Stanley M. Besen

Private Copying, Appropriability, and Optimal Copying Royalties

THERE is little doubt that the small-scale, decentralized reproduction of intellectual property-private copying-is a widespread practice, but its precise extent and economic effects are the subject of considerable dispute. Although the owners of copyrighted computer programs, printed matter, and audio and video tapes have claimed extensive harm from copying,1 and have occasionally succeeded in having legislation introduced that would compensate them for this harm,2 the effect of copying is not well understood and its quantitative effect is poorly measured.

Evaluating the competitive effects of mergers of internet backbone providers

This article analyzes the usefulness of the traffic measurement methodologies used by the European Commission (EC) and the United States Department of Justice (DOJ) in assessing the competitive effects of mergers of Internet backbone providers. The analysis concludes that the traffic ratios used by the EC to estimate market shares when it reviewed the merger application of MCI and WorldCom, and by the EC and the DOJ when they reviewed the proposed merger of Sprint and MCI WorldCom, have significant limitations. In particular, the article shows that these measurements provide a potentially misleading picture of the effect of a merger of backbone providers, even under the assumption that the Internet is a rigid hierarchy, and that this problem is likely to become worse as the use of secondary peering, multihoming, and intelligent content distribution services become more widespread.

The Evolution of Internet Interconnection from Hierarchy to 'Mesh': Implications for Government Regulation

The Internet has evolved from a “hierarchy”—in which interconnection was achieved by having Internet Service Providers (ISPs) purchase transit services from top-level backbones and top-level backbone providers engage in direct settlement-free peering—to a “mesh” in which peering occurs among a much larger number of participants and some peering arrangements involve payments from one peer to another. In this new environment, backbone providers, ISPs, and suppliers of content have a far wider array of interconnection alternatives, both technical and financial, than they did only a short time ago. As is often the case, the introduction of new alternatives and contractual arrangements has led to calls to regulate which alternatives and arrangements are acceptable. In this paper, we explain why such regulation would be harmful, as it would (i) reduce the incentives of industry participants to minimize total costs; (ii) lead to higher access prices to end users; (iii) result in prices that do not adequately reflect costs; and (iv) create regulatory inefficiencies. We also explain why the alternative interconnection arrangements to which Content Delivery Networks (CDNs) (and their content provider clients) and ISPs generally have access already impose limits on the exercise of market power, thus obviating any need for regulation.

The Determinants of Network Television Program Prices: Implicit Contracts, Regulation, and Bargaining Power

Recently, the Federal Communications Commission and the Department of Justice have imposed detailed regulatory schemes governing the contractual relationship between the commercial television networks and program suppliers. This article provides empirical evidence on the determinants of program prices that indicates that the claims underlying the adoption of these regulations are unfounded. Although the network-supplier contract appears to place obligations only on suppliers, our analysis suggests that networks assume an implicit obligation to adjust program prices in response to improved information about program performance.

An Economic Analysis of the AT&T-T-Mobile USA Wireless Merger

On March 20, 2011, wireless provider AT&T announced its intention to merge with T-Mobile USA, a competing wireless provider. This article reviews the economic analysis of this proposed acquisition that we carried out for Sprint and explains why the merger would have been anticompetitive. We analyze how the merger would have led to adverse unilateral, coordinated, and exclusionary effects. AT&T and T-Mobile contended that their proposed merger would not adversely affect competition in wireless services because T-Mobile USA was not an effective rival, because other wireless providers could easily replace any competition that was lost as a result of the merger, and because the efficiencies from the merger would be so substantial that they would outweigh any perceived anticompetitive effects. Our analysis concludes that AT&T failed to provide convincing evidence of the lack of anticompetitive effects and failed to document the claimed efficiencies in a manner consistent with the Horizontal Merger Guidelines of the U.S. Department of Justice and the Federal Trade Commission.