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Sunday, June 15, 2008 - 12:47amSanction this postReply
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Hi everyone,

I'm sure that you're all familiar with the notion of media consolidation and the resulting greater homogeneity of political opinions of the audience. TV, radio, print newspapers, magazines and news magazines, wire services--are all supposedly undergoing mergers so that only a handful of firms own vast majorities of these news outlets (I say supposedly since my only real source at the moment is the three or so pages from my textbook describing this point).

The problem of course is that this notion and subsequent arguments are closely associated with bad ideas and bad philosophies--so I'm suspicious of them; but I haven't done enough of my own research yet, so I am not -actually- able to counter this notion very well. I wonder what objectivists know about the behavior of media firms, or about the actual facts concerning media consolidation, or whatever other information can ensure for us that the free market isn't producing a 1984-ish world in which all media are actually one singularly-owned medium brainwashing all the poor vulnerable-to-social-determinism people into samey masses.

I know already, but I don't think it's quite convincing enough (to the layperson or the leftist), to simply assert that--since individuals are rational and will pay for news sources that are objective, thoughtful, and present many sides of an argument, and that since firms operate by the profit motive--firms will climb over themselves to do exactly that. What are the facts? What will really happen if, say, the airwaves are deregulated or the 1996 Telecom Act scrapped?

-Michael

[Finally, I'm always a little fearful that my questions aren't perfectly clear, so please mention any ambiguities, unclarity &c. I am also tempted to list all the possible ugly philosophical directions the above notion could take, but I won't. I've pondered it, however, and the potential for wrong-ness is really dazzling, even elegant, as if one is trying to make as many philosophical errors as possible.]

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Sunday, June 15, 2008 - 1:52amSanction this postReply
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Having worked in the telecom industry, my immediate reaction toward the repeal of the 1996 telecom act would be one of joy, so long as prior restrictions such as those that prevented local carriers from offering long distance or long distance carriers from owning local networks were also removed.

That act had John McCain and Trent Lott's dirty little fingerprints all over it. McCain got most of his campaign donations from telecom companies and more telecom donations than any other politician. The law basically allowed "competition" under a set of arcane and arbitrary rules which were adjudicated post facto. For example, it was argued that because AT&T had been divested of its local networks, some period should be mandated where local bell companies who would begin to compete with AT&T by selling their own long distance (over there own networks!) should have to allow AT&T to rent their local networks as a "temporary" solution at below market rates until AT&T could get its own local infrastructure off the ground.

Not only did AT&T never build its own local infrastructure, indeed dismantling what little local infrastructure it did have, because renting access at government set rates was cheaper than building their own, companies like MCI, which had never been divested, were allowed to loot the local bells as well, since the were classed as the same type of local carrier.

MCI/Worldcom, which had never been divested of anything, moved into reselling the local bells' service which they could rent from the bells at something like 1/10th of the local bells actual costs. Even then, MCI under Bernie Ebbers engaged in all sorts of unprofitable business models - for instance, reselling the local bells' service to customers of the local bells who were in default (had service cut off for non-payment) managing to bill these deadbeats for a few months until they too stiffed MCI. These customers churned between innumerable resellers, keeping working phone service with the same telephone numbers while staying a few days ahead of losing service due to non-payment buy "moving to another carrier" i.e., another non-phone service provider who would bill for the local company's service as a middleman. Even when carriers like MCI were stiffed by their "customers" for the local bill, MCI would leave the line active but blocked for outgoing calls so that the customer could not switch to another company and control of the line (for which MCI might literally pay a few dollars a month or less) would not revert to the local bell which would sell it at a break-even cost of about a dozen bucks for just local service.

The biggest industry issue now is cable/telephone parity. Cable companies do not have to pay the same outrageous taxes (like the 3% federal surcharge instituted to pay for the Spanish American War in 1898 - and still on the books!) which weigh down the telecoms.

In this environment, the local bells remained barely afloat while having to seek court action to get the rates for their mandated resold service reregulated up to market value. Fiber Optic infrastructure investment was delayed by a decade. And AT&T, which did not commit the same frauds as MCI, could not compete, and became a blue chip turned penny stock to be bought out by Bell South. MCI should have been liquidated, but, based in Trent Lott's home state, this was prevented by behind the scenes pull, and AT&T was doomed. The entire assets of MCI should have been granted to AT&T, although that would have been of little recompense.

Total deregulation is the proper step. Media consolidation is not to be feared. Each now has at least landline, cable, sattellite and cellular access, or at least one or two of those media in even the most rural areas. There is no carrier monopoly anywhere except where mandated by law.

As for media content, have you read your local newspaper lately? How many stories are AP releases sold to every paper in the country, and how many pieces are actually investigative journalism done by actual reporters with bylines. So far as I am aware, the NY POST has Andrea Peyser as its only staff reporter outside the sports and gossip pages. The NY SUN is unique in NY in offering actual investigative reporting, and it breaks national news more often for its size than any other paper of which I am aware.

In any case, the newspapers must focus on after the fact analysis and editorializing. By the time they print a story it is at least half a day old on the internet and has been repeated 12 times on cable news.

All media ownership regulations should be abolished.

Post 2

Sunday, June 15, 2008 - 3:01pmSanction this postReply
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Standard free-market economics applies to the telecommunications industry as is does to any other.  The number of providers is determined by their own productive capacities scaled against market demand, and firms will enter the market and scale up their operations until the demand can no longer be profitable filled, their respective sizes being determined by the quality of their product and its price, competition driving the quality up and price down.  Any providers which fail to adequately compete they lose their customers, (and market share) and profits, ultimately going bankrupt.  In absence of government restriction new providers could enter the market at any time, creating more competition.  If at any time the customers became dissatisfied with the product which they received, they too would be free to enter the market themselves.

If you think that mergers between telecom providers might allow some time of 1984 style information control, be assured it will not.  The truth can be suppressed only by means of force and in a fully free society any lies will be quickly and completely exposed.  If a provider proceeded to present false or prejudiced stories to the public, they would be exposed and its credibility destroyed and reputation ruined, resulting in the rapid decline of its business.  If a number of providers were to merge and attempt this, the same thing would happen again, and since the financial damage would be proportionately greater it would create an incentive for a higher level of accuracy and honesty, not a lower one.  This of course does not guarantee that no telecom provider will try this, but that if it does it will not get away with it for long and suffer in proportion to its wrong doing.  

It is only in the presence of government regulation that low quality, higher prices or unethical behavior can exist, since it is this that restricts the actions of the providers and thus competition creating a protective barrier to the economic justice that would otherwise be inflicted in a free market.

(Edited by Robert E. Milenberg on 6/15, 3:17pm)


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Post 3

Sunday, June 15, 2008 - 3:30pmSanction this postReply
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Step Aside, Please

Verizon's FiOS network is the largest current capital outlay by any American corporation. Verizon will become that largest competitor for TV as well as broadband and telephony service in the US market.

Yet in most states, Verizon must seek municipality-by-municipality approval to offer its TV service, with bribes to local officials and legal challenges from existing cable operators blocking it way.

There are over 900 municipalities, 900 separate entities to cajole and bribe in NY state alone.

In almost all cases, Verizon will be using its existing rights of way to provide service, replacing its present copper network with fiber optic. It requires no local approval to replace copper with copper. But to replace copper with something better, at no cost to the taxpayer, requires a legal battle of unprecedented proportions. The FCC has said that states may decide to allow "franchising" to be done at the state rather than the local level, if states so wish. Imagine if what you could see on youtube were subject to state or local permission.

The government needs to do one thing only - step aside.

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