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Harmonious Contention, Cheating, and Antitrust Enforcement

The process of determining winners and losers that we call *competition* has two dimensions. One can cross the finish line first by running faster or one can *win* by handicapping opponents.

The former represents harmonious contention and the latter cheating. There exists no uncertainty about how to label a given action. Activities directed at improving the value proposition delivered to end users (i.e. running faster) represent harmonious contention. Activities directed at reducing (i.e. handicapping) an opponent's value proposition represent cheating.

We don't let Johnny cheat on tests. We don't let Lance Armstrong win the Tour de France by slashing his opponents tires. The antitrust laws exist to prevent cheating in the business sphere.

The antitrust laws don't get engaged until a company achieves a level of market power that yields an incentive to cheat. A market with several competitors already limits the utility of cheating. Individual companies likely won't have efficient means to make others suffer and diverting energies to injure one opponent risks creating a disadvantage relative to others.

John Nash, the Princeton University Professor profiled in the movie "Beautiful Mind", won a Noble Prize for working out the mathematics of this idea. He proved using the framework of game theory that in the absence of a dominance solution (one player stronger than all others), the best strategy from an individual player's perspective corresponds with the one that obtains the greatest value for the group. This does not mean the same outcome for everyone, but that all energies go toward building value rather than destroying it - harmonious contention.

The Bell companies remain in pursuit of a dominance strategy. The present problems in telecom follow directly from this reality and the failure of effective antitrust or regulatory enforcement to counter it. Consider the extent of Bell company energies directed at handicapping non-ILEC's as opposed to their work on the value proposition offered end users.

The FCC seems intent on complying with Bell company pressures to further remove regulatory constraints, but this will only make the cheating worse. When the Bells claim regulatory changes will serve competition, they have in mind the cheating side of the ledger. Nothing stops the Bells from winning through harmonious contention today.

Regulations and antitrust laws only limit cheating:

o Refusal to deal - cheating
o Tying - cheating
o Collusion - cheating
o Predatory pricing - cheating
o Market allocation - cheating
o Boycotts - cheating
o Various other exclusionary practices - cheating

The Bells have won regulatory relief on numerous occasions over the years. The many concessions did not reduce a single telephone bill or lead to the deployment of a single new service. The historical track record makes it clear we should expect the opposite.

The Department of Justice has a woeful record of holding the Bells accountable to the antitrust laws except for the historical accidents associated with Bill Baxter's tenure as Antitrust Chief that produced the MFJ in 1982. Consider that the DoJ worked to dilute the MFJ immediately after Bill Baxter returned to Stanford.

Telecom suffers dominance more than any other sector of the economy. Even ignoring that the Bells operate as a cartel through the USTA, consider that the twenty largest power companies collectively control only 30% of the market. Bell company economic and political power chills dissent not to mention their tendency to threaten litigation. Raise you hand if you fear speaking out against the Bell companies.

Aggressive antitrust (anti-cheating) enforcement represents the only antidote.



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