Category Archives: Monopolies

FCC Chairman: We Won’t Approve An XM-Sirius Merger

For the moment, any discussion of a merger between satellite radio providers XM and Sirius is just that, talk. Nonetheless, the advantages of such a merger to both companies are apparent.

The Chairman of the FCC, who you will remember is a Republican appointed by a Republican President and approved by a Republican Congress, though, has already announced that the FCC will not approve a merger of the two companies if it is ever proposed:

NEW YORK (AdAge.com) — XM and Sirius satellite radio’s proposed merger hit a roadblock yesterday when Federal Communications Commission Chairman Kevin Martin suggested at a press conference in Washington that their licenses would cause a monopoly.

“There’s a prohibition on one entity owning both of those licenses,” Mr. Martin told reporters.

The problem, as the Adage article goes on to explain, is that the FCC has historically viewed satellite radio (and television) as its own market, and refused to look at the broadcast industry as a whole, even though it’s clear that traditional radio broadcasters consider satellite radio to be a serious competitor for listeners:

“Clearly, traditional broadcasters view satellite radio as a competitor, but FCC is viewing it as a separate entity. So [FCC’s] concern would be you have one satellite radio company that can dictate prices or whatever they want. But the question is, if they jack the prices up, can the consumer in that case say. ‘I’m going to local digital radio stations or internet radio or various other sustainable products.'”

Clearly, the answer is yes. That new car you bought may come with the capability to receive either XM or Sirius, but you don’t have to buy the subscription plan, and you don’t have to renew it when it expires. More importantly, and I think this will become more a important consideration as XM and Sirius are forced into the position of running commercials on some channels (already a fact on most non-music stations on XM), you don’t have to listen at all.

Of course, the FCC shouldn’t be involved in this process at all. But, if it is going to evaluate the potential market impact of an XM-Sirius merger, it needs to have a more logical definition of the relevant market.

H/T: Outside The Beltway

Ron Paul Votes For Price Fixing Prescription Drugs

Today, the U.S. House of Representatives voted today to allow the government to “negotiate” the price of prescription drugs bought for Medicare Part D. Ron Paul voted for it. There is a precedent for the government “negotiating” prescription drug prices, that is the VA drug plan. However, a piece in the Weekly Standard by Robert M. Goldberg describes the reality of VA “negotiating”.

Far from negotiating drug prices, the VA imposes them. Federal law requires companies to sell to the VA at 24 percent below wholesale price. If they won’t, they are banned from selling medicines to Medicaid, Medicare, and the public health service. The VA demands even deeper discounts by creating a national formulary–a restrictive list of approved drugs for its patients. Companies that don’t meet that additional discount don’t make the list. Patients must get drugs from VA pharmacies instead of retail outlets. Patients who endure side effects from a formulary medicine–or who fail to respond to one–must submit themselves to an arduous and time-consuming bureaucratic process to gain access to any pharmaceuticals not on the list.

In opposing the Medicare Part D reform in 2003, Democratic senator Patty Murray stated that she “was unhappy at the prospect that this plan could tell patients with MS, Parkinson’s disease, and ALS that they can’t get the drugs they need because their plan will not cover them.” Yet Azilect, the newest drug to treat the symptoms of Parkinson’s disease, approved in 2006, is not on the VA drug list, though every Medicare Part D plan has adopted it. In delaying access to new medicines, the VA is no different from the national health services of Canada and Great Britain. Tysabri, a new drug for multiple sclerosis, is available under every Medicare plan. It is not on the VA drug plan.

So in other words, price controls. These government imposed price controls have effects on both availability of drugs and the quality of the drugs. Since the drug companies will not give the drugs away to the VA, VA patients cannot buy the drugs. However, Medicare Part D is privately administered so newer and better and more drugs are available to patients under Part D. There are no price controls since private companies actually negotiate, not threaten, the drug companies to give them the best possible deal and the private companies pass them on accordingly.

In addition, as Goldberg points out, this could have a chilling effect on biotech research.

If making the lives of seniors shorter and sicker isn’t bad enough, the Democrats’ price control plan threatens to devastate pharmaceutical and biotechnology innovation just as the failed Clinton drug- pricing scheme of 1993 would have. Back then, a federal Breakthrough Drugs Committee was envisioned that would evaluate a drug’s cost effectiveness. In response, venture capital investment in biotech dropped drastically and the market valuation of the biotech industry plunged 40 percent.

Today, drug companies have over 1,000 partnerships with biotech firms. So among the first victims of the Democratic drug price-control scheme would be investors in the research Michael J. Fox also supports. That includes Merck, which just invested over $1 billion in a company run by Nobel Prize winners that developed a technique to suppress tumor growth common to stem cell therapy, and Eli Lilly, which is investing in a company called Suven that focuses on Alzheimer’s, schizophrenia, depression, vascular dementia, and Parkinson’s disease.

Speculative biotech research will be unsustainable under Democratic price pressure. Genzyme, whose drugs are always a target of Democratic anti-pharmaceutical show trials, just bought the rights to a Parkinson’s clinical trial program of Avigen. Celegene, which is likely to be bashed for the annual $61,000 price of Revlimid (a treatment for multiple myeloma and other cancers of the blood system), is investing heavily in a promising source of adult stem cells that have been used to replace dopamine neurons in people with Parkinson’s. It is hard to imagine how such research could be sustained in a system that would cut drug companies’ revenues and sales in half.

Of course to correct all these problems with HR 4, the Democrats will propose to make it better, with HillaryCare.

Now let me turn my attention to Ron Paul, aka Dr. No. He’s being billed as the “Taxpayer’s Best Friend”. Surely as a man who believes in the free market and in limited government, he knows better than to support price fixing. Unless of course a free market can be made for price fixing now. Things like this, his xenophobic streak, and his questionable stance on foreign policy will temper my enthusiasm for a Ron Paul candidacy.

Note: I’m not defending Medicare Part D, which should be repealed, or I’m not opposing Ron Paul’s bid for president, yet. I’m raising some questions.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at The Hayride.com and Rare. You can also find me over at the R Street Institute.

A Regulator Admits That Regulation Is Unnecessary

Lawrence Lessig, who was at the forefront of the anti-Microsoft movement in the 1990s and an advocate of government action to breakup the company’s alleged monopoly power, admits that he was wrong:

I was one of those reluctant regulators. As the evidence of Microsoft’s practices became clear, I remember well thinking, “Of course the government needs to do something.” And I remember very well the universal impatience with the notion that the market would solve the problem. How could it, when any other company was likely to behave just as Microsoft did?

We pro-regulators were making an assumption that history has shown to be completely false: That something as complex as an OS has to be built by a commercial entity. Only crazies imagined that volunteers outside the control of a corporation could successfully create a system over which no one had exclusive command. We knew those crazies. They worked on something called Linux.

I wanted to believe that Linux would prevail. But I’m a lawyer, and lawyers aren’t programmed to see how profitable innovation might happen without commercial control. I didn’t like the idea of regulation; I just didn’t see any alternative. The suits would always beat the rebels. Isn’t that why they were so rich?

Lessig acknowledges, though, that the rise of Linux as an alternative to Windows and Firefox as an alternative to Internet Explorer, all of which came about without government intervention, shows that the instinct to regulate is often wrong.

Unfortunately, it looks as though Lessig doesn’t apply what he learned to the net neutrality debates, where he once again favors government intervention.

H/T: Hit & Run

ESPN Power Struggles

This post was originally posted at The Unrepentant Individual, where I’ve been posting about college football a lot lately. It drifted over into the territory of monopolies, so I thought I’d cross-post it here.

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Over the past few years, cable companies have been battling ESPN over the cost of carrying the ESPN channel. It’s long been part of the “standard” cable offerings, but ESPN, knowing their status as the “WorldWide Leader in Sports”, have steadily been raising their costs to the cable providers. It’s gotten to the point where cable providers have been threatening to make it a pay channel.

ESPN, though, rather than taking their foot off the throttle, have kept the pressure up. ESPN GamePlan was understandable, because they were offering pay content for games that wouldn’t normally ever be broadcast nationally. That works well for fans who have left their alma mater’s locale, like I have. For a cost of $99 per season, you can subscribe to ESPN GamePlan and get all the games you desire. But ESPN decided to take it to the next level. They created a new channel, ESPNU, which is dedicated to college sports. And they’ve used this to exert more pressure on cable providers.

You see, ESPN GamePlan games are often available through local affiliates. I have had situations where I’ve caught Purdue games on CSS (Comcast Sports South), which normally would have required a subscription to GamePlan. Those games are usually broadcast locally to the school on ESPN+ channels. But ESPNU is different. It’s a channel like ESPN or ESPN2, in that games broadcast on ESPNU are only available on ESPNU. And they want all cable providers to carry ESPNU. Many have chosen not to, at this point.

Games carried on ESPNU require me to head out to a sports bar to watch. It’s actually been a little tougher than normal, because one place I would normally go to watch games doesn’t even carry ESPNU. So it requires going to certain sports bars. Granted, since I’m a fan of Purdue, a mid-level Big Ten team, I understand that it’s going to be a little tough for me to always find my team on TV. But ESPN knows that if they really want to get cable providers signed up for ESPNU, they must piss off fans of bigger programs. So earlier this year, Ohio State played a conference game on ESPNU, much to the chagrin of Columbus residents. OSU fans seem to think it’s a god-given right to watch Buckeye football on basic cable. Last weekend, I believe (I could be mistaken) that the Michigan – Ball State game was on ESPNU. ESPN is trying very hard to use their “monopoly” power to ensure local cable providers will add ESPNU to their lineups.

I use the term “monopoly” in quotes for a reason. ESPN is the “WorldWide Leader in Sports” for a reason, and that’s because they’ve done it better and cheaper than anyone else for quite some time. But they’re not a state-enforced monopoly, they’re a natural monopoly. And they’re pissing off their customers. You know what the result of that will be? As I pointed out before the season started, the result will be the Big Ten Network. In a natural monopoly, competition will arise which forces the monopoly power to change its ways, or lose its monopoly status. The Big Ten Network is the first attempt at doing just that, offering the games not carried by ESPN, ESPN2, or a major network, and putting on its own channel that may carry less of a price tag than ESPNU.

This is a real-life example of the natural breakup of a natural monopoly. And I’m not going to guarantee it’s going to be a clean fight, and I’m not going to guarantee everything will come up roses. But I think it will work itself out, and it will do so without the power of government. Not that anyone will pick up on the lesson, but I feel like someone has to point it out.

I Can’t Believe I’m Saying This

But, I actually like something that Markos Zuniga Moulitsas a.k.a “Daily Kos” has written:

The Case for the Libertarian Democrat

In this article, Kos attempts to describe why he thinks there is a more natural alliance between those with libertarian principles, and the Democratic party; as well as why the Republican party has been losing so much of it’s traditionally libertarian center…

…and but for two important points, I’m agreeing with what he’s written (which by the way isn’t what I think he truly believes. I’ve read enough of his stuff over the years that I know he’s way more to the left than he’s presenting himself here).

The first principle that I utterly disagree with, is that corporations are the ultimate evil in this world; and that capitalism must be strictly regulated and monitored by government or it will inevitably become a totalitarian evil.

The funny thing about that one is; it’s not too far wrong. Oh it is completely wrong in reality; but the difference between reality, and this socialists paranoid dystopian fantasy future isn’t very large. Mercantilist fascism is a distinct posibility if certain elements get tweakend in certain ways.

The irony of this principle, is that this result is exactly what we KNOW to be true, and will ALWAYS happen with an unfettered government; which brings us to the second issue I have…

The second principle he espouses here that I completely disagree with, is the core philosophy which separates Liberals, Democrats, Libertarians, libertarians, Republicans, and Conservatives alike.

Those on the left and the right (presuming a continuous linear spectrum as presented above) both believe that government can to some degree or another, do good; and be a legitmate and positive force; either for change, or to maintain stasis.

Those who are Libertarians, or libertarians; in general believe that all government is inherently a negative thing, but that some government is less negative than the alternative.

This principle was once the guide of the centrists wings of both the Democratic, and Republican parties; however those wings are severely weakened (in the case of the republicans), or have simply been purged from the party over the past 40 years (the democrats).

This means that there is no longer a functioning constiuency for severely limited government in power today. Both major parties are operating under the principle that with THEIR guidance, government can and WILL do good (or what THEY consider to be good – which is nothing of the sort), no matter the consequences.

One thing that these types never seem to understand, is the law of unintended consequences, and it most important corolary, the corolary of intentions.

ALWAYS REMEMBER THIS:

No matter what you do, what you know, or what your intentions are; every word you say, every thing you do, will have consequences you did not intend, forsee, or understand. Good intentions matter, but good results matter more.

Oh, and I suppose there’s one other principle that Kos is espousing that I can’t take: The idea that the way to fix the country is by voting democratic; and that if enough libertarians come to the democratic party, things will be alright again (or it’s corrolary, that tactically voting against republicans will force them to become more libertarian as a reaction to their electoral losses).

I reject this concept as utter folly; and dangerous folly at that. If the democratic party is ever allowed into the kind of power position it had in the late 70s again; it will destroy America utterly, and possibly kill us all in the process.

No, I’m not being hyperbolic, I am simply doing that which is prudent: the consequences of following what democrats say are, or have proven to be, their policies; will be the utter subjugation of the west to political correctness, weakness, appeasment, “tolerance”, and “multiculturalism”; and that WILL get us all killed.

The Democratic party, and the left who have chosen the Democrats as their represntatives; are in fact not liberty oriented at all (though some individuals may be). They are controlled by totalitarian transnational “progressivists”.

If these political philosophies are given reign over the country, it will weaken us to the point where we would be unable to resist the muslim and communist assault on our society, and we would all be killed or converted.

This is not to say the Republicans are all that much better; but I do not fear for my immediate safety, or the safety of my children given Republican principles and track record. Yes, taken too far, we COULD become that totalitarian mercantilist fascist state that frothy leftists have paranoid wet dreams about… but I for one would rise in bloody revolution first, as I know would at least hundreds of thousands of my fellow citizens; and we’ve all got plenty of guns.

Of course we wouldn’t if the transnational progressivists had their way, now would we.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

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