Recently, the Washington Lawyer ran a great piece called Net Neutrality: Who Should Be Minding Online Traffic? The article goes back and forth between the extremes of: (1) heavy handed Orwellian like regulation of the Internet by the Federal Communications Commission (“FCC”), and (2) self-regulation and content discrimination by greedy Internet Service Providers (“ISP”). This seems to be a false dichotomy. Even in the absence of heavy handed FCC regulation, which can crush innovation, the Sherman Act (“Act”) is an available tool to punish unlawful Internet hogging or collusion by ISPs.
The Internet is a public good. It was created by the government. Before, it was called ARPANET. It was a tool of the military. As a result, the Internet is akin to a public park. At the same time, there are now Internet Service Providers (“ISP”) who provide Internet users with differentiated access to this public good. Think of the ISPs as competing private tour guides in Central Park. Some tours will be faster but more pricey than other slower tours.
The net neutrality debate wrongly omits how the Sherman Act can help police the ISP market without the need for heavy handed regulation by the FCC. To the extent an ISP has market power and tries to keep competing companies out of the market, the essential facilities doctrine would likely apply. To the extent that there is an oligopoly of price fixing ISPs, then there will be claims under Section 1 of the Act. If an ISP tries to obtain too much market power through a merger, the government can oppose it. The problem with too much regulation by the FCC is that it discourages technological innovation by ISPs who compete for customers by providing better service at a lower price. If the FCC requires such companies to take a one size fits all approach to every customer, competitive innovation will likely suffer. So, too, will consumers seeking faster rides through the Central Park that is the Internet.
There is the old saying that, “if it ain’t broke, don’t fix it.” But Harvard Business School (“HBS”) professors Francesca Gino and Gary P. Pisano rightly point out in their article, Why Leaders Don’t Learn From Success, that successful businesses often appear not to be broken, only to find out that they are when it is too late.
When things are going well with your business, you often let your guard down. You think that things are going well because you are doing something right. But the HBS professors explain in their article that your success may be due to factors including fortuitous market conditions or beginner’s luck, as was the case with the rookie Ducati Corse racing team who won third place in the Grand Prix in 2003. You don’t question your strategy as much when things are going well. The Ducati team changed the design of their racing bike thinking it would improve performance in 2004, but the hasty changes left them in third place. It was only then that they realized the errors of their ways. Like with others, the authors write, the team learned only went things bad. The problem is that when things go bad, it may be too late. Another competitor may have already wooed your major client away. In short, its good to take the time to learn from your successes rather than waiting for a crushing defeat to wake up from what you realize was a slumbering false sense of security.
This is the first blog post on the new website of Ryan E. Long PLLC. We hope you like the new site. We sure do. And that is thanks to Kevin Robbins of Ironclad360, L.L.C., an excellent New York based web design company. We also hope you like our entries, which will cover thought provoking and/or inspiring stories we read about in the press or encounter in our practice. One article that we saw which peaked our interest was Mavericks with Medals on WSJ.com.
The reason why we liked the article is that we thought Mr. Sean White, the subject of the article, is a dying breed of American — independent, creative, and yet highly effective. Through his entrepreneurial zest, Mr. White was able to achieve success “his way.” Mr. Sinatra would be proud. But not only that. Mr. White’s different way of training, which shunned, to some extent, being cast with everyone else, enabled him to make moves nobody else ever saw before. Of course, there is no doubt that efficiencies of scale come about from mass production. And yet sometimes these efficiencies of scale from the Ford style mass production are made possible only be the likes of Mr. White. Take, for example, the Wright Brothers. They beat out the better funded Langley for the first to flight. We think what explains the Wright Brothers success is ingenuity, creativity, and, of course, persistence and bravery. We also think, too, that Mr. White shares these traits. Our clients do, too. Whether you are talking about music, fashion, technology, or hospitality, our clients are in the vanguard of their industries because of their tenacity and willingness to do what it takes to succeed. We applaud them. And we certainly applaud Mr. White.