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What's stunning to me is seeing Ajit Pai and conservative interest groups citing the FCC's investigation into ISPs subsidizing certain types of data (a.k.a. zer

What's stunning to me is seeing Ajit Pai and conservative interest groups citing the FCC's investigation into ISPs subsidizing certain types of data (a.k.a. zero-rating) as an innovation that burdensome regulation was inhibiting. There's plenty of room for debate on what constitutes predatory pricing. But I think it's clear that when you drop the price for a product to zero, there's no longer an argument that you are attempting to fairly compete in that market. The only rational reason is to drive your competitors out of business. Pai isn't interested in a competitive market; he's told us that much explicitly. He's interested in a market where the powerful have a free hand to consolidate that power into full-on monopoly. And he's right, consumers will see certain benefits -- like zero-rating -- while that consolidation is occurring. But then, afterwards, we'll be stuck relearning the lessons of Standard Oil and Pacific Bell all over again.

Aloha 9y ago
I think he's trying to solve a different problem.. universal access to networks. I don't think his measures will actually solve it, but I don't think he's protecting incumbents for the sake of protecting them.
- matt4077 9y ago
  Trying my hardest to keep an open mind, this argument is the closest I've seen to something even remotely sane, but I'm stumped in regards to the specific mechanism. I can think of two, and would love to hear if anyone can improve them: (a) There's a house a mile away from the city. Right now, running a cable to it isn't worth it for the X$/mo they would pay for internet. Without net neutrality, Comcast will also get 20% of Amazon's revenue, and Netflix', and the investment starts to make sense. (My criticism: Those 20% will have to be added to Amazon's prices, considering their thin margins, and the customer could have just paid the total directly to Comcast, without all the harm to people not in their situation. Also: this argument rapidly loses plausibility for even a small cluster of, say, a dozen houses. If you want to life in a cabin in the woods, slow internet seems like the sort of trade-off it involves. You get clean air, in turn. Although that may be changing, as well). (b) A simple trickle-down theory of network access: Comcast will make so much money, some of it just has to end up in network investment. (criticism: there really isn't a point at which a company will say "we have so much money, let's spend a little more on investments bound to cost us money")
  - Aloha 9y ago
    It kinda makes sense for me, it increases the effective margin on services, so it could make an area that would otherwise be not cost effective for service, cost effective. Telcos only make expansions for areas that can generate an effective rate of return, if the density required to make a rate of return drops a wider area can be serviced. I'm optimistic but not hopeful - we didn't have these kinds of services long enough to see if they would move the needle.. but I strongly suspect that they wouldn't, and would just line the pockets of the incumbent telcos. For things like utilities I'm a big big big believer in regulated monopolies. It makes no sense from a cost perspective to have duplicated facilities rather than rate of return based financing.. and if you want universal access, you need that cross subsidization that was done before divestiture (high margin services subsidized low margin ones to ensure universal access). In the end, the only way to have universal service is to have some sort of cross subsidization either from higher margin services the telco also sells, or from an external entity.
- metaphorm 9y ago
  it's possible for Ajit Pai to have more than one objective. He may value universal access to networks but it is just as clear from his other statements that he values deregulation of big businesses because it benefits those businesses, social side effects be damned.
golergka 9y ago
> there's no longer an argument that you are attempting to fairly compete in that market. The only rational reason is to drive your competitors out of business. Wait. "Fairly compete" and "drive your competitors out of business" are opposite things now? How? Obviously, most businesses, ideally, want to be so successful so that their competitors go out of business - as long as the market is more or less zero-sum game, one always go in hand with the other.
- devrandomguy 9y ago
  IMO, the "fair" part implies a set of rules that promote a more interesting playing field, rather than total war.
- humanrebar 9y ago
  You can be the best at what you do by improving yourself or you can be the best at what you do by making sure nobody else can even do it in the first place. The problem with zero rating is that it is unlikely that new players will end up getting zero rated. So we're not talking about established players being really good at using less bandwidth or something, we're talking about established players having entirely different rules than newcomers.
- scarmig 9y ago
  There's a world of difference, in context. One is in kind of an equilibrium, where the costs of a product or service are included as part of the good. Consumers can choose the product that makes legible the costs and labor that went into it. Some suppliers will win, others will lose, but it's based on transparent pricing, which markets function best with. The other only sustains low prices through some exogenous means. It could be a VC dumping money to subsidize a product until all other competitors are gone and network effects take over. It could be a company taking revenues from one profitable product line and investing them to subsidize other product spaces where competitors have to rely on making money from the explicit pricing. On the surface they're similar, in that one company has consumers choosing their product over another's. The difference is what will happen down the line to consumers. In one situation any bad behavior can be quickly corrected by the market. The other is the image of Comcast charging you for a boot stamping on your face forever, even though you never asked for the boot and have requested half a dozen times that they stop the boot stamping on your face service.
whack 9y ago
To play devil's advocate, there are plenty of businesses where companies sell loss-leaders in order to bring in customers, who then spend lucrative amounts of money on other things. Black Friday deals are one example. Mexican restaurants offering free salsa and chips is another. On a larger scheme though, I agree that companies selling things at below-cost, can lead to anti-competitive outcomes that bankrupt any competitors without deep pockets. Uber's subsidized rides are an example of this. The WTO has rules against this when it comes to international trade. Perhaps it's time we adopted similar laws domestically as well.
- pharrlax 9y ago
  Sure, but Mexican restaurants' salsa and chips isn't a separate industry. Offering free chips with dinner isn't an attempt to price people out of buying Tostitos at the grocery store. It's one thing when you offer a subset of services within the same industry as a loss leader; it's another when you extend your reach to another industry and start pricing out existing companies to gain a foothold there.
jtraffic 9y ago
> But I think it's clear that when you drop the price for a product to zero, there's no longer an argument that you are attempting to fairly compete in that market. The only rational reason is to drive your competitors out of business. This statement is far too rigid. You probably don't mean it exactly as written. To illustrate, this would imply that Robinhood was not attempting to fairly compete in the brokerage market when it first launched.
- pharrlax 9y ago
  Robinhood is an exception because their business is holding funds. When you hold funds, you can make interest off them. I guess the better way to say it is "when you drop the profit you receive from a product to zero".

Aloha 9y ago

I think he's trying to solve a different problem.. universal access to networks. I don't think his measures will actually solve it, but I don't think he's protecting incumbents for the sake of protecting them.

matt4077 9y ago
Trying my hardest to keep an open mind, this argument is the closest I've seen to something even remotely sane, but I'm stumped in regards to the specific mechanism. I can think of two, and would love to hear if anyone can improve them: (a) There's a house a mile away from the city. Right now, running a cable to it isn't worth it for the X$/mo they would pay for internet. Without net neutrality, Comcast will also get 20% of Amazon's revenue, and Netflix', and the investment starts to make sense. (My criticism: Those 20% will have to be added to Amazon's prices, considering their thin margins, and the customer could have just paid the total directly to Comcast, without all the harm to people not in their situation. Also: this argument rapidly loses plausibility for even a small cluster of, say, a dozen houses. If you want to life in a cabin in the woods, slow internet seems like the sort of trade-off it involves. You get clean air, in turn. Although that may be changing, as well). (b) A simple trickle-down theory of network access: Comcast will make so much money, some of it just has to end up in network investment. (criticism: there really isn't a point at which a company will say "we have so much money, let's spend a little more on investments bound to cost us money")
- Aloha 9y ago
  It kinda makes sense for me, it increases the effective margin on services, so it could make an area that would otherwise be not cost effective for service, cost effective. Telcos only make expansions for areas that can generate an effective rate of return, if the density required to make a rate of return drops a wider area can be serviced. I'm optimistic but not hopeful - we didn't have these kinds of services long enough to see if they would move the needle.. but I strongly suspect that they wouldn't, and would just line the pockets of the incumbent telcos. For things like utilities I'm a big big big believer in regulated monopolies. It makes no sense from a cost perspective to have duplicated facilities rather than rate of return based financing.. and if you want universal access, you need that cross subsidization that was done before divestiture (high margin services subsidized low margin ones to ensure universal access). In the end, the only way to have universal service is to have some sort of cross subsidization either from higher margin services the telco also sells, or from an external entity.
metaphorm 9y ago
it's possible for Ajit Pai to have more than one objective. He may value universal access to networks but it is just as clear from his other statements that he values deregulation of big businesses because it benefits those businesses, social side effects be damned.

golergka 9y ago

> there's no longer an argument that you are attempting to fairly compete in that market. The only rational reason is to drive your competitors out of business. Wait. "Fairly compete" and "drive your competitors out of business" are opposite things now? How? Obviously, most businesses, ideally, want to be so successful so that their competitors go out of business - as long as the market is more or less zero-sum game, one always go in hand with the other.

devrandomguy 9y ago
IMO, the "fair" part implies a set of rules that promote a more interesting playing field, rather than total war.
humanrebar 9y ago
You can be the best at what you do by improving yourself or you can be the best at what you do by making sure nobody else can even do it in the first place. The problem with zero rating is that it is unlikely that new players will end up getting zero rated. So we're not talking about established players being really good at using less bandwidth or something, we're talking about established players having entirely different rules than newcomers.
scarmig 9y ago
There's a world of difference, in context. One is in kind of an equilibrium, where the costs of a product or service are included as part of the good. Consumers can choose the product that makes legible the costs and labor that went into it. Some suppliers will win, others will lose, but it's based on transparent pricing, which markets function best with. The other only sustains low prices through some exogenous means. It could be a VC dumping money to subsidize a product until all other competitors are gone and network effects take over. It could be a company taking revenues from one profitable product line and investing them to subsidize other product spaces where competitors have to rely on making money from the explicit pricing. On the surface they're similar, in that one company has consumers choosing their product over another's. The difference is what will happen down the line to consumers. In one situation any bad behavior can be quickly corrected by the market. The other is the image of Comcast charging you for a boot stamping on your face forever, even though you never asked for the boot and have requested half a dozen times that they stop the boot stamping on your face service.

whack 9y ago

To play devil's advocate, there are plenty of businesses where companies sell loss-leaders in order to bring in customers, who then spend lucrative amounts of money on other things. Black Friday deals are one example. Mexican restaurants offering free salsa and chips is another. On a larger scheme though, I agree that companies selling things at below-cost, can lead to anti-competitive outcomes that bankrupt any competitors without deep pockets. Uber's subsidized rides are an example of this. The WTO has rules against this when it comes to international trade. Perhaps it's time we adopted similar laws domestically as well.

pharrlax 9y ago
Sure, but Mexican restaurants' salsa and chips isn't a separate industry. Offering free chips with dinner isn't an attempt to price people out of buying Tostitos at the grocery store. It's one thing when you offer a subset of services within the same industry as a loss leader; it's another when you extend your reach to another industry and start pricing out existing companies to gain a foothold there.

jtraffic 9y ago

> But I think it's clear that when you drop the price for a product to zero, there's no longer an argument that you are attempting to fairly compete in that market. The only rational reason is to drive your competitors out of business. This statement is far too rigid. You probably don't mean it exactly as written. To illustrate, this would imply that Robinhood was not attempting to fairly compete in the brokerage market when it first launched.

pharrlax 9y ago
Robinhood is an exception because their business is holding funds. When you hold funds, you can make interest off them. I guess the better way to say it is "when you drop the profit you receive from a product to zero".