10 months ago

Is Facebook really like Ma Bell?

Some commentators and politicians have proposed regulating Facebook, Twitter and Google as public utilities.

To make sense of this proposal, let’s consider the economic role of public utilities.

Today’s social media giants might meet the popular definition of monopoly, namely having a very large market share. Economists, however, use a much stricter definition, and public utility regulation is applied only to the specific type known as a “natural” monopoly. Natural monopoly refers to industries where the cost per unit produced or customer served falls due to a very high first unit cost and a very low cost of serving extra customers.

Consider the electric grid. Establishing the grid requires generation plants, transmission lines, substations, and finally the power wires in our communities. Once built, the cost of connecting one more home or business to the grid is very low. The same dynamic applies to water and sewer systems, landline telephones and roads and streets.

One large firm will likely dominate such industries. Why? Competition drives price down to the cost of production. Here, the largest firm has a cost advantage and can profitably charge lower prices than its rivals. Smaller firms can either match the leader’s price and lose money or maintain a profitable price and likely lose customers. After the smaller guys go bankrupt, the large firm can raise its price and earn big profits.

We frequently use anti-trust laws to prevent the establishment of or to break up existing monopolies. But breaking up a natural monopoly is unlikely to produce competition for long. The largest firm’s cost advantage doesn’t go away.

What are the alternatives? One is government ownership of the utility, which we rely on for water, sewers, roads, and electricity in communities like Troy. Cooperative ownership by customers – electric and natural gas co-ops – prevents managers from trying to profit at customers’ expense.

Public utilities regulation gives a private, for-profit company an exclusive service territory, albeit with restrictions. Government regulators, in Alabama the Public Service Commission, set prices and other terms of service. And the utility is a common carrier who must provide service to all customers willing to pay the regulated price. Economists and lawyers developed the public utilities doctrine around 1900.

Another way to think about a public utility is that competition between profit-seeking businesses normally best serves customers. But the enormous cost of power grids renders multiple systems and competition unattractive. Perhaps having one grid and economists deliver the benefits of competition through rules makes more sense.

Whether the public utilities doctrine served America well during the 20th Century is a question for another day. How about applying this model to social media today?

Facebook and Google meet the popular definition of monopoly – they dominate their markets. Twitter dominates its unique product, but alternatives exist to push out messages. None of the three has a massive, critical physical infrastructure creating declining cost per customer.

The social media giants do possess an advantage resembling natural monopoly. They have coordination value: the value of being on Facebook increases with the number of other users. Economists call this a network effect. Although many economists fear that network effects might lock us into inferior technology, in practice entrepreneurs can get consumers to switch: we do not still watch VHS movies and listen to cassettes.

The social media companies serve their customers very well. For instance, YouTube’s advertising allows performers to earn money, with some stars earning millions per year. Facebook has offered users innovative features and an easy interface. Market domination due to better service benefits consumers.

Alternatives to Facebook currently exist, like LinkedIn and even MySpace. More significantly, a new rival would not have to duplicate a massively costly physical infrastructure. The economic case for regulating the fast-changing digital world with a model designed for the physical world is weak. Today’s social media giants will likely have a much shorter time on our economic stage than phone and electric utilities unless we cement their positions via regulation.

Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University.

5 hours ago

Mobile Bay Bridge project awarded $125 million grant by Trump administration

The I-10 Mobile Bayway Bridge project has been awarded a $125 million Infrastructure for Rebuilding America (INFRA) grant by the U.S. Department of Transportation.

The announcement was made Monday by Senator Richard Shelby’s (R-AL) office, which said the amount signifies one of the largest competitive federal grants ever awarded to the state of Alabama.

Additionally, the city of Tuscaloosa was separately awarded a $6.87 million INFRA grant to help replace an overpass bridge located on University Boulevard and U.S. Highway 82.

“Both of these projects will help improve safety, alleviate traffic congestion and concerns with overcapacity, and promote increased economic development opportunities across the state,” Shelby said in a statement.

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“Investing in essential infrastructure in Alabama and across the country promotes a more prosperous future for our nation,” he concluded. “I thank (U.S. DOT) Secretary Chao for her attention to these projects and look forward to continuing my work to ensure that our state is well represented in any effort to fund federal transportation priorities.”

The federal award to the I-10 Mobile Bayway Bridge project comes amid significant controversy over the Alabama Department of Transportation’s (ALDOT) plan to pay for the project, at least partially, through tolling. The total projected cost of the project is approximately $2 billion.

Congressman Bradley Byrne (AL-01) has previously lamented that ALDOT was not more focused on securing federal money and avoiding tolling, even as Alabama federal officials like Byrne and Shelby worked to secure funding access.

ALDOT was previously turned down for a $250 million federal grant application for the project last year.

Byrne led Alabama’s entire House delegation in sending a bipartisan letter to Chao in February in support of funding the project with an INFRA grant.

After the news of the award broke on Monday, Byrne released a statement celebrating the news and reaffirming his opposition to ALDOT’s tolling proposal.

“This is outstanding news for the people of Southwest Alabama! Fighting for federal funding for this bridge has been one of my top priorities in Congress, and I am glad the Trump Administration has come through with this grant award,” Byrne said. “I am very appreciative of the help from our entire Alabama congressional delegation, especially Senator Richard Shelby.”

“Today is a positive step toward making this project a reality, but our work is not over,” he added. “The current tolling proposal for this project is unacceptable, and I will continue leading the fight against tolling and working to ensure this project helps – not hurts – the people of South Alabama.”

The tolling proposal has also become a statewide political piñata, with 2020 Republican U.S. Senate candidates such as Tommy Tuberville and Secretary of State John Merrill coming out swinging in addressing the topic recently.

Sean Ross is a staff writer for Yellowhammer News. You can follow him on Twitter @sean_yhn

Byrne: Border battle harms Alabama communities

The detrimental effects of the humanitarian and national security crisis on our border extend all the way to Alabama communities. That’s why I’ve made it a priority to address our immigration policies.

One of the most obvious ways our insecure border harms our communities is the drug trade. Our porous border is perhaps the most significant contributing factor to the ongoing opioid crisis — the worst drug epidemic in modern American history. In 2017, over 47,000 lives were claimed by opioids. That’s more than those from car accidents and firearms. These deaths have affected families across our great state.

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The drug problem is made worse by the unprecedented migrant surge. James Carroll, director of the U.S. Office of Drug Control Policy, said just last week that drug seizures are down this year because so much attention is being diverted to humanitarian needs.

Because of that diversion, border patrol agents and resources are unable to be allocated towards their fundamental law enforcement functions. According to Carroll, more drugs are coming in than ever before.

One of the primary drivers of the migrant crisis is our asylum policy. Through a combination of loopholes worsened by a legal settlement made by the Clinton administration, migrants are encouraged to cross our border and give themselves up to law enforcement.

After arrest, migrants claiming asylum are eventually permitted entrance into the country while their claims are processed. This is permitted even when migrants do not cross at a legal checkpoint.

Although, by some estimates, only around a tenth of asylum claims are found by our courts to be legitimate, the vast majority never show up for their court date and remain free inside the United States.

A disproportionate number of these asylum claims are made by able-bodied young men. Only a few months ago, a Mobile teacher was killed in a car crash by an illegal immigrant minor who had falsely claimed asylum but never showed at his court date to avoid deportation.

The coyotes and cartels, of course, have every reason to facilitate migrants along their journey and orchestrate lawlessness at the border.

Last week, one of the biggest points of entry at the Southern border had to be shut down after a wave of nearly 50 undocumented immigrants rushed the border into Texas. The group attempted to tear down barricades and assaulted several border patrol officers who were forced to deploy tear gas and pepper balls.

Let’s call these people what they are – criminals. And while border agents were able to keep these criminals out of our communities, many more slip through the cracks while agents deal with illegal stunts like this and the humanitarian needs of asylee claimants.

Last year, a 13-year-old girl in Huntsville was beheaded after witnessing the stabbing of her grandmother by gang members in a horrific incident involving members of the Sinaloa Cartel. It is disheartening that gangs like MS-13 have infiltrated communities throughout our nation, but stories like this reinforce the sad truth that the problem is impacting Alabamians.

There are other significant problems that do not receive headlines. I’ve spoken with Alabama sheriffs who have shared horror stories about the strain illegal immigration places on their deputies. And I’ve talk to incredibly frustrated school superintendents who must divert resources away from educating local students to deal with their illegal immigrant population. Our hospitals are also placed under enormous burdens by illegal immigration. And governments are forced to pay for services for illegal immigrants that could have gone towards roads, bridges and other services for Americans.

This is not just a Texas, New Mexico, Arizona or California issue. This is an Alabama issue. I will continue standing with President Trump and work to get an immigration system that works for the American people.

U.S. Rep. Bradley Byrne is a Republican from Fairhope.

7 hours ago

Boating deaths are soaring on Alabama’s lakes and rivers

BIRMINGHAM, Ala. (AP) — Alabama has already had its deadliest year in two decades for boaters — and the summer isn’t nearly over yet.

Boating accidents in the first 6 ½ months of 2019 have killed 25 people, AL.com reported.

Already, that makes this year the deadliest one since 1998, when 32 people died. The number of deaths so far this year is already higher than year-end totals for the past several years.

This July alone, 12 crashes resulted in six deaths.

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“In my 24 years of doing this, I’ve never seen anything like it,” said Capt. Gary Buchanan, the commander of the Alabama Law Enforcement Agency’s Marine Patrol.

Investigators can’t definitively pinpoint the cause for this year’s drastic increase, Buchanan said.

“Some have happened at night, some during the day, some have involved one boat, some two boats and alcohol has been a factor in some,” Buchanan said. “It’s all over the spectrum.”

There has been a decrease in Marine Patrol presence on Alabama’s lakes and rivers. There are roughly 45 Marine Patrol current officers throughout Alabama. There are 21 vacancies — jobs that were all filled 10 to 15 years ago, Al.com reported.

Boater registrations have also increased in recent years.

“There’s an increase in boaters and there are fewer Marine Patrol troopers on the waterways,” Buchanan said. “There’s no doubt that an enforcement presence has an effect on behavior, just like when you top that hill and you see a trooper car in front of you.”

The year with the most boating-related fatalities was 1972, which had a year-end total of 55. The year with the fewest, according to ALEA statistics, was 2013, with 10.

(Associated Press, copyright 2019)

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8 hours ago

Alabama K9 officer dies after drug raid

“Jake,” a K9 officer with the Alabama Department of Corrections, has died following a raid Thursday on Staton Correctional Facility in Elmore County.

CBS 42 reported last week that Jake was recovering after having a medical emergency during a contraband raid at the prison. He reportedly came into contact with synthetic marijuana and became unresponsive. Medical personnel and his handler at the prison then heroically performed live-saving measures on the K9, who was expected to return to duty within a few weeks.

However, CBS 42′ Reshad Hudson reported on Monday that Jake died from complications following the initial incident.

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WSFA is reporting that Jake died on Saturday at Auburn University Veterinary Clinic.

“I was saddened to hear that one of the Corrections K9s, Jake, lost his life over the weekend,” Governor Kay Ivey said. “This K9 died in service to public safety and in service to the state. Jake is an example of the goodness, the loyalty and service that our four-legged friends provide. We certainly lost a loyal companion.”

A criminal investigation into Jake’s death is reportedly underway. More testing of the apparent synthetic marijuana is pending, according to ADOC. Officials told WSFA that anyone found to be responsible in Jake’s death will be prosecuted to the fullest extent of the law.

Jake had worked with his handler, Sgt. Quinton Jones, since the K9 joined ADOC in 2014.

“This is a difficult time for our ADOC family and especially for Sgt. Jones and those assigned to our K9 Bureau who worked with Jake on a daily basis,” ADOC Commissioner Jeff Dunn told WSFA. “I extend our deepest condolences for the loss of this noble K9 who honorably served the State of Alabama and for ultimately giving his life while protecting the public.”

Dunn added that Jake likely saved lives by detecting the substance during the raid.

“With Jake’s training and ability to find the narcotic, he saved other lives by giving his own in the line-of-duty. Jake’s heroism and ultimate sacrifice will never be forgotten,” he emphasized.

Jake will be given a burial with full honors this week, according to WSFA.

Sean Ross is a staff writer for Yellowhammer News. You can follow him on Twitter @sean_yhn

10 hours ago

Byrne visiting U.S.-Mexico border on Monday

Congressman Bradley Byrne (AL-01) is visiting the United States’ southern border on Monday, the Republican U.S. Senate candidate’s office announced in a release.

Byrne reportedly arrived at the border Monday morning and will meet with Customs and Border Protection officials, tour a port of entry and visit an Immigration and Customs Enforcement (ICE) detention facility.

“As the national security and humanitarian crisis at our border escalates, it is important to see the situation firsthand and talk directly with border agents, law enforcement, and local officials about the challenges they face and what resources they need,” Byrne said in a statement.

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He has been a consistent supporter of President Donald Trump’s immigration policies.

“The American people have demanded a lawful system of immigration that protects their economic and personal safety, and I will continue working closely with President Trump and his Administration to secure our border, support law enforcement, and keep the American people safe,” Byrne concluded.

Senator Doug Jones (D-AL) has opposed building a wall on the U.S.-Mexico border.

Sean Ross is a staff writer for Yellowhammer News. You can follow him on Twitter @sean_yhn