4 ms·

It's a company trying to get approval for a merger, so the state has the leverage to get them to do things they feel would benefit the state. Not a big deal, p

by ada1981 8y ago

It's a company trying to get approval for a merger, so the state has the leverage to get them to do things they feel would benefit the state. Not a big deal, pretty common, and pretty common sense. These states want to bring internet to everyone. They are allowing concentration of power, if that power promises to help them accomplish some of their goals.

rayiner 8y ago
Your comment suggests you're thinking about the problem in moralistic/score-keeping terms. But the question is not "does the state have leverage," but rather "what are the economic effects of using this leverage to impose a particular policy?" State and municipal regulators love the idea of a free lunch. "They have to get our approval, and we can extract these concessions, and it's free!" But that's not how the economy works. Every policy has a cost. State and municipal regulators not only fail to balance those costs, they don't even realize that those costs exist. The most damning example is, of course, the reason why we have so much market concentration in broadband to begin with. State and municipal regulators thought they could get universal cable coverage for their constituents, so they gave out municipal franchise monopolies with universal-coverage obligations. They thought they were getting a free lunch, instead they created massive market distortion.
- Dylan16807 8y ago
  The default option is not letting them merge. It's not a moral thing as much as a simple economic negotiation. Letting them merge is absolutely not a 'free lunch' situation. It's a trade.
  - rayiner 8y ago
    The fact that a regulation is easy to extract because it is imposed as part of a merger approval has no bearing on the economic effects of that regulation (except to the extent that the condition is directly aimed at reducing the anti-competitive impact of the merger, e.g. a spin-off requirement, which is not the case here). To go back to OP's point: the government telling a company that the have to service a bunch of uneconomic households is a subsidy to those households. Either other customers' costs will rise in order to pay for that service, or capital will be diverted from upgrading or expanding service to economic customers. There is a very large economic cost to servicing uneconomic customers--that money has to come from somewhere. The idea that you can rig the merger so that it comes out of corporate profits with no consumer impact is nonsense.
    - Dylan16807 8y ago
      > the government telling a company that the have to service a bunch of uneconomic households is a subsidy to those households. Which we have decided as a society is worth it. Everyone should be able to communicate, and it helps those people be more productive too, helping everyone. > Either other customers' costs will rise in order to pay for that service, or capital will be diverted from upgrading or expanding service to economic customers. On the other hand, having less competition for something with huge last-mile costs can save money overall. The tricky part is keeping the downsides of low competition in check, by forcing more responsibility on the company as it gets more power. > The idea that you can rig the merger so that it comes out of corporate profits with no consumer impact is nonsense. If the merger let them go from negative profits to $10B, then the consumer impact already happened. If none of that can be rigged into rural expansion, then the merger shouldn't have been allowed, and they can go back to minimal profits.
      - rayiner 8y ago
        > Which we have decided as a society is worth it. Everyone should be able to communicate, and it helps those people be more productive too, helping everyone. Except we haven't. One of the consequences of imposing these sorts of obligations through hidden cross subsidies is that it obscures the cost of these outcomes. Would the public be willing to pay through taxes the $X million it would cost to serve those uneconomic households? Probably not. But when a regulator forces them to pay that amount indirectly, they're not in a position to evaluate whether it is "worth it." (Which is why unelected bureaucrats love these "free lunch" measures--it allows them to tax the public indirectly for things the public would not willingly pay for directly.) > On the other hand, having less competition for something with huge last-mile costs can save money overall. The tricky part is keeping the downsides of low competition in check, by forcing more responsibility on the company as it gets more power. This is exactly the New Deal-era thinking that has been resoundingly debunked. Regulators applied this kind of thinking to everything from railroads to airlines. But deregulation of those things has yielded enormous real gains. (And not just in the U.S., in many respects western Europe and Japan have been more aggressive in deregulation than the U.S., and have seen concomitant benefits.) > If the merger let them go from negative profits to $10B, then the consumer impact already happened. TWC and Charter did not previously compete, so it's unlikely that the swing is due to increased pricing power. Rather, it's more likely due to (1) the fact that TWC was already profitable; and (2) reduced expenses through the elimination of internal redundancy.

rayiner 8y ago

Your comment suggests you're thinking about the problem in moralistic/score-keeping terms. But the question is not "does the state have leverage," but rather "what are the economic effects of using this leverage to impose a particular policy?" State and municipal regulators love the idea of a free lunch. "They have to get our approval, and we can extract these concessions, and it's free!" But that's not how the economy works. Every policy has a cost. State and municipal regulators not only fail to balance those costs, they don't even realize that those costs exist. The most damning example is, of course, the reason why we have so much market concentration in broadband to begin with. State and municipal regulators thought they could get universal cable coverage for their constituents, so they gave out municipal franchise monopolies with universal-coverage obligations. They thought they were getting a free lunch, instead they created massive market distortion.

Dylan16807 8y ago
The default option is not letting them merge. It's not a moral thing as much as a simple economic negotiation. Letting them merge is absolutely not a 'free lunch' situation. It's a trade.
- rayiner 8y ago
  The fact that a regulation is easy to extract because it is imposed as part of a merger approval has no bearing on the economic effects of that regulation (except to the extent that the condition is directly aimed at reducing the anti-competitive impact of the merger, e.g. a spin-off requirement, which is not the case here). To go back to OP's point: the government telling a company that the have to service a bunch of uneconomic households is a subsidy to those households. Either other customers' costs will rise in order to pay for that service, or capital will be diverted from upgrading or expanding service to economic customers. There is a very large economic cost to servicing uneconomic customers--that money has to come from somewhere. The idea that you can rig the merger so that it comes out of corporate profits with no consumer impact is nonsense.
  - Dylan16807 8y ago
    > the government telling a company that the have to service a bunch of uneconomic households is a subsidy to those households. Which we have decided as a society is worth it. Everyone should be able to communicate, and it helps those people be more productive too, helping everyone. > Either other customers' costs will rise in order to pay for that service, or capital will be diverted from upgrading or expanding service to economic customers. On the other hand, having less competition for something with huge last-mile costs can save money overall. The tricky part is keeping the downsides of low competition in check, by forcing more responsibility on the company as it gets more power. > The idea that you can rig the merger so that it comes out of corporate profits with no consumer impact is nonsense. If the merger let them go from negative profits to $10B, then the consumer impact already happened. If none of that can be rigged into rural expansion, then the merger shouldn't have been allowed, and they can go back to minimal profits.
    - rayiner 8y ago
      > Which we have decided as a society is worth it. Everyone should be able to communicate, and it helps those people be more productive too, helping everyone. Except we haven't. One of the consequences of imposing these sorts of obligations through hidden cross subsidies is that it obscures the cost of these outcomes. Would the public be willing to pay through taxes the $X million it would cost to serve those uneconomic households? Probably not. But when a regulator forces them to pay that amount indirectly, they're not in a position to evaluate whether it is "worth it." (Which is why unelected bureaucrats love these "free lunch" measures--it allows them to tax the public indirectly for things the public would not willingly pay for directly.) > On the other hand, having less competition for something with huge last-mile costs can save money overall. The tricky part is keeping the downsides of low competition in check, by forcing more responsibility on the company as it gets more power. This is exactly the New Deal-era thinking that has been resoundingly debunked. Regulators applied this kind of thinking to everything from railroads to airlines. But deregulation of those things has yielded enormous real gains. (And not just in the U.S., in many respects western Europe and Japan have been more aggressive in deregulation than the U.S., and have seen concomitant benefits.) > If the merger let them go from negative profits to $10B, then the consumer impact already happened. TWC and Charter did not previously compete, so it's unlikely that the swing is due to increased pricing power. Rather, it's more likely due to (1) the fact that TWC was already profitable; and (2) reduced expenses through the elimination of internal redundancy.