gnu@toad.com (John Gilmore) (03/01/90)
dam@mtqua.att.com (Daniel A Margolis) wrote: > It does not matter whether the company accused of dumping has designed > a product specifically for the US. What does matter is that they have > been found to be subsidizing their US products with their Japanese > profits. Isn't this what AT&T did for years -- subsidize local access with long distance revenues? Why is it good when the FCC orders AT&T to do it and bad when a company (that happens to be from Japan) does it? > Of course, if the Japanese companies manufacture in the US, they can > do the same thing and get away with it (perhaps a weakness in the law). The weakness in the law is the idea that you can regulate cross- subsidization within a company or a market. Let's say you "fixed" this "weakness in the law" so that a wholly owned US company was unable to "dump" products in the US. Are you going to force each product that every company sells to have the same margin? Suppose Sun Microsystems *wants* to buy market share at the expense of short term profits, by selling lots of cheap workstations? That's exactly what they are doing, by the way...but I don't hear anybody screaming about dumping. Suppose the desktop PC clones market is very competitive but laptops are still rare. Should a company that builds both be permitted to subsidize their desktop machines with their laptop revenues? Suppose they only make a dollar profit per desktop PC? Suppose they lose a dollar per desktop PC but the cross-support enables them to stay in the market in the hope of better times? How does this differ from the Japanese selling PBX's at low prices to get into a market? Should Hershey be allowed to sell Hershey bars at 5c even if it costs them 6c to produce? Assuming they can stay in business, why not? The US government spends more than a cent in making pennies, but I hear no cries of penny dumping. > [Moderator's Note: Thank you for an excellent rebuttal and contribution > to the Digest. PT] I don't count a rebuttal as excellent if I can kick a hole this big in it. [Moderator's Note: The flaw in your analogy between AT&T/Bell System subsidies to local service from long distance revenues and the Japanese thing is that AT&T started doing it at a time when we were striving for universal service -- phones in each household, etc. Keeping the price of local service artificially low at the expense of long distance revenues was one way to help spur universal service. And with phone service, unlike other utilities, or perhaps the electronic appliances in your home, it takes two to tango, so to speak. That is, my own phone service is worth more or less depending on many others of you have service also. If you and I were the only people in the USA to have phones, chances are we would not bother having them either. So phone service overall was improved by the cross subsidy since the low rates for local service prompted more people to get phones, thus increasing the value of my phone and service. This is true only of phone *connections* -- not phone *instruments*. If your instrument meets certain minimal standards imposed by the FCC, we can communicate with each other. The Panasonic or AT&T label on it matters not. PT
deej@bellcore.bellcore.com (David Lewis) (03/05/90)
In article <4618@accuvax.nwu.edu>, gnu@toad.com (John Gilmore) writes: > dam@mtqua.att.com (Daniel A Margolis) wrote: > > It does not matter whether the company accused of dumping has designed > > a product specifically for the US. What does matter is that they have > > been found to be subsidizing their US products with their Japanese > > profits. > Isn't this what AT&T did for years -- subsidize local access with long > distance revenues? Why is it good when the FCC orders AT&T to do it > and bad when a company (that happens to be from Japan) does it? > [Moderator's Note: The flaw in your analogy between AT&T/Bell System > subsidies to local service from long distance revenues and the > Japanese thing is that AT&T started doing it at a time when we were > striving for universal service -- phones in each household, etc. > Keeping the price of local service artificially low at the expense of > long distance revenues was one way to help spur universal service.] If promotion of universal service were the only reason for the FCC-mandated cross-subsidy between local and long distance, you might have a point. But guess what -- universal service has been achieved, and we still have a cross-subsidy between local and long distance. Except now, instead of just being a bookkeeping move by AT&T, it's actual money changing hands from ICs to LECs. The fact of the matter is that the government is still promoting the long-distance subsidy of local usage. The reason is no longer to spur universal service; instead, it's a "public interest" issue -- the public is viewed, in a lot of places, as having a "right" to inexpensive local phone service. So we levy an access charge, we sock the ICs for exchange access, and we subsidize local service. Of course, time passes, technology advances, and the market will have its way sooner or later. There will always be users who cost less to provide service to, and users who cost more to provide service to, and entrepeneurs who discover that they can undercut the government-approved price in some areas and take the monopoly to the cleaners. Established interests call it "cream-skimming"; others would call it "the free market". Just ask NYTel how they're doing in the financial district in Manhattan. David G Lewis ...!bellcore!nvuxr!deej (@ Bellcore Navesink Research & Engineering Center) "If this is paradise, I wish I had a lawnmower."