally cripple the very service they are selling (that is, beyond the already overbooked pathways which the bells provide their customers). Right now we’re at the very beginning of a mass exodus from the strangled pipes of dialup, and so to these new customers even 128kbps dsl can feel like the wings of Atlas – but as more and more fat pipe service become popular and the public sees more and more content offered they cannot realistically access even via their new “fast” pipes that will all surely change. And who in their right mind is going to subscribe to an internet service where the most popular sites are deliberately “broken” by those SELLING THE SERVICE?

    The internet is as neutral as it needs to be, and the public will continue to see that it remains that way – but ONLY if we step back and let these providers shoot as many toes off as they need to learn the lessons of handling a loaded gun. Calling for legislation to preserve “internet neutrality” is just putting the fox in charge of the henhouse… who the hell do you think BUYS all those laws? This latest post is just one more proof of that… don’t let the internet become just another battleground for lobbyists and pacs to divide up and dole out to the highest bidders….

  • http://www.technoutopia.blogspot.com Jess Curtis

    The only thing worse than corporate influence is government influence — corporations are checked by other corporations and ultimately consumers. The state can do whatever the hell it wants. Let’s let the free market sort this out — massive deregulation would be optimal here.

  • three blind mice

    having a multitude of DSL providers to choose from when the only way to actually connect point A to point B is with ONE set of wires owned by the people who just happen to be offering their own DSL serivce is… well, a little like being able to choose any color car you like just so long as it is black.

    well, if the only path to your computer is a twisted pair, and if all DSL providers are neutral, then you are indeed left with choosing between different shades of black.

    but in many other parts of the world, this problem does not exist: competition is robust, prices are low, and bandwidth is plentiful. it is a pity that US academics (such as our kind host) are trying to cut a path on telecommunications policy matters through a jungle that grows only america.

    this may be the reason why there are no global american operators. the germans (t-mobile) , english (vodafone), and spanish (telefonica) have all produced global telecoms giants. why are american companies – who dominate in nearly every other high tech industry – so conspicuously absent from the world telecommunications market?

    the answer is not likely to be found in technology or business accumen… american companies are undoubtedly leaders here… the answer for america’s poor performance on the world stage is more likely to be found the heavy regulation like the Tunney Act that prevents american companies from competiting on equal terms.

  • nullbull

    I’m reminded of a quote I read about the “free market” and housing prices in the US:

    “‘Let the free market decide!’ trumpeted the elephants, as they danced amongst the chickens.”

    Saying that we should let a deregulated market decide costs and options for telecom consumers at THIS point is sort of like allowing one football team to cheat for the entire game, then with 2 minutes left on the clock, starting to apply the rules equally. Then, after it’s all over, congratulaing ourselves on what a wonderfully fair game it was.

    In order for market deregulation to WORK there has to be a significantly large group of parties ready to compete the moment regulatory barriers fall. As was illustrated in the energy markets in California in 2001, when you deregulate a market with few or no parties prepared to compete, you get price-gouging, rolling blackouts, and general chaos (ala Enron). Many “faith-based free marketeers” don’t realize that this is what caused the energy crisis in California in 2001. Deregulation crashes and burns when there is insufficient competition. Anyone want to argue that, RIGHT NOW, there is sufficient competition in the US telecom industry?

    The pathetic dogma of these faith-based free marketeers is blindly followed, foolishly ignorant of environmental (little “e”) realities, and ultimately, damaging to our economy.

  • Raphy

    Happy to see the blogosphere is finally starting to pick up on this! There would’ve been legal challenges, but the public interest groups and consumer groups that were opposing didn’t have the money to get into a legal battle with the Bells.

    The bottomline is the DoJ is ignoring the Tunney Act and not allowing the courts to do their job, all while prices have gone up, customer service has gotten worse, etc.

    Not only are the Bells allowed to cheat for the first 58 minutes, but they’re so smug about it. Check out this interview Ed Whitacre had with Jeff Halpern:

    JH: How much of the merger savings do you anticipate the regulators are going to demand get returned to customers as part of the approval process? And then what’s your sense about how the confirmation of Robert McDowell of the SBC affects the BellSouth approval process?

    EW: “I think the new commissioner — I guess it remains to be seen whether he’ll vote on the BellSouth merger or not. I think you can find it both ways. But in any case, I don’t think it makes any difference in the BellSouth merger . And number two, and I’m reasonably confident of this, is I don’t think we’ll have to give back anything. I don’t think we’ll have to give back one thing to gain approval of the BellSouth merger. And we really did not on the AT&T merger; I think the same conditions exist here, I don’t expect to give back anything.”

  • http://bennett.com/blog Richard Bennett

    This is excellent. The Net Neutrality movement has egg on its face now that its claims that Cox Cable was blocking Craig’s List in order to promote its own ad business have been debunked, so along comes a brand new crazy allegation that nobody can prove one way or another.

    This one is just in time to give the pro-Google regulations a boost in committee.

    Lessig, you’re my hero.

    BTW, what does this have to do with the QoS surcharge Google and friends want to kill? Not much that I can see.

  • http://www.aaronwall.com/ aaron wall

    >american companies are undoubtedly leaders here

    Maybe, or maybe not.

    I recently called Verizon for not being able to connect via my DSL connection (for about the 10th time in the last 2 weeks). I called tech support where I had to wait about 15 minutes to get a human response (all the while the message reminded me they are “available via chat 24/7 click on the contact us link on http://www.verizon.net/help“). After I finally got a human they told me that while they are tech support they can not help me and that I needed to call billing for tech support.

    What kind of a business tells there tech support staff to tell you to call billing for tech support? Not “undoubtedly leaders”. Well that is, of course, unless being a market leader consists of leading by monopolistic business practices.

    I truly hope the business models for these scumbag telecom corporations erode quickly.

  • notyourpetmonkey

    Three Blind Mice,
    How much do you get paid to write your crap?
    Reading your posts is like listening to a cell phone sales man.

    Is poptones ‘good cop’?

    everything 3BM says is nearly 100% crap.

    Poptones says good points then bad, bad ‘points’.

    If 3BM is getting paid he should be fired. He’s an eye roller. If he isn’t getting paid he’s got one up on Archie Bunker.

    complete crap