I agree, We must stop the US from becoming Russian like, ie:
October 4, 2000
Plugging In
AOL Time Warner Merger Beset
By Woes Of Its Own Making
By BILL FREZZA
If ever you wanted a perfect case study of why antitrust regulations serve the interests of bureaucrats and not consumers, look no further than the saga of the pending merger between America Online and Time Warner. Although free market principles would strongly support the right of these two companies to join forces, one can't help but delight in the pain that AOL CEO Steve Case is suffering at the hands of the same government inquisitors he so recently set upon his competitors.
The number of unrelated issues and specious antitrust theories raised by well-connected special interests opposed to this merger, accented by the hypocritical flip-flops of the principals involved, make it abundantly clear that we have left the rule of law behind and have passed into the realm of pure power politics. In such a realm, business rivals, academic cranks, grandstanding congressmen and even global commissars are invited to pile on the victim of the moment to extract their pound of flesh. Such is the legacy of an administration whose campaign to mulct the magnates of the new economy knows no bounds.
There are so many sideshows going on here that one hardly knows where to begin. The most prominent issue is open cable access, the theory that cable TV operators should be forced to turn over their massive system upgrade investments to competitors at prices set by government. When Steve Case was on the outside looking in, he thought this was a swell idea and aggressively lobbied both local franchise authorities and the FCC to insist on strict rules that would guarantee AOL a free ride. Now that AOL is set to marry one of the country's largest cable operators, giving it the opportunity to stiff competitors, Case no longer thinks that such a policy is in the public interest.
So who picks up the banner now? Why our good friends at Walt Disney Co., gleefully whacking Time Warner with the open access club in revenge for getting temporarily shut out of Warner's New York cable system during testy negotiations over carrying the Disney Channel. But Disney should be careful about what it wishes for. Is it really fair that Disney World doesn't have an "open access" policy giving competing retailers a chance to set up souvenir shops inside the park at government-controlled rents to compete with Disney merchandisers? After all, Disney World was built on land that was once owned by the people. And isn't selling tickets to an amusement park while setting up a proprietary souvenir monopoly a case of illegal bundling? Maybe we should have a congressional hearing.
Then there is the brouhaha over blocked access to AOL's Instant Messenger (AIM) service. Here is a capability that did not even exist a few years ago which has suddenly achieved the legal status of an "essential facility." What fun it is to see Microsoft giving AOL a taste of its own medicine: calling into question AOL's right to maintain AIM as a proprietary monopoly, citing the same "network effect" theory of dominance that AOL used to bash Microsoft's Internet Explorer.
Never mind that consumers can get a free AIM account whenever they want. This is not about consumers. It is about competitors substituting political lobbying for marketing competence.
Probably the most bizarre turn of this tale is the effort being made by the European Commission to force Time Warner's EMI group to divest most of its valuable music assets. The theory is that placing such an enormous library of copyrights in the hands of AOL might someday put it in a position to dominate the music downloading business.
Never mind that this is a business that doesn't even exist yet, unless one counts Napster-style piracy as a business.
Never mind that the best way to crack the cozy little recording industry cartel that keeps CD prices so high is to have one of its members defect to an Internet company, which is exactly what this merger will accomplish. The European Commissars know what is good for their subjects, and they'll huff and puff until Time Warner bows to their power. After all, why should only Washington hog the spotlight?
Where does this all end? Unless corporations take the long view and make a principled defense of free enterprise, even if it means defending the rights of archrivals, they will be picked off one at a time, ending up in thrall to unelected bureaucrats happy to invent "laws" to justify the grab of the moment.
Bill Frezza is a general partner at Adams Capital Management. He can be reached at frezza@alum.MIT.EDU or www.acm.com
internetwk.com
-- and the follow up letter
Antitrust Foes Become Victims At Own Hands
Bill Frezza's column "AOL Time Warner Merger Beset By Woes Of Its Own Making" (Oct. 9) is right on target.
It's understandable that CEOs whose vision typically covers only the next quarter still don't get it. Today's corporate objectors against free enterprise really don't care about consumers, but themselves.
In the long run, not only will consumers be hurt by this business strategy, but the very companies that have substituted antitrust law for competitive abilities will, one by one, become victims of their own making
-me: American's bedrock belief in private enterprise must not be eroded by petty public officials as in third world countries. |
