tag:theconversation.com,2011:/au/topics/atandt-32596/articlesAT&T – The Conversation2022-08-18T17:23:54Ztag:theconversation.com,2011:article/1887862022-08-18T17:23:54Z2022-08-18T17:23:54ZWill the Inflation Reduction Act actually reduce inflation? How will the corporate minimum tax work? An economist has answers<figure><img src="https://images.theconversation.com/files/479917/original/file-20220818-6276-9qt389.jpg?ixlib=rb-1.1.0&rect=152%2C58%2C2842%2C1782&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Don't expect the Inflation Reduction Act to bring down prices all that much.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/ProducerPrices/e52f9db68a144f2e9822d8c2f0f06925/photo?Query=prices&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=51911&currentItemNo=52">AP Photo/David Zalubowski</a></span></figcaption></figure><p><em>The U.S. is about to <a href="https://www.nytimes.com/interactive/2022/08/13/upshot/whats-in-the-democrats-climate-health-bill.html">spend US$490 billion over 10 years</a> on reducing greenhouse gas emissions, improving health care and reducing the federal deficit. Where’s all that money coming from?</em></p>
<p><em>We asked University of Michigan economist <a href="https://www.nirupamarao.org">Nirupama Rao</a> to examine how the new law will raise enough revenue to pay for clean energy tax credits, Affordable Care Act subsidies and incentives for manufacturers to use cleaner technologies, among other initiatives. We also wanted to know, given its name, will the Inflation Reduction Act actually bring down inflation?</em></p>
<h2>What are the main revenue components in the bill?</h2>
<p>The new law funds itself primarily <a href="https://www.nytimes.com/interactive/2022/08/13/upshot/whats-in-the-democrats-climate-health-bill.html">through a mixture of tax-related measures and health care savings</a>. In fact, the revenue it’s projected to raise more than pays for the new spending, reducing the deficit by roughly a quarter of a trillion dollars over 10 years.</p>
<p>The biggest source of revenue, <a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf">projected by the Joint Committee on Taxation</a> at about $222 billion, comes from a new 15% minimum corporate tax rate. Another $124 billion in net revenue is expected as a result of stepped-up tax enforcement by the Internal Revenue Service. The committee expects two other tax measures – including a 1% tax on corporate stock buybacks – would raise about $126 billion.</p>
<p>Congress is also hoping to save $265 billion through several provisions to <a href="https://theconversation.com/why-letting-medicare-negotiate-drug-prices-wont-be-the-game-changer-for-health-care-democrats-hope-it-will-be-188560?notice=Article+has+been+updated.">lower the amount of money the government spends</a> on prescription drugs through its Medicare program. </p>
<h2>How will the corporate minimum tax work?</h2>
<p>The corporate minimum tax is aimed at raising revenue from companies that report large profits to their shareholders but pay minimal taxes. </p>
<p>Though businesses can, of course, owe no tax because of perfectly legitimate uses of the tax code, seeing headlines about <a href="https://www.washingtonpost.com/business/2022/08/11/minimum-corporate-tax">successful companies</a> paying little to no tax <a href="https://www.pewresearch.org/fact-tank/2021/04/30/top-tax-frustrations-for-americans-the-feeling-that-some-corporations-wealthy-people-dont-pay-fair-share/">has been galling</a> to many Americans and can potentially undermine the public’s faith in the tax system. </p>
<p>In addition, government revenue from companies <a href="https://www.taxpolicycenter.org/statistics/corporate-income-tax-revenue-share-gdp-1934-2020">has plunged in recent years</a> as a result of the 2017 corporate tax cut and other measures. Corporate tax revenue fell by nearly half as a share of gross domestic product from 2015 to 2020. </p>
<p><iframe id="joM7r" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/joM7r/4/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>To be subject to the minimum tax, U.S. corporations must earn an average of at least $1 billion in adjusted book income – the earnings they report to shareholders less some adjustments – over the previous three years. It hits foreign companies too, though they need only report $100 million in U.S. income. </p>
<p>Basically, companies subject to the minimum will have to calculate their tax liability twice – once under regular corporate income tax rules and again by multiplying their adjusted book income by 15%. Their tax is whichever is greater. Theoretically, this ensures they at least pay the minimum.</p>
<p>A few important adjustments included in the bill’s final language will limit how much companies pay under the minimum tax. To prevent manufacturers from facing high minimum tax bills, for example, <a href="https://www.taxpolicycenter.org/taxvox/how-senate-approved-corporate-minimum-tax-works">companies will be able to employ</a> some of the same credits and deductions they use to reduce their regular corporate tax bills to lower the minimum tax they’ll pay as well. </p>
<p>While an earlier vision of the bill would have subjected private equity funds to the minimum tax, <a href="https://www.nytimes.com/2022/08/08/business/corporate-minimum-tax-private-equity.html">intense lobbying</a> of Arizona Sen. Kyrsten Sinema helped the industry get an exemption, along with retaining the carried interest loophole that the bill initially closed.</p>
<p>In the end, <a href="https://www.finance.senate.gov/imo/media/doc/CAMT%20JCT%20Data.pdf">fewer than 150 companies</a> – including many household names like <a href="https://www.washingtonpost.com/business/2022/08/11/minimum-corporate-tax/">Amazon, AT&T and General Motors</a> – are expected to be subject to the tax. </p>
<figure class="align-center ">
<img alt="A sign reads Internal Revenue Service in front of a large stone building" src="https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=347&fit=crop&dpr=1 600w, https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=347&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=347&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=436&fit=crop&dpr=1 754w, https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=436&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/479918/original/file-20220818-459-zgp5vk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=436&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The IRS gets a big boost in funding from the new law, which should help it beef up enforcement and bring in more revenue.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/Corporations-ZeroTaxes/960af7fa6f804aa3acc39d119caf450d/photo?Query=company%20tax%20profits&mediaType=photo&sortBy=arrivaldatetime:desc&dateRange=Anytime&totalCount=236&currentItemNo=11">AP Photo/J. David Ake</a></span>
</figcaption>
</figure>
<h2>How will IRS enforcement generate so much revenue?</h2>
<p>The law allots $80 billion in new funding for the Internal Revenue Service. The Joint Committee on Taxation expects the investment to <a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf">garner $204 billion in revenue over 10 years</a>, or $124 billion once you subtract the increased spending. </p>
<p>The main target of this spending is the so-called tax gap, which is currently <a href="https://home.treasury.gov/news/featured-stories/the-case-for-a-robust-attack-on-the-tax-gap">estimated at about $600 billion a year</a>. The tax gap is the difference between how much corporate or individual taxpayers owe the IRS and how much the agency is able to collect. </p>
<p>The new revenue is expected to come from increased auditing, mostly targeting high-income taxpayers. <a href="https://home.treasury.gov/system/files/136/JLY-letter-to-Commissioner-Rettig-Signed.pdf">Treasury Secretary Janet Yellen</a> and <a href="https://www.irs.gov/pub/irs-utl/commissioners-letter-to-the-senate.pdf">IRS Commissioner Charles Rettig</a> have both pledged that the investments will not lift audit rates on small businesses and households earning less than $400,000 a year.</p>
<p>Many Democrats, along with former <a href="https://www.washingtonpost.com/opinions/2021/11/17/cbo-build-back-better-irs-revenue-too-low/">Treasury Secretary Larry Summers</a>, believe this investment in the IRS will raise a lot more money than estimated because of <a href="http://jasondebacker.com/papers/DHTY_IndivAudit.pdf">better compliance</a> among taxpayers who want to avoid being audited. </p>
<p>The funding will also be used to update <a href="https://www.nextgov.com/it-modernization/2018/03/irs-system-processing-your-taxes-almost-60-years-old/146770/">antiquated technology</a> and increase the IRS’s staff. Decades-old computer systems and understaffing <a href="https://www.taxpayeradvocate.irs.gov/reports/2021-annual-report-to-congress/">prevent the IRS from answering taxpayer queries</a>, tracking funds owed and using simple analytics to guide enforcement. </p>
<p>While an $80 billion investment that returns $204 billion already sounds pretty impressive, it may be possible that it’s a conservative estimate. </p>
<h2>Will the law reduce inflation, as the name implies?</h2>
<p>Probably not much.</p>
<p>Several measures in the law, such as narrowing the deficit, lowering drug prices and making the U.S. less vulnerable to energy price spikes, should all help reduce inflation somewhat. </p>
<p>Though monetary policy is the main tool for fighting inflation, it’s also possible that the new law will convince people that Congress is functional and willing to take steps to address inflation, and that feeling <a href="https://twitter.com/WendyEdelberg/status/1555256251369635841">could lead to lower expectations</a> for future inflation, which can be a self-fulfilling prophesy. </p>
<p>However, the magnitude of the direct impact on inflation, despite the bill’s name, will likely be slight. The <a href="https://budgetmodel.wharton.upenn.edu/issues/2022/8/12/senate-passed-inflation-reduction-act">Penn-Wharton Budget Model</a>, which publishes economic analysis on the fiscal impact of public policy, suggests that the reduction in inflation of the Inflation Reduction Act “will be statistically indistinguishable from zero.” </p>
<p>That’s an economist’s way of saying, when it comes to the bill’s impact on inflation, don’t get your hopes up too much.</p><img src="https://counter.theconversation.com/content/188786/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Nirupama Rao has received research support from the Center for Equitable Growth.</span></em></p>The new law will pay for increased spending in several ways, including a corporate minimum tax and funding tax code enforcement by the IRS.Nirupama Rao, Assistant Professor of Business Economics and Public Policy, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1785162022-03-09T18:09:49Z2022-03-09T18:09:49ZWhy Apple, Disney, IKEA and hundreds of other Western companies are abandoning Russia with barely a shrug<figure><img src="https://images.theconversation.com/files/450817/original/file-20220308-17181-yumwpg.jpg?ixlib=rb-1.1.0&rect=134%2C239%2C3761%2C2354&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Muscovites rushed to buy furniture and other goods from IKEA before it closed its Russian stores.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/RussiaWarUkraineEconomy/bfef81caccce40939ef2963011fdafb2/photo?Query=russia%20close%20store&mediaType=photo&sortBy=creationdatetime:desc&dateRange=Anytime&totalCount=10&currentItemNo=7">AP Photo/Vladimir Kondrashov</a></span></figcaption></figure><p>Many companies in the U.S. and elsewhere have been quick to sever ties to Russia – going well beyond applying the <a href="https://www.bloomberg.com/news/articles/2022-02-28/sanctions-imposed-so-far-on-russia-from-the-u-s-eu-and-u-k">sanctions ordered by their governments</a>. </p>
<p>IKEA, Nike and H&M are <a href="https://edition.cnn.com/2022/03/03/business/ikea-h-and-m-russia/index.html">temporarily closing their Russian stores</a>. Disney, Sony and Warner Bros. <a href="https://www.theguardian.com/film/2022/mar/01/disney-and-warner-bros-pause-film-releases-in-russia-over-ukraine-invasion">paused the release of new films</a> in Russia. Apple, Samsung and Microsoft <a href="https://www.cnet.com/news/apple-microsoft-and-other-tech-companies-stop-sales-in-russia/">stopped selling their products there</a>. McKinsey, Ernst & Young and many other top <a href="https://www.wsj.com/articles/big-auditors-to-leave-russia-amid-invasion-of-ukraine-11646666419?mod=djemCFO">accounting</a> and <a href="https://www.ft.com/content/6c412673-d65e-4e75-adbb-08146c42387c">consulting firms</a> said they are leaving the Russian market – possibly for good. </p>
<p>In all, <a href="https://som.yale.edu/story/2022/over-200-companies-have-withdrawn-russia-some-remain">over 300 companies have announced plans</a> to close stores, reassign staff or stop selling products in Russia since the invasion began on Feb. 24, 2022, according to a running tally by Yale management professor Jeffrey Sonnenfeld. Most recently, <a href="https://www.cnn.com/2022/03/08/business/mcdonalds-pepsi-coke-russia/index.html">McDonald’s</a>, <a href="https://www.nytimes.com/live/2022/03/08/business/stocks-economy-inflation-ukraine">Starbucks</a> and Coca-Cola joined the list on March 8, 2022, announcing they would close stores and cease sales.</p>
<p>In some ways, these decisions fit in with a <a href="https://theconversation.com/how-corporate-ceos-found-their-political-voice-83127">recent trend in which companies have increasingly staked out</a> public positions on often controversial social and political issues, such as restrictions on trans rights and ability to vote. As <a href="https://business.rice.edu/person/douglas-schuler">business professors</a> <a href="https://scholar.google.com/citations?user=k7slUggAAAAJ&hl=en&oi=ao">who study why</a> companies engage in activism, we feel the same factors that have driven those decisions to speak out are at work over Ukraine. </p>
<p>But we also believe Ukraine stands out for one important reason: For many of these companies, it may have been one of the easiest stands they’ve ever taken – even if there is a financial cost.</p>
<h2>Taking a stand</h2>
<p><a href="https://www.doi.org/10.1177/0022242920937000">Corporate sociopolitical activism</a> – the technical term we use – entails companies making public declarations or taking actions about significant social or political issues that extend beyond their core business. </p>
<p>Until relatively recently, <a href="https://theconversation.com/how-corporate-ceos-found-their-political-voice-83127">companies rarely took stands</a> on social or political issues. </p>
<p>That didn’t really change until the 2000s, when LBGTQ rights were under attack and major companies such as <a href="https://www.reuters.com/article/us-walmart-arkansas-analysis-idUSKBN0MT13E20150402">Walmart spoke out</a> against bills that would have allowed discrimination.</p>
<p>Since then, there’s been a <a href="https://qz.com/work/1797058/2020-is-the-year-corporate-activism-and-global-political-risk-converge/">surge in companies taking proactive stands</a> on issues ranging from climate activism and racism to abortion and voting rights. </p>
<p>For example, in the wake of the murder of George Floyd by police in Minneapolis in 2020, hundreds of CEOs <a href="https://www.cnbc.com/2020/06/11/ceos-unveil-plans-against-racial-inequality-after-george-floyd-death.html">signed a pledge</a> against racial discrimination and <a href="https://www.ceoaction.com/purpose/">created an organization dedicated</a> to diversity, equity and inclusion. In 2021, the CEOs of Dell, American Airlines, Southwest Airlines and AT&T <a href="https://www.npr.org/2021/04/02/983709091/these-are-the-businesses-speaking-out-against-texass-newly-proposed-election-law">spoke out against a Texas bill</a> aimed at making it more difficult for citizens to vote. </p>
<p>Others have taken more decisive action. <a href="https://www.npr.org/2021/09/08/1035045952/lyft-uber-will-pay-drivers-legal-fees-if-theyre-sued-under-texas-abortion-law">Uber and Lyft</a> said they would pay to defend their drivers if they got sued under a Texas law that allows anyone to sue a person who helps someone get an abortion. And in 2016, <a href="https://www.cnbc.com/2017/03/27/bathroom-bill-to-cost-north-carolina-376-billion.html">PayPal and the NCAA pulled business</a> from North Carolina after the state passed a bill limiting LGBTQ protections.</p>
<p><a href="https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/great-expectations-navigating-challenging-stakeholder-expectations-of-brandsexpectations-of-brands">Surveys show</a> <a href="https://www.ipsos.com/sites/default/files/ct/publication/documents/2021-11/ipsos-global-trends-2021-report.pdf">today’s consumers expect</a> <a href="https://www.5wpr.com/new/wp-content/uploads/pdf/5W_consumer_culture_report_2020final.pdf">companies to live up</a> to the <a href="https://certusinsights.com/wp-content/uploads/2019/10/Markstein-Social-Responsibility-_-Certus-Insights-Research-_.pdf">values they espouse</a> in their press releases, and big corporate groups such as the Business Roundtable even began <a href="https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans">urging companies</a> to focus on creating value for everyone – not just shareholders. </p>
<figure class="align-center ">
<img alt="a crowd marches in a city street behind a banner that reads justice for George" src="https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/451007/original/file-20220309-20-12axmhb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Many companies spoke out against racism after George Floyd’s murder inspired months of protests, like this one on the first anniversary of his death.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/RacialInjustice-MinnesotaProtests/b9a714aa8e5c4a0d8981cff7ae70176f/photo?Query=George%20Floyd%20protest&mediaType=photo&sortBy=creationdatetime:desc&dateRange=Anytime&totalCount=11555&currentItemNo=113">AP Photo/Christian Monterrosa</a></span>
</figcaption>
</figure>
<h2>Why companies speak out</h2>
<p>More specifically, <a href="https://www.econbiz.de/Record/don-t-mix-business-with-politics-understanding-stakeholder-reactions-to-corporate-political-activism-appels-moritz/10012303252">research</a> has identified <a href="https://www.doi.org/10.5465/amr.2018.0084">three major factors</a> that typically drive a company’s decision to pursue corporate activism: employee beliefs, consumer pressure and the <a href="https://hbr.org/2018/01/the-new-ceo-activists">CEO’s personal involvement</a> or conviction. </p>
<p>It’s not always clear what is driving corporate decisions to suspend operations in Russia, but it seems as if all three factors are at play. </p>
<p>IKEA, for example, <a href="https://about.ikea.com/en/newsroom/2022/03/03/ikea-pauses-operations-in-russia-and-belarus">cited the support and security</a> of its workforce in announcing its “pause” in Russia and a donation of 20 million euros for humanitarian assistance for those displaced by the war. After a #BoycottMcDonald’s <a href="https://www.mashed.com/789748/heres-why-boycott-mcdonalds-is-trending-on-twitter/">began trending on Twitter</a> to protest its presence in Russia, the fast-food chain said it was temporarily closing its stores there. And Tesla CEO Elon Musk <a href="https://www.vox.com/recode/22958373/ukraine-russia-starlink-spacex-elon-musk">agreed to provide Ukraine</a> with free satellite internet after a Ukrainian official requested it on Twitter. </p>
<figure class="align-center ">
<img alt="People stand outside a restaurant-looking building with yellow arches spelling an M as they wait to eat McDonalds for the first time." src="https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=387&fit=crop&dpr=1 600w, https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=387&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=387&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=486&fit=crop&dpr=1 754w, https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=486&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/450993/original/file-20220309-13-1co2myw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=486&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">McDonald’s has been in Russia since it opened its first store in Moscow in 1990.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/RussianMcDonalds1990/bdb02160f3c742118e8ef29ed8288b48/photo?Query=McDonald%27s%20russia&mediaType=photo&sortBy=arrivaldatetime:asc&dateRange=Anytime&totalCount=159&currentItemNo=3">AP Photo</a></span>
</figcaption>
</figure>
<h2>A corporate no-brainer</h2>
<p>But ultimately, the decision whether or not to sever a relationship with a country – even if temporarily – is very different from taking a stand on an anti-trans measure.</p>
<p>Even so, the speed with which U.S. and other Western companies have abandoned Russia is something we’ve never seen in our lifetimes. And it suggests the decision was likely a no-brainer. </p>
<p>For one thing, Russia’s invasion has been met with widespread revulsion in the West. And even before the war, the public’s perception of Russia in Western countries <a href="https://www.pewresearch.org/fact-tank/2020/02/07/russia-and-putin-receive-low-ratings-globally">was very low</a>. </p>
<p>[<em>Over 150,000 readers rely on The Conversation’s newsletters to understand the world.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-150ksignup">Sign up today</a>.]</p>
<p>One post-invasion poll found that 86% of Americans <a href="https://poll.qu.edu/poll-release?releaseid=3837">saw the invasion as unjustified</a> – with broad bipartisan agreement – and another showed that half of the respondents would <a href="https://www.live5news.com/2022/03/07/poll-finds-majority-want-russian-oil-ban-divided-biden/">compare the actions of Vladimir Putin</a> with those of Adolf Hitler. </p>
<p>And governments including those like <a href="https://www.dw.com/en/german-chancellor-olaf-scholz-announces-paradigm-change-in-response-to-ukraine-invasion/a-60932652">Germany</a> that have close commercial ties to Russia have strongly condemned its actions and joined unprecedented sanctions. About 80% of Germans said they approved of their government’s decision to sanction Russia and export weapons to Ukraine – or said it didn’t go far enough.</p>
<p>Ultimately, the Russian market is just not that big for companies in the U.S, such as <a href="https://appleinsider.com/articles/22/03/04/what-apple-risks-by-stopping-all-sales-operations-in-russia">Apple</a> and <a href="https://deadline.com/2022/03/disney-ukraine-theme-parks-disneyplus-1234973007/">Disney</a>. For others, such as McDonald’s, which has been <a href="https://www.bloomberg.com/news/articles/2022-03-08/mcdonald-s-faces-tough-questions-with-large-exposure-to-russia?sref=Hjm5biAW">in Russia since 1990 and has about 850 locations there</a>, days of pressure finally persuaded company officials they had to pull out. </p>
<p>On many hot-button social issues like <a href="https://news.gallup.com/poll/350174/mixed-views-among-americans-transgender-issues.aspx">trans rights</a> and <a href="https://www.pewresearch.org/fact-tank/2021/09/13/key-facts-about-americans-and-guns/">gun control</a>, the general public is split almost right down the middle, meaning taking a stand could alienate a lot of consumers. </p>
<p>But on the issue of Russia’s invasion of Ukraine, many companies likely were more worried about the <a href="https://www.nbcnews.com/business/consumer/mcdonalds-us-brands-pressure-stop-business-russia-rcna18990">risks to their reputation</a> were they to do nothing. With so many other companies pulling out, it likely seemed better to explain to shareholders and customers back home <a href="https://edition.cnn.com/2022/03/02/business/companies-pulling-back-russia-ukraine-war-intl-hnk/index.html">why they’re leaving</a> than <a href="https://www.bbc.com/news/business-60660006">why they’re staying</a>.</p><img src="https://counter.theconversation.com/content/178516/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Over 300 companies so far have closed stores, reassigned staff or halted sales in Russia in the two weeks since the invasion began.Douglas Schuler, Associate Professor of Business and Public Policy, Rice UniversityLaura Marie Edinger-Schons, Professor of Sustainable Business, University of MannheimLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1767812022-02-22T13:42:53Z2022-02-22T13:42:53ZWhat is 3G and why is it being shut down? An electrical engineer explains<figure><img src="https://images.theconversation.com/files/447377/original/file-20220218-19-1gyfpm0.jpg?ixlib=rb-1.1.0&rect=0%2C8%2C5887%2C3904&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The sun is setting on 3G networks.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/frted/50211584991/">Ted/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>On Feb. 22, 2022, AT&T <a href="https://www.fcc.gov/consumers/guides/plan-ahead-phase-out-3g-cellular-networks-and-service">is scheduled to turn off</a> its 3G cellular network. T-Mobile is scheduled to turn its off on July 1, 2022, and Verizon is slated to follow suit on Dec. 31, 2022.</p>
<p>The vast majority of cellphones in service operate on 4G/LTE networks, and the world has begun the transition to 5G, but <a href="https://www.latimes.com/business/story/2021-11-05/column-5g-wireless-transition">as many as 10 million phones</a> in the U.S. still rely on 3G service. In addition, the cellular network functions of <a href="https://www.vox.com/recode/22912235/3g-shutting-down-att-verizon-tmobile">some older devices</a> like Kindles, iPads and Chromebooks are tied to 3G networks. Similarly, some older internet-connected systems like home security, car navigation and entertainment systems, and solar panel modems are 3G-specific. Consumers will need to <a href="https://www.vox.com/recode/22912235/3g-shutting-down-att-verizon-tmobile">upgrade or replace</a> these systems.</p>
<p>So why are the telecommunications carriers turning off their 3G networks? As an electrical engineer who <a href="http://www.ece.tufts.edu/%7Emaivu/">studies wireless communications</a>, I can explain. The answer begins with the difference between 3G and later technologies such as 4G/LTE and 5G.</p>
<p>Picture a family trip. Your spouse is on the phone arranging activities to do at the destination, your teenage daughter is streaming music and chatting with her friends on her phone, and her younger sibling is playing an online game with his friends. All those separate conversations and data streams are communicated over the cellular network, seemingly simultaneously. You probably take this for granted, but have you ever wondered how the cellular system can handle all those activities at the same time, from the same car?</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three children in the backseat of a car use tablet devices" src="https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/447385/original/file-20220219-7720-1sa1ix3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">How does it work when everyone in your car is using cellular voice and data service at the same time, and so are many of the people in the cars around you?</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/photo/siblings-using-digital-tablet-in-back-seat-of-car-royalty-free-image/1297084394">The Good Brigade/DigitalVision via Getty Images</a></span>
</figcaption>
</figure>
<h2>Communicating all those messages</h2>
<p>The answer is a technological trick called <a href="https://www.electronicdesign.com/technologies/communications/article/21802209/electronic-design-fundamentals-of-communications-access-technologies-fdma-tdma-cdma-ofdma-and-sdma#%E2%80%9DOFDMA%E2%80%9D">multiple access</a>. Imagine using a sheet of paper to write messages to 100 different friends, one private message for each person. The multiple access technology used in 3G networks is like writing every message to each of your friends using the whole sheet of paper, so all the messages are written on top of each other. But you have a special set of pens with different colors that allows you to write each message in a unique color, and each of your friends has a special pair of glasses that reveals only the color intended for that person.</p>
<p>However, the number of colored pens is fixed, so if you want to send messages to more people than the number of colored pens you have, you will need to start mixing colors. Now when a friend applies their special lenses, they will see a little bit of the messages to other friends. They won’t see enough to read the other messages, but the overlap might be enough to blur the message intended for them, making it harder to read.</p>
<p>The multiple access technology used by 3G networks is called Code Division Multiple Access, or CDMA. It was invented by Qualcomm founder <a href="https://www.invent.org/inductees/irwin-mark-jacobs#:%7E:text=NIHF%20Inductee%20Irwin%20Mark%20Jacobs%20Invented%20CDMA%20Technology">Irwin M. Jacobs</a> with several other prominent electrical engineers. The technique is based on the concept of spread spectrum, an idea that can be <a href="https://www.americanscientist.org/article/random-paths-to-frequency-hopping">traced back to the early 20th century</a>. Jacobs’ <a href="https://ieeexplore.ieee.org/abstract/document/289411?casa_token=F0fopuxled0AAAAA:fRxNKBHn6n4t6jdDbfwCFJ26gXM_DxKH8QMzJMdWUwgh4_oGcEFf9Y6MgqSqmzU9Rxn_Eyzc9A">1991 paper</a> showed that CDMA can increase the cellular capacity manyfold over systems at the time.</p>
<p>CDMA lets all cellular users send and receive their signals at all times and over all frequencies. So if 100 users wish to initiate a call or use a cell service at around the same time, their 100 signals will overlap with each other over the entire cellular spectrum for the whole time they communicate.</p>
<p>The overlapping signals create interference. CDMA solves the interference problem by letting each user have a unique signature: a code sequence that can be used to recover each user’s signal. The code corresponds to the color in our paper analogy. If there are too many users on the system at the same time, the codes can overlap. This leads to interference, which gets worse as the number of users increases.</p>
<h2>Slices of time and spectrum</h2>
<p>Instead of allowing users to share the entire cellular spectrum at all times, other multiple access techniques divide access by time or frequency. Division over time creates time slots. Each connection can last over multiple time slots spread out in time, but each time slot is so short – a matter of milliseconds – that the cellphone user doesn’t perceive the interruptions from alternating time slots. The connection appears to be continuous. This time slicing technique is time-division multiple access (TDMA).</p>
<p>The division can also be done in frequency. Each connection is given its own frequency band within the cellular spectrum, and the connection is continuous for its duration. This frequency slicing technique is frequency division multiple access (FDMA).</p>
<p>In our paper analogy, FDMA and TDMA are like dividing the paper into 100 strips in either dimension and writing each private message on one strip. FDMA would be, for example, horizontal strips, and TDMA would be vertical strips. With individual strips, all messages are separated.</p>
<p>4G/LTE and 5G networks use Orthogonal Frequency Division Multiple Access (OFDMA), a highly efficient combination of FDMA and TDMA. In the paper analogy, OFDMA is like drawing strips along both dimensions, dividing the whole paper into many squares, and assigning each user a different set of squares according to their data need.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="a graph in four parts, two showing stripes, one showing layers and another showing squares" src="https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=298&fit=crop&dpr=1 600w, https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=298&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=298&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=374&fit=crop&dpr=1 754w, https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=374&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/447363/original/file-20220218-49929-6p63vs.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=374&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Different techniques for sharing access to wireless network resources.</span>
<span class="attribution"><a class="source" href="https://www.mdpi.com/1099-4300/21/3/273/htm">Entropy 2019, 21(3), 273</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>End of the line for 3G</h2>
<p>Now you have a basic understanding of the difference between 3G and the later 4G/LTE and 5G. You might still reasonably ask why 3G needs to be shut down. It turns out that because of those differences in the access technology, the two networks are built using completely different equipment and algorithms. </p>
<p>[<em>Over 140,000 readers rely on The Conversation’s newsletters to understand the world.</em> <a href="https://memberservices.theconversation.com/newsletters/?source=inline-140ksignup">Sign up today</a>.]</p>
<p>3G handsets and base stations operate on a wideband system, meaning they use the whole cellular spectrum. 4G/LTE and 5G operate on narrowband or multi-carrier systems, which use slices of the spectrum. These two systems need completely different sets of hardware, from the antenna on the cell tower down to the components in your phone. </p>
<p>So if your phone is a 3G phone, it cannot connect to a 4G/LTE or 5G tower. For a long while, the cellular service providers have been keeping their 3G networks going while building a completely separate network with new tower equipment and servicing new handsets using 4G/LTE and 5G. Imagine bearing the cost of operating two separate networks at the same time for the same purpose. Eventually, one has to go. And now, as the carriers are starting to deploy 5G systems in earnest, that time has come for 3G.</p><img src="https://counter.theconversation.com/content/176781/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mai Vu receives funding from National Science Foundation. </span></em></p>As the wireless telecommunications companies ramp up their 5G rollouts, they are beginning to pull the plug on their 3G networks. 2022 is the end of the line for the venerable cellphone service.Mai Vu, Associate Professor of Electrical and Computer Engineering, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1753062022-01-25T13:28:14Z2022-01-25T13:28:14ZHow 5G puts airplanes at risk – an electrical engineer explains<figure><img src="https://images.theconversation.com/files/442368/original/file-20220124-13-p8az99.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C1563%2C875&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The FAA raised concerns that new, full-speed 5G cellphone services near airports could interfere with aircraft operations.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/44073224@N04/28345407183/">Bernal Saborio/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>New high-speed cellphone services have raised concerns of interference with aircraft operations, particularly as aircraft are landing at airports. The Federal Aviation Administration has <a href="https://www.faa.gov/5g">assured Americans that most commercial aircraft are safe</a>, and AT&T and Verizon have agreed to <a href="https://www.npr.org/2022/01/18/1073859389/verizon-att-5g-rollout-delay-airports-airlines-faa">hold off on installing their new cellphone antennas</a> near airports for six months. But the problem has not been entirely resolved.</p>
<p>Concerns began when the U.S. government <a href="https://docs.fcc.gov/public/attachments/DOC-370267A1.pdf">auctioned</a> part of the <a href="https://www.cnn.com/2022/01/19/tech/c-band-5g-att-verizon-rollout/index.html">C-band spectrum</a> to wireless carriers in 2021 for US$81 billion. The carriers are using C-band spectrum to <a href="https://theconversation.com/what-is-5g-an-electrical-engineer-explains-173196">provide 5G</a> service at full speed, 10 times the speed of 4G networks.</p>
<p>The C-band spectrum is close to the frequencies used by key electronics that aircraft rely on to land safely. Here’s why that can be a problem.</p>
<h2>Keeping order on the spectrum</h2>
<p>Wireless signals are carried by radio waves. The radio spectrum ranges from 3 hertz to 3,000 gigahertz and is part of the electromagnetic spectrum. The portion of the radio spectrum that carries the signals from your phone and other wireless devices is <a href="https://www.ctia.org/news/what-is-spectrum-a-brief-explainer">20 kilohertz to 300 gigahertz</a>.</p>
<p>If two wireless signals in the same area use the same frequency, you get garbled noise. You hear this when you are midway between two radio stations using the same or similar frequency bands to send their information. The signals get garbled and sometimes you hear one station, at other times the other, all mixed with a healthy dose of noise. </p>
<p>Therefore, in the U.S., the use of these frequency bands is tightly regulated by the Federal Communications Commission to ensure that radio stations, wireless carriers and other organizations are assigned “lanes,” or frequency spectra, to use in an orderly fashion.</p>
<h2>Bouncing radio waves off the ground</h2>
<p>Modern airplanes use altimeters, which calculate the time it takes for a signal to bounce back from the ground to determine a plane’s altitude. These altimeters are a vital part of automatic landing systems that are especially useful in cases where there is low visibility. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A hand on an aircraft yoke in front of a multicolor display panel" src="https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442379/original/file-20220124-23335-w6fct0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The radio altimeter in an aircraft tells the pilot how far off the ground the aircraft is.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/AustraliaMalaysiaPlane/6fb7b6c1d681451e988f5f9efad4205b/photo">AP Photo/Rob Griffith</a></span>
</figcaption>
</figure>
<p>So, if an altimeter interprets a signal from a wireless carrier as the rebounded signal from the ground, it may think that the ground is closer than it is and prematurely try to lower the landing gear and do the other maneuvers that are needed to land an aircraft. If interference with wireless carrier signals corrupts and garbles the altimeter’s radio signals, the altimeter may not recognize the rebounded signal and thus be unable to figure out how close to the ground the plane is.</p>
<p>[<em>Understand new developments in science, health and technology, each week.</em> <a href="https://memberservices.theconversation.com/newsletters/?nl=science&source=inline-science-understand">Subscribe to The Conversation’s science newsletter</a>.]</p>
<p>The portions of the radio frequency spectrum used by airplanes and cellphone carriers are different. The problem is that airplane altimeters use the 4.2 to 4.4 gigahertz range, while the recently sold – and previously unused – C-band spectrum for wireless carriers ranges from 3.7 to 3.98 gigahertz. It turns out the 0.22 gigahertz difference between the signals may not be quite enough to be absolutely sure that a cellphone carrier signal will not be mistaken for or corrupt an altimeter’s signal.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Four vertical rectangular devices mounted on the corner of a roof of a building with a church spire in the background" src="https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442380/original/file-20220124-27-n2x6kx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Full-speed 5G signals like those in services that wireless carriers are currently rolling out might interfere with aircraft altimeters.</span>
<span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/VirusOutbreak5GConspiracyTheories/71c36ff2fca14b4baf1ee83fda44af00/photo">AP Photo/Alastair Grant</a></span>
</figcaption>
</figure>
<h2>Steering clear of trouble – for now</h2>
<p>The telecommunication industry has argued that the gap of 0.22 gigahertz is enough and <a href="https://apnews.com/article/why-are-airlines-worried-about-5g-f908b6eff8551b580dfd111029c5be2d">there will be no interference</a>. The airline industry has been <a href="https://www.npr.org/2022/01/07/1071409710/airlines-are-concerned-5g-wireless-service-may-affect-the-ability-to-land-planes">more cautious</a>. Even if the risk is very small, I believe the consequences of a plane crash are enormous.</p>
<p>Who is correct? The chances of such interference are very small, but the truth is that there isn’t much data to say that such interference will never happen. Whether there will be interference depends on the receivers in the altimeters and their sensitivity. In my view, there is no way to ensure that such stray interfering signals will never reach altimeters. </p>
<p>If the altimeters can register the stray signals as noise and filter them out, then they can function correctly. Upgrading aircraft altimeters <a href="https://www.cnn.com/2022/01/22/tech/5g-airlines-crisis-what-happened/index.html">is a costly proposition</a>, however, and it’s not clear who would pay the cost.</p>
<p>The FAA has been testing altimeters and <a href="https://arstechnica.com/tech-policy/2022/01/airline-ceos-make-u-turn-now-say-5g-isnt-a-big-problem-for-altimeters/">clearing ones that can be relied on</a> in the near future. AT&T and Verizon have agreed to not put up 5G transmitters and receivers near the 50 largest airports for six months while a solution is being worked out. This has averted a major crisis in the near term, but it isn’t a permanent solution. </p>
<p>Moreover, regional airlines and rural airports <a href="https://www.cnn.com/2022/01/20/business/faa-5g-airliner-approvals/index.html">remain at risk of interference</a>.</p><img src="https://counter.theconversation.com/content/175306/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Prasenjit Mitra works with Remcom Inc. He does not receive any funding from them. </span></em></p>Airplanes use radio waves to determine how far off the ground they are. New 5G cellphone services come close to the same frequencies the airplanes use. Here’s how that can be a problem.Prasenjit Mitra, Professor of Information Sciences and Technology, Penn StateLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1516492020-12-16T15:21:15Z2020-12-16T15:21:15ZStreaming wars: how threatening are they really to the film industry?<figure><img src="https://images.theconversation.com/files/375352/original/file-20201216-15-b2geb4.jpg?ixlib=rb-1.1.0&rect=32%2C0%2C3600%2C2398&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The decision by Warner fuels a popular fallacy that studios simply react to what customers want.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/seat-vintage-popcorn-bucket-abandoned-movie-1138616186">Cory Seamer/Shutterstock</a></span></figcaption></figure><p>In a world of countless entertainment opportunities, movies are one of the few remaining proven ways to attract a new audience and <a href="https://www.forbes.com/sites/scottmendelson/2020/11/21/movies-streaming-conundrum-problem-doom-wonder-woman-mulan-trolls-netflix-disney-hbo-max/?sh=953eea274de7">retain existing ones</a>. Yet the dominant narrative seems to be that in the age of the internet the old system of theatrical release can no longer cater for audiences worldwide – or so we are told.</p>
<p>Digital technologies – streaming in particular – are expected to replace the legacy of theatrical releases, bringing movies into the fold of the growing <a href="https://global.hitachi-solutions.com/blog/direct-to-consumer-retail">Direct-to-Consumer (DTC)</a> list of industries, as opposed to third-party distribution through theatrical release.</p>
<p>This particular story of the new supplanting the old – turbocharged by the pandemic – is often portrayed as a matter of “when”, not “if”. It was under this narrative that AT&T – the US telecommunications giant that owns Warner Brothers – <a href="https://about.att.com/story/2020/warner_bros_pictures_group_hybrid_distribution_model.html">suddenly announced</a> its decision to release all of Warner Brothers movies for 2021 simultaneously in cinemas and on HBO Max, its streaming service.</p>
<p>Industry observers and commentators have accordingly <a href="https://www.nytimes.com/2020/12/04/opinion/warner-hbo-movies-theaters.html">suggested</a> the move shows that the studio “has finally embraced the inevitable future, even if they’re not saying it explicitly”. </p>
<h2>A mighty clash of cultures</h2>
<p>This bold move has managed the rather rare feat of uniting everyone in the <a href="https://theconversation.com/uk/topics/film-1175">film</a> industry in utter contempt. Filmmakers <a href="https://deadline.com/2020/12/christopher-nolan-slams-warner-bros-hbo-max-theatrical-windows-tenet-1234651892/#comments">feel betrayed</a>, as they had in good faith designed movies meant for the big screen to be experienced in a theatrical setting. Cinemas, both independents and major chains, <a href="https://variety.com/2020/film/news/hbo-max-warner-bros-dune-matrix-4-theater-owners-1234846103/">feel abandoned</a> in perhaps their most desperate hour of need.</p>
<figure class="align-center ">
<img alt="Person holding tablet with Netflix, HBO, Prime video, hulu and Disney+ on the screen" src="https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/375353/original/file-20201216-13-wbng78.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Studio partners feel hoodwinked by pivots to streaming.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/barcelona-spain-jan-2019-man-holds-1272527956">Ivan Marc/Shutterstock</a></span>
</figcaption>
</figure>
<p>Talent agencies, meanwhile, <a href="https://variety.com/2020/film/news/caa-blasts-warner-bros-hbo-max-1234851004/">are also fuming</a> as their clients are potentially left out of lucrative back-end film earnings – what the industry calls “residuals”. And, as expected, audiences are growing confused. As the number of platforms offering movies <a href="https://www.latimes.com/entertainment-arts/business/story/2020-06-12/hbo-go-hbo-now-canceled-warnermedia-hbo-max-launch">multiply</a>, so too do monthly subscription costs and crowded programme listings to navigate.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/new-research-shows-how-brain-computer-interaction-is-changing-cinema-94832">New research shows how brain-computer interaction is changing cinema</a>
</strong>
</em>
</p>
<hr>
<p>As if that were not enough, studio partners feel hoodwinked as their initial investment (often covering 50% or more of the overall price of a movie) was made with the understanding that it was towards a theatrical release and related profits, <a href="https://www.thewrap.com/dune-and-godzilla-vs-kong-producer-legendary-considers-legal-options-against-warner-bros-over-hbo-max-deal/">not to bolster subscription numbers</a> for a streaming platform. </p>
<p>As both movies and streaming platforms are now owned by the same people, there is no agreement of this kind. In the past, some money exchanged hands, filtering down from licensing fees streamers like Netflix which would pay a studio to show their films. With dual ownership of streamers and films, that’s now out of the window.</p>
<p>Some, including Ann Sarnoff, chief executive of WarnerMedia Studios, have rushed to point out that it is simply a temporary response to the current crisis and that it may well go away as soon as audiences return to theatres in <a href="https://www.washingtonpost.com/entertainment/warner-bros-to-release-all-2021-films-on-hbo-max-theaters/2020/12/03/169d839a-3598-11eb-9699-00d311f13d2d_story.html">about a year’s time</a>.</p>
<h2>The death of cinema?</h2>
<p>Be that as it may, the issue is not whether any of the recent announcements about pivoting to streaming make financial sense “right now”. It does: HBO Max is placing fourth in a three-horse streaming race – way behind Netflix, Amazon and Disney – and <a href="https://www.cnbc.com/2020/08/05/disney-streaming-subscribers-shows-massive-growth.html">needed to do something about it</a>. Hosting all Warner Brothers movies is a deliberate move to bolster its offering.</p>
<p>The issue is that the Warner/AT&T decision fuels a popular fallacy engulfing the film industry: that studios are simply reacting to what customers want. John Stankey, AT&T’s CEO, illustrates this perfectly when he <a href="https://event.webcasts.com/starthere.jsp?ei=1402782&tp_key=651941536e">says that</a>: “Customers are going to drive what occurs in the market ultimately.”</p>
<figure class="align-center ">
<img alt="Cineworld cinema boarded up with Fin written over the shopfront in graffiti" src="https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/375354/original/file-20201216-19-urq4ib.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Cinemas may be in trouble, but there is no streaming rulebook on how to react to a pandemic.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-22-november-2020-closed-1861830487">CK Travels/Shutterstock</a></span>
</figcaption>
</figure>
<p>The same narrative of the “death of cinema” also falls prey to the cult of innovation – where <a href="https://ssir.org/articles/entry/embracing_the_paradoxes_of_innovation">“innovation is now so fervently favoured that it almost cannot be questioned”</a>.
In the understandable excitement about streaming as a new form of revenue and audience engagement, legitimate concerns about the future of film raised by those making movies, those showing them and their audiences, are forgotten. </p>
<p>Framing these decisions as being influenced solely by consumer satisfaction ignores history and forgets that while the cinema (and television) model has survived countless crises, streaming has not yet faced its first. </p>
<p>We don’t yet know how and when a streaming crisis may manifest itself. Will it be consumer fatigue, or a lack of returns on huge initial investments? Will investors pull out? Perhaps streaming platforms will reach a natural limit in potential pools of subscribers? But come it will – and industry analysts are <a href="https://www.pwc.com/us/en/services/consulting/library/consumer-intelligence-series/consumer-video-streaming-behavior.html">suggesting</a> that “this might be the calm before the streaming storm”. </p>
<p>The AT&T/Warner announcement and related commentary do all of the above mostly because of its internal, unavoidable clash of cultures.</p>
<p>AT&T is a technology company in the business of 5g, mobile telephony and internet pipelines. Content is acquired to serve those pipelines and justify their existence and expense. Warner Brothers is in the business of making films as its primary function, later also ensuring they reach the widest possible audience, using the most effective means of distribution.</p>
<p>What could be a heavenly partnership of shared interests is in fact a marriage made in hell as the two partners are pulled in opposite directions by their respective priorities.</p>
<p>This narrative of crisis where theatrical release is the underlying issue and streaming is its cure, is evidently in need of some story editing.</p>
<p>Film is not dead, not even dying in fact. It is growing significantly in <a href="http://www.vodprofessional.com/2020/02/25/box-office-still-dominates-growing-global-market-for-movies/">most regions in the world</a>, while proving stubbornly stable in the US. It is understandable to be concerned about the present but to ignore the data because it does not match the narrative is shortsighted.</p>
<p>Dry up that reservoir of movies feeding the theatrical ecosystem and companies will quickly look like any other streaming service vying for attention online. This will make them less stable and more open to market turbulence, not less.</p>
<p>The film and TV industry, Hollywood in particular, is a business of relationships: with filmmakers, exhibitors, investors, audiences and beyond. They represent the connective tissue that is needed for this industry to function. To ignore the <a href="https://variety.com/2020/film/news/dune-denis-villeneuve-blasts-warner-bros-1234851270/">ambitions</a> – creative and financial – of any one of these groups is to undermine the very foundations of this industry, one made of people, not platforms.</p>
<p>Streaming is, as yet, untested by crisis. There is no history of it. No rulebook on how to react to an unforeseen development. Film and television have a long history of survival: declared dead many times, <a href="https://www.bbc.com/culture/article/20200403-why-cinemas-will-bounce-back-from-the-coronavirus-crisis">but always surviving</a>. Something to ponder while we prepare for future crises.</p><img src="https://counter.theconversation.com/content/151649/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gianluca Sergi does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Industry experts see the shift away from theatrical releases as a sign that Hollywood studios are embracing the inevitable future. But is it as simple as that?Gianluca Sergi, Director, Institute for Screen Industries Research and Associate Professor of Film and Television, University of NottinghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1253602019-11-08T12:14:20Z2019-11-08T12:14:20ZApple, Disney and Netflix’s streaming battle isn’t winner-take-all<figure><img src="https://images.theconversation.com/files/300712/original/file-20191107-10915-18agxtl.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Apple TV Plus has focused on recruiting big names for its shows.
</span> <span class="attribution"><span class="source">AP Photo/Tony Avelar</span></span></figcaption></figure><p>With the <a href="https://www.techradar.com/news/apple-tv-plus-cost-review-and-everything-you-need-to-know">recent launch of Apple TV Plus</a> and the imminent arrival of Disney Plus, the video landscape has never looked so competitive. </p>
<p>These services join a crowded marketplace of subscription streaming services that includes Netflix, Hulu and Amazon Prime Video – with <a href="https://www.theverge.com/2019/7/25/20727317/nbc-universal-streaming-service-launch-date-2020-comcast">more to come</a> next year. For viewers, the proliferation of services means more choice in shows and services. For the companies, it means increased competition for talent and escalating budgets. </p>
<p>Although <a href="https://www.hollywoodreporter.com/news/afm-streaming-wars-loom-large-as-market-gets-underway-1252706">many</a> <a href="https://www.cnn.com/2019/09/18/media/streaming-wars-scorecard/index.html">publications</a> <a href="https://www.theverge.com/streaming-wars">have</a> <a href="https://www.nbcnews.com/think/opinion/disney-rollout-shows-streaming-wars-are-over-viewers-lost-ncna1067276">described</a> the situation as “<a href="https://www.latimes.com/entertainment-arts/business/story/2019-10-10/streaming-wars-winners-and-losers-disney-plus-netflix-hbo-max-peacock-quibi-apple-tv">streaming wars</a>,” these companies have different goals for each of their video services.</p>
<p><a href="http://www.amandalotz.com">We have</a> <a href="http://opensquare.nyupress.org/books/9781479804948/">been studying</a> the recent <a href="https://global-internet-tv.com/">boom</a> in subscription video streaming to understand the implications for audiences and industry. Contrary to all this reporting, we find little evidence of a “streaming war.” </p>
<p>In fact, many of these services are playing different games.</p>
<h2>Diverse strategies</h2>
<p>The major streaming services – both old and new – all have different catalogs, pricing and strategies. While all services seek viewers’ time and attention, in other respects they are different beasts.</p>
<p>Take <a href="https://www.cnet.com/news/disney-plus-streaming-service-launch-release-dates-prices-preorders-shows-movies-deals/">Disney Plus</a>. Disney’s strong suit is kids, family and its popular Marvel and “Star Wars” content. It has also invested in a few original series such as “The Mandalorian,” a “Star Wars” spin-off. </p>
<p>But unlike Netflix, Disney Plus doesn’t offer a full-service entertainment package. With its lowball pricing of US$7 per month compared with $13 for Netflix’s most popular plan, Disney Plus is pitched as a service to have alongside Netflix, rather than a direct replacement.</p>
<p>Similarly, <a href="https://www.cnet.com/news/apple-tv-plus-launch-date-price-shows-movies-films-to-expect/">Apple TV Plus</a> – which debuted on Nov. 1 for $4.99 a month – has a tiny catalog of high-profile shows and stars, such as Oprah and Jennifer Aniston. Compared with Netflix’s library of <a href="http://unogs.com/countrydetail/">5,000 titles</a>, Apple TV Plus is a minnow. Its purpose is to add value and glamour to Apple device purchases not to replace another service.</p>
<p>In other words, neither Disney Plus nor Apple TV Plus is likely to be a “<a href="https://www.thestreet.com/investing/stocks/can-apple-tv-plus-be-a-netflix-killer-14908038">Netflix killer</a>” anytime soon. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300759/original/file-20191107-10924-1j82kmv.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The growing number of streaming services can co-exist.</span>
<span class="attribution"><span class="source">Manuel Esteban/Shutterstock.com</span></span>
</figcaption>
</figure>
<h2>Netflix is global</h2>
<p>Another key difference between Netflix and services such as Disney Plus, Hulu and Apple TV Plus is the amount of global content in the former’s library. </p>
<p>Today, <a href="https://variety.com/2019/digital/news/netflix-subscriber-peak-us-pwc-report-1203234190/">six out of every seven</a> new Netflix subscribers live outside the U.S. The <a href="https://www.salon.com/2017/04/11/the-unique-strategy-netflix-deployed-to-reach-90-million-worldwide-subscribers_partner/">global market</a> is essential for Netflix’s future growth. </p>
<p>To support this endeavor, it is spending considerably on producing shows outside the U.S., and this original content is available to subscribers worldwide. Of course not every viewer is interested in series produced elsewhere, but Netflix is making the bet that sci-fi fans will turn up for a good adventure whether it is produced in the U.S. or Brazil.</p>
<p>In contrast, Disney and Apple are following a more traditional U.S. export model of media globalization. </p>
<h2>Room for other players?</h2>
<p>Many questions remain about the future of <a href="https://www.digitaltrends.com/movies/how-does-hulu-work/">Hulu</a> now that its owners – Disney and Comcast – are launching other services.</p>
<p>Hulu provides a distinct service as a source of current series produced for Disney and NBC. Viewers that are cutting cable and satellite service – a trend that has <a href="https://www.cordcuttersnews.com/cord-cuttings-growth-has-more-than-tripled-in-2019/">increased</a> in the last year – may find Hulu a good replacement.</p>
<p>And more change is coming. Comcast announced a service called Peacock for next year. Peacock will draw heavily from the library of shows Comcast owns as the corporate parent of NBC and Universal. It will be free to Comcast subscribers and <a href="https://www.engadget.com/2019/11/01/nbc-peacock-free-report/?guccounter=1">possibly to everyone</a>.</p>
<p>Meanwhile, AT&T will launch <a href="https://www.digitaltrends.com/home-theater/what-is-hbo-max/">HBO Max</a> – the new direct-to-consumer portal for HBO content, some original series and titles from the Warner Bros. library such as “Friends.”</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300758/original/file-20191107-10915-ptqa4f.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Disney can use data collected from its streaming service for other purposes, such as driving people to the theaters to watch ‘Frozen 2.’</span>
<span class="attribution"><span class="source">Photo by Arthur Mola/Invision/AP</span></span>
</figcaption>
</figure>
<h2>What winning means</h2>
<p>In other words, the question of who will “win” the streaming war is more complicated than it appears. </p>
<p>Rather than one service to rule them all, there may be many winners because most are playing different games. Netflix is the only “pure” subscription video-on-demand service – meaning its only business is streaming video. It wins when viewers subscribe or keep subscribing. Apple and Amazon are playing another game entirely. Apple wins if you buy a new iPhone, and Amazon wins if you start buying more from its online retail service. Similarly, Comcast and AT&T are likely angling to increase internet subscribers.</p>
<p>Disney also wants viewers to pay to subscribe, but it has other ambitions too. Launching its own streaming service allows Disney to collect valuable data about who is watching and what they like. This kind of data is useful for driving viewers to theaters as Elsa and Anna return in “Frozen 2” and enticing families to buy lots of stuffed toys and maybe even visit its theme parks. </p>
<p>In other words, this is not a single war so much as a collection of different media and technology businesses that are using video streaming to accomplish different goals. </p>
<p>[ <em>Get the best of The Conversation, every weekend.</em> <a href="https://theconversation.com/us/newsletters/weekly-highlights-61?utm_source=TCUS&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=weeklybest">Sign up for our weekly newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/125360/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amanda Lotz receives funding from the Australian Research Council Discovery programme (DP190100978).</span></em></p><p class="fine-print"><em><span>Ramon Lobato receives funding from the Australian Research Council Discovery programme (DP190100978).</span></em></p>Although some have dubbed the flurry of new video services coming out as a ‘streaming war,’ the reality is very different.Amanda Lotz, Professor of Media Studies, Queensland University of TechnologyRamon Lobato, Senior research fellow, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1192832019-07-17T11:18:19Z2019-07-17T11:18:19Z3 myths to bust about breaking up ‘big tech’<figure><img src="https://images.theconversation.com/files/284118/original/file-20190715-173342-1ji5sep.jpg?ixlib=rb-1.1.0&rect=45%2C0%2C5069%2C3376&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Before taking on tech giants, shatter a few misconceptions.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/iron-hammer-breaking-glass-window-340890053">W. Scott McGill/Shutterstock.com</a></span></figcaption></figure><p>As the public and government regulators around the world discuss <a href="https://www.npr.org/2019/06/09/731044346/big-tech-and-antitrust">whether and how</a> to manage the power of technology companies, one idea that keeps coming up is breaking up these large conglomerate corporations into smaller pieces. Public distrust for tech companies has shifted to talk of <a href="https://www.wsj.com/articles/justice-department-is-preparing-antitrust-investigation-of-google-11559348795">antitrust action</a> against them. Facebook, for instance, might then have to <a href="https://www.mercurynews.com/2018/05/21/facebook-owns-instagram-messenger-whatsapp-now-theres-a-call-to-break-it-all-up/">compete with Instagram for photo-sharing</a> and WhatsApp for messaging – rather than owning both. </p>
<p>The idea has managed to garner support from both <a href="https://www.politico.com/2020-election/candidates-views-on-the-issues/technology/tech-competition-antitrust/">Massachusetts Sen. Elizabeth Warren</a>, a Democrat, and <a href="https://www.nbcnews.com/politics/donald-trump/trump-claims-collusion-between-big-tech-democrats-backs-antitrust-fines-n1015726">Republican President Donald Trump</a>.</p>
<p>However, <a href="https://www.politico.com/2020-election/candidates-views-on-the-issues/technology/tech-competition-antitrust/">advocates</a> and <a href="https://www.weforum.org/agenda/2019/07/these-are-some-of-the-best-quotes-about-technology-monopolies-in-2019/">opponents</a> of breaking up big technology firms are falling prey to some serious misconceptions. I study the effects of digital technologies on lives and livelihoods across 85 countries and lead Tufts Fletcher School’s <a href="https://sites.tufts.edu/digitalplanet/">Digital Planet</a> initiative studying technological innovation around the world. In my opinion, there are three myths worth busting before considering taking on big tech. </p>
<h2>Myth 1: Comparing Standard Oil and Google</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=901&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=901&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=901&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1132&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1132&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284102/original/file-20190715-173370-5ovggf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1132&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">John D. Rockefeller, founder of Standard Oil.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:John_D_Rockefeller_1872.png">Urbanrenewal/Wikimedia Commons</a></span>
</figcaption>
</figure>
<p>Arguments for and against antitrust action against tech firms rely heavily on the <a href="https://www.nytimes.com/1998/10/19/business/microsoft-trial-precedents-previous-antitrust-cases-leave-room-for-both-sides.html">experiences of earlier cases</a>. The massive <a href="https://theconversation.com/for-tech-giants-a-cautionary-tale-from-19th-century-railroads-on-the-limits-of-competition-91616">19th-century monopoly Standard Oil</a> has, in fact, been referred to as the “<a href="https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html">Google of its day</a>.” There are also people who are recalling the 1990s <a href="https://www.nytimes.com/2018/05/18/opinion/microsoft-antitrust-case.html">antitrust case against Microsoft’s dominant position</a> in the era of personal computers. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=490&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=490&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=490&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=615&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=615&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284103/original/file-20190715-173360-2qxmqd.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=615&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Google co-founders Sergey Brin, left, and Larry Page.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Schmidt-Brin-Page-20080520_(cropped).jpg">Joi Ito/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Those cases from the past may seem similar to today’s situation, but this era is different in one crucial way: the global technology marketplace. Currently, there are two parallel “big tech” clusters. One is in the U.S., dominated by <a href="https://theconversation.com/big-tech-isnt-one-big-monopoly-its-5-companies-all-in-different-businesses-92791">Google, Amazon, Facebook and Apple</a>. The other is based in China, dominated by <a href="https://singularityhub.com/2018/08/17/baidu-alibaba-and-tencent-the-rise-of-chinas-tech-giants/">Baidu, Alibaba, Tencent and Huawei</a>. This global market is subject to different political and policy pressures than regulators faced when dealing with Standard Oil and Microsoft.</p>
<p>Both clusters are attempting to add users to <a href="https://hbr.org/2019/01/which-countries-are-leading-the-data-economy">accumulate reservoirs of data</a>, which will fuel the next stage of competitiveness in a future run by artificial intelligence. The Chinese government has blocked most of the U.S. companies from entering the Chinese market, protecting its “<a href="https://www.scmp.com/tech/china-tech/article/2120913/china-recruits-baidu-alibaba-and-tencent-ai-national-team">AI national team</a>.” The <a href="https://www.bloomberg.com/news/articles/2018-06-27/alibaba-pulls-back-in-u-s-amid-trump-crackdown-on-chinese-investment">U.S. government has done likewise</a>, blacklisting some Chinese outfits for a period while discouraging others.</p>
<p>If the U.S. technology giants are broken up, the result would be a vastly uneven global playing field, pitting fragmented U.S. companies against consolidated state-protected Chinese firms.</p>
<p>Geopolitical factors aren’t limited to the U.S.-China rivalry. The European Union, Russia and India are also heavy users of Silicon Valley technologies, and each is <a href="https://www.ft.com/content/3eb00398-9815-11e9-8cfb-30c211dcd229">exploring its own options</a> for legislation and regulation too.</p>
<p>U.S. companies’ size and data accumulation capabilities give the country economic and political influence around the globe. Their power would change if they were broken up – and, in my view, that should be a key consideration in regulators’ decisions.</p>
<h2>Myth 2: Price is right</h2>
<p>There are two main views of antitrust action in these discussions. One focuses on consumer welfare, which has been the prevailing approach federal lawyers have taken <a href="https://www.jstor.org/stable/724991">since the 1960s</a>. The other view suggests that regulators should look at the <a href="https://www.yalelawjournal.org/note/amazons-antitrust-paradox">underlying structure of the market</a> and potential for <a href="https://www.pbwt.com/antitrust-update-blog/a-brief-overview-of-the-new-brandeis-school-of-antitrust-law">powerful players to exploit</a> their positions.</p>
<p>Those two sides seem to agree that price plays a key role. People who argue against breaking up the tech giants point out that Facebook and Google provide services that are <a href="https://slate.com/technology/2019/06/facebook-big-tech-antitrust-breakup-mistake.html">free to the consumer</a>, and that Amazon’s marketplace power drives its products’ costs down. On the other side, though, are those who say that <a href="https://www.yalelawjournal.org/note/amazons-antitrust-paradox">having low or no prices</a> is evidence that these companies are artificially lowering consumer costs to draw users into company-controlled systems that are <a href="https://techcrunch.com/2019/02/04/why-no-one-really-quits-google-or-facebook/">hard to leave</a>.</p>
<p>Both sides are missing the fact that the monetary price is less relevant as measure of what users pay in the technology industry than it is in other types of business. Users <a href="https://theconversation.com/how-much-is-your-data-worth-to-tech-companies-lawmakers-want-to-tell-you-but-its-not-that-easy-to-calculate-119716">pay for digital products with their data</a>, rather than just money. Regulators shouldn’t focus only on the monetary costs to the users. Rather, they should ask whether users are being asked for more data than is strictly necessary, whether information is being collected in <a href="https://theconversation.com/7-in-10-smartphone-apps-share-your-data-with-third-party-services-72404">intrusive or abusive ways</a> and whether customers are <a href="https://www.axios.com/mark-warner-josh-hawley-dashboard-tech-data-4ee575b4-1706-4d05-83ce-d62621e28ee1.html">getting good value in exchange for their data</a>.</p>
<h2>Myth 3: Trust-busting is all or nothing</h2>
<p>There aren’t just two ways for this debate to end, with either a breakup of one or more technology giants or simply leaving things as they are for the market to develop further. </p>
<p>My own idea of the best outcome would take a page from the history of antitrust litigation: The company that is sued is not broken up, and yet the very fact that there was a lawsuit leads to progress. That has happened in the past, in the cases against the Bell System, IBM and Microsoft.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=538&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=538&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=538&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=676&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=676&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284111/original/file-20190715-173376-1k7ro27.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=676&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A replica of the first transistor, developed at AT&T’s Bell Laboratories in 1947.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Replica-of-first-transistor.jpg">National Archives</a></span>
</figcaption>
</figure>
<p>In the 1956 federal consent decree against the Bell System, which settled a seven-year legal proceeding against the company, the company wasn’t split up, but Bell was required to <a href="https://economics.yale.edu/sites/default/files/how_antitrust_enforcement.pdf">license all its patents royalty-free</a> to other firms. This meant that some of the most profound technological innovations in history – including the <a href="https://www.computerhistory.org/atchm/who-invented-the-transistor/">transistor</a>, the <a href="https://www.popsci.com/article/science/invention-solar-cell/">solar cell</a> and the <a href="https://www.photonics.com/Articles/A_History_of_the_Laser_1960_-_2019/a42279">laser</a> – became widely available, yielding computers, solar power and other technologies that are crucial to the modern world. When the Bell System was <a href="https://www.cio.com/article/3267826/breaking-up-is-hard-to-do-why-the-bell-system-breakup-isn-t-a-model-for-tech.html">eventually broken up</a> in 1982, it did not do nearly as much to spread <a href="https://si.wsj.net/public/resources/images/BF-AV826_ATT_16U_20171120171814.jpg">innovation and competition</a> as the agreement that kept the Bells together a quarter-century earlier. </p>
<p>The antitrust action against IBM lasted 13 years and didn’t break up the firm. However, as part of its tactics to avoid appearing to be a monopoly, IBM agreed to <a href="https://www.cnet.com/news/ibm-and-microsoft-antitrust-then-and-now/">separate pricing for its hardware and software products</a>, previously sold as an indivisible bundle. This created an opportunity for entrepreneurs Bill Gates and Paul Allen to create a new software-only company, called Microsoft. The surge of software innovations that have followed can clearly trace their origins to the IBM settlement. </p>
<p>Two decades later, Microsoft was itself the target of an antitrust action. In the resulting settlement, <a href="https://www.theverge.com/2018/9/6/17827042/antitrust-1990s-microsoft-google-aol-monopoly-lawsuits-history">Microsoft agreed to ensure its products were compatible</a> with competitors’ software. That made room in the emerging internet marketplace for web browsers, the predecessors of Apple’s Safari, Mozilla’s Firefox and Google Chrome.</p>
<p>Even Margrethe Vestager, the European Union’s top antitrust official and frequent tech-giant nemesis, has said that “<a href="https://www.nytimes.com/2018/02/20/magazine/the-case-against-google.html">Antitrust prosecutions are part of how technology grows</a>.” But that doesn’t mean they all have to achieve their most extreme ends, of breaking up the companies. </p>
<p>Antitrust rules are complicated enough, and plenty of experts will be called on to give their views on what to do with “big tech.” Technology pervades every aspect of modern lives, giving each person a responsibility to weigh in on this issue without misconceptions clouding their judgments. Technology has become a political issue. In a politically overheated climate, public sentiments may matter even more than the opinions of experts.</p><img src="https://counter.theconversation.com/content/119283/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bhaskar Chakravorti has founded and directs the Institute for Business in the Global Context at Fletcher/Tufts that has received funding from Mastercard, Microsoft, the Gates Foundation, the Rockefeller Foundation and the Onassis Foundation. He is a Non-Resident Senior Fellow at Brookings India and a Senior Advisor on Digital Inclusion at the Mastercard Center for Inclusive Growth.</span></em></p>Advocates and opponents of breaking up Facebook, Google and other technology giants are falling prey to some serious misconceptions.Bhaskar Chakravorti, Dean of Global Business, The Fletcher School, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/987512018-07-10T10:41:28Z2018-07-10T10:41:28ZAT&T-Time Warner, net neutrality and how to make sense of the media merger frenzy<p>Last month, the <a href="http://money.cnn.com/2018/06/12/media/att-time-warner-ruling/index.html">Department of Justice lost its suit</a> to prevent AT&T’s acquisition of Time Warner. </p>
<p>The agency had brought the case out of <a href="https://www.justice.gov/opa/pr/justice-department-challenges-attdirectv-s-acquisition-time-warner">concern</a> that the acquisition would reduce competition and in turn result in higher prices for consumers as well as less innovation. </p>
<p>Although the Justice Department <a href="https://www.cnbc.com/2018/07/12/justice-department-will-appeal-time-warner-att-merger-approval-dow-j.html">is appealing</a> the ruling, the June decision encouraged a <a href="https://deadline.com/2018/07/disney-should-win-fox-analysts-say-1202420556/">still-ongoing bidding war</a> between Disney and Comcast for most of the assets of 21st Century Fox. It also prompted business <a href="https://www.wsj.com/articles/hundreds-of-millions-in-fees-at-stake-in-media-merger-frenzy-1528928459">journalists</a> to predict a coming <a href="https://www.msn.com/en-us/health/healthtrending/atandt-time-warner-and-the-entire-media-merger-frenzy-explained/vi-AAyyphQ">frenzy</a> of mergers.</p>
<p>My <a href="https://mitpress.mit.edu/books/we-now-disrupt-broadcast">research</a> tracks how the media business has changed over the last two decades and what that change means for consumers. I’ve learned that not all mergers are alike, and some are more consequential than others. As I’ll show, allowing mergers like AT&T’s acquisition of Time Warner will profoundly reshape the American media landscape, even more so because of the elimination of net neutrality.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/226545/original/file-20180706-122247-1a91qu0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Actress Yara Shahidi stars in ‘Black-ish’ on ABC. Disney’s purchase of ABC in 1995 was a so-called horizontal merger because it combined content companies.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/-Black-ish-FYC-Event-Arrivals/39fd49f482fc4695a87cca00b9361557/97/0">Invision/AP/Richard Shotwell</a></span>
</figcaption>
</figure>
<h2>All media businesses are not the same</h2>
<p>The first thing to understand about these mergers is that not all “media” companies do the same thing.</p>
<p>Some media companies create content – they decide what to produce, fund its creation and organize it as a schedule of programming for a channel. Content companies then negotiate with cable/internet and satellite businesses that distribute that content to millions of homes that pay them to provide programming or internet access. </p>
<p>Until 2011, a logic of keeping content and distribution companies distinct guided the organization of the media industry, what legal scholar Tim Wu terms a “<a href="https://www.amazon.com/Master-Switch-Information-Empires-Borzoi/dp/0307269930">separations principle</a>.” The businesses that create content and the cable/internet companies that enable it to reach viewers were, for the most part, different entities. </p>
<p>The reason AT&T’s purchase of Time Warner is so significant is that it allowed a major distribution company to purchase a large content company. </p>
<p>Consumers pay <a href="https://www.att.com/Common/about_us/pdf/att_btn.pdf">AT&T</a> to receive mobile phone (159 million in the U.S. and Mexico), video (47 million) and internet services (15.8 million). Time Warner is mostly a content creation company. Its holdings include Warner Entertainment, Turner Broadcasting and HBO. </p>
<p>This type of “vertical” integration – the joining of companies that perform different aspects of the supply chain – has not been as much a concern for <a href="https://www.ftc.gov/public-statements/2018/01/vertical-merger-enforcement-ftc">antitrust regulators</a> as “horizontal” mergers, which they often try to prevent. That’s because horizontal deals allow a merger of two companies that do the same thing – creating a monopoly in the most extreme – and might give them considerable competitive advantage over others. </p>
<h2>Fox’s suitors and the end of ‘separations’</h2>
<p>But the competitive dynamics of media aren’t like other industries. </p>
<p>Distributors often have considerable power because they face limited and sometimes no competition. Normal marketplace dynamics have not operated because <a href="https://www.amazon.com/Foundations-Communications-Policy-Principles-Communication/dp/1572733438">U.S. policy</a> – in acknowledgment of the infrastructure required to wire a nation – has offered these services protections that have allowed them to operate as monopolies or with minimal competition. This has given consumers very <a href="http://theconversation.com/americas-broadband-market-needs-more-competition-71676">little choice</a> in providers and has led to the many <a href="http://carseywolf.ucsb.edu/wp-content/uploads/2018/02/Lotz_ChannelBundles.pdf">aspects of service</a> that frustrate them.</p>
<p>When looking at the acquisition of Fox – a content company – its two suitors create different concerns. </p>
<p>Like Fox, Disney is mostly a content company. Their merger would provide Disney with greater market power in negotiating with cable/internet companies and reduce the employment marketplace for creative talent. It’s a classic horizontal tie-up, the kind antitrust investigators often oppose, but less concerning than a vertical deal because of the conditions of the U.S. media marketplace.</p>
<p>Comcast is a cable/internet company, which would make its acquisition of Fox a vertical merger and raise the same concerns as the AT&T-Time Warner deal. Such concerns derive from particular features of media, like the way their content isn’t perfectly substitutable and plays important democratic and cultural functions. </p>
<p>Since <a href="https://variety.com/2013/biz/news/pay-tv-prices-are-at-the-breaking-point-and-theyre-only-going-to-get-worse-1200886691/">90 percent</a> of professionally produced U.S. television is created by just nine companies, the net result is a dysfunctional marketplace that makes vertical mergers concerning.</p>
<h2>A new media landscape</h2>
<p>The U.S. television industry has been in the midst of constant, precipitous change for the last 20 years in response to the arrival of the internet as a new technology for delivering video. </p>
<p>During that time, new competitors have arisen – such as Netflix – while others that dominated cable and broadcast distribution have developed internet-distributed services – think HBO Now and CBS All Access. Yet, these new “competitors” rely on the same content creators that make shows for cable and broadcast, so the current ecosystem is multifaceted with many entities that are as complementary as competitive.</p>
<p>For consumers, it will be difficult to distinguish the implications of the erosion of the separations principle from the <a href="http://money.cnn.com/2018/06/11/technology/net-neutrality-repeal-explained/index.html">abandonment of net neutrality</a> policy, a change that became official the same week as the ruling in the AT&T-Time Warner case in June. </p>
<p>The elimination of net neutrality allows internet service providers to require companies that distribute content over the internet to pay for prioritization – what has been described as a “fast lane” – to be readily available to customers. Imposing those fees on companies such as Netflix and Hulu will most likely lead them to hike fees to subscribers. </p>
<p>Consumers are likely to see these implications sooner – within the year – than they are to notice changes to the competitive landscape of U.S. media because of the AT&T-Time Warner merger. But the <a href="https://www.npr.org/2018/06/11/618928905/net-neutrality-has-been-rolled-back-but-its-not-dead-yet">end of net neutrality</a> magnifies the impact of this deal. </p>
<p>That is, AT&T will be able to treat its own content favorably – for example, HBO won’t have to pay to receive fast-lane access on AT&T’s internet service – but AT&T will likely require competing services such as Netflix to pay up. AT&T might also make HBO very expensive for those who do not receive its internet service in order to encourage subscribers to switch providers.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/226548/original/file-20180706-122268-49x2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Netflix, one of the newer competitors on the TV landscape, airs ‘Orange Is the New Black,’ the company’s most viewed original show.</span>
<span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Netflix-s-Orange-Is-the-New-Black-Season-Five-/2d73c7b78aea4ddd99481d44df59bd31/84/0">Photo by Charles Sykes/Invision/AP</a></span>
</figcaption>
</figure>
<h2>What next?</h2>
<p>Like the <a href="https://www.amazon.com/Empires-Entertainment-Industries-Deregulation-1980-1996/dp/081355053X/ref=sr_1_sc_1?s=books&ie=UTF8&qid=1529705521&sr=1-1-spell&keywords=empires+of+entertainmnet">series of mergers in the early-to-mid 1990s</a> that completely reconfigured media into the conglomerated structure Americans now face, the AT&T acquisition of Time Warner similarly signals the dawn of a new competitive field. </p>
<p>The implications of those mergers weren’t immediately evident in the 1990s either. It took five to 10 years for strategies and industrial practices to shift, and when they did, it was rarely obvious that the root cause was the new ownership structure. This will likely be the case now too. </p>
<p>The abandonment of the separations principle means distribution companies like AT&T can use access to exclusive content as a strategy to drive consumers to purchase their service. That may be a reasonable strategy if most consumers had more than one or two options for internet service, but the reality is Americans do not. </p>
<p>As a result, consumers with specific tastes – those who want NFL football, HBO and AMC dramas like “The Walking Dead” – may find themselves paying much more if their internet/cable provider doesn’t own all the content they desire. </p>
<p><em>This article has been updated to reflect new information.</em></p><img src="https://counter.theconversation.com/content/98751/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amanda Lotz does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A scholar of the media business tries to make sense of the flurry of merger news lately, and why the contested tie-up between AT&T and Time Warner will profoundly reshape the American media landscape.Amanda Lotz, Fellow, Peabody Media Center; Professor of Media Studies, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/846442018-02-14T11:36:44Z2018-02-14T11:36:44ZCorporate America needs to get back to thinking about more than just profits<figure><img src="https://images.theconversation.com/files/206059/original/file-20180212-58327-1ra6xen.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Larry Fink, right, shared a stage with several of the CEOs he urged to spend more time doing good.</span> <span class="attribution"><span class="source">Stuart Ramson/AP Images for The Women's Forum of New York</span></span></figcaption></figure><p>Should companies be doing more to make the world a better place? </p>
<p>The <a href="https://www.cnbc.com/2018/01/23/blackrocks-push-for-social-responsibility-shows-shift-in-companies.html">world’s biggest money manager thinks so</a>. He recently urged companies to contribute more to society if they want BlackRock as an investor. </p>
<p>“A company’s ability to manage environmental, social and governance matters demonstrates the leadership and good governance that is so essential to sustainable growth,” BlackRock chief Larry Fink <a href="https://www.blackrock.com/corporate/en-no/investor-relations/larry-fink-ceo-letter">wrote in his annual letter to CEOs</a>, “which is why we are increasingly integrating these issues into our investment process.”</p>
<p>Fink’s letter, seen by some as an <a href="https://www.forbes.com/sites/robertlenzner/2018/01/17/blackrocks-6-trillion-and-the-social-purpose-of-corporations/#69867df7a1e6">ultimatum</a> to “be good” or be excluded from BlackRock’s US$5.7 trillion in assets, symbolizes the tightrope companies must walk. On one side are those insisting companies focus on raising their share price in the short term – even if it means hurting the environment, workers and communities in the long run. On the other, a growing chorus are demanding that doing “good” (or at least, as Google might put it, <a href="http://time.com/4060575/alphabet-google-dont-be-evil/">not doing evil</a>) be their top priority and let profits follow. </p>
<p>This battle isn’t new. It was front and center in the 1970s as economist <a href="https://link.springer.com/chapter/10.1007/978-3-540-70818-6_14">Milton Friedman insisted</a> a corporation’s only obligation was to maximize profits for the shareholder. What is new is that the “forces of good” appear to be rising again. </p>
<p>Earlier in my career, in the 1980s, when companies were putting shareholder value first and profits were tight, I was a senior executive at General Motors during a period of wrenching downsizing. I convinced my bosses that doing a little good, even amid plant closings and layoffs, could make a real difference for hard-hit communities, and so we donated to local charities to mitigate some of the pain.</p>
<p>Years later, at the University of Michigan, my experience at GM helped me shape a graduate course on corporate social responsibility that examined the tension between Friedman’s view and the one expressed by Fink. </p>
<p>Today I believe that companies, awash in profits, can once again afford to make money while doing good. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=464&fit=crop&dpr=1 600w, https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=464&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=464&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=584&fit=crop&dpr=1 754w, https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=584&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/206284/original/file-20180213-44630-102lbm6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=584&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Companies didn’t do good just for the warm feelings it created. Newly empowered unions were among the forces that prodded companies such as Ford to do better by their workers.</span>
<span class="attribution"><span class="source">AP Photo</span></span>
</figcaption>
</figure>
<h2>The ‘good corporation’ is born</h2>
<p>A <a href="https://hbswk.hbs.edu/archive/new-world-new-rules-the-changing-role-of-the-american-corporation-new-world-new-rules-from-global-dominance-to-global-competition">lack of competition</a> is one of the main reasons U.S. companies became known for serving the public good in the decades after World War II. </p>
<p>Domestically, whole industries were dominated by just one or a handful of companies, such as AT&T in communications and the “Big Three” (GM, Ford and Chrysler) in automobiles. Meanwhile, Europe and Japan were struggling to recover from the massive destruction of years of war, while the rest of Asia had not yet developed enough to provide competition. </p>
<p>So American businesses became very profitable. At the same time, <a href="https://hbr.org/2013/04/why-the-decline-in-corporate-s">three pressures helped imbue them</a> with a sense of a public purpose: more powerful unions, partnerships between business and government forged during World War II and the need to raise capital from public markets to fuel expansion. </p>
<p>Yes, shareholders were to be rewarded, but it was also the case that <a href="https://itif.org/publications/2005/02/28/past-and-future-americas-economy-long-waves-innovation-drive-cycles-growth">big companies provided workers</a> with stable, well-paid jobs and secure pensions. This was back when Americans were <a href="https://hbswk.hbs.edu/archive/new-world-new-rules-the-changing-role-of-the-american-corporation-new-world-new-rules-from-global-dominance-to-global-competition">more likely to have one or two jobs for life</a>. </p>
<p>Communities and the public in general often benefited as companies financed public-interest research like <a href="https://www.bell-labs.com">AT&T’s Bell Labs</a> or developed products with broadly positive impacts like <a href="http://theinventors.org/library/inventors/blcrashtestdummies.htm">GM’s crash dummy</a>. </p>
<p>Put simply, profitability and a bit of prodding to serve a public purpose prompted U.S. companies to do good. </p>
<h2>The good company: RIP</h2>
<p>This stable world <a href="https://hbswk.hbs.edu/archive/new-world-new-rules-the-changing-role-of-the-american-corporation-new-world-new-rules-from-global-dominance-to-global-competition">began to unravel</a> during the 1970s in the aftermath of two oil shocks and the disintegration of the international monetary system that had been forged at Bretton Woods near the end of World War II. Growth slowed in virtually all industrialized nations. At home inflation and unemployment both worsened sharply. </p>
<p>At the same time, those “oligopolistic rents” in the ‘50s and '60s began to shrink steadily as U.S. companies faced increased competition in global markets after Europe and Japan recovered and rebuilt from wartime devastation and other Asian countries climbed the development ladder to the point where they, too, could create competitive companies and industries.</p>
<p>This made it harder for U.S. companies to meet the expectations of their many stakeholders. American businesses’ profit margins shrank, and companies were broken up, cutting short the previously safe seats of chief executives. The views of conservative economists like Friedman took hold, dictating that a corporation’s sole obligation should be to stockholders.</p>
<p>In 1993, journalist Robert Samuelson drove the point home by <a href="http://www.newsweek.com/rip-good-corporation-194642">publishing an “obituary”</a> in Newsweek headlined “R.I.P.: The Good Corporation,” concluding bleakly that, “"We thought all companies could marry efficiency and social responsibility. We were wrong.”</p>
<h2>Institutional investors strike back</h2>
<p>Well, turns out Samuelson may have called the death of the good company prematurely as activists and even investors like BlackRock bombard executives with demands that they bear more responsibility for social good. In fact, 60 percent of the companies that responded to a <a href="https://www.conference-board.org/retrievefile.cfm?filename=TCB-GT-V1N15-How-Corp-Speaks-Out-on-Social-Issues1.pdf&type=subsite">2016 survey of 92 major corporations</a> reported rising stakeholder pressure to get engaged on issues, from human rights to climate change. </p>
<p>While environmental and <a href="https://www.theguardian.com/sustainable-business/2015/feb/09/corporate-ngo-campaign-environment-climate-change">other more traditional activists</a> <a href="https://theconversation.com/when-did-che-guevara-become-ceo-the-roots-of-the-new-corporate-activism-64203">have had some impact</a>, it’s the major institutional investors that are the more effective conduit to force corporate change since <a href="https://www.finra.org/investors/institutional-investors-get-smart-about-smart-money">they manage nearly 70 percent</a> of all publicly listed U.S. securities. </p>
<p>For example on climate change, financial firms that collectively own more than $26 trillion in assets <a href="https://www.ft.com/content/6cfa6c50-dff9-11e7-a8a4-0a1e63a52f9c">have been pressuring</a> the world’s biggest emitters to cut emissions and disclose more of the risks. Their pressure has worked, as oil companies such as <a href="https://theconversation.com/exxon-mobils-about-face-on-climate-disclosure-89121">Exxon Mobil</a> and others have promised to do both.</p>
<p>For today’s CEOs, managing the delicate balancing act between these stakeholders and the equally powerful “activist” investors that primarily want a quick gain has perhaps never before been such a challenge. Billionaire investor Carl Icahn and other hedge fund managers <a href="https://www.theatlantic.com/business/archive/2016/11/activist-investors/506330/">have become more aggressive</a> pushing companies to maximize profits or face the consequences. Just ask Ford’s <a href="https://www.nytimes.com/2017/05/22/business/dealbook/ford-was-unprepared-for-investor-revolt-and-ceo-change.html">Mark Fields</a>, <a href="https://www.huffingtonpost.com/entry/you-dont-think-like-i-do-why-activist-investors-target_us_598b6debe4b08a4c247f27f4">DuPont’s Ellen Kullman</a> or the former CEOs at <a href="https://hbr.org/2017/10/why-ges-jeff-immelt-lost-his-job-disruption-and-activist-investors">General Electric</a>, <a href="https://www.bloomberg.com/gadfly/articles/2017-05-16/u-s-steel-stock-an-activist-could-galvanize-it">U.S. Steel</a>, <a href="https://www.washingtonpost.com/business/csx-lost-expensive-ceo----and-contenders-for-his-job-gadfly/2017/12/18/afab7714-e405-11e7-927a-e72eac1e73b6_story.html">CSX</a>, <a href="https://www.businessoffashion.com/articles/news-analysis/breaking-mickey-drexler-to-leave-j-crew">J.Crew</a> and <a href="http://www.businessinsider.com/yahoo-marissa-mayer-rise-and-fall-2017-6">Yahoo</a>, <a href="https://www.wsj.com/articles/the-ceos-who-didn't-deserve-the-boot-1499899231">all of whom</a> lost their jobs because they didn’t do what the activists wanted in 2017. </p>
<h2>Fat with profits</h2>
<p>I would argue, however, that today the choice between satisfying shareholders and serving a public service should be an easier one for most companies. That’s because the biggest companies in the U.S. are sitting on a <a href="https://www.bloomberg.com/news/articles/2017-09-21/corporate-america-has-amassed-a-record-amount-of-cash">record pile of cash</a> and making some of the <a href="https://fred.stlouisfed.org/series/CP">biggest profits on record</a>. </p>
<p>And that’s before they start to see the <a href="https://taxfoundation.org/final-tax-cuts-and-jobs-act-details-analysis/">tremendous gains</a> from the sharp reduction in the corporate tax rate from 35 percent to 21 percent. </p>
<p>In other words, companies can afford to do a little good and heed Larry Fink’s message. Some companies, including AT&T, Boeing and several large banks, <a href="http://www.businessinsider.com/trump-gop-tax-plan-companies-rush-to-announce-special-bonuses-pay-hikes-2017-12/#wells-fargo-4">have already announced</a> that they plan to use the windfall from the tax cut to invest more in their communities and <a href="https://www.nytimes.com/2018/01/22/us/politics/bonuses-tax-laws-trump-impact.html">give raises</a> or bonuses to workers. </p>
<p>It’s a good start to bringing the good corporation back from the dead.</p><img src="https://counter.theconversation.com/content/84644/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marina v. N. Whitman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Companies are flush with cash and profits and soon will have even more once the tax cut takes effect. So they can afford to be good again.Marina v. N. Whitman, Professor of Business Administration and Public Policy, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/896482018-01-10T11:40:22Z2018-01-10T11:40:22ZDefanged regulations have big media licking their chops<figure><img src="https://images.theconversation.com/files/201405/original/file-20180109-36009-qhta6p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Consolidation is happening at a rapid pace. But who will bear the brunt of the costs?</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/businessman-suit-tv-instead-head-keeping-756496138?src=pHgQ7avrqq46SC82CSqcUQ-2-12">Khakimullin Aleksandr/Shutterstock.com</a></span></figcaption></figure><p>The year 2017 ended with a flurry of news affecting all aspects of the media industry. A shift in net neutrality policy and Disney’s <a href="https://theconversation.com/disneys-potential-21st-century-fox-merger-continues-troubling-trend-of-media-consolidation-89229">planned purchase</a> of several Fox assets capped a year that also witnessed the pending merger between Sinclair Broadcast Group and Tribune Media.</p>
<p>As someone who teaches and <a href="https://mitpress.mit.edu/books/we-now-disrupt-broadcast">writes</a> about the media industry, I’ve been following these developments closely. Whether you’re simply concerned about your cable and internet bill, or you’re wondering how the elimination of net neutrality will influence access to your favorite websites, here are some key stories and developments you should tune into in 2018.</p>
<h2>Buckle up for ‘fast lanes’</h2>
<p><a href="https://theconversation.com/with-fccs-net-neutrality-ruling-the-us-could-lose-its-lead-in-online-consumer-protection-88816">The repeal of net neutrality</a> – the rules that prevent internet service providers from charging websites to secure preferential treatment – hasn’t gone into effect just yet, and legal challenges are in the works. But if the rollback goes through, as it’s expected to do, it will likely affect companies and consumers in a couple of ways.</p>
<p>First, the business models of internet-reliant services such as Netflix and Spotify have always assumed that they would have free, unfettered use of the internet. They are among the first places that ISPs could target with fees, and these sites would feel compelled to fork over the money in order to reach consumers at the fastest speeds. At the same time, to offset these new costs, these internet-reliant services will likely pass these costs on to their customers. </p>
<p>Meanwhile, if paid “<a href="https://www.wired.com/story/fcc-prepares-to-unveil-plan-to-gut-net-neutrality/">fast lanes</a>” become standard practice, consumers will also notice that accessing sites that don’t or can’t pay – such as government, education, libraries and other non-commercial sites – might seem slower or more difficult to use.</p>
<p>Also, expect to see internet service companies leverage the content they’ve purchased to encourage more subscribers. Companies that own content – whether it’s TV channels or film franchises – will be able charge lower prices than those that license it. (This is at the heart of the AT&T-Time Warner merger discussed below.) For example, if AT&T succeeds in buying Time Warner – which includes HBO – it will likely offer HBO to AT&T subscribers at rates well below what their competitors like Comcast will charge, because these competitors must pay AT&T before they can offer HBO’s content.</p>
<h2>Investments and mergers galore</h2>
<p>Though we’re in the midst of an unpredictable regulatory environment, it seems likely that <a href="http://www.multichannel.com/news/sports/disney-pulls-fox-trigger/417071">Disney’s purchase of Fox assets</a> will proceed. </p>
<p>This won’t immediately bring big changes for consumers. As a content company, Disney’s primary goal is to maintain and accumulate content assets: television series, films and brands like Star Wars, Marvel and DC. The more it owns, the better positioned it is to negotiate with companies such as Comcast and AT&T that make most of their money from distributing content (via internet, phone, cable service), but are also increasingly purchasing content of their own. </p>
<p>Companies built on owning content don’t want to be left behind, so their goal is to be able to possess content so valuable that consumers demand that all distributors offer it. Just as <a href="https://theconversation.com/politics-dont-explain-espns-subscriber-decline-76843">Disney has long used</a> used the popularity of ESPN to secure access for less popular channels like ESPN Classics or Disney XD, the more essential content Disney owns, the more leverage it has to charge high fees and ensure distribution for content that’s less in demand. </p>
<p>The mergers likely to have a greater impact on consumers are the Sinclair-Tribune and AT&T-Time Warner mergers. <a href="http://www.multichannel.com/news/transactions/discovery-buy-scripps-networks-146-billion/414315">Sinclair and Tribune</a> aren’t household names, but they do own several local television stations. Sinclair already owns the most television stations in the U.S. – <a href="http://sbgi.net">193 stations in 89 markets</a> that reach 40 percent of American households. Buying Tribune’s stations would enable it to reach 72 percent of American households, even though current rules cap national reach at 40 percent. </p>
<p>The Federal Communications Commission – with its current makeup geared toward deregulation – has <a href="http://variety.com/2017/tv/news/fcc-national-ownership-cap-sinclair-tribune-1202620605/">signaled its intention</a> to revise ownership rules to enable the merger to proceed. This scale of broadcast ownership is unprecedented in the United States and reminiscent of the late 1990s, when limits on national radio station ownership were eliminated and <a href="https://apps.fcc.gov/edocs_public/attachmatch/DA-07-3470A6.pdf">massive consolidation occurred</a>. </p>
<p>Many have <a href="https://www.salon.com/2001/06/28/telecom_dereg/">since decried</a> this shift in radio ownership rules. The consolidation led to local job losses, and a recent <a href="https://arstechnica.com/information-technology/2017/10/fcc-rule-change-could-help-tv-and-radio-stations-abandon-local-communities/">change in rules</a> allows conglomerates to operate without local studios. Sinclair has already been criticized for <a href="https://www.nytimes.com/2017/05/.../sinclair-broadcast-komo-conservative-media.html">forcing all its stations</a> to air the same editorials. This is contrary to broadcast policy that has long prioritized upholding the right of local stations to deliver programming attuned to the interests of their audiences.</p>
<p>The AT&T-Time Warner merger has been in the news for over a year now. The Department of Justice <a href="https://www.washingtonpost.com/news/the-switch/wp/2017/11/20/the-justice-department-just-sued-att-to-block-its-85-billion-bid-for-time-warner/?utm_term=.3cbd72a2a731">announced plans</a> to sue to prevent the merger in November 2017 and the deal awaits court consideration. This merger deserves a closer look, because like <a href="https://www.reuters.com/article/us-comcast-nbc/comcast-completes-nbc-universal-merger-idUSTRE70S2WZ20110129?irpc=932">Comcast’s 2011 purchase of NBCUniversal</a>, it allows a distribution company (AT&T) to own content: Time Warner’s assets include HBO, CNN and the Turner networks. The Comcast merger was ultimately permitted, but it included a <a href="https://www.justice.gov/opa/pr/justice-department-allows-comcast-nbcu-joint-venture-proceed-conditions">number of provisions</a> to maintain a competitive marketplace. </p>
<p>Although much has been made of <a href="https://www.salon.com/2017/11/24/is-trump-blocking-a-major-merger-because-of-his-cnn-vendetta_partner/">President Trump’s hostility towards CNN</a> as a possible reason for the Department of Justice lawsuit, the potential anti-competitive actions AT&T could take as owner of Time Warner’s most lucrative asset – HBO – is a much better explanation. AT&T could refuse to allow competing services such as Comcast to offer HBO, or make it far more expensive to consumers that subscribe to a different ISP. </p>
<p>Over the next year, we’ll see media conglomerates continue to bid for assets and push to roll back rules in an effort to accumulate more power and profit. At the same time, ISPs – many of which already operate as local <a href="https://arstechnica.com/information-technology/2016/08/us-broadband-still-no-isp-choice-for-many-especially-at-higher-speeds/">monopolies or with limited competition</a> – now have permission to delegate access and raise fees. </p>
<p>If history is a guide, consumers will be the big losers.</p><img src="https://counter.theconversation.com/content/89648/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amanda Lotz does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the coming year, media companies will be adjusting to a new reality – one that ultimately leaves consumers with fewer choices.Amanda Lotz, Fellow, Peabody Media Center; Professor of Media Studies, University of MichiganLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/822022017-08-17T01:27:38Z2017-08-17T01:27:38ZFirstNet for emergency communications: 6 questions answered<figure><img src="https://images.theconversation.com/files/181830/original/file-20170811-13459-zr7tw1.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">FirstNet could relieve emergency workers of having to carry multiple radios and other communications devices.</span> <span class="attribution"><a class="source" href="http://www.apimages.com/metadata/Index/Associated-Press-Finance-amp-Business-Louisia-/4af76d8a48e1da11af9f0014c2589dfb/14/0">AP Photo/Ric Francis</a></span></figcaption></figure><p><em>Editor’s note: In the aftermath of 9/11, public safety officials in New York City and around the country realized that firefighters, police officers and ambulance workers needed to be able to <a href="https://supernet.isenberg.umass.edu/visuals/DOD-LSN-Final-2017.pdf">talk to each other at an emergency scene</a> – not just to their <a href="http://dx.doi.org/10.1111/j.1475-3995.2010.00785.x">supervisors and dispatchers</a>. The solution was nearly 16 years in coming, but on March 30, the First Responder Network Authority, or FirstNet, was created. It’s one of the largest public-private partnership agreements ever, between the National Telecommunications and Information Administration (part of the U.S. Department of Commerce) and a group of companies led by AT&T. AT&T and its partners will develop and manage a nationwide wireless broadband network for use by first responders. Each U.S. state and territory is in the process of deciding whether it wants to <a href="https://www.ntia.doc.gov/files/ntia/publications/sapp_opt_out_process_02162017_0.pdf">build its own towers and wired connections</a> or <a href="https://www.firstnet.gov/sites/default/files/factors-governor-decision.pdf">let the AT&T group do the construction</a>. Ladimer Nagurney and Anna Nagurney, scholars of communications and network systems, respectively, explain what this multi-billion-dollar effort is, and what it means.</em></p>
<h2>1. What is FirstNet?</h2>
<p>The system nicknamed FirstNet was created by Congress in the <a href="https://www.congress.gov/bill/112th-congress/house-bill/3630">Middle Class Tax Relief and Job Creation Act of 2012</a>. Under the contract with the government, the <a href="https://www.commerce.gov/news/press-releases/2017/03/firstnet-partners-att-build-465-billion-wireless-broadband-network">group led by AT&T</a> will build, operate and maintain a new nationwide communications network, providing high-speed wireless communications for public safety agencies and personnel. The network will be protected against unauthorized intrusion and <a href="https://theconversation.com/creating-a-high-speed-internet-lane-for-emergency-situations-79151">strong enough to withstand disasters</a> that might damage other communications systems. Emergency workers will be able to preempt other users’ traffic on the network, and will be able to send and receive as much data as they need to during their emergency work.</p>
<h2>2. Why do we need it?</h2>
<p>In the aftermath of the 9/11 attacks in 2001, public safety agencies found that the first responders had a hard time sharing critical information throughout their agencies, or between different responding organizations. In just one tragic instance, after the south tower of the World Trade Center collapsed, the Fire Department of New York ordered all firefighters to <a href="http://www.cbsnews.com/news/communication-breakdown-on-9-11/">evacuate the north tower</a>. But many firefighters didn’t hear the order over their radios – and city and Port Authority police officers didn’t communicate on the same frequencies, so they never had a chance to hear the warning.</p>
<p>Four years later, the <a href="https://m.csmonitor.com/2005/0915/p04s01-usmb.html">same problems weakened officials’ response</a> to Hurricane Katrina. Most of the early efforts to solve this problem focused on making sure emergency workers’ radios could communicate with each other properly. In the intervening years, though, first responders have increasingly used smartphones, tablets and computers. They need to do more than talk; they need to share data among those devices – such as building layouts, possible environmental hazards, information about who and where victims might be and even basic details like local weather conditions. </p>
<p>Another change over time is our understanding of who first responders are. It’s not just police, firefighters and emergency medical personnel. <a href="http://www.nfro.org/who.html">Other public agencies</a> also are involved from the very early stages of a crisis, including transit agencies and environmental protection workers. Private companies are needed too, handling <a href="https://www.epa.gov/waterutilityresponse">damage or interruptions to utilities services</a> such as electricity, water, gas, telephone, cable TV and cellular service. </p>
<p>All of those groups need wireless communications at or near a disaster site. At the moment, they must compete with the general public: People inside the disaster area are often trying to seek help by calling 911 or texting friends or relatives. They may even post videos and photos of what is happening to social media sites. Loved ones elsewhere also flood communications networks, checking in as “safe” and trying to contact people they know who might be affected, to make sure they’re OK too. After the 2013 Boston Marathon bombing, for example, <a href="https://www.fastcompany.com/3008458/why-your-phone-doesnt-work-during-disasters-and-how-fix-it">all the major cellular networks got overloaded</a> by the number of people trying to make calls and send texts at the same time. (This even happens during nonemergency situations, such as concerts and <a href="https://arstechnica.com/features/2012/08/why-your-smart-device-cant-get-wifi-in-the-home-teams-stadium/">sporting events</a>.)</p>
<p>What’s more, many mobile broadband companies <a href="https://www.cnet.com/g00/how-to/how-to-tell-if-your-wireless-carrier-is-throttling-data/">limit the amount of high-speed data</a> a user can consume in a given month, either cutting off traffic or slowing it down significantly. But a first responder using a camera-equipped drone to inspect, say, a dam that might be breached needs unlimited high-speed communications to get real-time information that can protect both first responders and the public. </p>
<h2>3. Who will pay for it?</h2>
<p>The Federal Communications Commission has been rearranging the frequencies television channels use to broadcast their signals, making room in the electromagnetic spectrum for additional wireless broadband services. The agency recently <a href="https://www.fcc.gov/about-fcc/fcc-initiatives/incentive-auctions">auctioned off the rights</a> to use some of those frequencies to <a href="http://www.commlawmonitor.com/2017/04/articles/internet/fcc-announces-the-results-of-the-19-8-billion-broadcast-incentive-auction/">50 winning bidders including T-Mobile, Dish and Comcast</a>, raising US$19.8 billion.</p>
<p>Of that, $6 billion will be paid to the AT&T group, which will spend that money, plus an <a href="http://www.reuters.com/article/us-firstnet-at-t-contract-idUSKBN171209">additional $40 billion</a>, to build and operate the network.</p>
<p>Money will also come from payments from emergency response agencies, which will have to <a href="https://www.firstnet.com/plans">buy a FirstNet service plan</a> for each device, at prices expected to be similar to today’s mobile pricing. That revenue will also help fund the network, cover the companies’ investments and help generate enough of a profit that the AT&T group has promised to repay the $6 billion to the U.S. Treasury after the FirstNet contract expires in 25 years.</p>
<h2>4. What will happen when there’s not an emergency?</h2>
<p>When there is no emergency in an area, the bandwidth on the FirstNet network in that area will be available to AT&T to sell to private or corporate customers. This revenue, in addition to that from the first responder users themselves, is expected to pay for FirstNet.</p>
<h2>5. What do other countries do about this problem?</h2>
<p>Because of the close relationship between the U.S. and Canadian broadband services, Canada is creating <a href="https://www.publicsafety.gc.ca/cnt/mrgnc-mngmnt/psbn-en.aspx">a Public Safety Broadband Network</a> using the same frequency spectrum and protocols as the U.S. so that agencies on both sides of the border can connect to each other easily.</p>
<p>The U.K. is building an Emergency Services Network, expected to <a href="https://www.ft.com/content/d7981bf4-5730-11e7-80b6-9bfa4c1f83d2">begin partial operation near the end of 2017</a>. South Korea expects to complete its public safety wireless network in time to be <a href="https://www.rrmediagroup.com/Features/FeaturesDetails/FID/482">used during the 2018 Winter Olympics</a>. Several other countries have networks that are in <a href="http://e.huawei.com/us/publications/global/ict_insights/201608271037/focus/201608271435">various stages of design and construction</a>.</p>
<h2>6. FirstNet is supposed to last 25 years. What does that mean, and how will it happen?</h2>
<p>As <a href="http://www.electronicdesign.com/4g/wireless-companies-follow-roadmap-past-4g-and-5g">broadband wireless technology improves</a>, our devices and networks will too, including FirstNet.</p>
<p>The effort is also expected to promote technological innovations. Already, some of the technical solutions that serve first responders, such as the ability for <a href="https://resources.ext.nokia.com/asset/200168">devices to connect directly to each other</a>, have been incorporated into LTE standards. Some <a href="https://www.firstnet.com/apps">apps developed for first responders</a> may also release versions useful to others.</p>
<p>It’s hard to know what we’ll need in 25 years – just as 25 years ago, it would have been very hard to envision the technical details of today’s interconnected world. But building FirstNet will help protect and serve both first responders and the public during emergencies – and it will enhance communications in times of peace and prosperity.</p><img src="https://counter.theconversation.com/content/82202/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ladimer Nagurney, in an inherited IRA, owns approximately $1200 of AT&T stock. </span></em></p><p class="fine-print"><em><span>Anna Nagurney does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A multibillion-dollar effort is just beginning to build an all-new nationwide wireless broadband network for emergency responders. How will it work, why do we need it and how will it last 25 years?Ladimer Nagurney, Professor of Electrical, Computer and Biomedical Engineering, University of HartfordAnna Nagurney, John F. Smith Memorial Professor of Operations Management, UMass AmherstLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/726972017-03-09T04:20:17Z2017-03-09T04:20:17ZFrom the mundane to the divine, some of the best-designed products of all time<figure><img src="https://images.theconversation.com/files/159814/original/image-20170307-14941-ufygy6.jpg?ixlib=rb-1.1.0&rect=66%2C9%2C2993%2C2104&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Poul Henningsen's Artichoke Lamp, viewed from below at London's Park Plaza Hotel.</span> <span class="attribution"><a class="source" href="https://upload.wikimedia.org/wikipedia/commons/4/48/Artichoke_lamp_from_below.jpg">Doc Searls/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p><em>A well-designed product equally elevates form and function. It is pleasing to look at, easy to use and solves a common problem.</em></p>
<p><em>We reached out to five design professors and posed the following question: What’s the best-designed product of all time, and why?</em></p>
<p><em>Their responses vary from cheap, everyday products to newer, more expensive ones. But all share a story of trial, error and ingenuity.</em> </p>
<hr>
<h2>Cutting the glare</h2>
<p><strong>Catherine Anderson, The George Washington University</strong></p>
<p>In the early 1920s, as Danish designer Poul Henningsen observed Copenhagen at night, he lamented the quality of light in people’s homes. <a href="http://www.kosmorama.org/ServiceMenu/05-English/Articles/Lamps-Light-and-Enlightenment.aspx">He noticed</a> that the incandescent bulbs – sometimes bare, sometimes surrounded by a single shade – created “arrows of light” and a harsh glare. </p>
<p><a href="https://www.scandinaviandesign.com/poulHenningsen/index.htm">Henningsen set out to create a new design</a> that would mitigate this “dismal” effect; it would be “…constructed with the most difficult and noble task in mind: lighting in the home.” </p>
<p>“The aim is to beautify the home and who lived there,” <a href="https://www.scandinaviandesign.com/poulHenningsen/index.htm">he wrote</a>, “to make the evening restful and relaxing.” </p>
<p>His approach was <a href="http://www.jstor.org/stable/10.5406/scanstud.85.1.0079?seq=1#page_scan_tab_contents">scientific</a>. He rigorously examined how using multiple shades could cast a warm glow of light within a room.</p>
<p>In 1924, the “PH lamp” was born.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=424&fit=crop&dpr=1 600w, https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=424&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=424&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=532&fit=crop&dpr=1 754w, https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=532&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/159826/original/image-20170307-14966-pnt12j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=532&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Poul Henningsen’s PH lamp.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:PH-Lampan_1.jpg">Holger.Ellgaard/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>It’s delightful to look at. But most importantly, <a href="http://www.lauritz.com/en/ph-3-2/a3880/0/0/?sflang=da">it emits</a> a light that’s forgiving to the eye – an effect that’s created by the multiple shades, which evenly distribute the light. This creates a soft halo that attenuates the contrast between the light source and the surrounding darkness. </p>
<p>Henningsen’s sleek, spare lamp was <a href="https://www.phillips.com/article/5689896/the-lights-of-poul-henningsen">awarded a gold medal</a> at the 1925 International Exhibition of Modern Decorative and Industrial Arts. Over the years, it inspired many offshoots, such as the <a href="http://www.louispoulsen.com/int/products/indoor/pendants/ph-artichoke/c-24/c-1422/p-55590">Artichoke Lamp</a>, and became a product worthy of kings: In 1938, a train compartment for Danish King Christian X <a href="http://www.palainco.com/discover/item/miracles-called-ph-lamps-part-2/">included one of Henningsen’s lamps</a>.</p>
<p>All underscore the strength of the original design, <a href="http://www.dwr.com/sale-great-deals/ph5-pendant-lamp/137089.html?lang=en_US&adpos=1o1&creative=96969738159&device=c&matchtype=&network=g&gclid=COSE86q3x9ICFZmCswodzlYK9A">which can still be bought today</a>. </p>
<hr>
<h2>Holding it together</h2>
<p><strong>Lorraine Justice, Rochester Institute of Technology</strong></p>
<p>For years I took the simple paper clip for granted. As a kid I’d twist them apart to hang Christmas ornaments. In my teens I’d use them to shoot rubber bands at my friends. And in the 1990s I’d straighten them to pop a software floppy disk from a defective hard drive. </p>
<p>It wasn’t until I became a design student that I realized the paper clip – which is officially patented as a <a href="http://www.slate.com/content/dam/slate/articles/arts/design/2012/05/paperclip/120521_Design_Paperclip_image5_gemads.jpg.CROP.article568-large.jpg">“gem paper clip”</a> – was a near-perfect design: elegant, functional and made of steel, a sustainable and recyclable material. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/159832/original/image-20170307-14946-1ukn9sh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">11 billion sold in America – per year.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/download/success?src=1DzI6z9nAFfuuwz0lP5khQ-1-73">'Paperclip' via www.shutterstock.com</a></span>
</figcaption>
</figure>
<p>But the paper clip had a long path to the flawless form we know today.</p>
<p><a href="http://inventors.about.com/od/famousinventions/fl/The-History-of-the-Paperclip.htm">The paper clip started out</a> as a pin that pierced the papers to hold them together. The sharp pins would prick the workers using them and were difficult to use. Thus began the gradual improvements: The straight pin morphed into something called a T-pin, a device with a horizontal wire on the end that allowed the pin to be pushed more easily through the papers without needlessly pricking fingers. However, this design still left holes in the papers. </p>
<p>In the late 1890s inventors in the United States and Europe began to work on new versions of the paper clip. In 1898, Pennsylvania inventor Matthew Schooley <a href="https://books.google.com/books?id=b-6LDQAAQBAJ&pg=PA51&lpg=PA51&dq=henry+petroski+%22From+Pins+to+Paper+Clips%22&source=bl&ots=TyZ1wue050&sig=PRvWf2yNsnfhrqGSxKgcI_Pheiw&hl=en&sa=X&ved=0ahUKEwi-lvHy18LSAhXD7iYKHagkBu4Q6AEIKzAD#v=onepage&q=henry%20petroski%20%22From%20Pins%20to%20Paper%20Clips%22&f=false">believed he had improved upon the pin design</a> by creating two loops in the wire. But there was still a problem: A piece of wire extended from the loops and would catch and rip the paper. Many other inventors <a href="http://gizmodo.com/why-is-the-paper-clip-shaped-like-it-is-1699985310">introduced various clasps, clips and metal-stamped designs</a>, all in an effort to create a reusable paper binder that would be cheap, safe and secure. </p>
<p>Finally, in 1899, an inventor from Connecticut named William Middlebrook designed the gem paper clip, along with <a href="http://pdfpiw.uspto.gov/.piw?Docid=00636272&homeurl=http%3A%2F%2Fpatft.uspto.gov%2Fnetacgi%2Fnph-Parser%3FSect2%3DPTO1%2526Sect2%3DHITOFF%2526p%3D1%2526u%3D%2Fnetahtml%2FPTO%2Fsearch-bool.html%2526r%3D1%2526f%3DG%2526l%3D50%2526d%3DPALL%2526S1%3D0636272.PN.%2526OS%3DPN%2F636272%2526RS%3DPN%2F636272&PageNum=&Rtype=&SectionNum=&idkey=NONE&Input=View+first+page">a machine to manufacture it</a>, to create the paper clip that we know today. </p>
<p>The iconic double loop design had just enough spring to hold several sheets of paper together – without snapping and without piercing fingers or paper. Today, Americans <a href="https://www.theatlantic.com/business/archive/2011/08/americans-buy-11-billion-paper-clips-year/338575/">buy 11 billion paper clips every year</a>, though they aren’t all used for binding pieces of paper – I doubt Middlebrook could have imagined that his invention would double as an ornament hanger and rubber band launcher.</p>
<hr>
<h2>Terminal waits</h2>
<p><strong>Craig M. Vogel, University of Cincinnati</strong></p>
<p><a href="http://www.eamesoffice.com/the-work/eames-tandem-seating-2/">In 1958</a>, architect Eero Saarinen, who had been tasked with designing the main terminal for Washington Dulles International Airport, approached furniture designers Charles and Ray Eames – already famous for their <a href="http://www.mfa.org/collections/object/lounge-chair-and-ottoman-no-670-and-671-505139">Eames Lounge Chair</a> – with a request: He wanted a public seating system for the terminal that was affordable, sturdy, stylish and versatile.</p>
<p><a href="http://www.hermanmiller.com/products/seating/public-seating/eames-tandem-sling-seating.html">In 1962</a>, the husband and wife team unveiled their tandem sling seating system. Even though it was designed to complement Saarinen’s terminal, it was so practical that it quickly became <a href="http://apex.aero/airport-seating-design-pod">one of the most common seating solutions</a> for airports around the United States – and, eventually, the world.</p>
<p>Because public seating gets so much use, it needs to be sturdy and easy to maintain. Cost is always an issue, so designers are often hamstrung if they want to make something that’s aesthetically pleasing.</p>
<p>An iconic example of the principles of midcentury modernist design, Eames’ seating system was an elegant and simple solution to all of these problems. It ships in parts, is easy to put together and maintain, and is tamper-proof.</p>
<p>The chairs are sturdy but lack a cumbersome support structure, which makes it easy to clean the floor under the seats. <a href="https://www.hermanmiller.com/content/dam/hermanmiller/documents/pricing/PB_ETS.pdf">The configuration is flexible</a>: Rows can be as small as two seats and as long as eight. </p>
<p>Furthermore, there are only three main materials used in the design: aluminum, vinyl and neoprene (a synthetic rubber). Even though the materials are cheap, they look expensive and upscale. The sling seat cushion slides into a slot and never tears. Meanwhile, the width of the seat accommodates a wide range of body types. </p>
<p>And if travelers miss their flight and need to spend the night in the terminal, the seat and seat back are angled in a way – like the Eames Lounge Chair – that allows its occupant to get some shut-eye. </p>
<hr>
<h2>Dial ‘D’ for design</h2>
<p><strong>Kalle Lyytinen, Case Western Reserve University</strong></p>
<p>American industrial designer Henry Dreyfuss’ AT&T Model 500 phone is one of the most iconic and recognizable products of the 20th century. The phone – together with its design process – was a harbinger of many design principles used today. </p>
<p>Rotary phones – which feature a round dial with finger holes – first emerged in the early 20th century. But many of these were bolted to the walls or <a href="http://www.sparkmuseum.com/images/Telephone/1921%20Auto-%20Elec%20Strt-Shaft%20Dial%20Candle.JPG">required two separate devices for speaking and listening</a>. </p>
<p>In addition, early telephone users would call into operators, who would use a switchboard to connect callers. When this process became automated, designers needed to figure out a way to offer an intuitive interface, since callers would be dialing more complicated number sequences (essentially doing the “switching” on their own). </p>
<p>Though earlier models came close to addressing these needs, the 500 model elevated the design, adding several functions that forever changed the way phones would be used. </p>
<p>AT&T’s first rotary phone in 1927 (dubbed <a href="http://www.beatriceco.com/bti/porticus/bell/images/1928_desk_set.jpg">“the French Phone”</a>) had an integrated handset for both the loudspeaker and the microphone, but it was cumbersome to use. Meanwhile, Dreyfuss’ earlier model from 1936, <a href="https://www.cooperhewitt.org/wp-content/uploads/2014/11/Dreyfuss_302-560x424.jpg">the 302</a>, was made out of metal and also had an awkwardly shaped handset. </p>
<p>Then, in 1949, his Model 500 came along. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/159834/original/image-20170307-14939-6wwt1t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Do your grandparents still have a Model 500?</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:WE500dialphone.jpg">ProhibitOnions/Wikimedia Commons</a></span>
</figcaption>
</figure>
<p>Employing new plastic technology, the phone’s handset was smooth, rounded and proportional, an improvement on unwieldy earlier versions. <a href="https://books.google.com/books/about/Henry_Dreyfuss_Industrial_Designer.html?id=afRTAAAAMAAJ">It was the first</a> to use letters below the numbers in the rotary – a boon for businesses, since phone numbers could now be advertised (and remembered) as mnemonic phrases (think American Express’ “<a href="https://www.youtube.com/watch?v=nVNHuqsHigo">1-800-THE-CARD</a>”).</p>
<p>The 500 phone was also the first to undergo a design process <a href="https://books.google.com/books/about/Henry_Dreyfuss_Industrial_Designer.html?id=afRTAAAAMAAJ">that used ergonomic (comfort) and cognitive experts</a>. AT&T and Dreyfuss hired <a href="http://www.nytimes.com/2013/02/09/business/john-e-karlin-who-led-the-way-to-all-digit-dialing-dies-at-94.html">John Karlin</a>, the first industrial psychologist in the world, to conduct experiments to evaluate aspects of the design. Through extensive consumer testing, the designers were able to tweak all minutiae of the product – <a href="http://www.papress.com/html/product.details.dna?isbn=9781616892913">even minor details</a> like placing white dots beneath the holes in the finger wheel and the length of the cord. </p>
<p>Including its later incarnations, the phone would go on to sell nearly <a href="http://www.nytimes.com/books/97/05/11/bib/970511.rv092249.html">162 million units</a> – around one per American household – and become a presence in living rooms, kitchens and offices for decades to come.</p>
<hr>
<h2>Changing the way we work and play</h2>
<p><strong>Carla Viviana Coleman, University of Maryland, Baltimore County</strong></p>
<p>In recent years, virtual reality glasses have hit the market. They don’t come cheap: Most cost US$3,000 to $5,000.</p>
<p>But one of these models – the Microsoft HoloLens – <a href="http://www.theverge.com/2017/1/27/14411744/microsoft-hololens-sales-numbers">has sold thousands of units</a> since its first shipment in 2016. </p>
<p>The HoloLens allows users to interact with a 3D digital world and simultaneously see what’s around them in the real world. In order to operate the interface, users can make hand gestures, talk or simply gaze. </p>
<p>The product was designed with ergonomics in mind: Users can adjust the head size, the head band and glasses. The weight – distributed throughout the crown area – prevents pressure on the nose and ears. Users can even wear their own glasses or wear their hair up in a pony tail. This is a key difference from most VR headsets – like the <a href="https://i.ytimg.com/vi/7zqp1szDWyA/maxresdefault.jpg">HTC Vive</a> – which are heavy, cumbersome products. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/159850/original/image-20170307-14957-3tsqrz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The future is holo.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:Ramahololens.jpg">Ramadhanakbr/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>While one could easily imagine a new generation of video games being designed for the HoloLens, a number of employers have realized the glasses can improve workplace productivity and ease the burdens of certain jobs.</p>
<p>For example, the company ThyssenKrupp, which manufactures elevators and escalators, <a href="https://www.thyssenkrupp.com/en/newsroom/press-releases/press-release-114208.html">has begun giving HoloLenses to its elevator technicians</a>, with the idea that the glasses will allow them to access data much more efficiently. The employees can multitask, choosing either to lift up the spherical visor or to keep it in front of their eyes as needed – all while working in a cramped elevator shaft.</p>
<p>Meanwhile, medical schools are using the HoloLens <a href="http://www.youtube.com/watch?v=SKpKlh1-en0">to train doctors</a> without using cadavers, while Volvo is using it <a href="https://www.cnet.com/roadshow/news/volvo-is-the-first-automaker-to-add-microsoft-hololens-to-its-engineering-toolkit/">to design new car models</a>.</p>
<p>If the price goes down, the market for this product – currently in the thousands – could easily multiply into millions.</p><img src="https://counter.theconversation.com/content/72697/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We asked five design experts – what’s your favorite product of all time, and why?Catherine Anderson, Assistant Professor of Interior Architecture and Design, George Washington UniversityCarla Viviana Coleman, Assistant Professor of Design, University of Maryland, Baltimore CountyCraig M. Vogel, Director of the Center for Design Research and Innovation, University of Cincinnati Kalle Lyytinen, Iris S. Wolstein Professor of Management Design, Case Western Reserve UniversityLorraine Justice, Dean of the College of Imaging Arts and Sciences, Rochester Institute of TechnologyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/676482016-10-27T04:51:48Z2016-10-27T04:51:48ZThe problems with AT&T’s bid for Time Warner<p>Those who don’t learn from history are doomed to repeat it. So it is with a sense of familiarity that we greet AT&T’s proposed acquisition of Time Warner. </p>
<p>In early 2000, AOL acquired Time Warner for US$164 billion. Broadly, like AT&T’s acquisition, AOL’s involved a sausage maker acquiring something to put in those sausages. The AOL takeover was variously described as a “<a href="http://fortune.com/2015/01/10/15-years-later-lessons-from-the-failed-aol-time-warner-merger/">calamity</a>”, and a “<a href="http://money.cnn.com/2016/10/24/investing/time-warner-att-aol/">text book case</a>” of deal failure. AT&T’s proposed acquisition seems also to be faring poorly. </p>
<p>AT&T’s acquisition does not suffer the same problems as AOL’s acquisition, and comes at a time of <a href="http://www.smh.com.au/business/world-business/atttime-warner-may-signal-start-of-new-media-industry-consolidation-20161023-gs8vh2.html">industry consolidation</a>. </p>
<p>But already the market has sent AT&T’s share price down, reflecting the likely premium it’s expected to pay for Time Warner. Indeed, the decline occurred even before the takeover was officially announced, on the back of <a href="https://www.washingtonpost.com/news/the-switch/wp/2016/10/20/att-may-be-trying-to-buy-time-warner/">rumours</a>. Between 19 October and 26 October, AT&T’s market capitalisation had declined by nearly US$20 billion.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=348&fit=crop&dpr=1 600w, https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=348&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=348&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=438&fit=crop&dpr=1 754w, https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=438&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/143247/original/image-20161026-11268-fzt46t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=438&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">AT&T’s share price at the close of trade.</span>
<span class="attribution"><span class="source">Google Finance</span></span>
</figcaption>
</figure>
<p>Before drawing any conclusions though, it’s important to consider pre-takeover deal anticipation, and (where possible) longer post-announcement returns to give the market time to fully digest the takeover. Also to look at what else the takeover might signal about the firm’s internal growth prospects, expansion plans, and stock price valuation. </p>
<h2>Understanding ‘abnormal returns’</h2>
<p>Some firms have the [mis]fortune of announcing takeovers on the day of other major events. These could include interest rate decisions, severe commodity fluctuations, and “flash crashes”. This is why it’s worth looking at the firm’s <a href="http://www.investopedia.com/terms/a/abnormalreturn.asp">“abnormal return,”</a> which is the firm’s return less that of some relevant benchmark (i.e. the stock market index).</p>
<p>Of course, not all firms are equally sensitive to market movements. One way to reflect this is to multiply the market return by the firm’s “beta,” which represents its sensitivity and responsiveness to market movements. This is commonly available via Bloomberg and online (via Google Finance).</p>
<p>Google Finance <a href="https://www.google.com/finance?cid=33312">reports</a> that AT&T has a beta of around 0.3. Though, given that the market returns around the announcement are small, whether or not we beta-adjust the market return makes little difference. </p>
<p>We can see that AT&T’s raw returns and abnormal returns have been consistently negative leading up to and following the takeover announcement. In fact, AT&T’s returns from 20 October onwards were negative, coinciding with the aforementioned rumours of the deal. From the time the deal was rumoured, the market discounted AT&T. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=446&fit=crop&dpr=1 600w, https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=446&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=446&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=561&fit=crop&dpr=1 754w, https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=561&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/143248/original/image-20161026-11236-1vpnvn5.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=561&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">AT&T’s returns.</span>
<span class="attribution"><span class="source">Google Finance</span></span>
</figcaption>
</figure>
<h2>But it gets worse over time</h2>
<p>The market’s reaction on the day of the announcement is illustrative, but can paint an incomplete picture. It ignores that the market might anticipate an announcement. More importantly, the market needs some time to fully process the deal. </p>
<p>So, it is best to look at returns several days after the announcement to get a full picture. After getting these abnormal returns, you can then sum them over an event period surrounding the takeover announcement, giving cumulative abnormal returns (or CARs). You can also <a href="http://eventstudymetrics.com/index.php/event-study-methodology/">multiply them</a> to give buy-and-hold abnormal returns (or BHARs). </p>
<p>AT&T’s returns illustrate the usefulness of looking at returns in the days after the takeover. The buy and hold return (i.e. from just buying and holding AT&T’s stock and not adjusting for other market movements) was nearly 7%. The abnormal returns are similarly negative and are in the below graph. The cumulative and buy-and-hold abnormal returns following the announcement are strongly negative. Indeed, the negative return had nearly doubled in magnitude between October 20 and October 25. By October 25, the BHARs and CARs were nearly -7%. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=259&fit=crop&dpr=1 600w, https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=259&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=259&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=326&fit=crop&dpr=1 754w, https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=326&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/143208/original/image-20161026-4721-155ypp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=326&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Google Finance</span></span>
</figcaption>
</figure>
<h2>What’s really going on and why the negative reaction?</h2>
<p>The market’s negative reaction to the deal clearly indicates some trepidation about whether it will create value. This reflects several underlying concerns. </p>
<p><strong>Overpayment</strong>: There is the fear that AT&T will over pay. Comcast’s acquisition of NBCUniversal appears to have fared well. However, CNN <a href="http://money.cnn.com/2016/10/24/investing/att-time-warner-wall-street-reaction/">reports</a> that AT&T will pay over 12 times Time Warner’s forecast EBITDA, whereas Comcast paid only 9 times in its similar acquisition of NBCUniversal. Paying an excessive takeover premium could undermine shareholder wealth even if the deal might itself create value.</p>
<p><strong>Debt</strong>: The amount of debt is also a concern. The deal will involve “<a href="http://www.nytimes.com/2016/10/24/business/dealbook/att-plans-to-shoulder-mega-debt-merger-time-warner.html">mega debt</a>” to pay for Time Warner. This involves around US$40 billion in additional debt. That debt load is, in isolation, sustainable. However, it is in addition to the debt assumed for the acquisition of <a href="http://dealbook.nytimes.com/2014/05/18/att-to-buy-directv-for-48-5-billion/?_r=0">DirecTV</a> and AT&T’s other financial commitments. It takes AT&T’s total debt to around US$175 billion, making AT&T <a href="http://www.nytimes.com/2016/10/24/business/dealbook/att-plans-to-shoulder-mega-debt-merger-time-warner.html">one of the largest</a> non-bank borrowers. This increases financial risk, especially if and when interest rates increase.</p>
<p><strong>Integration</strong>: The deal also raises integration issues. This debt, and the deal, also come at a time when AT&T is already attempting to integrate DirecTV, which it <a href="http://www.forbes.com/sites/greatspeculations/2015/07/27/att-closes-directv-acquisition-reviewing-the-concessions-and-benefits/#5d9812db7e89">acquired</a> for nearly US$50 billion (nearly 25% of AT&T’s 26 October market capitalisation). The Time Warner acquisition is around US$80 billion (around one third of AT&T’s market capitalization). Large acquisitions pose integration difficulties when executed in isolation. The need to integrate two large additional units simultaneously can pose barriers to achieving synergies in the acquisition. </p>
<p><strong>Signaling</strong>: The takeover announcement itself can also signal other information about the bidder. For example, the need to do a takeover can provide a signal to the market <a href="http://dx.doi.org/10.2139/ssrn.2517209">about the bidder’s standalone value</a>. Such diversification can be beneficial, as was arguably the case with Comcast’s acquisition of NBCUniversal. However, the need to do such an acquisition can itself be a signal that AT&T is “<a href="http://dealbook.nytimes.com/2014/05/18/att-to-buy-directv-for-48-5-billion/?_r=0">trying to compensate for slowing growth in its own core businesses</a>”, causing the market to discount AT&T’s standalone value.</p>
<p>The fall in AT&T’s share price reflects beliefs that AT&T might overpay, assume too much debt, and have difficulty integrating the new unit. Indeed, shareholders might end up thankful if the <a href="http://www.nytimes.com/2016/10/23/business/dealbook/regulatory-microscope-lies-ahead-for-att-and-time-warner.html">regulators</a> end up blocking the deal.</p><img src="https://counter.theconversation.com/content/67648/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mark Humphery-Jenner does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The market sends us many signals on mergers and acquisitions, and there’s a few simple tricks to understanding them.Mark Humphery-Jenner, Associate Professor of Finance, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/673612016-10-26T03:23:47Z2016-10-26T03:23:47ZHere’s why our next president should block AT&T’s Time Warner tie-up<p><a href="http://www.nytimes.com/2016/10/23/business/dealbook/att-agrees-to-buy-time-warner-for-more-than-80-billion.html?action=click&contentCollection=DealBook&module=RelatedCoverage&region=EndOfArticle&pgtype=article&_r=0">AT&T’s plan to buy Time Warner</a> for US$85.4 billion is only the latest of a string of mega corporate mergers that have been announced in recent years. </p>
<p>That deal would combine the second-largest U.S. cellphone carrier with one of the biggest content producers in the world, with cable networks including HBO, TBS and CNN, as well as Warner Bros. film and TV studio.</p>
<p>But it’s hardly the only tie-up in the offing. <a href="http://www.investors.com/research/ibd-industry-themes/qualcomm-seals-deal-to-buy-nxp-semiconductors/">Qualcomm</a> wants to merge with NXP Semiconductors and create the world’s second-largest chipmaker. Bayer’s bid for Monsanto would <a href="http://www.reuters.com/article/us-monsanto-m-a-bayer-deal-idUSKCN11K128">result in a company</a> that produces more than a quarter of the world’s seeds and pesticides. </p>
<p>After years of consolidation, the top four airlines control two-thirds of the U.S. <a href="https://www.statista.com/statistics/250577/domestic-market-share-of-leading-us-airlines/">market</a>. <a href="http://www.newyorker.com/news/daily-comment/we-need-real-competition-not-a-cable-internet-monopoly">In most cities</a> there is one or at most two cable companies. Internet service <a href="http://www.newamerica.org/oti/policy-papers/the-cost-of-connectivity-2014/">is far more expensive</a> and slower than in most countries in Europe or East Asia. <a href="https://www.statista.com/statistics/199359/market-share-of-wireless-carriers-in-the-us-by-subscriptions/">Four cellphone companies dominate</a> 98 percent of all subscriptions.</p>
<p>While recent articles about the AT&T-Time Warner merger have reminded readers about the negative consequences of industry consolidation in terms of the impact on <a href="http://www.npr.org/sections/alltechconsidered/2016/10/25/499185907/the-at-t-time-warner-merger-what-are-the-pros-and-cons-for-consumers?ft=nprml&f=499299869">consumers</a> and <a href="http://www.nytimes.com/2016/10/05/upshot/liberal-economists-think-big-companies-are-too-powerful-hillary-clinton-agrees.html?action=click&contentCollection=The%20Upshot&module=RelatedCoverage&region=EndOfArticle&pgtype=article">income inequality</a>, there is another reason to block this and similar mega mergers – and try to roll back ones already completed such as drug company <a href="http://www.wsj.com/articles/SB123293456420414421">Pfizer’s purchase of Wyeth</a> in 2009: Such behemoths manipulate Congress and regulators, undermining our democracy.</p>
<p>As <a href="http://www.emeraldinsight.com/doi/pdfplus/10.1108/S0198-8719%282014%290000026007">my research shows</a>, nearly a half-century of corporate consolidation has transformed American politics in ways that have undermined the ability of government agencies to respond to voters’ desires and to implement policies that challenge corporate power.</p>
<h2>Checks and balances</h2>
<p>The U.S. political system tends to be seen as one of checks and balances, with tensions and competing power centers among various branches of government as well as between federal, state and local officials. And for most of the 20th century, there has also been the same sort of balance in the business world as well, with political power and influence split between national and regional companies.</p>
<p>In other words, in many industries government policies such as <a href="http://www.federalreservehistory.org/Events/DetailView/25">Glass-Steagall Act of 1933</a> and the <a href="https://transition.fcc.gov/Reports/1934new.pdf">Communications Act of 1934</a> helped ensure a balance between large national companies and smaller ones that operated at a regional or state level. </p>
<p>For example, Glass-Steagall reformed the <a href="https://global.oup.com/academic/product/managed-by-the-markets-9780199216611?cc=us&lang=en&">financial industry</a> to limit the number of nationally chartered investment and commercial banks that could sell their products anywhere, and forbade them from lines of business reserved for savings and loans. State-chartered savings and loan institutions, meanwhile, <a href="http://www.annualreviews.org/doi/abs/10.1146/annurev-soc-073014-112402">were restricted</a> in where they could do business. </p>
<p>Similarly, the <a href="http://web.asc.upenn.edu/gerbner/Asset.aspx?assetID=2575">government licensed</a> television and radio stations to operate in specific localities. National networks could own only a limited number of stations and broadcast only at certain hours, leaving most of the day for locally produced shows. </p>
<p>As a consequence of this national-regional split, local <a href="http://www.emeraldinsight.com/doi/pdfplus/10.1108/S0198-8719%282014%290000026007">companies had more influence</a> over their state senators and representatives, both through the financial largess of their owners and the electoral power of their employees. Thus the influence of America’s elite on U.S. politics was more spread out, and regionally focused businesses were able to limit the reach of large national companies. <a href="https://deepblue.lib.umich.edu/handle/2027.42/43654">This prevented</a> a few giant corporations from controlling government policy and markets. </p>
<p>But that balance depended on vigorous antitrust enforcement. </p>
<p>Part of the problem is that regulators tend to judge mergers on whether they raise prices and reduce choice for consumers. This vague standard leaves a lot of wiggle room for the Justice Department’s antitrust division and the political appointees who supervise the career of government lawyers. </p>
<p>Enforcement from <a href="http://repository.law.umich.edu/cgi/viewcontent.cgi?article=1117&context=law_econ_current">Franklin Delano Roosevelt through Lyndon B. Johnson</a> was strict enough to prevent the emergence of oligopolies or single industry-dominating firms. The policy changed abruptly in 1969, <a href="https://www.ftc.gov/sites/default/files/documents/public_statements/modern-evolution-u.s.competition-policy-enforcement-norms/0304modernevolution.pdf">when the Nixon administration</a> became more tolerant of within-industry mergers, even when they significantly reduced competition. </p>
<p>Newly formed <a href="http://www.nber.org/chapters/c8650.pdf">mega companies and massive banks</a> used their enhanced political power and influence over policy to lobby for more deregulation in the financial, telecommunications and other industries, which in turn <a href="http://www.people.hbs.edu/estafford/papers/newevidence_perspectivesonmergers.pdf">made more mergers possible</a>. By the 1990s, <a href="http://www.jstor.org/stable/2096400">few restrictions</a> were left. </p>
<p>This is why <a href="http://onlinelibrary.wiley.com/doi/10.1002/ddr.430300411/abstract">Americans tend to pay more for pharmaceuticals</a>, cell and <a href="http://www.newamerica.org/oti/policy-papers/the-cost-of-connectivity-2014/">internet services</a> and <a href="http://www.newyorker.com/news/daily-comment/we-need-real-competition-not-a-cable-internet-monopoly">other products</a> than people in many other countries, and why a <a href="https://www.amazon.com/State-Innovation-Governments-Technology-Development/dp/1594518246">growing share</a> of government spending goes to <a href="https://object.cato.org/sites/cato.org/files/pubs/pdf/PA703.pdf">corporate subsidies</a>. One noteworthy example of that is Medicare D, which is forbidden by law from negotiating prices with pharmaceutical companies for drugs, <a href="http://www.nytimes.com/2015/01/08/upshot/the-drugs-that-companies-promote-to-doctors-are-rarely-breakthroughs.html?hp&action=click&pgtype=Homepage&module=second-column-region&region=top-news&WT.nav=top-news&abt=0002&abg=1">many of which were developed</a> in government labs or with federal grants to university labs. </p>
<h2>Challenging corporate interests</h2>
<p>So before all these mergers, regional companies served as an effective check on the power of their national competitors, providing more room for elected officials to formulate policies that challenged their more monopolistic corporate interests. </p>
<p>As one or a few companies have come to dominate major industries, they have the power to block policies that benefit consumers. These businesses <a href="https://www.amazon.com/Fracturing-American-Corporate-Elite/dp/0674072995">are also able to enrich themselves</a> at the expense of rivals and others and to appropriate resources needed for the investments in infrastructure and education that are needed to sustain American competitiveness. </p>
<p>Enron, which <a href="https://www.amazon.com/Smartest-Guys-Room-Amazing-Scandalous/dp/1591840538">imploded into bankruptcy in 2001</a>, was emblematic of the political effects of such monopolistic companies. Enron was able to gain control over energy markets in a number of states, including California. The company’s leverage over federal and state regulators ensured that it was able to overcharge California industrial businesses as well as ordinary consumers. </p>
<h2>The importance of reinvigorated enforcement</h2>
<p>The Obama administration <a href="https://www.stanfordlawreview.org/online/has-the-obama-justice-department-reinvigorated-antitrust-enforcement/">has been tougher</a> in reviewing mergers than any administration since Nixon’s. Yet Obama has not been tough enough to reverse the tide of consolidation. </p>
<p>Most often Obama administration regulators have merely imposed limited conditions before allowing mergers to proceed. In other words, the “gigantification” that has dominated corporate America for the past 40 years has proceeded largely unhindered. </p>
<p>The question is whether this will change under the next administration. Fortunately, in my view, <a href="http://www.reuters.com/article/us-time-warner-m-a-at-t-idUSKCN12N0OF">there are signs</a> that it will.</p>
<p>Hillary Clinton, for her part, <a href="http://www.nytimes.com/2016/10/05/upshot/liberal-economists-think-big-companies-are-too-powerful-hillary-clinton-agrees.html?action=click&contentCollection=The%20Upshot&module=RelatedCoverage&region=EndOfArticle&pgtype=article">had pledged</a> before the AT&T news to increase antitrust enforcement, with some of her own economic advisers arguing that consolidation has worsened inequality by concentrating profits with a handful of companies. She said AT&T’s deal <a href="http://www.reuters.com/article/time-warner-m-a-at-t-clinton-idUSKCN12N0UX">deserves close scrutiny</a>. </p>
<p>Donald Trump <a href="http://money.cnn.com/2016/10/22/media/donald-trump-att-time-warner/">has come out forcefully against</a> the merger, declaring it “a deal we will not approve in my administration because it’s too much concentration of power in the hands of too few.”</p>
<p>If the next administration is able to follow through – which it’s free to do without Congress’ approval – room would be created for more competitors in various industries. Those new, or newly viable older, businesses will bring their particular and conflicting interests to bear on the making of regulations and legislation and on decisions about federal and state spending. Legislators will come under more diverse pressures and will have expanded opportunities to attract support and build coalitions. </p>
<p>Politics won’t be a confrontation between the interests of one or a few corporations against citizens who usually are disorganized and not mobilized. Conflicts among firms within and across industries would create openings for less wealthy citizens to gain leverage as firms need allies in legislative and regulatory arenas they no longer can control through sheer size. </p>
<p>Antitrust was rightly <a href="http://www.theatlantic.com/politics/archive/2016/06/the-forgotten-wisdom-of-louis-d-brandeis/485477/">understood</a> a hundred years ago as a way to empower citizens as well as to reduce prices and improve product quality for consumers. </p>
<p>Antitrust again can help reduce the advantage the biggest corporations have in politics.</p><img src="https://counter.theconversation.com/content/67361/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Lachmann does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>AT&T’s planned merger would add to a growing list of mega deals that have not only harmed consumers and exacerbated inequality but also undermined our democracy.Richard Lachmann, Professor of Sociology, University at Albany, State University of New YorkLicensed as Creative Commons – attribution, no derivatives.