more on why should we ever trust corporation -- BP Named in Inquiry on Pricing - New York Times

[David Farber <dave () farber net>]

Amen djf

Begin forwarded message:

From: "Faulhaber, Gerald" <faulhabe () wharton upenn edu>
Date: June 29, 2006 3:55:14 PM EDT
To: David Farber <dave () farber net>
Subject: RE: [IP] more on why should we ever trust corporation -- BP  
Named in Inquiry on Pricing - New York Times

Migod, a virtual lovefest between Dana and me; I'm deeply disturbed by
this;-)

Of course I agree; let's do everything we can to increase the supply of
broadband and the "cartel" (actually, a duopoly; no evidence of price
fixing, I believe) will fall on its own.  That has always been the
objective of those (such as myself) arguing for platform competition.
Abundant supply is the killer of market power; always has been, always
will be.

In recent IP correspondence, I suggested that the primary responsibility
for increasing the supply of last-mile broadband lay with the IP
readership!!  New entry in broadband will come when smart entrepreneurs
(i.e., IP readers) figure out how to bring BB to households
competitively: Craig McCaw's Clearwire, BPL, WiMax (forever the next big
thing),... The technologies are out there; what we need are guys with
business plans.  Some have argued the "guys with business plans" should
be municipal gov'ts and/or communities, and I say fine, bring 'em on (to
paraphrase Dubya).  But sitting around on our duffs whining about
duopolies and complaining to Congress is not going to increase the
supply of BB.  It's only going to increase the supply of whining and I
think we have quite enough of that already.


Professor Gerald Faulhaber
Business and Public Policy Dept.
Wharton School, University of Pennsylvania
Philadelphia, PA 19104
Professor of Law
University of Pennsylvania

-----Original Message-----
From: David Farber [mailto:dave () farber net]
Sent: Thursday, June 29, 2006 2:58 PM
To: Gerald Faulhaber
Subject: Fwd: [IP] more on why should we ever trust corporation -- BP
Named in Inquiry on Pricing - New York Times



Begin forwarded message:

From: Dana Blankenhorn <dana () a-clue com>
Date: June 29, 2006 2:51:12 PM EDT
To: dave () farber net
Subject: Re: [IP] more on why should we ever trust corporation -- BP
Named in Inquiry on Pricing - New York Times

Mr Faulhaber is absolutely right in this case.

But let's extend the metaphor. The Bells and Cable people are doing the
same thing with bits, today, in the U.S., that DeBeers did with diamonds
for such a long time.

They're hoarding, controlling the supply, and thus controlling the
price. Such hoarding to control price can be done either privately, as
DeBeers did, or through a public agency, as the Texas Railroad
Commission did in the 1950s.

There is no more reason for a 1.5 Mbps line to cost $100/month (with the
phone line or a cable package) than that a diamond should have cost what
it did a decade ago.

The answer, as Faulhaber notes, is to increase the supply, to break up
the cartel.

Government policy is not powerless in this area. To claim it is, in the
face of an unregulated monopoly hoarding the key to 21st century growth,
is to be willfully blind to one's own premise.

There are many options open to us, and we should be arguing now about
means, not ends.

Dana Blankenhorn   dana () voic us
editor    www.voic.us


----- Original Message ----- From: "David Farber" <dave () farber net>
To: <ip () v2 listbox com>
Sent: Thursday, June 29, 2006 2:39 PM
Subject: [IP] more on why should we ever trust corporation -- BP Named
in Inquiry on Pricing - New York Times


> Begin forwarded message:
>
> From: Gerry Faulhaber <gerry-faulhaber () mchsi com>
> Date: June 29, 2006 2:33:36 PM EDT
> To: Ron Avitzur <avitzur () PacificT com>
> Cc: dave () farber net
> Subject: Re: [IP] more on why should we ever trust corporation -- BP
> Named in Inquiry on Pricing - New York Times
>
> The scarce resource was the rather small number of diamond mines
> in  SA, which could and did form a cartel, managed by deBeers.
> There  were almost no mines elsewhere, so deBeers could control the
> product.  This cartel was extremely effective up until about 10 years

> ago, when Russian diamonds came on the market in large quantities;
> the Russians apparently decided not to play along with the cartel any

> longer.  The diamond cartel is pretty much defunct now, and the price

> of diamonds has fallen dramatically over the past decade.  Much more
> to the story, but the essence is: when supply increased (Russion
> diamonds) the cartel fell apart.
>
> Professor Gerald R. Faulhaber
> Business and Public Policy Dept.
> Wharton School, University of Pennsylvania Philadelphia, PA 19104
> Professor of Law University of Pennsylvania Law School
>
> ----- Original Message ----- From: "Ron Avitzur"
> <avitzur () PacificT com>
> To: <dave () farber net>
> Cc: <gerry-faulhaber () mchsi com>
> Sent: Thursday, June 29, 2006 2:24 PM
> Subject: Re: [IP] more on why should we ever trust corporation -- BP
> Named in Inquiry on Pricing - New York Times
>
>
> > > From: Gerry Faulhaber <gerry-faulhaber () mchsi com>
> > >
> > > I was really surprised to see this article; "cornering the market"
> > > in a commodity is almost always unprofitable, unless there's a truly

> > > scarce bottleneck somewhere (as with diamonds, but not propane).
> >
> > It was my understanding that diamonds would be merely a semi-precious

> > stone if not the long-term and outstandingly effective work of the De

> > Beers at creating artificial scarcity to preserve the monopoly and
> > maintain profits. The scarce bottleneck with diamonds is not the
> > rarity
> > of the stone, but rather the artificial scarcity maintained by De
> > Beers.
> >
> >   http://www.theatlantic.com/doc/198202/diamond
> >
> > "Suddenly, the market was deluged with diamonds. The British
> > financiers who had organized the South African mines quickly realized

> > that their investment was endangered; diamonds had little intrinsic
> > value-and their price depended almost entirely on their scarcity. The

> > financiers feared that when new mines were developed in South Africa,

> > diamonds would become at best only semiprecious gems.
> >
> > The major investors in the diamond mines realized that they had no
> > alternative but to merge their interests into a single entity that
> > would be powerful enough to control production and perpetuate the
> > illusion of scarcity of diamonds."
>
>
>
> -------------------------------------
> You are subscribed as dana () a-clue com
> To manage your subscription, go to
>  http://v2.listbox.com/member/?listname=ip
>
> Archives at: http://www.interesting-people.org/archives/interesting-
> people/
>
>
>
> --
> No virus found in this incoming message.
> Checked by AVG Free Edition.
> Version: 7.1.394 / Virus Database: 268.9.6/378 - Release Date:
> 6/28/2006





-------------------------------------
You are subscribed as lists-ip () insecure org
To manage your subscription, go to
 http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/