Tales of the Sausage Factory: Of Open Access, Kicking Butt, and Why Arbs Don't Know Jack

The Ninth Circuit has given us another win in the fight to make cable plants open their facilities to independent ISPs (aka “open access” ). Winning feels good, especially when you predicted it over the odds given by the “experts”. The experts here are the industry analysts and arbitrageurs (or “arbs” ). What does it mean, and why are the experts so often wrong? See my opinions below.

Since 1998, my organization and others have pushed to apply the same rules to cable as apply to the phone network for internet open access. Right now, any ISP that wants to offer Internet access service over the phone network can do so. This has resulted in competition, innovation, investment, jobs and lots of good stuff. And, most importantly, a medium in which everyone can say whatever the heck they please.

That didn’t happen by accident. It happened because in the 1970s and 1980s, the FCC imposed a rule on the phone networks that made them open their lines to rivals, then they extended that rule in the late 1990s to DSL. I always get a chuckle out of the fact that the wonderfully libertarian Internet could not have happened without horrible, yucky, intrusive government regulation, but I’m perverse that way.

Anyway, the cable companies have fought tooth and nail to avoid having the same rules apply to them. In 2002, the FCC agreed. We and others said the FCC was wrong and filed a Petition for Review in the Ninth Circuit. The trade press and arbs predicted we would lose. Imagine their surprise when, in 2003, the Ninth Circuit agreed with us.

The FCC and the cable companies confidentaly predicted that the full court of the Ninth Circuit would reverse. This is called a request for rehearing en banc, which is Latin for “get all the judges together to tell the first panel why they are idiots.” (Latin is a very compact language). At the time, I told reporters that I did not think the Ninth Cir. would rehear the case. The law in question was not difficult and, aside from the fact that the FCC and cable cos didn’t like the result, it followed naturally from Ninth Circuit precedent. The trade press and arbs predicted the Ninth Cir. would rehear and reverse.

Yesterday, the Ninth Cir rejected the FCC and cable petitions for rehearing. The entire decision is one paragraph long:

3/31/04 Filed order ( Richard D. Cudahy, Diarmuid F. O’SCANNLAIN, Sidney R. THOMAS, ): The full court has been advised of the petitions for rehearing en banc and no active judge requested a vote on whether to hear the matters en banc. The petitions for rehearing and suggestions for rehearing en banc are therefore denied. [4901514-1] [02-70518, 02-70684, 02-70685, 02-70686, 02-70879, 02-71425, 02-72251] (wp) [02-70518 02-70684 02-70685 02-70686 02-70879 02-71425 02-72251]

For us in the legal field, that’s the equivalent of scraping the FCC and cable co briefs off the bottom of one shoe like dog poop. Not a single judge showed the slightest interest in rehearing the case. Oooooohhh, schweet, schweet victory.

I can understand the FCC and cable cos saying what they did, but why are industry analysts such idiots? My feeling on this is twofold. First, predicting that industry will win over public interest advocates is a lot like predicting in April that the Yankees will make it to the play offs. It is certainly betting the odds based on past performance.

But more importantly, I think most people miss how thoroughly captured industry analysts are by the industries they study. The analysts live side by side with these guys, attend conferences where the industry wine and dine them, and the analysts count on the industry people for just about all their info. Lazy herd beasts.

So its natural human nature that the analysts will swallow what the industry puts out. You should remember that next time you hear those advertisements from trading houses promising you all sorts of independent analysis and research. You can save yourself considerable expense by just reading corporate press releases.

Stay tuned . . . .

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2 Comments

  1. John says:

    Damn.

    Harold, this may be your best yet.

    Now then, I like the decision. I’m surprised by it (i’m a cynic, can you blame me), but I like it.

    But what I most appreciate about the post is your professional insight, which is, to coin a phrase, priceless.

    OK, Enough with the flattery.

    jrs

    PS: if you don’t knock it off with those smiley faces I may have to put a pie in your face one of these days.

  2. Stearns says:

    I don’t fault the analysts for being part of the community they analyze, but you’re right to remind us of this.

    It makes me appreciate the sometimes frustrating conventions whereby judges seek to insulate themselves and other trial participants from contact with the communities they adjudicate. [Justice Scalia is such an asshole.]

    I guess sometimes having only a little knowledge is a powerful and clarifying thing.

    But how do they know what domain knowledge to ignore and what not to? When I was a teenager, I wondered how much there is to know. Then I wondered how many ways there was to organize, classify and abstract what there was to know. Now I wonder how to decide what things I need not, or should not, know.

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