Time Warner Cable, Cablevision Sink as the FCC Goes ’Nuclear’(businessweek.com)
businessweek.com
Time Warner Cable, Cablevision Sink as the FCC Goes ’Nuclear’
http://www.businessweek.com/news/2010-05-06/time-warner-cable-cablevision-sink-as-the-fcc-goes-nuclear-.html
5 comments
The whole net neutrality debate scares the shit out of me.
One the one hand, we have ISPs, all with near-strangleholds in their area, making decisions that the market can't effectively retaliate against (high barriers to entry and whathaveyou).
On the other hand, we have the slippery-slope of government regulation of the internet. I know I'm in the minority, here, but frankly, I find this option the more unnerving.
Are we simply damned if we do, damned if we don't? How do we take power from providers without giving any more power to regulators?
One the one hand, we have ISPs, all with near-strangleholds in their area, making decisions that the market can't effectively retaliate against (high barriers to entry and whathaveyou).
On the other hand, we have the slippery-slope of government regulation of the internet. I know I'm in the minority, here, but frankly, I find this option the more unnerving.
Are we simply damned if we do, damned if we don't? How do we take power from providers without giving any more power to regulators?
You're begging the question of whether the FCC should or shouldn't have the same regulatory power over ISPs that it does over traditional common carriers.
You're also begging the question of whether treating ISPs as common carriers grants the FCC power to "regulate the internet".
Those are each highly debatable positions that you're assuming as truth.
I'm not going to question your motives, but suffice it to say your argument is hardly convincing for making these assumptions.
You're also begging the question of whether treating ISPs as common carriers grants the FCC power to "regulate the internet".
Those are each highly debatable positions that you're assuming as truth.
I'm not going to question your motives, but suffice it to say your argument is hardly convincing for making these assumptions.
If the trade is the limits on regulation at the discretion instead of limits on speed and access at the discretion of comcast, I'm pretty fine with it.
This is a great move. It is simply tragic that we live in the country that invented the Internet, and yet the bandwidth available to the average citizen is very low compared to the rest of the first world countries.
The free market has failed the Internet. For some things, like utilities, government regulation works best. I think we all can agree that network access is a utility and should be treated as such.
The free market has failed the Internet. For some things, like utilities, government regulation works best. I think we all can agree that network access is a utility and should be treated as such.
It is simply tragic that we live in the country that invented the Internet, and yet the bandwidth available to the average citizen is very low compared to the rest of the first world countries.
To some extent that is a result of the fact that we had it early. A lot of money was put into the early infrastructure, and it now needs to be upgraded, but there's little incentive to do so as long as it's working well enough.
Whereas latecomers to the party can get equipment three generations better than what we started with, and install it for a lot less money than we had to sink into our old stuff.
This is not too uncommon in business, either, where (especially in fields where patents don't ensure a monopoly for the innovator), the innovator spends a lot of resources in development, setting up the supply chain, and driving consumer demand. The "me, too!" business then comes along and benefits from all of this without having to pay a dime, and can skip right past many unprofitable months and challenge the innovator to a game of catch-up very quickly.
To some extent that is a result of the fact that we had it early. A lot of money was put into the early infrastructure, and it now needs to be upgraded, but there's little incentive to do so as long as it's working well enough.
Whereas latecomers to the party can get equipment three generations better than what we started with, and install it for a lot less money than we had to sink into our old stuff.
This is not too uncommon in business, either, where (especially in fields where patents don't ensure a monopoly for the innovator), the innovator spends a lot of resources in development, setting up the supply chain, and driving consumer demand. The "me, too!" business then comes along and benefits from all of this without having to pay a dime, and can skip right past many unprofitable months and challenge the innovator to a game of catch-up very quickly.
It's called "leap-frogging." Preventing it is the goal of patents, but many here argue against those as well. It's like they want things to be better, but they don't want to allow the creators of those better things to benefit from the betterment themselves.
When you limit the innovators' ability to profit from their innovations, they'll stop innovating...
When you limit the innovators' ability to profit from their innovations, they'll stop innovating...
You're saying the goal of patents is to force others to adapt outdated technologies? Funny, I always thought the purpose of patents was to promote progress of "science and the useful arts".
I can't imagine where you got that I was saying that. The goal of patents is to allow innovators to share their ideas, while still protecting their ability to profit from the idea.
The goal of patents is to reduce the risk of competitors taking profits for an idea without investing the R&D in the idea.
The goal of patents is to reduce the risk of competitors taking profits for an idea without investing the R&D in the idea.
The free market has failed the Internet. For some things, like utilities, government regulation works best.
It needs both, honestly. Companies need freedom to innovate, and they also need rules to prevent them from screwing consumers and other businesses. I see neutrality as a means to ensure freedom for companies to innovate on an equal playing field.
Here's an over stretched metaphor:
It's as if UPS owned parts of the highway and only allowed delivery of certain items by certain companies.
FedEx would pay huge tithes to them just to compete. Eventually FedEx would need to buy it's own network of highways somewhere else to lock-in an area and compete.
This is an exaggeration, but I see this as analogous to media companies (like TimeWarner) buying up cable companies to become ISPs.
Metaphors end here, because I personally don't see driving on a highway as a Right, and internet communication is very similar to Speech, which is an American Right.
It needs both, honestly. Companies need freedom to innovate, and they also need rules to prevent them from screwing consumers and other businesses. I see neutrality as a means to ensure freedom for companies to innovate on an equal playing field.
Here's an over stretched metaphor:
It's as if UPS owned parts of the highway and only allowed delivery of certain items by certain companies.
FedEx would pay huge tithes to them just to compete. Eventually FedEx would need to buy it's own network of highways somewhere else to lock-in an area and compete.
This is an exaggeration, but I see this as analogous to media companies (like TimeWarner) buying up cable companies to become ISPs.
Metaphors end here, because I personally don't see driving on a highway as a Right, and internet communication is very similar to Speech, which is an American Right.
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the agency plans to impose more regulations on Web-access providers after a court stripped the agency of its powers last month.
What does that mean? Which powers were stripped? How can they impose more regulations if they have less power?
What does that mean? Which powers were stripped? How can they impose more regulations if they have less power?
If I'm reading it right, basically the courts said that the FCC doesn't have the right to regulate internet providers like they do common carriers (like phone networks), so they're just going to reclassify them as common carriers, then regulate them.
IMHO this is probably huge for net neutrality, but I wonder where their (generally accepted) efforts at traffic shaping will end up in all of this? I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.
IMHO this is probably huge for net neutrality, but I wonder where their (generally accepted) efforts at traffic shaping will end up in all of this? I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.
I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.
I comment in agreement with the need to maintain QoS for reasons of network health, especially if you need to maintain minimum guaranteed bandwidth in the presence of misbehaving clients (e.g. botnets, ping floods, not just abusive torrenters).
However, the carriers in questions have often not been using QoS for reasons of improving service, but rather to penalize the percentage of broadband users who actually use a large portion of the bandwidth they're paying for.
For example, say you buy 1.5Mbit DSL and then carefully set up your torrent client to use a consistent 1.0Mbit during nighttime. A month later you get a disconnect notice from your ISP claiming that you were hogging bandwidth, probably leaving you SOL since that's the only viable ISP in your area.
This is the sort of business practice the FCC is trying to address.
I comment in agreement with the need to maintain QoS for reasons of network health, especially if you need to maintain minimum guaranteed bandwidth in the presence of misbehaving clients (e.g. botnets, ping floods, not just abusive torrenters).
However, the carriers in questions have often not been using QoS for reasons of improving service, but rather to penalize the percentage of broadband users who actually use a large portion of the bandwidth they're paying for.
For example, say you buy 1.5Mbit DSL and then carefully set up your torrent client to use a consistent 1.0Mbit during nighttime. A month later you get a disconnect notice from your ISP claiming that you were hogging bandwidth, probably leaving you SOL since that's the only viable ISP in your area.
This is the sort of business practice the FCC is trying to address.
You aren't SOL, you can stop using so much bandwidth. You can be a conscientious user of shared resources. Using a constant stream like that is almost always a bit lacking in legitimacy. It usually means you are using the service in ways that your service plan wasn't designed to be used, either you're downloading and/or sharing large, perhaps copyrighted videos, music, or software, or you are running a server for gaming or something like that.
Those 1.5Mbit DSL is "maximum capacity." Not what you should try to consume. Ultimately, all the customers go through one pipe, or a shared few pipes, so those hogging the lines negatively affect others.
In my opinion, it's the users of the bandwidth that are greedy. Do they really need 1,000 movies on their hard drives? Many bit torrenters have more content than they could ever watch in their entire lives...
Those 1.5Mbit DSL is "maximum capacity." Not what you should try to consume. Ultimately, all the customers go through one pipe, or a shared few pipes, so those hogging the lines negatively affect others.
In my opinion, it's the users of the bandwidth that are greedy. Do they really need 1,000 movies on their hard drives? Many bit torrenters have more content than they could ever watch in their entire lives...
Strawman argument. If I break the law, charge me. Otherwise you have no business second-guessing what I transfer over the line I pay for.
If they don't want people to use the bandwith they pay to get, they should say so by advertising their monthly cap or whatever.
The idea that I can only transfer the particular types of bits across the wire that my ISP thinks I should is exactly the point of net neutrality rules. If that's not an infringement of free speech, I don't know what is.
If they don't want people to use the bandwith they pay to get, they should say so by advertising their monthly cap or whatever.
The idea that I can only transfer the particular types of bits across the wire that my ISP thinks I should is exactly the point of net neutrality rules. If that's not an infringement of free speech, I don't know what is.
In many cases, you are breaking your contract with the ISP. Read almost any residential contract and it says the subscriber agrees not to run servers for example. My ISP in california even blocked port 80 upstream.
Limiting the ability to share movies online is not an infringement of free speech.
Limiting the ability to share movies online is not an infringement of free speech.
It could be argued such contracts violate net neutrality.
I'm pretty sure the telcos don't have enough lines for everyone to place a call at the same time. Are you also going to argue that running a call center should be prohibited, too, because you are excessively using shared resources?
I'm pretty sure the telcos don't have enough lines for everyone to place a call at the same time. Are you also going to argue that running a call center should be prohibited, too, because you are excessively using shared resources?
I'm not sure anyone wants broadband that can't throttle its bittorrent users a little.
Why would your 24MBit/s work slower for bit-torrent than other uses? The whole point of this net neutrality debate is that ISPs have no business deciding which traffic they prefer, much like your phone company has no business deciding which one of your friends you're allowed to call.
Why would your 24MBit/s work slower for bit-torrent than other uses? The whole point of this net neutrality debate is that ISPs have no business deciding which traffic they prefer, much like your phone company has no business deciding which one of your friends you're allowed to call.
The issue is that network advertisers don't have the bandwidth they say they do. So they really can't give everyone 24 sustained, only burst.
God forbid they actually advertise their real and burst rates instead of picking a completely unrealistic, sky-high number.
And the reason most heavy users do not complain very loudly about this false advertising is that we are benefactors, since our heavy internet usage is subsidized by those that only browse the web a bit and get email, but still want 25 Mbps because it's "more" than 2 Mbps.
If my neighbor is downloading a torrent for 3 hours, it hardly matters whether it arrives in 3:04 or 3:05. But if I'm browsing HN or email, the difference between 0.1 seconds and 1.0 seconds is quite perceptible.
They don't throttle those guys a little. They throttle them a lot.
The FCC may have to rely on legislative action by Congress or a more favorable federal court opinion.
http://www.washingtonpost.com/wp-dyn/content/article/2010/04...
The real issue question is whether or not enforcing net neutrality would introduce a new level of federal regulation that would scare off investment.
http://www.washingtonpost.com/wp-dyn/content/article/2010/04...
The real issue question is whether or not enforcing net neutrality would introduce a new level of federal regulation that would scare off investment.
The decision last month was that the FCC did not have authority from Congress to regulate internet traffic. So now the FCC is attempting to reclassify cable providers in the same bucket as telephone providers. If courts accept this then the FCC has a very clear grant of authority from Congress to regulate as they wish.
The open question is whether the courts will accept this reclassification. This question will likely take several years to wind its way through the courts, but no matter how it turns out it will be a huge headache for the cable providers.
The fundamental issue here is whether net neutrality can be imposed on the cable providers. The standard meme is that net neutrality is a basic right. I am one of the few people who actually don't want net neutrality. Not because I trust ISPs to behave in a reasonable fashion, but because I think that the only real solution to bot nets is to make ISPs liable for the traffic that they let onto the Internet, and any such rule would be incompatible with net neutrality.
The open question is whether the courts will accept this reclassification. This question will likely take several years to wind its way through the courts, but no matter how it turns out it will be a huge headache for the cable providers.
The fundamental issue here is whether net neutrality can be imposed on the cable providers. The standard meme is that net neutrality is a basic right. I am one of the few people who actually don't want net neutrality. Not because I trust ISPs to behave in a reasonable fashion, but because I think that the only real solution to bot nets is to make ISPs liable for the traffic that they let onto the Internet, and any such rule would be incompatible with net neutrality.
Bot nets are a small but annoying problem for a small percentage of people in the world. A pay-as-you-go, "we'll charge you extra for downloading 1MB from youtube rather than some other site" internet such as the one ISPs would like to aim towards would be a huge problem for everyone.
Have a sense of proportions...
Have a sense of proportions...
Small but annoying? Try saying that to someone who runs a website that has been forced to pay extortion fees as the price of staying up. And truth be told, if the public had any idea how often bot nets are responsible for their computers running slowly and their personal financial details getting stolen, there would be a lot of justified outrage about that as well.
Just because people aren't aware of how big a problem it is doesn't mean that it isn't a big problem.
Just because people aren't aware of how big a problem it is doesn't mean that it isn't a big problem.
The agency gets to classify new technology in different buckets. They put the ISPs in the data provider bucket.
So the providers started screwing people over depending on what kind of bits they wanted to get over the net -- the beginning of some god-awful 74-thousand tiered pricing structure.
Lots of fuss about that. FCC tries to step in. Court says nope, in that bucket you don't have the authority to act.
So the FCC puts them in new bucket. Huge part of the economy now regulated and nobody had to elect anybody, there was no bill, no debate, no nothing (And I support this, but damn it's a freaking Faustian bargain if I ever saw one)
So the providers started screwing people over depending on what kind of bits they wanted to get over the net -- the beginning of some god-awful 74-thousand tiered pricing structure.
Lots of fuss about that. FCC tries to step in. Court says nope, in that bucket you don't have the authority to act.
So the FCC puts them in new bucket. Huge part of the economy now regulated and nobody had to elect anybody, there was no bill, no debate, no nothing (And I support this, but damn it's a freaking Faustian bargain if I ever saw one)
Eh, it's not as bad as you think. We (congress) gave the FCC the authority to do this. Granted, we didn't quite understand the implications when we did, but it is still a democratic process.
LOL. Yes, I understand how the regulatory process works.
Apologies if I seemed to mislead anyone. There is nothing unconstitutional going on.
But that doesn't take away from the fact that the regulatory agencies have immense power in our society -- granted to them by Congress. For instance, the DEA can classify new drugs as dangerous, including setting what the jail time will be for possession -- and Congress has virtually no role[1]. Used to be it took an entire constitutional amendment to outlaw alcohol, but now a commission does the same work and there's little publicity.
[1] Ok, so they have "oversight", but as somebody who has seen oversight behind the scenes, and watched a lot of it on C-SPAN, color me unimpressed.
EDIT: Another good one is the EPA classifying CO2 -- the air we breathe -- as being under it's regulatory guidance. Now they made provision so that it only covers large producers of CO2, but that was their decision as an agency. There was no public debate or vote in Congress. Just a bunch of guys sitting around a conference table.
Once again, I support the outcome in this case. I'm not trying to argue that it's a bad outcome. Just not crazy about the way we got here, or the implications for broadband 20 years from now.
Apologies if I seemed to mislead anyone. There is nothing unconstitutional going on.
But that doesn't take away from the fact that the regulatory agencies have immense power in our society -- granted to them by Congress. For instance, the DEA can classify new drugs as dangerous, including setting what the jail time will be for possession -- and Congress has virtually no role[1]. Used to be it took an entire constitutional amendment to outlaw alcohol, but now a commission does the same work and there's little publicity.
[1] Ok, so they have "oversight", but as somebody who has seen oversight behind the scenes, and watched a lot of it on C-SPAN, color me unimpressed.
EDIT: Another good one is the EPA classifying CO2 -- the air we breathe -- as being under it's regulatory guidance. Now they made provision so that it only covers large producers of CO2, but that was their decision as an agency. There was no public debate or vote in Congress. Just a bunch of guys sitting around a conference table.
Once again, I support the outcome in this case. I'm not trying to argue that it's a bad outcome. Just not crazy about the way we got here, or the implications for broadband 20 years from now.
Part of their oversight is the court system.
Legislative branch sets out what should happen (but misses details)
Executive branch fills in the details via implementation
Judicial branch tells them when they screwed up the details or the legislative branch did something that conflicts with higher law.
Legislative branch sets out what should happen (but misses details)
Executive branch fills in the details via implementation
Judicial branch tells them when they screwed up the details or the legislative branch did something that conflicts with higher law.
This thread is turning into a civics lesson.
Yes, you are correct.
"Oversight" committees are set up by Congress to manage the authority they were given. These are -- well, start watching some if you'd like to know what they are. And don't let the Congressmen tell you their staff is on top of it. Managing Congressional staff is something the various agencies have learned a long, long time ago.
The agency itself is a part of the executive branch. So theoretically they report to the president. In practice, however, the government is a huge thing. It is highly unusual to be within 3 people of reporting to the executive. The president makes political appointments, and the top people at each agency are those who manage those guys. Usually contractors are brought in to create a lot of presentations and such so that staff can show to the political hack how great the agency is. Over time agencies get very, very good at managing the hacks and resisting change. After all, the agency is full of people there for life. These guys are just passing through. It's not unusual for the president to bring in activists or ex-corporate types as their political hacks. After all, these guys are contributors and they are interested and qualified (but also have many hidden agendas)
The courts technically oversee whether or not the agencies act in a constitutional manner -- the idea being that although Congress can delegate huge swaths of its power to agencies, it can't delegate something it never had. Appellate courts step in when federal agencies overstep, but historically in an ad-hoc manner. http://www.jstor.org/pss/2647783 The worst abuses with the most political imapct are caught. Lots of little guys get trampled.
Yes, you are correct.
"Oversight" committees are set up by Congress to manage the authority they were given. These are -- well, start watching some if you'd like to know what they are. And don't let the Congressmen tell you their staff is on top of it. Managing Congressional staff is something the various agencies have learned a long, long time ago.
The agency itself is a part of the executive branch. So theoretically they report to the president. In practice, however, the government is a huge thing. It is highly unusual to be within 3 people of reporting to the executive. The president makes political appointments, and the top people at each agency are those who manage those guys. Usually contractors are brought in to create a lot of presentations and such so that staff can show to the political hack how great the agency is. Over time agencies get very, very good at managing the hacks and resisting change. After all, the agency is full of people there for life. These guys are just passing through. It's not unusual for the president to bring in activists or ex-corporate types as their political hacks. After all, these guys are contributors and they are interested and qualified (but also have many hidden agendas)
The courts technically oversee whether or not the agencies act in a constitutional manner -- the idea being that although Congress can delegate huge swaths of its power to agencies, it can't delegate something it never had. Appellate courts step in when federal agencies overstep, but historically in an ad-hoc manner. http://www.jstor.org/pss/2647783 The worst abuses with the most political imapct are caught. Lots of little guys get trampled.
> the idea being that although Congress can delegate huge swaths of its power to agencies, it can't delegate something it never had.
Also, as in this FCC case, there is the matter of whether or not Congress gave them the power to do X in the first place.
Also, as in this FCC case, there is the matter of whether or not Congress gave them the power to do X in the first place.
Cue up story about defense attorneys and other groups pitching together to ask congress to tighten up their language because the wording is so vague in places that they are making criminals out of people for clerical errors. Also other groups protesting the use of huge bills and last-minute additions to make law.
Your EPA example is misleading since a) new regulations like that always have a public comment period and there certainly was a debate about that decision, and b) the supreme court has agreed that regulating CO2 falls under the EPA's charter. (And CO2 "the air we breathe" in the same way that nitrous oxides are, they'll kill you in concentrations high enough and is not useful to humans in any way.)
What you are painting as a demon I think of as giving regulators flexibility to adapt to a changing world. It couldn't work otherwise, if everything had to be spelled out exactly by Congress do you really think it would work better?
What you are painting as a demon I think of as giving regulators flexibility to adapt to a changing world. It couldn't work otherwise, if everything had to be spelled out exactly by Congress do you really think it would work better?
Ah, I see what you're getting at now. I'll now take the ostrich approach (stick your head in the ground & pretend it's okay) when it comes to dealing with specific government agencies. I don't want to know the details.
This move by the government certainly throws a wet blanket on any deal speculations and hampers all cable and telco stock multiples,” said Chris Marangi, an analyst with Gabelli & Co in Rye, New York. “It’s going to be years-long litigation and the cable guys can’t give an inch. Time Warner Cable sank $2.51, or 4.6 percent, to $52.48 at 10:35 a.m. in New York Stock Exchange composite trading. Earlier the shares dropped as much as 6.4 percent. Cablevision plunged $1.14 to $25.67, after earlier falling as much as 5.2 percent.
And all they had to do to avoid this was not act like greedy assholes.
I guess it was a matter of asking a leopard to change its spots.
And all they had to do to avoid this was not act like greedy assholes.
I guess it was a matter of asking a leopard to change its spots.
Corporate leaders have a fiduciary responsibility to act like greedy assholes. We have to understand that. It's required by the SEC and the law.
Corporations must grow. They must increase their share price. They must continue to do more and more and more to get more money or they die. If you aren't growing you are dead.
That's the problem with our system. But this system violates the laws of nature. Organisms in nature don't continue to grow forever. Those that don't stop growing eventually collapse under their own weight. That's exactly what is happening to our corporations -- and our society.
We have to create a new system, whereby corporations -- organizations -- are rewarded for their stability, for their consistency. For their remaining the same for a long time.
Small businesses can do this. At some point, the small business owner can say, "I have enough." But corporate leaders cannot say, "Our corporation is big enough." If they say that, they are fired. If you go public, you have to grow forever until your corporation collapses -- or is broken up by regulators.
There is only one destination for public companies -- destruction, either through collapse or regulatory fragmentation.
Corporations must grow. They must increase their share price. They must continue to do more and more and more to get more money or they die. If you aren't growing you are dead.
That's the problem with our system. But this system violates the laws of nature. Organisms in nature don't continue to grow forever. Those that don't stop growing eventually collapse under their own weight. That's exactly what is happening to our corporations -- and our society.
We have to create a new system, whereby corporations -- organizations -- are rewarded for their stability, for their consistency. For their remaining the same for a long time.
Small businesses can do this. At some point, the small business owner can say, "I have enough." But corporate leaders cannot say, "Our corporation is big enough." If they say that, they are fired. If you go public, you have to grow forever until your corporation collapses -- or is broken up by regulators.
There is only one destination for public companies -- destruction, either through collapse or regulatory fragmentation.
This point of view always bothers me because it's not really true. Yes, one of the primary duties board members have is to increase the wealth of the shareholders, but it does not equate to purely performing greedy moves. Look at the case of Dodge v. Ford Motor Company. Here's an excerpt from the decision made (emphasis mine):
"A business corporation is organized and carried on primarily for the profit of the share-holders. The powers of the directors are to be employed for that end. We are not, however, persuaded that we should interfere with the proposed expansion of the Ford Motor Company. In view of the fact that the selling price of products may be increased at any time, the ultimate results of the larger business cannot be certainly estimated. The judges are not business experts."
Yes, they are primarily in it to make money for their shareholders. However, it's nearly impossible to tell the effects of many decisions on the company's bottom line, and moves that increase the company's image in the eyes of the general populace can certainly be argued to have effects that increase the financial well-being of the company.
There's something called the business judgment rule that's applied in cases such as this. The board members must act in good faith, act in the best interests of the corporation, act on an informed basis, not be wasteful, and not involve self-interest. This gives a great deal of wiggle room because, as the judge said in Dodge v. Ford Motor Co., "judges are not business experts."
A move like eschewing moves away from net neutrality is arguably (which is all it needs to be) a move done in good faith to increase the bottom line of the company, especially since it builds goodwill with consumers.
"A business corporation is organized and carried on primarily for the profit of the share-holders. The powers of the directors are to be employed for that end. We are not, however, persuaded that we should interfere with the proposed expansion of the Ford Motor Company. In view of the fact that the selling price of products may be increased at any time, the ultimate results of the larger business cannot be certainly estimated. The judges are not business experts."
Yes, they are primarily in it to make money for their shareholders. However, it's nearly impossible to tell the effects of many decisions on the company's bottom line, and moves that increase the company's image in the eyes of the general populace can certainly be argued to have effects that increase the financial well-being of the company.
There's something called the business judgment rule that's applied in cases such as this. The board members must act in good faith, act in the best interests of the corporation, act on an informed basis, not be wasteful, and not involve self-interest. This gives a great deal of wiggle room because, as the judge said in Dodge v. Ford Motor Co., "judges are not business experts."
A move like eschewing moves away from net neutrality is arguably (which is all it needs to be) a move done in good faith to increase the bottom line of the company, especially since it builds goodwill with consumers.
A move like eschewing moves away from net neutrality is arguably (which is all it needs to be) a move done in good faith to increase the bottom line of the company
It could be argued that it violates the property rights of the corporation. Almost every restaurant has a sign that says, "We reserve the right to refuse service to anyone."
The telecoms built those wires. They installed the switches. It seems wrong to me to tell them how they must allow traffic to flow over them. Existing transportation companies aren't hounded by the Department of transportation because they charge more for a 12 cubic foot container than they charge for a 1 cubic foot container.
If a railroad wants to charge one company more than another company they can do that. If they want to limit the amount of goods they transport, they can do that. They can refuse to transport certain kinds of goods as well. Grains, liquids, explosives... Or charge a different rate...
How is the internet, where the packages are full of 1's and zeros different?
It could be argued that it violates the property rights of the corporation. Almost every restaurant has a sign that says, "We reserve the right to refuse service to anyone."
The telecoms built those wires. They installed the switches. It seems wrong to me to tell them how they must allow traffic to flow over them. Existing transportation companies aren't hounded by the Department of transportation because they charge more for a 12 cubic foot container than they charge for a 1 cubic foot container.
If a railroad wants to charge one company more than another company they can do that. If they want to limit the amount of goods they transport, they can do that. They can refuse to transport certain kinds of goods as well. Grains, liquids, explosives... Or charge a different rate...
How is the internet, where the packages are full of 1's and zeros different?
In the United States, railroads are common carriers, so they're not allowed to have discriminatory pricing.
Telecoms are also given a lot of government protection, like local monopolies and no liability for the information they deliver, in return for the regulation. The government paid for a lot of the wires and switches with subsidies, which muddles the property rights argument. The government certainly has a right, as well as an obligation to the public, to ensure that its expenditures are to the public benefit.
I personally take the view that, for all intents and purposes, telcoms aren't completely private entities due to the legal and financial privelages they recieve from the government, so reasoning by analogy to other private enterprises is flawed. The crossover is enough to give them a civic obligation in addition to their fudiciary responsibility, enforcable by regulation.
Telecoms are also given a lot of government protection, like local monopolies and no liability for the information they deliver, in return for the regulation. The government paid for a lot of the wires and switches with subsidies, which muddles the property rights argument. The government certainly has a right, as well as an obligation to the public, to ensure that its expenditures are to the public benefit.
I personally take the view that, for all intents and purposes, telcoms aren't completely private entities due to the legal and financial privelages they recieve from the government, so reasoning by analogy to other private enterprises is flawed. The crossover is enough to give them a civic obligation in addition to their fudiciary responsibility, enforcable by regulation.
You'll have to provide a reference, because this one disagrees, saying (on page 3):
CSX has pricing rates by commodity http://www.csx.com/?fuseaction=customers.pricing_lists
It's obvious to anyone who has shipped almost anything that costs are different by size and weight and scale.
Shipping rates vary by type of commodity
Each cargo owner pays a different rate
CSX has pricing rates by commodity http://www.csx.com/?fuseaction=customers.pricing_lists
It's obvious to anyone who has shipped almost anything that costs are different by size and weight and scale.
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It's obvious to anyone who has shipped almost anything that costs are different by size and weight and scale.
The discriminatory pricing refers to the client, not to the shipped goods.
Pricing for different goods by type, size and height is appropriate because of the different resources needed to ship those goods. More fuel and studier cars are needed to move iron loads vs a load of pillows. Moving coal requires open-topped coal cars while moving ice-cream requires refrigerated cars, etc.
Telecoms are in the business of moving bits. If they want to charge more to move a gigabyte of video data than they do to charge a gigabyte of text data, or if they want to offer slower speeds for a gigabyte of torrent data vs a gigabyte of FTP data, I think they should better explain how the different types of data justify the different charges.
The discriminatory pricing refers to the client, not to the shipped goods.
Pricing for different goods by type, size and height is appropriate because of the different resources needed to ship those goods. More fuel and studier cars are needed to move iron loads vs a load of pillows. Moving coal requires open-topped coal cars while moving ice-cream requires refrigerated cars, etc.
Telecoms are in the business of moving bits. If they want to charge more to move a gigabyte of video data than they do to charge a gigabyte of text data, or if they want to offer slower speeds for a gigabyte of torrent data vs a gigabyte of FTP data, I think they should better explain how the different types of data justify the different charges.
It seems to me that acting like greedy assholes to the point that the regulators step in, would actually be failing at maximizing shareholder value.
I believe also that paying dividends would be an alternative to having a pyramidal share price.
I believe also that paying dividends would be an alternative to having a pyramidal share price.
You could say they are greedy assholes, or you could say they are trying to maximize the revenue potential of their investment.
Software companies do it all the time. Oracle charges Salesforce more for its database than it charges a university and it gives it way for free to some organizations.
Essentially, net neutrality is saying that the telecoms don't have the right to choose how to charge for their product.
If the FCC is saying the internet is a right everyone should enjoy at the same rate, why don't they create a public wireless grid? People argue against that saying the government will control our traffic, but essentially that's what they are arguing for here as well. They want the FCC to control the internet, but keep it private in such a way that limits the corporation's ability to profit.
I'd be angry if the FCC came in and told me what I could charge for my SaaS or my consulting hours. Why is it different for the telecoms?
Software companies do it all the time. Oracle charges Salesforce more for its database than it charges a university and it gives it way for free to some organizations.
Essentially, net neutrality is saying that the telecoms don't have the right to choose how to charge for their product.
If the FCC is saying the internet is a right everyone should enjoy at the same rate, why don't they create a public wireless grid? People argue against that saying the government will control our traffic, but essentially that's what they are arguing for here as well. They want the FCC to control the internet, but keep it private in such a way that limits the corporation's ability to profit.
I'd be angry if the FCC came in and told me what I could charge for my SaaS or my consulting hours. Why is it different for the telecoms?
> Why is it different for the telecoms?
Because the telecoms have gotten tons of help from the public, via the government, over the years. At the Federal level, the cable and satellite companies got the original anti-circumvention laws that led to the DMCA. They also get to be exempt from a lot of state level regulation that they might not like, in exchange for the far friendlier FCC. And at the local level, telcos get to use public rights of way and often have monopoly grants.
They're in no way comparable to a small entrepreneur. They're like a company that's been given (or bought) permission to operate a toll road. In exchange for being allowed to make money, they need to charge everyone the same tolls and the amount of the tolls that they charge is going to be subject to regulation.
As for why the government doesn't just build and operate the infrastructure itself ... if the telcos keep it up, that may just be what happens. Critical infrastructure has been a frequent target, historically, for nationalization when the owners of that infrastructure are perceived to be rent-seeking to excess. The public tolerance for toll roads evaporated in the 1880s [1] and they were almost entirely stamped out by the Progressives; the telecommunication operators of today would do well to keep that in mind.
[1] http://eh.net/encyclopedia/article/Klein.Majewski.Turnpikes
Because the telecoms have gotten tons of help from the public, via the government, over the years. At the Federal level, the cable and satellite companies got the original anti-circumvention laws that led to the DMCA. They also get to be exempt from a lot of state level regulation that they might not like, in exchange for the far friendlier FCC. And at the local level, telcos get to use public rights of way and often have monopoly grants.
They're in no way comparable to a small entrepreneur. They're like a company that's been given (or bought) permission to operate a toll road. In exchange for being allowed to make money, they need to charge everyone the same tolls and the amount of the tolls that they charge is going to be subject to regulation.
As for why the government doesn't just build and operate the infrastructure itself ... if the telcos keep it up, that may just be what happens. Critical infrastructure has been a frequent target, historically, for nationalization when the owners of that infrastructure are perceived to be rent-seeking to excess. The public tolerance for toll roads evaporated in the 1880s [1] and they were almost entirely stamped out by the Progressives; the telecommunication operators of today would do well to keep that in mind.
[1] http://eh.net/encyclopedia/article/Klein.Majewski.Turnpikes
Personally, I think it'd be great to have a public wireless grid, but think of the privacy issues. The government could have much easier access to our emails.
But back to your point, the toll roads I travel on charge more for semi-trucks than they charge for passenger vehicles.
I understand the thought that the public is investing in these wires, so they own them, but the public invests in all sorts of industries, including pharmaceuticals (via the NIH), vehicles (buying GM), mortgages (fannie may, aig), but yet they don't regulate what gm charges for cars or Pfizer charges for their drugs.
I wonder why we believe it is okay for the govt to meddle in some areas and not others? Where and how do we draw the line?
But back to your point, the toll roads I travel on charge more for semi-trucks than they charge for passenger vehicles.
I understand the thought that the public is investing in these wires, so they own them, but the public invests in all sorts of industries, including pharmaceuticals (via the NIH), vehicles (buying GM), mortgages (fannie may, aig), but yet they don't regulate what gm charges for cars or Pfizer charges for their drugs.
I wonder why we believe it is okay for the govt to meddle in some areas and not others? Where and how do we draw the line?
But back to your point, the toll roads I travel on charge more for semi-trucks than they charge for passenger vehicles.
Yes, because the semis cause more than their share of road-maintenance costs. This is akin to charging me 2x as much if I want to upgrade to a pipe that's 2x as fast. Nobody has a problem with that.
The problem happens when the government sells the tollway to a private corporation, who then starts up its own trucking line. The road's new owner charges its own trucks $0.25 and everybody else's trucks $5.00. How could you defend that?
I wonder why we believe it is okay for the govt to meddle in some areas and not others? Where and how do we draw the line?
This isn't even a new question. There are some interesting parallels with the early telephone switching system. About a hundred years ago, an undertaker named Strowger noticed that his competitor was getting all the calls whenever someone kicked the bucket. It didn't take much investigation before he discovered that Betty the Switchboard Operator was the sister-in-law of Bob the Undertaker at the competing funeral home.
Nowadays we're faced with the exact same scenario, but due to the logistics of the last-wire monopoly, we can't solve it by inventing a new switching system like Strowger did. That's where the government has a legitimate role to play.
Yes, because the semis cause more than their share of road-maintenance costs. This is akin to charging me 2x as much if I want to upgrade to a pipe that's 2x as fast. Nobody has a problem with that.
The problem happens when the government sells the tollway to a private corporation, who then starts up its own trucking line. The road's new owner charges its own trucks $0.25 and everybody else's trucks $5.00. How could you defend that?
I wonder why we believe it is okay for the govt to meddle in some areas and not others? Where and how do we draw the line?
This isn't even a new question. There are some interesting parallels with the early telephone switching system. About a hundred years ago, an undertaker named Strowger noticed that his competitor was getting all the calls whenever someone kicked the bucket. It didn't take much investigation before he discovered that Betty the Switchboard Operator was the sister-in-law of Bob the Undertaker at the competing funeral home.
Nowadays we're faced with the exact same scenario, but due to the logistics of the last-wire monopoly, we can't solve it by inventing a new switching system like Strowger did. That's where the government has a legitimate role to play.
The most obvious reason that I can think of is that most of these companies have near-monopolies in many local markets.
The overarching point is that it's a clear good for society. It doesn't have to be fair - we're not required to be nice, or fair, to corporations - they're not people. We're required to maximise the benefit of the citizens in the country. Sure, being 'unfair' to corporations can have negative long term outcomes, which is why you only do it in cases like these: where the outcome is so clearly a positive for the system as a whole.
The overarching point is that it's a clear good for society. It doesn't have to be fair - we're not required to be nice, or fair, to corporations - they're not people. We're required to maximise the benefit of the citizens in the country. Sure, being 'unfair' to corporations can have negative long term outcomes, which is why you only do it in cases like these: where the outcome is so clearly a positive for the system as a whole.
I don't know if it is clearly positive for the system as a whole, because if telecoms can charge more, and generate more revenue from existing infrastructure, then they can get on to newer, fatter, and longer pipes.
Right now, they are basically stuck paying for all the copper they bought. They can't buy new fiber. They can't install new towers, etc...
Right now, they are basically stuck paying for all the copper they bought. They can't buy new fiber. They can't install new towers, etc...
Considering the current prices of US broadband, they ought to be making an absolute killing - particularly in urban areas. Compared to countries with different regulatory schemes, you guys pay a lot of money for not a whole lot.
Even so - I'm not sure they're being prevented from charging more, necessarily - although the FEC would gain the power to do so if necessary. The main thing is, they're being prevented from charging in a discriminatory manner.
Even so - I'm not sure they're being prevented from charging more, necessarily - although the FEC would gain the power to do so if necessary. The main thing is, they're being prevented from charging in a discriminatory manner.
I heartily agree. The problem is the same which besets comparisons of weather and climate: short-term profits and/or share values are measurable, whereas longevity and stability are abstractions which can only be assessed retrospectively, and the relationship between the two is not always clear.
I'm not sure how tractable this problem is. If you'll forgive some hand-waving, it reminds me of the oligopoly problem turned inside out - rather than a few large companies in a market, you have a few powerful directors in a market where shareholder votes are exchanged for management services. Even if directors have independent ideas about the right policy for the corporation, as they should, the nature of the (internal) market itself may result in unanimity to the detriment of shareholders. Shareholder demand for value (qua consumer demand for management services) is rather inelastic, which limits the appetite for risky things like firing the entire board, and by proxy firing the management team - the more so when fund managers of institutional investors (administering important things like pensions) have a clear fiduciary and ethical duty to maximize returns to the fundholders.
I'm not sure how tractable this problem is. If you'll forgive some hand-waving, it reminds me of the oligopoly problem turned inside out - rather than a few large companies in a market, you have a few powerful directors in a market where shareholder votes are exchanged for management services. Even if directors have independent ideas about the right policy for the corporation, as they should, the nature of the (internal) market itself may result in unanimity to the detriment of shareholders. Shareholder demand for value (qua consumer demand for management services) is rather inelastic, which limits the appetite for risky things like firing the entire board, and by proxy firing the management team - the more so when fund managers of institutional investors (administering important things like pensions) have a clear fiduciary and ethical duty to maximize returns to the fundholders.
> acting like greedy assholes to the point that the regulators step in
Yes, simple risk/return analysis? And they were warned too.
"Don't harass the chicken that lays golden eggs too much."
Yes, simple risk/return analysis? And they were warned too.
"Don't harass the chicken that lays golden eggs too much."
Corporate leaders have a fiduciary responsibility to act like greedy assholes. We have to understand that. It's required by the SEC and the law.
Well, specifically it's directors who have that duty, and (naturally) they select managers whose views further their own. Of course, in recent years there have been examples of tension between managers and shareholders in the US (unrelated to the financial crisis), where shareholders' powers to change policy 'from the floor' are relatively limited. Some argue, too, that directors' fiduciary responsibilities need to be rethought in terms of long-term sustainability and stability rather than in purely expansionary terms.
There's an interesting discussion of these issues here: http://blogs.law.harvard.edu/corpgov/2009/11/17/shareholders...
And on a slightly tangential note, a cautionary tale about a company that went bust within weeks of its IPO, and how the arguments of the firm's attorney and directors found short shrift in court: http://ssrn.com/abstract=1567657
Well, specifically it's directors who have that duty, and (naturally) they select managers whose views further their own. Of course, in recent years there have been examples of tension between managers and shareholders in the US (unrelated to the financial crisis), where shareholders' powers to change policy 'from the floor' are relatively limited. Some argue, too, that directors' fiduciary responsibilities need to be rethought in terms of long-term sustainability and stability rather than in purely expansionary terms.
There's an interesting discussion of these issues here: http://blogs.law.harvard.edu/corpgov/2009/11/17/shareholders...
And on a slightly tangential note, a cautionary tale about a company that went bust within weeks of its IPO, and how the arguments of the firm's attorney and directors found short shrift in court: http://ssrn.com/abstract=1567657
Corporations must grow. They must increase their share price. They must continue to do more and more and more to get more money or they die. If you aren't growing you are dead.
True, although do they have to do that by trying to decrease service at every opportunity, and by trying to enter markets outside their core competencies?
There's nothing wrong with being a big dumb pipe. For a cable carrier or telco, trying to do anything else will either divide the company against itself, or pit the company against its own customers. It could be argued that by trying to grow into inappropriate areas, the carriers are contravening their fiduciary duty.
True, although do they have to do that by trying to decrease service at every opportunity, and by trying to enter markets outside their core competencies?
There's nothing wrong with being a big dumb pipe. For a cable carrier or telco, trying to do anything else will either divide the company against itself, or pit the company against its own customers. It could be argued that by trying to grow into inappropriate areas, the carriers are contravening their fiduciary duty.
Telecom is a red ocean. Too many providers and too few customers. To grow, they have to extract more out of their customers, provide less costly services (increasing margins) or venture into areas outside that red ocean.
But blue oceans are uncharted territory. They are scary and risky and require a level of creativity that exists in few telecom companies.
Most telecoms are so big that to grow at a rate above 1% would require massive opportunity. It's much easier to charge 1% more to all their customers or include a hidden fee or provide 1% less bandwidth. They've done that to an equilibrium now and breaking the deadlock with their competitors is destructive to their own organization. They can't cut costs because they don't have the margins. They can't raise rates because customers will go to a cheaper alternative. They can't reduce services because the FCC comes down on them.
Remember what happened to comcast when they tried to treat bit torrent differently? It seemed reasonable to me. If the FCC wants to turn the internet into a transportation system, then they will need the equivalent of a weigh station, because the heavy trucks cause more damage to the roads.
But blue oceans are uncharted territory. They are scary and risky and require a level of creativity that exists in few telecom companies.
Most telecoms are so big that to grow at a rate above 1% would require massive opportunity. It's much easier to charge 1% more to all their customers or include a hidden fee or provide 1% less bandwidth. They've done that to an equilibrium now and breaking the deadlock with their competitors is destructive to their own organization. They can't cut costs because they don't have the margins. They can't raise rates because customers will go to a cheaper alternative. They can't reduce services because the FCC comes down on them.
Remember what happened to comcast when they tried to treat bit torrent differently? It seemed reasonable to me. If the FCC wants to turn the internet into a transportation system, then they will need the equivalent of a weigh station, because the heavy trucks cause more damage to the roads.
Ah, but the trucks are the same size and weight. There are just different numbers of trucks delivering different things. UPS, Fedex, and DHL all offer commercial delivery services. DHL is much smaller than the others (and so they have fewer trucks), but all pay the same prices per truck at weigh stations and for vehicle licensing.
If they were data companies, UPS and Fedex would have more and larger servers (sorting and storage facilities) than DHL, but their packets (trucks) are treated the same way on the open road.
If they were data companies, UPS and Fedex would have more and larger servers (sorting and storage facilities) than DHL, but their packets (trucks) are treated the same way on the open road.
I like being right about things, but it's a shame to be right when the Internet has to go completely wrong in order to prove a point.
NN was always a bad idea and this step by the FCC was obvious to anyone who saw through the NN BS. I'll never understand why people still think the government can "help" them by solving problems that don't even exist.
Say hello you're new Internet nanny, the FCC.
NN was always a bad idea and this step by the FCC was obvious to anyone who saw through the NN BS. I'll never understand why people still think the government can "help" them by solving problems that don't even exist.
Say hello you're new Internet nanny, the FCC.
Yeah, keep voting this down, that will make the Internet being controlled by the FCC better...somehow.
I think your problem might in part be from your claim that no problem exists.
I disagree with that while agreeing that a good outcome from this move is extremely unlikely. (Is you faith in the government that strong? In a political body who's partisan nature shifts from administration to administration?
And that was before I read the theory that this would freeze a lot of stuff while it gets fought out in the courts for the next few years.
I disagree with that while agreeing that a good outcome from this move is extremely unlikely. (Is you faith in the government that strong? In a political body who's partisan nature shifts from administration to administration?
And that was before I read the theory that this would freeze a lot of stuff while it gets fought out in the courts for the next few years.
Do you prefer large corporations over FCC to "control the Internet"?
Absolutely.
I downvoted not because of your opinion, but for its lack of a substantive argument.
clammer, would you mind emailing me sometime? I was just reading some of your other comments on HN, and I really enjoy hearing your thoughts. My email is jon at atlaswebdev dot com. Thanks!
It could have gone back to Congress to get clearer statutory authority for its mandate to regulate the web. If successful, that effort would have led to a solution in the form of a new statutory provision that carefully defined what the FCC could or couldn't do in regulating the internet. While that would have been an ideal solution, it would have meant having to get support for the agency's net neutrality goals in Congress, and that support was doubtful.
The other choice was to do what it did here, and that is to take its existing authority over common carriers in the telephone market and attempt to extend it to the internet. The problem with this is that such authority is very broad-based and includes (among other things) the power to regulate pricing through a complex system of tariffs.
The FCC is claiming to do a "hybrid," however, by saying that, yes, we are going treat internet access providers like phone companies but we don't intend to regulate their pricing or exercise any of the other broad regulatory powers we might otherwise exercise once we use this this approach. In effect, the agency is saying, "we plan to come in with a scalpel and do only what is needed to implement our narrow regulatory plan that is focused primarily on net neutrality rules - so, don't worry about the rest, trust us that we will not overreach."
Of course, nothing is in place under the FCC's chosen approach to stop overreaching by the agency except its own discretion. By invoking existing statutes designed for another purpose altogether, instead of seeking to get a new statute from Congress aimed at solving the immediate issue of net neutrality only, the FCC is exerting government power in a way that may not have been contemplated by the original statutes and in a way that will most certainly be challenged in the courts.
Maybe this approach will work for proponents of net neutrality but it comes at a price of the government staking out a pretty broad claim to regulate the internet without any particular checks on that power beyond the FCC's own judgment as to what it should or shouldn't do in the future. Thus, this is basically an agency power grab - perhaps supportable, perhaps not - but almost certain to have unpredictable and potentially unpleasant side effects as always happens when there are insufficient checks on government power.