GAO Report: Believing in Competition Doesn’t Make It Happen

Sometimes I think that the D.C. Circuit and the Republicans running the various Commerce Committees are the Arch Priests of Kiplings Gods of the Market, and it has brow-beaten the poor FCC through repeated reversals accompanied by tongue lashings into embracing this nonsense. The chief tenant of the Gods of the Market Place is that by deregulating the industry, competition emerges and consumers enjoy all the happiness that comes from a competitive environment. If this fails to happen as expected, adherents of the Gods of the Market practice a discipline called “Denial of Reality.” Practitioners of Denial of Reality believe that if you sufficiently discredit people who tell you about actual reality, and keep repeating that the reality you want actually exists, then Actual Reality will eventually by browbeaten into conforming to the reality promised by the Gods of the Market Place. And the FCC, like a good little penitent, keeps trying to produce reports that give the D.C. Circuit and the Republicans in Congress the world they want to see rather than actual reality.

Sadly, as GAO studies keep demonstrating, wishing for competition doesn’t make it so. This latest GAO Report on the lack of competition for business customers in major urban areas (and nicely explained in this piece here) is but the latest in a series of real world reports demonstrating that you can only ignore reality for so long before it bites you in the tender places. Sadly, however, it chomps down hard on the just and the unjust alike.

My analysis below . . .

AS I PASS through my incarnations in every age and race,
I make my proper prostrations to the Gods of the Market Place.
Peering through reverent fingers I watch them flourish and fall,
And the Gods of the Copybook Headings, I notice, outlast them all.

–Rudyard Kipling, The Gods of the Copybook Headings

Under the stern tutelage of the D.C. Circuit, which repeatedly reversed any efforts by the FCC to actually enforce the pro-competitive aspects of the 1996 Telecommunications Act, the FCC has done its best in recent years to worship the Gods of the Market Place, cast out the Gods of the Copybook Heading, and remain faithful to Denial of Reality. The FCC has approved merger after merger with limited conditions. It has deregulated as fast as it’s meeting schedule will allow. It has granted forebearance petition after forebearance petition for the telcos, all while loudly proclaiming the Holy Writ taught to it by the D.C. Circuit: “Competition Exists! We Are Arbitrary and Capricious That Do Not See The Blessed Competion! Deregulation Makes Markets Competitive! Forgive Us, Oh Activist Federalist Judges, For Not Deregulating Further and Faster! All praise the Gods of the Market Place!” And the D.C. Cir. smiles benignly and starts affirming the FCC instead of reversing it.

Most perniciously, the FCC keeps jiggering its reports to make sure its happy reality picture stays happy. Congress over the years has required the FCC to monitor various industry sectors to determine if they have become or remain competitive. The FCc is always at pains to arrange things to get the right result.

So, as the FCC Denial of Reality picture keeps drifting further from Actual Reality, folks in Congress have needed to turn to other places to get reliable information on Actual Reality. In doing so, it frequently relies on the Government and Accountability Office (GAO), an independent research arm of Congress.

“With the Hopes that our World is built on they were utterly out of touch,
They denied that the Moon was Stilton; they denied she was even Dutch;
They denied that Wishes were Horses; they denied that a Pig had Wings;
So we worshipped the Gods of the Market Who promised these beautiful things.”

Alas, GAO, while charged with providing as accurate a picture of Actual Reality as possible, has spent 12 years under the thumb of a Republican Congress with powerful members who are also fervent believes in the Gods of the Market Place and in the power of Denial of Reality. These believers brook no nattering nabobs of negativity from Actual Reality, and have no qualms about punishing those unfortunate enough to bring contradictory Actual Realities to their attention. Those that worship the Gods of the Market Place and believe in the power of Denial of Reality hold that declaring reality makes it true. They therefore take it as a positive and worthy deed to discredit and abuse proponents of Actual Reality until Actual Reality conforms itself to the land promised by the Gods of the Market Place.

So GAO has gotten very good at worshiping the Gods of the Copybook Headings while pretending to mouth the liturgy of the Gods of the Market Place. This hides the Actual Reality from the true believers who insist that deregulation has produced squindoodles of competition and thus has brought lower prices and better services to the public, while providing the data and evidence for them what really want to know what Actual Reality looks like.

Thus, when asked to study the actual state of competition in the “special access” market (what businesses pay for telecom services), the GAO went out and got a good picture of Actual Reality. This included a large number of absolute “no-nos” to the worshipers of the Gods of the Market Place. So the GAO called its Report “FCC Needs to Improve Its Ability to Monitor and Determine the Extent of Competition in Dedicated Access Services.” and pretended that this is just about improving the efficiency of FCC data reporting. When the FCC objected that the Actual Reality portrayed in the report would seem to suggest that the FCC should reinstitute (GASP) price regulation, the GAO hastened to reassure everyone reading that no, no! Heaven forbid! We have no wish to offend the Gods of the Market Place with such heresy as price control! We just think the FCC could do a better job of collecting data. Because, if it did, it would notice that:

1) There isn’t nearly as much competition as the FCC says there is, in fact, it appears to range from barely noticeable to negligible to nada;

2) The “colocation method” for determining competition developed by the FCC and blessed by the D.C. Cir. drasticly over reports the presence of competition and is pretty meaningless;

3) Once the FCC totally deregulates prices because it finds sufficient competition, it never checks back to see if the competing firms continue to survive or, if once the FCC has blessed the area and gone away, the ILECS utterly devour the competing firms and leave no trace like Pharoh’s thin cows gobbling up the fat cows;

4) Where the FCC has completely deregulated special access prices, special access prices have gone up;

5) These trends have accelerated since the FCC permitted two ILECs to buy out the two largest competing special access providers, but this is probably just a random coincidence that does not in the least suggest the FCC should scrutinize mergers better.

But we’re not suggesting anything radical as reregulating! We just think the FCC could reflect Actual Reality better so it, Congress, and the D.C. Cir. can doa better job Denying Reality better.

“Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four
And the Gods of the Copybook Headings limped up to explain it once more.”

The recent election of a somewhat more progressive Congress may signal that the Gods of the Market are coming to the end of their current run. Certainly the recent letters by Dingell, Markey and Inouye make it clear they will not turn a blind eye to Martin’s efforts to unrecuse McDowell and push through the AT&T/BellSouth merger over the objections of Copps and Adelstien. Nevertheless, we can expect the D.C. Cir. to continue to use its pulpit to prosletyze most vigorously for the Gods of the Market Place no matter how much Denial of Reality it takes, and I doubt that Republicans Like Ted Stevens or even Democrats like Al Wynn, who vote against net neutrality and anti-redlining provisions because deregulation WILL create competition and universal delpoyment (this time for sure!) have lost their religious fervor.

“As it will be in the future, it was at the birth of Man
There are only four things certain since ‘Deregulation’ began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire;

And when all regulation is vanquished, and the brave new world begins
Where incumbents have no market power, and consumers are never locked-in,
As surely as Water will wet us, as surely as Fire will bum,
The Gods of the Copybook Headings with terror and slaughter return.”

Stay tuned . . .

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5 Comments

  1. bj says:

    Your analysis, is, as usual, cogent, fun to read and delightfully irreverent. One hopes the Gods of the Marketplace don’t start hurling lightning bolts in your direction.

    There’s a rumor going ’round that <a href=”http://www.thenation.com/bl…“>FCC Chairman Martin</a> is considering a run for the governorship in his home state, and all this corporate buttkissing is for the purpose of filling his campaign chest with Telecomm and Media Gold. If it’s true it would tie a lot of little FCC factoids and oddnesses of the last few years together in a nice neat little package, I think.

  2. Harold says:

    Thanks for the kind words. I’ll add that I like your work over at Bitchslappin’ as well.

    As for the Martin rumor, there have been persistent rumors for several years now that Martin plans to run for political office some day. Certainly it would not surprise me if he did, but I am not aware of any evidence that he has any concrete plans at the moment.

    While I think Martin is “political” in the sense of being smart about political repercusions of his actions (where Powell was both insensitive to the politics and disdainful of them when thrust upon him), I don’t think he is trying to suck up to industry sectors for campaign contributions. Martin is a conservative free market type who genuinely believes that to get broadband and competing cable services to folks he needs to give the telcos what they want. But when the telcos were blantantly abusing market power by trying to keep charging the DSL universal service fee after the FCC rescinded it, Martin came down on them hard.

    I disagree very strongly with Martin’s ideology, and he plays a mean game of hardball. He is most definitely a graduate of the Karl Rove School of Power Politics. But that’s different from being an industry stooge.

  3. bj says:

    Why is it, though, that these “free market types” can’t see that in the case of utilities of any sort the free market doesn’t work? How many Enrons do they need to experience before they understand? How many games of Truth or Unintended Consequences do we have to play? If Martin is as savvy as you say, I can’t understand his insistence on giving up the game to the Telcos. Local Loop Unbundling was the one thing that had a chance of working to open up all sorts of true market competitiveness. And look what they did to it.

    Thanks for the kudos on bitchslappin. It’s early days for us, but I’m having fun with it. It was born out of a need to get my righteous indignation off my web design business blog, where it was taking over the joint. 🙂

  4. bj says:

    Darn, I forgot to make the request I came here to make.

    http://hraunfoss.fcc.gov/ed

    I personally would love to see you analyse this speech from a “Gods of the Market” perspective. There are a few boners that popped out at me in those stats Martin quoted and I know I don’t know my way around them as well as you do.

  5. Skeptic says:

    The trouble, Mr. Feld, is that you go to the other extreme and want to institute regulation everywhere, even where it does kill markets.

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