Babette Boliek

[Commentary] AT&T-Time Warner: The merger is vertical in nature, whereas the Disney-Fox merger is horizontal. But AT&T-Time Warner is a key merger from which to gather clues about the Department of Justice’s antitrust enforcement priorities under the new leadership of Makan Delrahim. Again, vertical mergers historically have been treated as either beneficial to consumers or having an ambiguous or benign impact on consumer welfare. Yet the proposed vertical merger is subject to a DOJ court action to block the merger.

[Commentary] To consumers, an Internet service provider using customer geolocation data (for example) to send them relevant advertising or Google using geolocation data to send them relevant advertising is a distinction without a difference. To require that consumers opt-out of a default privacy protection regime for ISPs and opt in to a privacy regime for using Google or Facebook potentially confuses the privacy issue. Why doesn’t the FCC just apply the same privacy law to Google and Facebook? Because it can’t.

Concerns about privacy are legitimate and change over time. It is reasonable to vigilantly and continuously assess the costs and benefits of any given privacy policy and adjust when necessary. But a disjointed policy that treats similarly situated economic players differently is not the answer.

[Babette Boliek is an associate professor of law at Pepperdine University School of Law ]

[Commentary] The investment advisory press is having a field day with the recently announced Comcast-Netflix deal. The deal, as the companies hope to eventually present it to consumers, will permit Comcast customers to subscribe to Netflix much as they already do to such premium offerings as HBO, Showtime, and Starz. Simple. But some in the blogosphere want to portray this deal as not just business but as détente in a war.

Reduced to its most simple elements, this deal illuminates a common story in the Internet ecosystem — a story long told in the cable world — carriers (Comcast) and content providers (Netflix) are complementary industries and together provide a product that consumers find desirable. To be sure, the exact terms of the deal will depend on a wide mix of variables that influence each party’s bargaining power — relative market size, relative consumer demand, market substitutes and, yes, potential regulatory intervention and pressure. The deal is exciting not because it is good against evil, but because it promises a product consumers may enjoy. It’s the excitement of the free market system doing what it does best — innovating.

[Babette Boliek is an associate professor of law at Pepperdine University School of Law.]

[Commentary] Some advocates don’t think the network neutrality rules proposed by the Federal Communications Commission allowing Internet service providers to enter into direct carriage agreements with application or content providers like Google and Netflix go far enough. The New York Times editorial board raves that Title II will “prohibit phone and cable companies like Verizon and Comcast from engaging in unjust or unreasonable discrimination against content.”

Title II treats telephone services as a common carrier. It is not about content, it is about prices -- namely the regulation of prices. Fast and slow lanes are permitted under Title II -- or, to say it the correct way, they are not prohibited under Title II.

[Boliek is an associate professor of law at Pepperdine University School of Law]

[Commentary] The House Judiciary Committee has heard testimonies on “Net Neutrality: Is Antitrust More Effective than Regulation in Protecting Consumers and Innovation?” I, however, would characterize the question a la a Seinfeld episode (paraphrasing): “Are you just saying you want to have Internet freedom for the little guy or do you really want to have Internet freedom for the little guy?”

If you want to protect the little guy, then this committee hearing was for you. The answer to the question posed -- given the empirical evidence -- is yes, antitrust is more effective than regulation at protecting consumers and innovation -- at least when the proposed regulation is “net neutrality.” Why is antitrust so much better than regulation at ensuring innovation in the Internet ecosystem? The reason is simple: unlike regulation, which specializes in control by the few -- a few commissioners, the few well-connected lobbyists, a few politically favored corporations -- antitrust is the law of the people.

For all their talk about wanting to preserve the Wild West of the Internet, net neutrality proponents seem to think consumers don’t know what they want until they’re told -- and free music is not what they really want. This convoluted and patronizing consumer welfare analysis is antithetical to antitrust.

Antitrust does not judge the legitimacy of consumer desires; it merely ensures that corporations do not censor your demands through anticompetitive practices.

[Boliek is an associate professor of law at Pepperdine University School of Law]

[Commentary] The Supreme Court pondered whether or not Aereo is engaged in the impermissible public performance of copyrighted material or whether it was doing, well something else.

And that seems to be the rub; the court seemed to struggle with exactly how to categorize what Aereo is doing. More specifically, the Justices tried to do what all lawyers do: find an analogy that helps them fit the facts of the present case into the factual bucket of a prior case.

There are two, strong potential prior case candidates: Sony Corp. v. Universal (Betamax) and Cartoon Network v. CSC Holdings (CableVision). In the Betamax case, the Supreme Court decided that Sony did not violate the copyright laws by selling a video recording device to an individual who used the device to record video transmissions or play back material that may or may not have been illegally copied. The CableVision case -- decided by the Second Circuit and therefore not binding on the justices – involved the use of a remote storage digital video recorder or RS-DVR.

The Second Circuit relied heavily on its own CableVision case in deciding in favor of Aereo, but both the Tenth and Ninth Circuits rejected similar arguments. So now it’s up to the Supreme Court to figure out what exactly is Aereo. Is it Betamax or is it CableVision?

Like all Supreme Court oral arguments there was something for everyone. There did seem to be emphasis on Aereo’s lack of payment of royalties at any point of the distribution -- a different business model than CableVision or Netflix. This might be the easiest way for the justices to distinguish Aereo from the Second Circuit’s CableVision case.

[Boliek is an associate professor of law at Pepperdine University School of Law]

[Commentary] I am usually not surprised at America’s fascination with sports telecasts (I share it; that’s why I write on it!). But surprised I was when not just one, but at least three Senators took a great deal of time to pose questions about sports programming during the Comcast/Time Warner hearing.

As any good fielder would do, I called out to the television “I got this,” but the Senators apparently didn’t hear the play. So let me try to respond to their concerns in this format. Roughly paraphrased, the Senators are uneasy with the proposed merger because Time Warner owns certain regional sports networks (RSNs) and Comcast owns interests in other RSNs. They fear that together the two companies would create a sports network juggernaut that could leverage these networks into an indomitable market share -- crushing all competition.

The perceived power of the RSN is almost hypnotic for the regulator – and apparently also for Senators and their constituents. They just can’t let it go. There are procompetitive rationales for not making such programming contracts compulsory, but for now I’ll leave it at this: senators, RSNs will not affect the market power of a merged Comcast/Time Warner. Just ask the Federal Communications Commission -- “they got this.”

[Boliek is an associate professor of law at Pepperdine University School of Law]

[Commentary] Since the decision of Verizon v. FCC in which the Federal Communications Commission “lost” some net neutrality rules, many (including myself) have claimed that Verizon was actually the loser.

But I’ve had time to reassess and I feel compelled to rephrase my claim; it is not Verizon but rather Google (and other of that ilk) who is the biggest loser. This is why: Verizon (and its ilk) is accustomed to being regulated, heavily -- the Verizon decision will not change that. Google is not used to being regulated -- the Verizon decision will change that. The result of the case was that the FCC can adopt policies that help get consumers Internet connections.

That’s not the most shocking part. If I were to ask 100 people what would encourage you to adopt a new Internet provider (maybe even your first provider) the vast majority would answer the same way you would -- a lower price would be the key. The court in Verizon saw things differently. Rather than price being “the”, or even “a”, fundamental driver of consumer demand, the direct connection between consumer price and consumer demand was ignored. Ultimately, the court bought the FCC’s tale that only content drives Internet adoption. What’s more, the court believed the FCC’s claim that content “innovators” (like WhatsApp, Facebook’s new $19 billion purchase) cannot fend for themselves but must be subsidized by Verizon (and others) -- which really means they will be subsidized by you through higher consumer prices. The increase of consumer prices will thus add to innovation, that will add to consumer adoption and (if this is to be believed) even higher consumer prices.

It is this thin theory that the court found sufficient to support the FCC’s move into Internet regulation.

[Boliek is an associate professor of law at Pepperdine University School of Law]

[March 10]