Subject: FW: [IP] harmonious contention, cheating, and antitrust enforcement
From: "Tim O'Reilly" <tim@oreilly.com>
Date: Sun, 27 Oct 2002 12:07:59 -0800

Not directly relevant to free software business, but very relevant to the
interests of this group.

I've always argued that the reasons to be mad at Microsoft have to do with
"cheating" as described here, rather than with proprietary software per se,
and this is a nice summary of the kinds of cheating that shouldn't be
allowed.

It's also relevant to FSBs because the state of the telecom market (the
cheating being addressed here) is very relevant to the future of some of the
key markets in which F/OSS software plays.

-- 
Tim O'Reilly @ O'Reilly & Associates, Inc.
1005 Gravenstein Highway North, Sebastopol, CA 95472
1-707-829-0515 http://www.oreilly.com, http://tim.oreilly.com


------ Forwarded Message
From: Dave Farber <dave@farber.net>
Reply-To: dave@farber.net
Date: Sun, 27 Oct 2002 09:29:33 -0500
To: ip <ip@v2.listbox.com>
Subject: [IP] harmonious contention, cheating, and antitrust enforcement


------ Forwarded Message
From: Daniel Berninger <dan@PULVER.COM>


Harmonious Contention, Cheating, and Antitrust Enforcement

The process of determining winners and losers that we call *competition* has
two dimensions.  One can cross the finish line first by running faster or
one can *win* by handicapping opponents.

The former represents harmonious contention and the latter cheating. There
exists no uncertainty about how to label a given action.  Activities
directed at improving the value proposition delivered to end users (i.e.
running faster) represent harmonious contention.  Activities directed at
reducing (i.e. handicapping) an opponent's value proposition represent
cheating.

We don't let Johnny cheat on tests.  We don't let Lance Armstrong win the
Tour de France by slashing his opponents tires.  The antitrust laws exist to
prevent cheating in the business sphere.

The antitrust laws don't get engaged until a company achieves a level of
market power that yields an incentive to cheat.  A market with several
competitors already limits the utility of cheating.  Individual companies
likely won't have efficient means to make others suffer and diverting
energies to injure one opponent risks creating a disadvantage relative to
others.

John Nash, the Princeton University Professor profiled in the movie
"Beautiful Mind", won a Noble Prize for working out the mathematics of this
idea.  He proved using the framework of game theory that in the absence of a
dominance solution (one player stronger than all others), the best strategy
from an individual player's perspective corresponds with the one that
obtains the greatest value for the group.  This does not mean the same
outcome for everyone, but that all energies go toward building value rather
than destroying it - harmonious contention.

The Bell companies remain in pursuit of a dominance strategy.  The present
problems in telecom follow directly from this reality and the failure of
effective antitrust or regulatory enforcement to counter it.  Consider the
extent of Bell company energies directed at handicapping non-ILEC's as
opposed to their work on the value proposition offered end users.

The FCC seems intent on complying with Bell company pressures to further
remove regulatory constraints, but this will only make the cheating worse.
When the Bells claim regulatory changes will serve competition, they have in
mind the cheating side of the ledger.  Nothing stops the Bells from winning
through harmonious contention today.

Regulations and antitrust laws only limit cheating:

o Refusal to deal - cheating
o Tying - cheating
o Collusion - cheating
o Predatory pricing - cheating
o Market allocation - cheating
o Boycotts - cheating
o Various other exclusionary practices - cheating

The Bells have won regulatory relief on numerous occasions over the years.
The many concessions did not reduce a single telephone bill or lead to the
deployment of a single new service.  The historical track record makes it
clear we should expect the opposite.

The Department of Justice has a woeful record of holding the Bells
accountable to the antitrust laws except for the historical accidents
associated with Bill Baxter's tenure as Antitrust Chief that produced the
MFJ in 1982.  Consider that the DoJ  worked to dilute the MFJ immediately
after Bill Baxter returned to Stanford.

Telecom suffers dominance more than any other sector of the economy.  Even
ignoring that the Bells operate as a cartel through the USTA, consider that
the twenty largest power companies collectively control only 30% of the
market.  Bell company economic and political power chills dissent not to
mention their tendency to threaten litigation.  Raise you hand if you fear
speaking out against the Bell companies.

Aggressive antitrust (anti-cheating) enforcement represents the only
antidote.

Daniel Berninger
http://www.pulver.com/antitrustreport/

* You may redistribute this message freely if you cc: dan@pulver.com and
include this notice.


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