Shooting in the Dark -- Owen Comments Waikiki Conference

Only when we understand why open access is necessary can we design an implementation that is responsive to the particular form of market failure that gives rise to the need for regulatory intervention. Otherwise, we are “shooting in the dark.” There are at least two equal access issues: First, should competitors have equal access to each other’s facilities, and second, should competitors have equal access to each other’s entertainment and other content. The answers depend on whether such departures from normal competition policy would enhance consumer welfare. Normal competition policy is to rely on market forces to allocate resources in a way that enhances consumer welfare. Competition generally produces supplier incentives that are compatible with welfare maximization. Centralized allocation and regulation in principle can mirror these incentives, but requires information not usually available to those in charge of the intervention. Regulators are also subject, by design, to political influence.Net neutrality, open access

The Net Neutrality Debate: Twenty Five Years after United States v. AT&T and 120 Years after the Act to Regulate Commerce

Apparent ignorance of more than a century of economic history now threatens the competitive constitution of the Internet under the guise of "net neutrality." Net neutrality is a slogan that stands for the proposition that the Internet and physical means of access to it should be available to all on uniform, non-discriminatory terms. Proponents of net neutrality fear, first, that access to bottlenecks, such as the "last mile" to the home, will be monopolized and second, that the successful monopolist will seek to favor its own vertical services by excluding or disfavoring others. Net neutrality is their answer to these threats. But the architects of the concept of net neutrality have simply resurrected the traditional na

China's Competition Policy Reforms: The Antimonopoly Law and Beyond

More than twelve years have elapsed since China began its efforts to enact a comprehensive antitrust law. Today, drafts of the law are still being debated. Such a protracted legislative process is highly unusual in China, and can only be explained by the controversy the draft law generates. After a brief review of China’s current competition policy, this paper discusses the fundamental issues in China’s economy that give rise to the challenges facing China’s antitrust policymakers in enacting the new antitrust law. These issues include the role of state-owned enterprises, perceived excessive competition in China’s economy, mergers and acquisitions by foreign companies, the treatment of administrative monopolies, and the enforcement of the antitrust law. While those controversies create significant policy issues for China, they do not constitute valid objections to the enactment of the new antitrust law. Meanwhile, it will be important for China to recognize that the new antitrust law alone will not be sufficient to fully realize its goal of promoting competition in its economy; other reforms will be necessary as well. China will be better off by moving swiftly to enact the new antitrust law, while keeping the momentum to engage in those other reforms.China, antitrust, law,

Local Broadband Access: Primum Non Nocere or Primum Processi - A Property Rights Approach

High-speed or "broadband" Internet access currently is provided, at the local level, chiefly by cable television and telephone companies, often in competition with each other. Wireless and satellite providers have a small but growing share of this business. An influential coalition of economic interests and academics have proposed that local broadband Internet access providers be prohibited from restricting access to their systems by upstream suppliers of Internet services. A recent term for this proposal is "net neutrality." We examine the potential costs and benefits of such a policy from an economic welfare perspective. Using a property rights approach, we ask whether transactions costs in the market for access rights are likely to be significant, and if so, whether owners of physical local broadband platforms are likely to be more or less efficient holders of access rights than Internet content providers. We conclude that transactions costs are likely to be lower if access rights are assigned initially to platform owners rather than content providers. In addition, platform hardware owners are likely to be more efficient holders of these rights because they can internalize demand-side interactions among content products. Further, failure to permit platform owners to control access threatens to result in inadequate incentives to invest in, to maintain, and to upgrade local broadband platforms. Inefficiently denying platform owners the ability to own access rights implies a need for price regulation; otherwise, there will be incentives to use pricing to circumvent the constraint on rights ownership. Price regulation is itself known to induce welfare losses through adaptive behavior of the constrained firm. The impact on welfare might produce a worse result than the initial problem, assuming one existed. Much of the academic interest in net neutrality arises from the belief that the open architecture of the Internet under current standards has been responsible for its remarkable success, and a wish to preserve this openness. We point out that the openness of the Internet was an unintended consequence of its military origins, and that other, less open, architectures might have been even more successful. A policy of denying platform owners the ability to own access rights could freeze the architecture of the Internet, preventing it from adapting to future technological and economic developments. Finally, we examine the net neutrality issue from the perspective of the "essential facility doctrine," a tool of the common law of antitrust. The doctrine establishes conditions under which federal courts will mandate access by competitors to the monopoly platform of a vertically-integrated firm. Because local broadband Internet access is not today a bottleneck monopoly (there are several competitors and the market is at an early stage of development), the essential facilities doctrine would not permit reassignment of access rights from platform owners to competitors. We conclude that "net neutrality" is a welfare-reducing policy proposal.Technology and Industry, Regulatory Reform

Antitrust in China: The Problem of Incentive Compatibility

This paper reviews China's recent efforts to enact a competition policy (antitrust) law. We focus on three issues: (1) What is the substance of the proposed law, and how does it differ from existing antitrust law in other countries, (2) How will the law be implemented or enforced, and how will those who must implement this law interpret their mandate, and (3) What will be the likely effects of this law given China's unique history and cultural heritage. We emphasize China's economic, legal and regulatory contexts in which an antitrust law may be enforced. Our central focus is the problem of establishing a substantive and procedural legal framework that is incentive-compatible with economic efficiency and growth. The policy debate on antitrust within the Chinese government is not public. An unofficial draft of the proposed law was widely circulated outside China in 2003 and was the subject of a public commentary by the American Bar Association. A slightly revised draft was submitted for deliberation to the State Council in March 2004 (See comments from Shang Ming, Director of the newly established Antitrust Investigative Office in the Ministry of Commerce, on September 16, 2004, available at http://big5.china.com.cn/chinese/law/661991.htm).The changes from the prior draft seem to have chiefly to do with which agency of the government will administer the law. At this time, no further information is available to us. Our comments on the "proposed law" are therefore based on the version that has already circulated. We find a number of respects in which the draft law could be improved, both to increase its clarity and to make its enforcement more consistent with the goal of achieving improvements in economic efficiency. We also find much merit in the draft, especially its strong focus on reducing anticompetitive practices of state owned enterprises (SOEs) and other government bodies. However, our major difficulty with the new law is that, in the absence of a tradition of reliance on the rule of law, Chinese and foreign enterprises will find it very difficult to rely on the antitrust statute or the actions of the courts in China as a basis for predicting the antitrust liability that might result from various business practices. Therefore, the principal vector by which antitrust law (or indeed any law) affects economic behavior is absent from the Chinese scene. Unless the bureaucracy that enforces the new antitrust law actively pursues a policy of consistent enforcement based on written guidelines, stare decisis, or other sources of predictability, the substance of the statute itself will have little significance. That outcome would represent a significant loss for the economic welfare of the Chinese people.Technology and Industry, Regulatory Reform, Other Topics

Connecting the Dots between Science, Technology, Engineering and Math Education and Aviation Professional Shortages

The 2018 Boeing Pilot and Technician Outlook report forecasted that the aviation industry needs 790,000 new civil aviation pilots worldwide over the next 20 years. Some airlines have answered the call by creating ab initio (entry-level) programs to recruit, train, and hire their own pilots. However, the 2018 Outlook report also forecasted that the aviation industry needs 754,000 maintenance technicians over the next 20 years. Recently, there has been more attention paid to potential shortages in other aviation careers such as aircraft maintenance technicians but the primary focus is still remains on the pilot population. One of the factors that will lead to the shortage of aircraft maintenance technicians is the retirements of current aircraft maintenance technicians. Other factors include the lack of knowledge of or interest in aviation careers among the very people that can fill the pipeline, the diminished role of “shop class” in some school systems and competing science, technology, engineering and math (STEM) programs such as robotics and coding. This paper will address the challenges to attracting new talent to aviation careers as well as innovative ways to help overcome those challenges. This paper will also discuss ways to expand aviation career outreach efforts beyond the K-12 age group to introduce new talent to the aircraft maintenance technician pipeline at a quicker rate