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Now that Comcast is apparently going to be merging with Time Warner, net neutrality is dead, and vertical integration is all the rage, it's worth remembering the glorious benefit Americans are getting from all this free market magic:

More below the squiggle...

Yep. Higher prices, worse service. USA! USA!

And no, this isn't just because we're a bigger country and service to rural areas is bad. We also pay more money for slower Internet in big cities, too.

Why is this? Doesn't standard economics dictate that free markets provide greater competition and lower cost?

Well, yes--in theory. There are many and very large wrinkles in the classical economic model, but in a perfectly efficient market where manufacturing the product is easy, and the public has the option not to buy the product or to substitute other products, that can and does work. For instance, it's hard to overcharge for toothpaste or apple juice. They're pretty easy to make, and if one company overcharges for them someone else will make it cheaper or people will find a substitute. A free market in toothpaste or apple juice will generally provide a better product at lower prices than a centrally planned market will (provided that government regulation exists to ensure that those products are produced safely and actually contain the advertised ingredients.)

But commodities like healthcare and the Internet are different. They're absolute necessities  bordering on human rights, for which there is no substitute. They're enormous and impossible for an underdog to produce at a lower cost. And they're easy for ruthless corporations to monopolize and vertically integrate for exploitative, rent-seeking purposes absent government intervention.

Allowing a "free market" in such commodities isn't free at all. It's insane. It's guaranteed to produce monopolies, high prices and terrible service. Which is exactly what we have in American healthcare and American internet: the world's freest, and therefore worst and most expensive, markets in essential services.

The mark of a sophisticated mind is to understand that some solutions work in some cases but not in others. It's the mark of an idiot to think that the same model will work in all cases.

People who think "free markets" work in healthcare or the Internet are just as functionally stupid about economics as the most hardline Communist who thinks that the government should exercise full control of the toothpaste market. Most of the world understands by now that the second guy is a dangerous fool. But we're at a weird point in history where the first guy undeservedly has more credibility. He shouldn't--and he won't for long.

Cross-posted from Digby's Hullabaloo

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Comment Preferences

  •  the free (and heavily subsidized) market rocks! (23+ / 0-)

    just look at the great success of deregulating the airlines, savings & loans, and banks!

    etc.

    The cold passion for truth hunts in no pack. -Robinson Jeffers

    by Laurence Lewis on Wed Feb 19, 2014 at 03:02:47 PM PST

  •  Yah... (20+ / 0-)

    I remember all that GOP hogwash about "freedom of choice" in choosing your cable company, way back when.

    Never worked. NEVER.

    It's about time to get the GOP out of government, and to restore some Antitrust laws.

    English usage is sometimes more than mere taste, judgment and education - sometimes it's sheer luck, like getting across the street. E. B. White

    by Youffraita on Wed Feb 19, 2014 at 03:10:21 PM PST

    •  Both sides own the lack of cable service choice. (4+ / 0-)

      Municipalities are generally the ones awarding franchise agreements.  Municipalities are the ones dumb enough to allow for an exclusivity clause in said agreements.  And there are plenty of both Democratic and Republican run municipalities out there.

      If the cablecos were made to compete at the local level in the first place instead of being awarded monopolies by local governments, we'd likely have far better and cheaper service and the ability to choose between multiple providers.

      Obviously, there are statewide and national issues at play as well, but ultimately, the franchise agreements and the exclusivity clauses are agreed to locally, so the root cause is also at that level.

      "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

      by Darth Stateworker on Wed Feb 19, 2014 at 10:28:09 PM PST

      [ Parent ]

      •  there are also such things as duopolies (6+ / 0-)

        having one or two competitors in a market usually does very little to reduce costs.

      •  Exclusive franchises... (2+ / 0-)
        Recommended by:
        TKO333, RiveroftheWest

        ...are not all that typical.  In many (I think most) instances, cable franchises are theoretically non-exclusive.

        However, it is rare that a cable company wants to overbuild an existing cable system because it simply isn't profitable to run up a parallel set of cables and infrastructure and then fight for market share.  In addition, while the franchises may be non-exclusive, many municipal governments may be hesitant to authorize a second company to tear up the public right of way to install cable even in those rare instances when someone is interested in overbuilding.

        The solution in this instance isn't competition at the infrastructure level -- it's regulation.

        Political Compass: -6.75, -3.08

        by TexasTom on Thu Feb 20, 2014 at 06:08:57 AM PST

        [ Parent ]

        •  Many Companies Rent Each Other's Cables (0+ / 0-)

          Net Zero rented all it's lines from other companies...
          In fact, most of their stuff ran through the WTC...
          They had moved to other lines by the time 9/11 happened,
          so instead of being wiped out completely, they still survive.

          A 2nd company in a market does not necessarily mean 'tearing up streets to run cables...'

          Here in Madison they use a tunneling mech-mole thing to burrow thru the terrace (between the sidewalk and the street) & feed the cable thru that.

          If corporations are people now, can we use eminent domain to tear down their corporate headquarters?

      •  Yeah, in Madison There Is A $4.50 Franchise Fee (0+ / 0-)

        The way it works is automatically add about $12.50 PER MONTH to the base price of service.
        With minimum wage at $7.35 an hr.
        Terrific.

        If corporations are people now, can we shut off their utilities?

    •  Glass-Stegall (0+ / 0-)

      It was under Clinton that many things got  thrown out that we should have kept

  •  Perhaps if Americans (1+ / 0-)
    Recommended by:
    cai

    stopped buying less for more it would send a message.  I'm not saying this to start an argument (because sometimes people on this site take things personally, go figure) but it's true.  Americans just continue to shrug their shoulders and buy the crap anyway.  Sure, everyone wants to be "connected" because they're addicted to FB, their cell phones, cable TV, etc.  We lived without it before, but I know the majority of folks can't imagine life without this stuff.  So, be prepared to bend over and please don't complain about it.

    If you acknowledge it, you can change it.

    by Raggedy Ann on Wed Feb 19, 2014 at 03:20:30 PM PST

  •  Let's try to stop the Comcast/TW merger (12+ / 0-)

    Sign this petition;

    http://act.demandprogress.org/...

    Daily Kos an oasis of truth. Truth that leads to action.

    by Shockwave on Wed Feb 19, 2014 at 03:21:59 PM PST

  •  Ah, the free market. (4+ / 0-)

    Choice is up to the consumer, unless no such choice exists in any accessible form...

    ...well then screw you, I guess.

    I didn't leave Huffington Post, Huffington Post left me...

    by speedyexpress48 on Wed Feb 19, 2014 at 05:25:45 PM PST

    •  HuffPost (1+ / 0-)
      Recommended by:
      RiveroftheWest
      I didn't leave Huffington Post, Huffington Post left me...
      Ah, another Facebook non-user??

      (That's how Huffington Post left me.)

      "It's high time (and then some) that we put an end to the exceptionalistic nonsense floating around in our culture and face the fact that either the economy works for all, or it doesn't work AT all." -- Sean McCullough (DailyKos user thanatokephaloides)

      by thanatokephaloides on Wed Feb 19, 2014 at 05:45:00 PM PST

      [ Parent ]

      •  Well (1+ / 0-)
        Recommended by:
        RiveroftheWest

        I am a Facebook user, but they require "verified" facebook accounts now, and I really don't care about using my cell phone number to verify my account. Hell, I was FB linked.

        It's sad, really. I was a Level 2 HuffPost super user with a large amount of well written comments (snarky...sure...but from what I seen people actually liked that), and it was definitely fun commenting on there, but HuffPost stepped over a really thick line there and I just can't support them anymore.

        I didn't leave Huffington Post, Huffington Post left me...

        by speedyexpress48 on Wed Feb 19, 2014 at 10:15:14 PM PST

        [ Parent ]

  •  Barriers to entrance (5+ / 0-)

    "They're enormous and impossible for an underdog to produce at a lower cost."

    Not true - communities can bypass the established companies and set up better for less:

    LUS Fiber - Historical Timeline

    TBoy

  •  A free market in the internet could work just (4+ / 0-)

    fine if all cables could be used by all companies, as (I believe) occurs in France.  The article I read was about television as well as internet (I believe), but it basically said that once cable was installed (to a home, or in a town), any company could offer service over it.  

    This meant that dozens of companies could offer cable tv and internet in a town, and people could choose according to pricing, channels, and services.

    © cai Visit 350.org to join the fight against global warming.

    by cai on Wed Feb 19, 2014 at 09:25:35 PM PST

  •  Money. (3+ / 0-)

    Here's the thing I don't get:

    Cons are always about money.  They're like Ebenezer Scrooge, always complaining about this costing too much, or that price being "unsustainable".... Ad infinium.  Self interest and keeping as much money in their pockets seems to be the primary goal of every con, from the wealthiest to the poorest.

    As such, since things like universal health care and municipal cable systems - government solutions to the cost of these items - are demonstrably and inarguably cheaper and more cost effective, why the fuck do they keep fighting such things?

    The private sector and capitalism has it's place.  However, in some places, the best solution is public, not private.  If they'd stop being so afraid of government because they get mislead by wedge issues, exaggeration, and downright fabrication, and understood that they are the government, and the government is them, perhaps they'd be less resistant to realizing that sometimes, government is the solution.

    Instead, they're rather just run around screaming "socialism" and "Benghazi!" 24/7 like a bunch of barely literate hyenas.

    "There was no such thing as a "wealthy" hunter-gatherer. It is the creation of human society that has allowed the wealthy to become wealthy. As such, they have an obligation to pay a bit more to sustain that society than the not-so-wealthy." - Me

    by Darth Stateworker on Wed Feb 19, 2014 at 10:22:05 PM PST

  •  The problem here (4+ / 0-)

    Is that we do not have a free market. We have crony capitalism where big companies like Comcast and Time Warner use government entities to write convoluted laws that ensure their monopolies and their profits.

    When I said that this merger looked bad to me, a friend pointed out that Comcast and Time Warner never competed in the same markets. She never stopped to ask why they did not compete in the same markets. Nor did she stop to think about the fact that if they are each #1 in their respective markets, their merger ensures they are #1 in all markets and can crush the competition, paving the way to taking us back to the time when there was only one company in town and you paid through the nose for lousy service.

  •  What free markets? (1+ / 0-)
    Recommended by:
    RiveroftheWest

    Retail telecomm ("the last mile") is a natural oligopoly; you might be able to sustain two local distribution networks in a lucrative market like NYC but you'll never get real competition.  (At the wholesale level, it is more competitive because of technology differentation, and even once that's dissipated, there are a variety of other criteria such as pricing, bundling, service, and so forth.)

    It's possible that Comcast is a separate monopoly.  If so, they should be under CAPM price and service regulation, and forced to divest anything not related to carriage of bits around fiber optic.

  •  A Quick History Lesson... (1+ / 0-)
    Recommended by:
    enufenuf

    While I agree that healthcare should be considered a life essential - the Internet is not!  And it never was.  There are low cost substitutes to it:  libraries, newspapers, books, schools with actual teachers teaching, and communities.  Advertising is done on television or in print, and you get your news from a variety of sources through television and newspapers.  Or, at least you used to do so.  No one NEEDS the Internet to provide any information, only the willingness to seek it out for themselves.  In fact, the guys who put us on the moon and developed penicillin did so without computers telling them the news or where to shop.  Yes, they used government computers to help get us to the moon, but they did not need a global big brother determining what they bought in stores or where they lived or what information for daily living they needed.

    Do not get me wrong! I live in a rural area and the Internet connects me to the rest of the world, but it is something that is not necessary for my life like health care or human contact.  It has a great many advantages, but as a society we have become far too dependent on computers and the Internet and we are seeing the results in how our privacy is being invaded, our children are being poorly socialized and educated, and in how we have more "friends" we have never met than real friends we can depend on in an emergency.  I will over the next few months reduce my interactions with the Internet and limit it to my church's activities.  I will do this to free up time to actually interact with real humans on a face-to-face basis more and reconnect with the real, natural world.  So, instead of complaining about how these corporations are delivering less for money, take your money and use it to make real friends and help your community.  When these organizations realize they are now losing money, prices will come down or you will see these groups break up.  But you, well, you might have a better life and so you will not care.

    •  Must be nice (0+ / 0-)

      to have a steady job in Mayberry, where everything is word of mouth.
      For those of us stuck in the revolving door which is the current job market the internet is not a luxury, and a cell phone is required. One cannot even find job openings without the web, and, "Fill out a profile on our website," is the first step in applying.
      In my market one has two choices for high-speed internet, and the only way to get a decent price is to bundle multiple services which you don't need. There are other options, but only for businesses.
      At least there is competition among mobile phone providers, not so much with internet connections.

      "To succeed in life, you need two things: ignorance and confidence." - Mark Twain

      by CaptainAnalog on Thu Feb 20, 2014 at 05:22:31 PM PST

      [ Parent ]

  •  High Speed Broadband in a Rural Area (0+ / 0-)

    While I appreciate that the chart shows averages, I'd like to point out that 45 megabit per second is not the max available to individual residents in the US.

    I live in a rural area of northwestern Wisconsin.  My house is literally 7 blocks from the shoreline of Lake Superior.  My city has a population of less than 3000.  One would think I'd be reduced to settling for 10 megabit DSL or 30 megabit cable due to living in a small community in a rural location.

    Thankfully, that assumption is dead wrong. :)

    For the past 4 years, I have enjoyed 100 megabit service for less than $100 per month.  Six years ago, I had 40 megabit service... a year later, it was increased to 60 megabit.  A year after that, I jumped at the chance when my provider offered 100 megabit service.

    Shortly after it was installed, I started having problems if I tried to watch my cable TV and be online at the same time.  Provider came out, identified the problem and realized they needed to reroute my service to avoid interfering with the rest of the area.  They strung up a temporary line and when summer came installed a permanent line underground.  I was charged absolutely nothing for this service.

    So who is this provider?  Charter Communications.  The company that tried to purchase the Time Warner units when they went up for sale and was rejected.  A company that has always responded promptly to my complaints and has never threatened to throttle my bandwidth or selectively block content.  Every day I thank my lucky stars that I live in an area covered by Charter rather than Time Warner or ComCast.  :D

  •  If you haven't noticed (1+ / 0-)
    Recommended by:
    enufenuf

    that when airlines merge prices go up, you haven't been paying attention.
    Where I live there is no cable - just satellite.

  •  Bad assessment (0+ / 0-)

    I don't agree with your assessment on toothpaste at all.  Toothpaste isn't anymore competitive than anything else.  Hell compare the price of toothpaste to gasoline.  Does it seem cheap to you now?  As with all products and sales in the USA there's a price point where most of the products will sync and then you have a few outliers on both ends.  The quality is well who knows what the hell is really in toothpaste and which one is really best for you.  But most of America will buy the brand name because that's what they've been taught and most toothpastes are made by what, one or two companies?

  •  These corporations know (1+ / 0-)
    Recommended by:
    Team Leftie

    that as long as people can be distracted by a few cheap consumer electronic goods and a steady diet of reality TV, there is almost no end to the amount of shit they can be fed. After all, it's a culture they've spent decades carefully cultivating.

    Even when they're caught red-handed, it's generally forgotten by the next news cycle. Lie big, retract quietly. Before long, even the pretense of lying will no longer be necessary.

    We're strong enough and dangerous enough to keep our freedom from being taken by force. But we're not smart enough to keep from giving it away to well paid con-men who cater to fear and hatred.

    It's low-self esteem, coupled with a pathological need to feel superior, that will end us.

    It's the sort of end that will engender little sympathy from those whose lives we've helped make hard, brutal, and short

    When elephants fight, it's the grass that suffers. -- African Proverb

    by LouisWu on Thu Feb 20, 2014 at 06:15:55 PM PST

  •  A little out of date (0+ / 0-)

    Here in Japan, 100 is very widely available, and in most urban areas, you can get 1000 MBPS for an additional $20/month.

  •  Less for more (0+ / 0-)

    It never fails to amaze me how the US sheeple allow themselves to get brainwashed. What do all the school taxes I paid do for the pupils? Raise dummies?
    Well, as know, Americans love it complicated. So they make others rich to have some role model for their own life.

  •  If people (0+ / 0-)

    don't start standing up things will only get worse.

  •  'We The People' net neutrality petition (0+ / 0-)

    There's a "We The People" petition to declare broadband providers as common carriers, which would protect net neutrality. Please sign and share it.
    http://wh.gov/...

    Reclassifying broadband as a common carrier service would protect the Internet as a hub for innovation and the exchange of ideas. It would prevent Internet Service Providers from hindering the exchange of information on the internet by discriminating between information sources in routing speed or quality.
    The FCC has the power to reclassify. Nothing in the Federal Court decision on Verizon vs FCC prevents this reclassification.  FCC's reluctance use this power in support of the common good is baffling and short-sighted.

    'By virtue of their designation as common carriers, providers of basic services were subject to the duties that apply
    to such entities, including that they “furnish . . . communication service upon reasonable request,” 47 U.S.C. §201(a), engage in no “unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services,” id.§ 202(a), and charge “just and reasonable” rates, id.§201(b).'*

    *http://www.cadc.uscourts.gov/...

  •  Market not free (0+ / 0-)

    We haven't tried a free market solution for Internet. No matter how many times they lie, it's not a free market if anyone can influence the sales price. So the problem is not with free market, but the total lack of a free market.

    Your confusion here is that this is NOT a commodity item - one in which there is no differentiation of the product, many buyers and sellers, etc. Wheat is a commodity. So is corn, coal, iron ore - you get the idea. Free markets do very well with commodities. Services with significant permanent infrastructure are practical monopolies, although in this case can best be viewed as limited markets. Problem is we deregulate those here in the States. Everyone else, recognizing the inherent inefficiencies of allowing a single-source (or even near single source) supplier set prices regulates the business.

    Of course, the article points out the core problem we have - even our writers are illiterate on economic issues, much less the people. No wonder corporations lead us around by the nose!

  •  Ah, the romance... (0+ / 0-)

    You'd think that with as hard and fast and long as Corporate America has been screwing the average consumer, they'd at least kiss us first. Hell, at THOSE prices, the Internet companies should even be able to spring for at least a jar of Vaseline.

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