The New Tech Monopolists?

In 1996 I wrote a paper on Antitrust issues in Telecom post the 1996 Telecom Act. I wrote:

The Act as amended in 1996 has removed antitrust protection from the telecommunications industry. In light of that fact, it is necessary to reexamine the implications of the many arrangements that have been customary practice, and view those arrangements in the light that all other similar arrangements can be viewed in all other industries. From an historical perspective, the Antitrust laws have been used to manage the gross misconduct of larger entities in existing competitive markets. In the case of local exchange telecommunications, however, there is a sharp distinction. Namely, the existing entities are the only player in the market and thus have essentially full monopoly control. The 1996 Act in Sections 251 and Sections 252 provide a vehicle that allows new entrants into the market so that a competitive environment may evolve. The issues however focus around the approaches taken in the new Act and how they may be interpreted.

Reed Hundt, the Chairman of the FCC and former practicing antitrust attorney, recently remarked about the relationship between interconnection and antitrust law:

“When cases like Standard Oil and Alcoa were decided, our economy ran on oil and metal. Our economy now runs on impulses of digital bits transmitted via fiber, wire or the ether. It is high time that the communications industry (so vital to our country) operate under the same pro‐
competitive policy as every other industry in the U.S. And ‐‐ despite the intricacies of our legal
culture, which has at least given an interesting and rewarding life to the lawyers in this room ‐‐ I
am confident that this will happen and happen quickly.”

It is clear that with the 8th Circuit Court intervening on the behalf of the monopolists and the Supreme Court has recently upheld this. Hundt’s point is very significant in that the Courts have addressed monopolies I oil and transportation when they were the key elements of our society, whereas the Courts are seeming to take a strong pro‐monopoly position when telecommunications is at the center of our growing economy.

We now see two issues driving debate; antitrust and privacy. How does one apply antitrust to the new Tech monopolists? What is the product, who is the buyer. Antitrust is focused on assuring the consumer is protected. I believe that the product is access and the payment is loss of one's privacy. Thus the nexus. In 2002 I wrote a detailed paper on Internet Privacy. My analysis was that the Internet was a market for selling people's information and that the information had value and people entered into the transaction getting access in return for information. This works for Google and Facebook. It does not work for Amazon since we are buying something and Amazon gets our information free! The same can be said of Apple.

Thus is there a basis for antitrust actions? I believe so but one needs be creative in transforming laws that broke up Standard Oil to the 21st Century. Politicians seem clueless, which is understandable, economists are equally clueless since the fail to understand the technology. The challenge will be to find the right voices to articulate the problem.

Notwithstanding the issue is a nexus between antitrust and privacy.