Incumbent ISPs and Predatory Pricing?

Many of you have probably heard about Google Fiber, where the search giant provides 1,000Mbps Internet service to homes and businesses in some areas of the country.  Because average Internet speed in the U.S. at the end of 2014 was ~11Mbps, that makes Google’s $70/mo offering around 100 times faster.  While only available in a few cities, Google Fiber is interesting both because of its technological superiority and because consumer satisfaction with these incumbent Internet providers is very low. (Comcast recently won Consumerist’s 2014 Worst Company of the Year award.)  There are also some smaller and less well-known competitors in local areas, like our own LightSpeed here in Lansing, MI, that offer similar service.

What’s interesting here is the response from incumbent carriers when a competitive service is announced.  When Google announced it planned to offer its service in Atlanta, Comcast responded by announcing it would also offer gigabit speeds in that city.  Google Fiber was announced for Kansas City and Austin, and AT&T matched that offer.  Most recently, Google Fiber announced plans to offer service in Charlotte, and Time Warner Cable announced huge no-cost upgrades in their service there.

If you think this feels a bit like predatory pricing by an incumbent monopolist, you’re not alone.  But is what these companies are doing actually illegal under anti-trust laws?  Unsurprisingly, this is somewhat complicated.   Since the text of the law itself isn’t very specific, the details have largely been left up to the courts, and in the past few decades the libertarian-leaning “Chicago School” has been very influential in the federal judiciary.  In general, this means it’s rather difficult to win an anti-trust case.  It would be even more difficult if federal judges (who, with lifetime appointments, are generally older) apply industrial age economics to an information age problem.

Generally, in order for someone like Google to win an anti-trust case against these incumbent ISPs, they’d have to show that both (1) the ISPs reasonably calculate that their response will deter other firms from entering the market, therefore increasing their own profits, and (2) that the prices they’re offering in response are below “cost”–usually a specific type of cost called average variable cost, or AVC. [1]  I think there’s a pretty good argument for #1, but #2 is a harder sell because of the way costs are structured in telecommunications.

But this is a damned-if-you-do, damned-if-you-don’t sort of situation, because it means that one of the following must be true.  Incumbent wireline broadband ISPs either-

  1. Can increase bandwidth by 100x without raising prices and still be profitable.  (But they aren’t doing it, e.g., because of insufficient competitive pressure.) or
  2. Are probably engaging in illegal predatory pricing because they are offering service below cost to deter potential competitors from entering the market.

This is a problem because barriers to entry in this market are high.  Because the FCC under the Bush (W) administration got rid of rules requiring infrastructure sharing, entering this market means running your own wires all over town.  Obviously this is very expensive, and requires extensive coordination with cities and other utilities to get access to rights of way and, e.g., utility pole attachments.  This might be addressed by having the municipality run telecommunications lines with the rest of their other infrastructure, but in many cases state laws prevent municipalities from offering an alternative themselves.  We in Michigan have our own version of this law at MCL §484.2252.

[1] Phillip Areeda, Louis Kaplow & Aaron S. Edlin, Antitrust analysis: problems, text, cases (2004); Herbert J. Hovenkamp, Predatory Pricing under the Areeda-Turner Test (2015), (last visited Apr 13, 2015).

The Home Stretch for Network Neutrality

How, if at all, should the FCC regulate the internet? The FCC, the courts, interested parties (e.g., ISPs) and a surprisingly large portion of the public have been vigorously debating this issue for the last several years. Last week, Federal Communications Commission Tom Wheeler made comments strongly suggesting that the agency is planning to reclassify the Internet as a Title II telecommunications service. This is very good news, but the battle isn’t over yet. The most critical phase is happening right now, and it’s one where we need your help.

If you’re not already engaged with this issue, start by watching this clip from Last Week Tonight with John Oliver. It’s highly entertaining, if somewhat out of date now, but obviously Mr. Oliver is much funnier and will reach a much wider audience than I ever will. If you’re still interested after watching it, come back and read the rest of this article. I’ll wait. If you’re still reading, I’ve divided the rest of this article into three sections; history and politics, about network neutrality, and what you can do. It’s pretty long, so feel free to skim or read/skip to what you’re interested in.

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On Leelah Alcorn

Like many others in our community, I was saddened to hear about the death of Leelah Alcorn, who committed suicide earlier this week. I actually remember her from about two months ago, when she posted to an online forum that I frequent asking for help and advice for dealing with her emotionally abusive parents. I had a reply half-composed, but I was finding it emotionally draining, at least a dozen people had already responded, and I had other things I needed to do that day, so I didn’t comment. I don’t feel guilty about this… I try to help with these posts once in a while, but there are just so many of them.

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LibreOffice Template for Academic Papers

It should come as no surprise that finishing law school and (most of) a doctoral degree requires a significant amount of writing.  I’m also someone who occasionally gets bored and does side projects.  A few times, this has involved the creation of nice-looking document templates in which to do my writing.  Historically, I’ve done these in Microsoft Word.  But, frustrated by Word’s constant crashing on retina-display Macs and the fact that it hasn’t been updated in quite some time, I took a fresh look at the open source software suites. Read about, and download, my academic paper template below.

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Cloud-Based Implicit Aptitude Test (IAT)

During the Fall 2014 semester, I was part of a group project in a methods class that needed to measure racist and sexist views after exposure to certain stimuli.  These attitudes are hard to measure because of a desirability bias; in other words, people know that the “right answers” are when you ask them explicit questions like “are you a racist?”

One solution to this problem is something called the Implicit Association Test.  The idea is that you have four categories of things, and you think that people are more likely to associate a certain set of two categories rather than another.  For example, in the case of racism in the U.S., they could be, roughly, good/bad and black/white.

In the past, there has been software to administer these tests that needed to be installed on lab computers.  Lab conditions have some benefits in terms of reducing variance, but there are downsides as well, like reduced ability to generalize to the real world.  For our project, I adapted the php-based IAT software by Mason, Allon and Ozturk.  Only minor modifications were needed, mostly around the need to place the IAT within (or, technically between two) a Qualtrics survey instrument.

The one downside was that I needed to set up the software and find reliable hosting, since having it on my home server and over my cable modem was not appropriate.  It occurs to me that setting that up as a cloud-based app would be fairly trivial to do, as the processing takes place almost entirely on the client-side.  Some more minor adaptations would be needed; a casual look at the software mentioned above suggested there would be some security issues with the software in a higher-profile deployment, and it would need to be adapted to work with a multi-user system.  OTOH, most of the coding work is in client-side JavaScript, so most of that work could probably be re-used.  A lot of people could use such an app even under the free app limits on something like Google App Engine.

Anyway, it’s something to think about, if I get some extra time and feel like working on a cloud app project for a weekend or something.  Or maybe somebody’s already done it, and my Google-fu is just weaksauce.  😉

Grade Distribution Chart using ggplot2 and R

Grade Distribution in R/ggplot2

Grade Distribution in R/ggplot2

For the past two years, I’ve taught TC 361, Information and Communications Technology Management at Michigan State.  I like to called it “how the Internet works for undergrads,” and it’s a nice opportunity to revisit some of the network engineering expertise I developed while working for ISPs in West Michigan, I guess… over a decade ago now.  Wow.  Anyway, because I spent all that time creating grading data, I wanted to have a nice quick graph to show students the grade distribution.  It’s nothing super-fancy, but I spent a little bit of time to make it look at least somewhat presentable.  So, without further ado, here’s the R snippet I used to create the graphic above.

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New Blog

Blogging is something that I’ve been meaning to do for the last several years but just have never gotten around to, for reasons that are utterly unsurprising for an academic.  Work time is always at a premium, and finishing my dual J.D./Ph.D program, passing the bar, and working on research and teaching projects has left doing some more public-facing writing at the bottom of the to-do list.

The problem is that, while this is a perhaps a good short term strategy, when more important deadlines loom, in the long run it’s also important to communicate and network with both colleagues and the public at large.  On top of that, it’s good to use those writing muscles in more situations than just for formal publications, etc…

So, rather than making blogging a completely separate task to keep up with, I think I’ll try to, for lack of a better word, integrate it with some other work, to the extent that’s possible.