Month: August 2014

Is Comcast’s Awful Service Grounds For Blocking The TWC Deal? Yes, Actually.

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The last few months have brought us a spate of Comcast horror stories and Comcast-hate. As captured by this totally not safe for work “Comcast — We Don’t Give a F—“ video from Funny or Die, the announcement that Comcast would acquire Time Warner Cable (TWC) has brought to boil a great deal of simmering resentment. Most recently, a recording of a subscriber spending 20 minutes trying to disconnect his Comcast service has prompted some investigating into Comcast’s service and employment practices. In particular, Adrianne Jefferies at  The Verge has been running an excellent series called “Comcast Confessions” based on hundreds of interviews with current and former Comcast employees showing that these long-standing customer service problems are not a blip but the result of systemic problems and deliberate business and strategy decisions pursued by the company (first three articles published so far here, here and here). I want to highlight this article in particular that puts together the pieces and shows how the TWC acquisition makes things worse.

 

From an academic standpoint, the wealth of data coming to light provides a great study on how conflicting economic incentives and difficulties in melding together a giant company by merger create awful customer service despite the persistent efforts of Comcast top management to improve customer service. But this blog isn’t about industrial organization and business practices for the fun of it. For me at the moment, the hot question is: does Comcast’s awful customer actually provide legal grounds for the FCC to block the Comcast/TWC merger?

 

Actually, yes. And I don’t just mean in the political “so many people hate Comcast the FCC can designate for hearing and survive Comcast’s political pushback.” I mean in the legal “the FCC has jurisdiction over this and should designate, as an issue for hearing, whether Comcast’s proposed acquisition of Time Warner Cable is contrary to the public interest and in violation of various provisions of the Communications Act” sense. And yes, I get that customers are pretty much equally dissatisfied with TWC, which would prompt one to think this should be a wash as “not merger specific” (i.e., service is crappy before merger and crappy after merger, so who cares — other than customers?)  However, as I shall elaborate below, the unique nature of Comcast’s pervasive problems — combined with several other factors — makes this a rare (but not unprecedented) case where the nature of the problems is both merger specific and subject to FCC review.

 

And while I would not normally suggest that such problems alone could block a merger, it becomes one more factor in a deal that already has a lot of problems. At a minimum, it becomes one more set of potentially pervasive behavioral conditions that would prompt Comcast to walk away whether or not the FCC actually designates for hearing, especially if lots of consumers write to the FCC about it (hint, hint).

 

More below . . .

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What Do We Learn From Big Data Visualizations Of Net Neutrality Comments?

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“Big data” and “Data visualization” are all very trendy these days. As with all tools, data analysis and data visualization require appropriate context to make sense. As my old mentor Professor Robert Seidman liked to caution: “you generally find the most firetrucks at the biggest fires.” Understanding context tells you cause and effect so that you don’t try to fight fires by eliminating firetrucks.

 

Which brings me to the analysis of the public comments in the FCC’s ongoing network neutrality proceeding. The FCC has received about 1.1 million comments so far (we can expect more when replies come due in September). To facilitate further discussion and debate, the FCC released these comments in 5 XML Files that make doing searches and analysis much easier. We have started to see some data crunching of this data, with a range of results. As someone with 15 years experience with FCC proceedings, I can put these in some context.

 

Briefly, the volume of individual comments and the analysis shows a high level of engagement. More importantly, the comments do not simply reflect the talking points we see in the mainstream media and debated in DC policy circles. A lot of people are actually thinking about this issue and deciding why it is important to them personally, and it has nothing to do with cat videos or Netflix. For a lot of people, this debate goes to fundamental values of basic fairness, opportunity, the American Dream, and the preserving free expression and diversity of views.

 

Perhaps most tellingly, the number of individual comments opposing net neutrality regulations as unnecessary and overly burdensome government regulation of the Internet is so small as to be statistically irrelevant to data visualization analysis. Those people who are engaged on this and care enough to comment all run one way — they want the FCC to adopt rules that prohibit paid prioritization and protect an open Internet.

 

I unpack this below . . .

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Those Who Love Uber Should Also Love Unlicensed Spectrum. The Paradox of “Regulatory Property.”

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I’ve decided that we should have a business with a limited number of licenses to conduct the business. All the people who got their licenses for free previously will, of course, be allowed to keep them. But now they can sell them as well. When we (very rarely) make more licenses available, we will sell them at public auction because, as we all know, auctions put the scarce resource in the hands of those who will use it for its highest, best use.” Letting people simply have free access would lead to wastefulness, inefficiency and devalue the resource.

Besides, by limiting the number of licenses and auctioning them off, we the government can make a lot of money without raising taxes. True, you can argue that by artificially limiting the number of licenses to make them valuable we are essentially creating a tax on the ability to do the business — we just collect it all up front. But we don’t like that argument so we will ignore it because “auctions put the resource to its highest best use” and if it is valuable, people ought to pay for it.

No, I’m not talking about spectrum. I’m talking about taxi cabs. State and local governments license taxi cabs. This creates an artificial scarcity. As a result, as anyone who owns a Taxi medallion will tell you, they are extremely valuable. And, as one might expect, the taxi cabs that benefit from this scarcity (and the states and localities that benefit from this scarcity) are less than happy at the thought of a new competitor, like Uber or Lyft, offering a competing service. It is a windfall to these guys to allow them to offer for free what we need to acquire — either at auction or in the secondary market — for money. If they want to compete, say the taxi cabs who have medallions, let the new entrants get medallions like us. When they become available.

OK, I was talking about taxi cabs, but y’all see where this is going right?

More below . . .

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