[IP] more on why should we ever trust corporation -- BP Named in Inquiry on Pricing - New York Times
Amen djf
Begin forwarded message:
From: "Faulhaber, Gerald" <faulhabe@xxxxxxxxxxxxxxxxx>
Date: June 29, 2006 3:55:14 PM EDT
To: David Farber <dave@xxxxxxxxxx>
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@xxxxxxxxxx]
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@xxxxxxxxxx>
Date: June 29, 2006 2:51:12 PM EDT
To: dave@xxxxxxxxxx
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@xxxxxxx
editor www.voic.us
----- Original Message ----- From: "David Farber" <dave@xxxxxxxxxx>
To: <ip@xxxxxxxxxxxxxx>
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@xxxxxxxxx>
Date: June 29, 2006 2:33:36 PM EDT
To: Ron Avitzur <avitzur@xxxxxxxxxxxx>
Cc: dave@xxxxxxxxxx
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@xxxxxxxxxxxx>
To: <dave@xxxxxxxxxx>
Cc: <gerry-faulhaber@xxxxxxxxx>
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@xxxxxxxxx>
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."
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