Comcast And Competition

Felix Salmon concludes his post on the Comcast acquisition and broadband competition with this paragraph.

So don’t count on competition to bring down prices in the broadband space. This is an area where the regulators — and only the regulators — can really be effective.

Ah, the enduring faith in the ability of government to lead us out of the wilderness and into a land of gigabit nirvana. Shall we count the ways that regulation has accomplished this feat, or should we count the ways it has led to sanctioned monopolies? Remember that one of the immutable laws of nature is that the regulated always capture the regulator, either through mutual interest in protecting relative turfs or “donations” to the politicians who oversee the regulator.

Two good, recent articles point out that the problem isn’t enough regulation, rather it’s regulation which accompanied the birth of broadband which stands in the way of delivering the amazing speeds which technology could provide to us. Andy Kessler in the WSJ and Jack Shafer at Bloomberg both make relatively the same point: Get the local governments who collect a fortune from the existing cable companies to cease excluding new entrants into their markets. Here’s Kessler:

Gigabit is in demand. Many cities, like Louisville, Ky., have invited Google Fiber but been turned down. Google didn’t like the terms. Even Mountain View, Calif., home of the Googleplex, reportedly declined to make the necessary concessions. Remember, most municipalities collect a kickback in the form of cable franchise fees (up to 5% of revenues) in exchange for the right of way. Hard to give that up. Citizens be damned.

The FCC can change this overnight. Instead of allowing municipalities to dictate onerous terms and laws that lock in (slow) incumbents, the FCC can mandate right-of-way rules similar to those granted Google Fiber to all credible competitors. If only the federal regulator would promote progress and focus on what’s best for the U.S. economy rather than for those it regulates.

It’s doubtful the Obama FCC will take up the challenge. Instead, last week it said it will introduce new rules to stop Internet providers from charging different prices for different content, like movies and TV shows on NetflixNFLX or Hulu. A U.S. appeals court in January threw out the FCC’s previous “network neutrality” rules as unconstitutional. Great, now a new set of convoluted net-neutrality rules that will limit incentives to run fiber.

Rather than subjecting broadband to further regulation in the interest of curing the bottleneck which regulation has created perhaps it’s time to try a different tack. There’s no reason to cut off the honey pot which municipalities have discovered in cable, simply open the market to competitors who might indeed increase their take. As Jack Shafer notes, the cable industry values its subscribers at about $4000 apiece. Google and other disrupters might see value at multiples of that number. Open it up and let the innovators and disrupters have a crack at the market. Regulation is always an option which can be taken on failure, it doesn’t always have to be the first option.

As an aside, given the FCC’s recently aborted attempt to gather information on the manner in which news organizations gather and disseminate news, do we really want to increase their sway over one of our primary channels of communication? Think about it.


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Data Mining At The Consumer Financial Protection Bureau


Officials at the Consumer Financial Protection Bureau are conducting a massive, NSA-esque data-mining project collecting account information on an estimated 991 million American credit card accounts.

It was also learned at a Congressional hearing Tuesday that CFPB officials are working with the Federal Housing Finance Agency on a second data-mining effort, this one focused on the 53 million residential mortgages taken out by Americans since 1998.¹

Once, the sole repository of massive amounts of sensitive data about the citizens of the US was the IRS. That agency, at least historically, accepted responsibility for probity and confidentiality with respect to the information in its computers. Indeed, employees of the IRS were and are subject to criminal penalties for the misuse of the data under their control. The standards to which they are held are much higher than those which are applied to other employees of the federal government. One can argue as to whether or not they might have lost their way a bit, become politicized and thus prone to misuse of the information they possess, but on the whole I think most Americans still view the agency with fear, yes, but also with a certain confidence that the data they yearly turn over to them remains out of reach of for the political class. Moreover, the IRS is subject to oversight by Congress as well as the executive branch and, though rare, breaches of trust when they occurred have tended to be viewed as truly beyond the pale.

The revelations of widespread NSA data mining of phone and internet communications produced an uproar which has led to at least token reforms, thanks to a light being shined on the NSA’s activities as well as Congressional oversight. Though Congress did not itself undertake any legislation limiting the activities of the NSA, their ability to do so forced the hand of the administration. No such pressure can exist to limit the reach of the CFPB. It is part of the Federal Reserve for which, properly neither the executive or legislative branches have oversight. Independence is essential for the functioning of a central bank but inimical to an agency which has the ability to affect the financial affairs of of the populace.

But let’s go back to the word I used to open this post – Why. Why does the CFPB need this information, what do they intend to do with it and perhaps most tellingly why do they need information on 85 – 90 percent of the active credit cards in the country when a smaller sample would suffice for modeling consumer behavior? It’s a simple question but nowhere have I seen an answer. It does seem to be important, really important since in the Congressional hearing CFPB Director Richard Cordray responded to this question in this manner.

“Would you object to getting permission from consumers, those people who you work for, before you collect and monitor their information?” Rep. Sean Duffy, R-Wis., asked Cordray.

“That would make it impossible to get the data,” Cordray replied.

Which is the sort of imperial response one would expect from someone secure in the knowledge that his interlocutors had no power to alter his plans.

This sort of data collection is troubling at any time, more so when it is undertaken by a government entity not subject to control. In a representative democracy an agency like the CFPB has no business existing outside the normal bounds of oversight and control. Frustrating as it may be at times, the US system of governance has served our needs admirably. No other ruling contrivance has guaranteed and delivered the sort of privacy and immunity from governmental intrusion into private affairs as has our system. The CFPB is an outlier born in a period of legislative frenzy. It’s mission may be worthy, but it needs to be conducted under the same sort of control which we demand of all other functions of government. Its overreach in this instance validates that need.

¹ Excerpted from the Washington Examiner.



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Ignore This Month’s Employment Report

Another month, another jobs report. According to economists the report is bleak, adversely impacted by weather, full of unseen positives and, of course, going to either cause the Fed to delay tapering or stay the course. Given the fact that the reliability of the data is tenuous at best (the payroll survey and household survey show contradictory trends) any conclusion about the import of the report has as good a chance as any other of being either right or wrong. Here’s the best advice I’ve seen today.

We suggest looking at 12-month average trends in the household survey because of the monthly volatility in the report and we note that the number of unemployed has dropped by 2.1 million since January 2013, while employment has risen by 1.8 million. This suggests the drop in the unemployment rate from 7.9% to 6.6% is not just a result of falling participation. –RDQ Economics Chief Economist John Ryding and Senior Economist Conrad DeQuadros


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Laszewski On The Recent ObamaCare Data

If this keeps up there won’t be a “death spiral.” Heck, so far the insurers are just re-enrolling their old customers at higher rates!   Robert Laszweski

That’s Laszweskis’s reading of the latest ObamaCare enrollment numbers. As usual, his most recent post is the best place to get informed, non-partisan data and analysis of this ongoing train wreck.

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Back To Blogging

Well, it’s been a rather nice extended Holiday hiatus from the keyboard. Don’t ask why I’ve neglected to communicate with my meager audience because I don’t have any sort of good answer. Just lost the itch for awhile, and let’s face it, things have been somewhat boring. Seriously, how much can you say about inequality, the minimum wage, NGDP, ObamaCare and the latest JP Morgan fine. Too much if you base it on my reading history. So, while I do have a couple of things to say about those subjects, I’ll spare you more boredom this evening.

I do want to point you to two really outstanding posts. Both should engender some introspection, so don’t just breeze through and not think about what they’re saying.

The first is by the Felix Salmon. He does what he does best, take a complicated subject and explain it simply. In” Why Quants Don’t Know Everything” he analyzes the rise of the quants and explains the potential, limitations and perils of Big Data. If you haven’t already read it, I  recommend you start with his earlier essay, “The Formula That Killed Wall Street.” They’re both masterpieces.

The other is Tim Carney’s tribute to Tom Coburn. I’m not sure it was meant as a tribute but that’s the way it read to me. Coburn’s departure from the Senate represents a loss for both sides of the aisle, but be sure to read to the end in order to appreciate the man’s integrity as opposed to the craven behavior of his contemporaries.

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A Very Merry Christmas To All

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A&E Not Giving Up On Their Money Machine


I suppose you can put this in the inevitable column.

Regardless of the current controversy and behind-the-scenes tension, A&E has every intention of keeping Phil Robertson on the air.

A source close to the situation confirmed that when the network resumes airing new episodes of Duck Dynastystarting Jan. 15, footage featuring the Robertson patriarch will indeed remain intact. The network also hopes the media and fan furor will cool down over the holidays and that tensions over shooting future episodes can then be resolved.

“There’s no negotiation to have; we’re doing the show,” said an insider close to the situation. “We’ll figure out a solution. It’s just not going to happen overnight. Everybody will take a break for the holidays and regroup afterward. That’s probably the smartest thing for everyone to do. Time heals a lot of wounds.”

It would seem the negative here is that we all get subjected to more bloviating about this.

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