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Comment by tc | Hacker News Reader

This can't end well. At the end of the day, Apple and AT&T have the right (or should have the right) to make any agreements they find necessary, and customers obviously have the power to reject the iPhone and AT&T if this matters enough to them. The government gets involved when consumers want to have their cake and eat it too -- you want the iPhone Apple & AT&T are offering BUT you aren't willing to accept their price and terms.

I know this isn't going to be a terribly popular point here, because, well, we all do want to get our way. But just consider how much you'd like to find yourself on the receiving end of one of these letters.

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Not true. AT&T does not own the spectrum they use, it is a publicly owned natural resource, licensed to them under specific rules, and can be revoked by the FCC for failing to comply with the regulations.

The government is not getting involved because people want to have their cake and eat it to, (although that is a pretty good default assumption), but because there appears to be collusion involving regulated resources.

You are being over-broad with the scary word collusion. Collusion would be AT&T, Sprint, T-Mobile, Verizon, etc. agreeing to keep voice revenues for the industry high by crippling mobile data. Nothing in a carrier's agreement with a handset vendor could possibly qualify for collusion.

As for violating regulations, please find for me the regulation that they have violated. It seems to me that their present sin consists of doing something unpopular.

This is a valid point, but I'm not convinced that it's OK for companies to act/co-operate in a way that is this detrimental to their customers just because they aren't supposed to be competitors. Based on the questions asked, the FCC seems to be trying to find out if this exclusivity agreement is harming consumers or not, which seems like a decent goal. If this inquiry leads to some transparency from Apple/AT&T, so much the better, right?

No! You can't think like that.

Apple and AT&T should have every right to be as opaque as they want. If you don't support their policies and pricing, switch to another carrier and buy another phone.

In a completely non-monopolistic scenario, which this is, the government should have no concern whether a company's action's harm customers or not, since the customer has complete choice in whether to buy the service or not.

This is precisely a situation in which the customer wants to have his cake and eat it too. Regulated resources are by definition a case when the customer wants to have his cake and eat it too.

Oh, for fuck's sake.

The FCC said why they wanted this information. They wanted this information as part of its examination of net neutrality and exclusive phones. The FCC doesn't even look at collusion and antitrust - the FTC does.

The idea that there's some monolithic "government" is juvenile at best.

The idea that there's some monolithic "government" is juvenile at best.

Thank you. It should, however, be noted that as Goldman Sachs rehires, the government will get bigger. Oh wait, I forgot that I'm not Matt Taibbi, so scratch that last sentence.

"he idea that there's some monolithic "government" is juvenile at best."

Are you serious? Do you pay attention to what goes on at all?

(warning: meta) We need more short, insightful comments starting with "oh, for fuck's sake" around here. Thanks :)

Apple and AT&T should have every right to be as opaque as they want.

Um, no, not with government-administered public airwaves, they don't.

I said they should have. Not that they do, with our socialistic government setup the way it is.

Collusion is defined as "secret agreement or cooperation especially for an illegal or deceitful purpose" at m-w.com. I would think this qualifies, and I used this word instead of the more inflammatory conspiracy, which would also be technically accurate. I was not using it to be scary, I was simply trying to describe the circumstances as they appear at the moment.

The FCC is investigating to see if any regulations had been violated; proof and a finding of guilt or innocence will come later, but it seems to me there is probable cause to investigate at this point.

This situation is ironic. Developers must submit to their Apple/AT&T overlords if they want to play in the Apple sandbox. Now Apple/AT&T are discovering their sandbox is within a larger federally-regulated sandbox, and they too are subject to overlords. Payback's a bitch. I don't have a lot of sympathy after reading about the forced refunds for previously approved apps.

The spectrum is a natural resource, but what about the devices? It will be interesting to see the extent to which the FCC can regulate devices offered on a carrier. I'm hoping some sort of number portability / anti-compete clause lets them push GV through and force some openness on Apple's end in regards to app approval.

Unfortunately, the iPhone is NOT a publicly owned natural resource, but maybe phone numbers are.

And your iPhone, once you've paid for it, is not Apple's anymore. Its yours.

Congress has passed legislative caveats around the DMCA for cell phones. Meaning you can unlock them. Well at least I haven't seen Apple or anyone else yet sue someone or call the FBI for someone doing so. So I guess they don't want to test the waters around whatever legislation actually was passed (of course, I don't read hundreds of pages of legislation, so I'm speaking off stuff I"ve read about it). The purpose of such legislation is part of enabling consumers to not be bound to a carrier. I don't know what else exists, but its clear Congress has made some progress on letting cell manufactures know that carrier freedom is on the landscape.

This can't end well. At the end of the day, Apple and AT&T have the right (or should have the right) to make any agreements they find necessary ...

So can I have the right to broadcast my own GSM signal in the 900 MHz range, or a perpetual sweet-heart franchise agreement with my local municipal government to run last-mile internet to my neighborhood's houses?

These are natural monopolies we're dealing with. My options are constrained to carriers that have been granted guaranteed access to public airwaves by the FCC. The carriers then use technical (carrier locks), legal (contracts), and social (difficult cancellation processes) means to lock consumers in.

The carriers then collude with handset makers to restrict consumer choice further by locking handset features, and restricting the applications that they run. There are ways around this (such as buying third party unlocked, unrestricted phones), but carriers and handset makers leverage their government-backed market position to discourage consumer adoption.

These are natural monopolies we're dealing with.

There is nothing natural about a monopoly (or in this case, oligopoly) ordained by government. And that is the problem that should be addressed directly. Current government policies create an absurd amount of artificial spectrum scarcity.

Edit: Obviously I wasn't clear here -- I should have been straightforward rather than going with a clever turn of phrase. I meant to say, as a point of accepted definition, that government-granted monopolies are not 'natural monopolies.' Natural monopolies are monopolies that occur 'naturally' in the market because of conditions or extreme capital requirements.

"Natural monopoly" is an economics term.

http://en.wikipedia.org/wiki/Natural_monopoly

Please identify whether a "sweetheart municipal franchise agreement" is a "natural monopoly" or a "coercive monopoly."

http://en.wikipedia.org/wiki/Coercive_monopoly

[Edited]

Both. The first market entrant has "... an overwhelming cost advantage over other actual or potential competitors".

Municipalities also have natural incentives to provide sweet-heart franchise agreements -- it's generally too expensive to do otherwise once the infrastructure is in place, often partially subsidized.

I didn't have to read the Wikipedia page. I linked to it for your benefit because you were degrading someone's comment when they were using a term that anyone with any exposure to economics would be familiar with.

I don't want to quibble about this forever, but you're still missing my point. I said there wasn't anything natural about a government-granted monopoly because government-granted monopolies are not "natural monopolies" (in the academic economic sense of the phrase). I asked if you read the WP page because I felt that if you had, and had read my comment as well, that it would be clear to you that was my point.

You need to go read the section under Regulation. Often natural monopolies do arise in participation with the government.

The section you reference deals with regulation as a solution to mitigating the perceived harms of an existing natural monopoly.

Yes, but they are allowed to continue to exist under government scrutiny. Most local utilities are set up this way. If you're the first there, you usually get to be the only supplier.

We're quibbling about terms, and I always fear at this point in a thread that the need to be right might overwhelm continued reading comprehension. But in economic parlance, if (let's say) a power company came to be a dominant monopoly in a given area without government support, that would be a natural monopoly. If the government then stepped in to regulate the power company as a utility and simultaneously excluded competitors by government force, the power company becomes a coercive monopoly. Is it still a natural monopoly? It's hard to say, because conditions change, but the government grant of exclusivity remains constant. Maybe a new technological innovation would have let a competitor emerge, breaking the natural monopoly. But we would never know as long as the government continued to exclude competitors by force of law.

We may just be disagreeing to disagree at this point. I'll let you have the last word here.

But we would never know as long as the government enforced the coercive monopoly.

This is a one-sided description and a false dichotomy. A non-regulated natural monopoly can be just as suppressive as a government enforced-coercive monopoly. A regulated natural monopoly does not also require the creation of a government-enforced coercive monopoly.

Please provide an example of where this has ever been the case. That is, where a company without a government grant of exclusivity (or other sorts of government favoritism) in a market has been able to 1) sustain that monopoly for more than a few years, and 2) to leave their customers worse off than if the business had never existed in the first place.

http://en.wikipedia.org/wiki/Natural_monopoly#Historical_exa...

That example discusses a naturally competitive situation and how that wasn't apparently optimal. No one was worse off for the companies existing, and they weren't even monopolies, making it irrelevant to our discussion here. The example claims society was better off when the government established monopolies that could be profitable. The government could have done that at any time -- the existing private companies didn't provide any impediment to that. So that's all fine and good, but how does that answer my question? I'll let you have the last word.

Clearly you didn't read it closely enough. They were worse off for the lack of an affordable water supply leading to a lack of sanitation and epidemic.

The inefficient private solution stayed the adoption of a publicly administered one.

Does this break the record for most nested comments?

You're right about reading comprehension degrading. So I'll spell this out simply. When Local Power Company establishes a regional power grid, they are the largest by virtue of being the first. Economies of scale prevent other firms from coming into the market. They would have to build an entirely separate, but redundant, power grid without any indication that customers, who need power to begin with, would purchase from them. This means they have, as the Wikipedia page reads, "an overwhelming cost advantage over other actual or POTENTIAL competitors." (Emphasis mine) This is why the government often steps in and legalizes the natural monopoly.

There is nothing natural about a monopoly (or in this case, oligopoly) ordained by government.

http://en.wikipedia.org/wiki/Natural_monopoly

And that is the problem that should be addressed directly. Current government policies create an absurd amount of artificial spectrum scarcity.

Liberalizing spectrum allocation policy -- or opening the airwaves to anarchy -- wouldn't solve the problem that wireless telecoms is a very strong natural monopoly.

Monopoly? Last I checked there were multiple competing mobile carriers. You do have to put a lot of capital at risk though to be a national carrier. Which is exactly the point, really. Someone put a lot of capital at risk, and now that their bet has worked out, the regulators want to step in and tell them how to run their business and (in many cases) how much return is fair for them to get from their investment.

Regulation of this sort is the same as partial nationalization, and has the same effect to a measured degree. When people anticipate that the returns on their winning bets will be 'moderated,' or that they will have to set business policies for the 'greater good,' they will in the future make less risky bets or put less capital at risk.

Monopoly? Last I checked there were multiple competing mobile carriers. You do have to put a lot of capital at risk though to be a national carrier. Which is exactly the point, really. Someone put a lot of capital at risk, and now that their bet has worked out, the regulators want to step in and tell them how to run their business and (in many cases) how much return is fair for them to get from their investment.

Natural monopoly. Not the same thing.

The cellular industry has seen massive consolidation and reduction in consumer choice over the past 15 years -- the existing 5 national wireless carriers (AT&T, Verizon, Sprint, T-Mobile, U.S. Cellular) are comprised of literally hundreds (if not thousands) of formerly independent regional carriers. Cingular itself started as a conglomeration of 100+ regional carriers, before a few more mergers made Cingular into the new AT&T.

This is not a particularly strong testament to consumer choice and competition in the face of a natural monopoly.

I see no reason why Apple and AT&T - who are corporations, not people - should have the right to do as they please. Our government grants corporations the ability to exist because doing so is beneficial to society. If a corporation is doing something that is harmful to consumers - and potentially society as a whole - then I want the government to step in.

Corporations are just collections of people (except for the grant of limited liability, which is really an abuse).

Too often, I think, we judge 'harmful' by the impossible standard of "could I imagine things being better if I could force others to do things exactly my way" rather than "would we be better off if they didn't exist at all."

So that is to say, sure, if a company is actually causing a harm, in the legal sense of the word (committing fraud, breaking contracts, etc.), then they should have to pay restitution for that. That's what the law is for. Not to second-guess how companies could better serve their customers.

Corporations are also legal entities that are separate from the people that comprise them, so they shouldn't have the same kind of rights an individual would.

Not necessarily. Some of the FCC's questions are simply about clarifying policies. Maybe the average consumer won't read through (or care about) a list of prohibited app or app categories, but it sure would help developers.

That's nice and all, but no one is forcing developers to support Apple and AT&T either. Apple was never really thrilled with the idea of having third-party developers. Let's not be too patronizing to AppStore developers -- they all knew (or should have known) what they were getting into. Apple's agreement has always put developers at their mercy.

No one is forcing Apple to develop for public airwaves, either.

Would we really be any better off if they never had? Even considering the App Store policies which are objectionable to some?

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