May 29th, 2014

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Trying to get out for reunions, but had to smack a fool and do a filing

Stuck frantically trying to get stuff done so I can get on the road. I should have taken today off, but I agreed to be respondent for an academic paper at a conference put together by Penn State and hosted at the FCC. Because we were operating under 'Catham House Rules,' I cannot disclose who said what. But here are some of my pithier comments.

1. It is disingenuous in a paper where you go on at great length about agency capture rendering agencies inherently unreliable to fail to disclose that AT&T paid you as a consultant in this proceeding. Barring evidence that civil servants are either better rational actors than academic economists, and therefore better able to predict how their positions in regulatory proceedings yield personal rewards, or that academic economists are more virtuous than civil servants, and therefore even direct financial inducements will not sway them, we should assume that "academic capture" is as much a problem as "regulatory capture."

2. You claim that consumer adoption of services like Facebook indicates that consumers are not concerned about privacy and would tolerate elimination of existing regulations protecting the privacy of phone calls. You have taken the fact that many people will exchange some personal information under certain conditions in exchange for access to certain free services and generalized this to a broad conclusion about consumer behavior. This is not empirical evidence. This is a category error. By contrast, the surveys of consumer behavior indicating that consumers differentiate between means of communication based on privacy is empirical evidence to the contrary.

3. Allow me to demonstrate with a real world example why delivery platform regulation (i.e., regulation of broadband access providers) remains relevant despite competition from over-the-top (OTT) services. In the town of Hopewell NJ, they have no cable provider and no wireless provider. Verizon is allowing the copper plant to age, so that they have no DSL and are rapidly losing even basic voice service. Reading your paper one would think "what morons! Why don't they just switch to Vonage or use Facebook messenger? Oh wait . . ."

4. When you make a general absolute categorical statement, you cannot dismiss evidence to the contrary as "anecdotal." This is known in logic as the case of the Black Swan. If you state "all swans are white," and you are presented with a single black swan, then the categorical rule is demonstrably false. You cannot dismiss the black swan as "anecdotal."

Here, we have a veritable flock of black swans.

5. You have proposed a general framework for regulation. Here are three pressing problems before the agency: How does your framework resolve the problem of rural call completion? How does your framework resolve the question of 9-1-1 geolocation accuracy? How does your framework resolve the question of how to allocate spectrum on an exclusive licensed or open unlicensed basis?

If your framework is only useful for interconnection, then please call it a "framework for interconnection" rather than a "general framework for regulation."

6. Ultimately, this paper is like the romance novels of which my wife is so fond. It contains stock characters following predictable patterns identical to all the other papers in the genre. As with romance novels, I understand that this repetition and predictability are what make it popular with its devoted fan base. Also as with romance novels, anyone foolish enough to model their real world behavior based on them will come to serious grief.

7. You assert that Title II common carrier regulation is what prevents traditional wireline service from competing with wireless, and that as a result 40% of the market has now 'cut the chord.' You are aware that wireless is a Title II service, yes? Does that in any way undercut your argument with regard to the relevance of Title II as a factor?

8. [presenter pointing to a chart showing that wireless prices for voice minutes have dropped since 2000, as graphed against industry concentration in the same period as measured by HHI] "As you can see from this graph, increased concentration in the wireless industry has not led to higher prices."

Me: Alternatively, the graph demonstrates that the DoJ and FCC are correct that an HHI of 2500 is the cut off point, and that the department acted properly in denying the AT&T/T-Mo merger.

It was a day . . .