The Smugtown Beacon has a new contributor, Susan Edelman. Here's her august list of qualifications:
Susan Edelman has a Ph.D. in Economics from Stanford University. In addition, Ms. Edelman was an economist at the Federal Communications Commission (FCC), and the Department of Defense. She also was on the Columbia University Business School faculty, and locally, worked in market research with Harris Interactive. Susan was a post-doc in the now defunct UofR Public Policy Analysis Program.
Her first post, despite having 8 footnotes, is a great example of how someone can pile up degrees and learn nothing about one's supposed area of expertise. Almost every paragraph shows a pretty shocking ignorance of the basics of her topic, which is a mishmash of Sarah Palin and Eric Massa's position on Time-Warner cable.
I'm going to pick apart just one terrible paragraph, otherwise I'd be here all night.
ACT THREE: In which the economist notes that private firms, like TWC and CBS, can run their firms any way they wish (assuming no laws are broken; not even suggested here). In a market economy, consumers show displeasure with a product by buying something else. There are substitutes for TWC/Road Runner and Letterman/CBS, e.g., Frontiernet and Conan/NBC. (And don’t tell the economist that DSL is not the same as RR: they’re both ISPs and provide the same content. See comments in Computer Link Magazine Saying that RR is better because it’s faster only means that it is a superior product, and we expect quality to cost more.)
The first sentence makes no sense. Eric Massa proposed more regulation of TWC -- he's saying "there ought to be a law". It's perfectly appropriate for a legislator to suggest legislation, and it's no argument against it to say that companies aren't breaking current law.
The rest of that paragraph also shows a complete lack of understanding of what's on offer from an ISP, and of monopoly economics. First, TWC and Frontier don't "provide content". They provide a conduit over which content is delivered, so all that matters is speed and reliability. Second, consumers can't "show their displeasure" by buying something else in most of the Southern Tier: RoadRunner is the only service available for most of Eric Massa's constituents. Finally, an economist should know that a duopoly is not a free market, that duopolies almost always lead to collusion and price-fixing, and therefore consumers don't have real choice in such a market.
The fundamental problem with Edelman's post is that she is trying to dodge Massa's reasonable claim that ISPs got a "pass" that's not provided to other public utilities. She makes the crazy statement that only two owners of "information transmission lines" have been government owned or regulated. Her examples are AT&T and the USPS. What about cable TV, which is regulated by franchise agreements in most cities and states?
And why is information different from all the other things transmitted to or from our houses over public right-of-way? Gas, electricity, water and sewer are either government-owned or heavily regulated. The onus is on Ms Edelman to explain why Internet service is in a different category.
Normally, I wouldn't bother with junk like Ms Edelman's post, but it's scary that someone so ignorant has advised the FCC as an "economist". This really is a new low for the Smugtown Beacon, which occasionally publishes some interesting stuff.
Comments
I honestly found her word salad impenetrable. One of the things I always strive for when penning my own articles is to try and educate, entertain, and make is easy for my readers to understand what the heck I am writing about without making them do logical gymnastics to "catch my drift."
Her piece was either a clever attempt at irony, requiring the reader to fire every synapse available to be in on it, or was hopelessly muddled from the get-go. I honestly don't know which.
Massa's bill didn't prohibit much of anything - it simply demands clear, independent evidence, before allowing providers to throw a Money Party in the duopoly broadband market locally. Since it's hard to justify overcharging after another cash bonanza quarter in profits from the broadband division, under existing price models, it's a safe bet their "proof" will be lacking.
"And don’t tell the economist that DSL is not the same as RR: they’re both ISPs and provide the same content. See comments in Computer Link Magazine Saying that RR is better because it’s faster only means that it is a superior product, and we expect quality to cost more."
This is superficial, at best. Time Warner Cable has a far more substantial market share where it competes because, in reality, the out the door price for Road Runner is actually LESS than DSL, is many times faster, more reliable, and is available wherever cable service is. DSL has severe limits that seriously erode its performance the further out from the central office you get. Here is Brighton, when I signed up for DSL I was being asked to accept a higher monthly bill for broadband service that maxed out at 3.1Mbps.
In many rural areas, DSL isn't available at all, at any price. Often, neither is cable. DSL is clearly a service headed for the same history heap that dial-up sits on today. Verizon has stopped even referring to it as "DSL" because it has such a negative connotation.
In a competitive market, the details about the product absolutely matter quite a bit to consumers deciding on which to choose. There are major differences between a Lexus and a Kia. How competitive a Kia is going to be, priced at or above the Lexus, is a question one need not have a degree to answer.
One of the great services you provide at your site is analysis of Time-Warner's financials. They continue to make huge profits on their Internet service business, even as usage has gone up. This is one of the current economic facts of the ISP business: wholesale bandwidth keeps getting cheaper. Yet TWC has been pretending that this isn't happening. I'm glad you're there to report on it.
Of course, as I read Ms Edelman (and I agree that her point is hard to figure), even a player in a duopoly can charge whatever they want.