Just yesterday we had a hearing in the anti-trust subcommittee looking at whether or not the consumer welfare standard that has guided anti-trust policies since the days of Ronald Reagan is the right framework. Or whether or not we need to enlarge or get rid of that or adjust it in different ways.

All of these values were part of the overall framework that guided how we looked at things like whether some companies should be able to merge. How we looked at those kinds of issues. But then this group of people came around in the 1970s and they said, “No, no, no. None of that stuff should matter. The only thing that should matter is short-term prices for consumers. If a merger, or what’s happening in the economy is going to benefit consumers in the short-term, then it’s a good thing. That’s all that should matter.” That’s what’s known as the consumer welfare standard. It’s been the reigning law of the land since the early 1980s.

As I said, the good news is that there’s beginning to be this discussion about whether or not that’s a good idea. Whether we should think about how concentration affects workers, affects small businesses, affects communities. People are saying these broader values need to come back into the mix of how we look at anti-trust issues. So there was this hearing yesterday in the anti-trust subcommittee in the Senate. We had some good speakers. Barry Lynn was there from Open Markets Institute and gave a great testimony about why we do need to have a broader way of looking at an anti-trust.

The bad news is that we had folks from the establishment, you could say, Carl Shapiro, who used to be on the Obama administration. Josh Wright, who’s been a very close ally and within the Trump administration on these issues. Both of whom spoke up in favor of this narrow consumer welfare standard. We are hearing this pushback from the anti-trust bar, the attorney’s bar, saying “We don’t want to hear what the public thinks about concentration. We want to keep it to those of us who are experts, who understand these issues and this is the way things work. The folks who are raising questions about concentration, you just don’t know what you’re talking about.” I find that’s a really dismaying way to approach this. 

One of the republican commissioners called out the first federal trade commissioner from Obama’s first term and said that this guy thinks that what we’re doing is perfectly fine. Well it turns out that Obama’s first federal trade commission chair is now working for one of the biggest monopolies in broadband and of course has a different point of view now. A reminder of how we may have come further with the grassroots movement, but still have a long way to go.

But the digression aside, what we’re seeing is that we just had network neutrality repealed. Which is a principle that when you pay for internet access, you’re paying for the entire internet. That your service provider cannot block sites. It can’t decide that some sites are going to load much slower than others because they’re not paying their extortion fees. They can’t enact toll booths in an arbitrary and capricious manner.

That, in fact, the internet is effectively a utility. I don’t really like that language, because utility is complicated and utility can mean different things and we regulate different utilities in different ways. But it is the difference between something that we rely on and we take very seriously in terms of all Americans having equal access to effectively. And a system in which people just pay for what they can get and they’re at the mercy of the market. We’ve moved very strongly in the direction of being at mercy of the market.

Now John follows this issue very closely, I know. So I’m curious if you have any thoughts on this network neutrality debate before we really focus on what we’re seeing in a broader anti-monopoly movement over the year 2017 and then looking back and then forward.

I think, Chris, you’ve done some excellent work and shared a lot on social media and our website, the community network’s website about the limited choices that people already have. This notion that as consumers that we can somehow make choices between companies to get what it is that we want. To avoid the toll lanes. To avoid the toll booths if you will.

And yet, there aren’t really very many meaningful choices. We see that in the energy sector as well. I’ll talk about that more in a few minutes. But I think we’re at this point where the concentration is getting so severe that the notion that we can somehow exercise power as consumers is really a misnomer. 

So I want to pay supreme respect to Hannah and Chris in our office who basically cracked open the FCC database and did an analysis to show that 100 million Americans only have internet access through one of the four providers that we were looking at, Charter, Comcast, AT&T and Verizon that have a history of violating network neutrality. In 50 million households, they only have one option among those four providers. And then in another 50 million households, they have a choice between those providers.

Which is to say that if they don’t like the way AT&T is screwing them over, then they can go with Charter and also not have an open internet through them in the future, now that the federal government has abdicated its role as a regulator. We put this information out there and we’re going to be able to do some more interesting things to show the total lack of market competition. Frankly, there’s no sense that there is new effective market competition on the way.

It’s no wonder that news organizations are laying people off. They’re the ones creating the content but Facebook has been so effective at creating this wall to garden, where people get their news there and never actually go to the sites that are generating that content.

We’ve been hearing just in the last few days from businesses that are now getting pushed off of Apple’s App Store. So Apple has said that if you’re a small business and you’re using one of these template based programs to generate an app for yourself, say you’re a pizza business. You want to be able to have customers order through an app and get their delivery set up that way. A lot of times you’ll use an off-the-shelf product that’s similar to WordPress for websites.

Apple has said, “No, no. We’re going to clean up the App Store. So any of these template based websites, they’re going to go.” What that means is small businesses who can’t afford to pay someone to develop an app just for them, are going to be completely walled off. It’s just like this power to direct commerce, to direct eyeballs, to direct information is really astonishing.

But actually, just want to make one other point, which is that Stacy’s glitching every now and then because she’s one of 30 million Americans who live between Maine and Virginia where they’re stuck with no good option. She basically only has an option of cable access. And even though she’s paying for a connection that would be very good and allow us to have high quality audio, we cannot get that from them on a regular basis, from Charter. This is something that monopoly is impacting our ability to bring you this analysis as we speak. I think we’ll come back to telecom a little bit. But John, tell us a little bit about the role of newspapers lately. 

I just first of all want to highlight when we talk about the energy sector, we are talking about an area in which the word utility is literally meant and describes the actors and the players in the market. But that this has for over 100 years been a very tightly regulated sector where in over 30 states utility companies have a monopoly over a certain service territory. And if you are a customer, you have only one choice and that is the utility that the state has chosen to serve you.

What they found was that essentially these monopoly utilities have grown too powerful for the public regulators to reign in. Part of it was a handout from state government that allowed these utilities to get what’s called construction work in progress. To essentially take money and collect money from customers for power plants before they were producing electricity. I want to quote what the journalist has said who had published this piece that it set off a “bonfire of risky spending $40 billion by four utilities across five states.” $40 billion by these four utilities across five states. For power plants that have almost entirely, are not defunct. That the projects became so expensive and so unwieldy that they have now been retired.

And yet, customers are wholly responsible for the cost of those projects. They gave as an example the city of Charleston, South Carolina owes so much to one of these defunct nuclear power plants that it’s enough money for them to hire 26 additional police officers on a monthly basis, that they pay for power plants that will never produce a single electron.

What this article essentially reveals is that with the help of the legislature, which has in many cases been heavily lobbied and financed by the utility companies, that they were able to run away with rate payer money and to fritter it away at a time when executives continued to get performance bonuses, despite projects that were clearly not going to result in the production of electricity. It’s an enormous scandal in the southeast.

But it actually highlights an ongoing problem that we’re seeing in the utility sector and it’s especially becoming poignant now because the technology and the energy system is moving in exactly the opposite direction from monopoly. That while for 100 years this industry was concentrated for the reason that power plants were large and expensive. And therefore we believed that we needed large, capital intensive businesses to build them. We’re now going in the opposite direction. There’s no longer a monopoly over power generation.

I couldn’t put a coal power plant on my roof. It would have been silly. They don’t build them that small. But I can certainly put solar panels up there. I can put a battery in my garage to store that energy. I can have an electric vehicle that I can charge from those solar panels. We’re at this fascinating moment where the utilities aided sometimes by commissions that they’ve captured and legislatures are running in one direction, doubling down on the last century’s model of centralized power generation and making incredibly risky bets.

At the same time, that all the technology and the economic opportunity is moving the opposite direction. We have this exciting grassroots resistance by customers being able to make different choices. It’s actually spreading as well to cities. You have over 50 cities in the United States that have said, “We actually want 100% of our electricity to come from renewable resources.” And throwing that in the face of the utility and saying, “If you can’t do it, then we’re going to try to do it.”

And in California, where they have a law, enabling communities to make that choice, to choose where they get their power from. 85% of electric customers in California, who won’t be rate payers anymore, they’ll be customers. By 2020 will be supplied by someone other than those incumbent utility monopolies. Most likely by their own city or county, which will be making those choices for them. When customers get a choice, they exercise it in a big way. You can see of course, from the story in the southeast, $40 billion dollars bonfire, why they might want to do so. 

At some point, inevitably, the power of those corporations is that they become so big that there’s no way for public oversight to really be effective at regulating them. We still have to think about it’s not as though the solution is simply just to have bigger and bigger government. The solution has to be, how do we disperse the power to begin with. It’s really exciting to hear that there’s so much movement on the energy front to do that. 

the incumbent monopoly not getting a satisfactory result from the regulatory commission about building a new gas plant, go instead to the legislature, where there are 50 lobbyists, one for every four legislatures in the Minnesota legislature could run around and get them the result that they want, which is a billion dollar power plant and a big return for their shareholders. 

Which was, you have conservative professional economists. And then you have professional conservative economists. Which I think of as the Wall Street editorial board. Which is an economist who use language to just justify whatever the big companies want.

One of the things I’d like, John, you to just very briefly react to is nuclear power plants. Because they played a role in this. One of the things that just drives me nuts is whenever I hear one of these professional conservative economists talk about how we need more market-driven solutions, like nuclear power. How do you react when you hear that?

2017 is a great year to talk about this because nuclear power plants are being propped up in many markets across the country because they are no longer competitive. The existing plants cannot compete. The new plants can’t be built. They’re simply not competitive anymore against the technologies that we have, rooftop solar, wind power, energy storage. Nobody could build a nuclear power plant, even with all of those loan guarantees and liability being underwritten by the Federal Government.

It’s laughable, this notion that somehow nuclear power has any role to play in a competitive market in energy. It’s really going to be the stuff that’s coming from the outside, the entrepreneurial solutions like people coming in and helping you install solar on your rooftop. People packaging solar and energy storage or ways that you can buy solar along with an electric vehicle.

Also, please tell other people about our work. Share that post on social media or copy it onto a cassette for that hipster friend of yours. Now, let’s get back to building local power.

As we continue to talk about some of the major mergers and the implications of monopoly power toward the end of 2017, there’s another one that’s popped up, that we want to discuss again before we reflect on how we got here over the course of 2017.

That’s Aetna and CVS. Why is that a big deal Stacy? I see you on the monitor rolling your eyes. This is something that’s obviously very close to you. I grew up thinking of CVS as just a place where I could buy candy bars. I’ve since learned that it’s something much more different than that.

They also own one of the largest pharmacy benefit management companies, CVS Health. That’s a company that decides what reimbursements rates are for other pharmacies, what drugs are covered. They basically manage your prescription drug benefits on behalf of insurers.

CVS has this long track record. Because of that conflict of interest that they have of basically squeezing independent pharmacies behind the scenes. Basically saying, “You can either take this reimbursement rate that is so low you will lose money on every prescription drug you fill. Or we can just leave you off the list and then people who have this particular type of insurance won’t even be able to get their prescription at your store.”

CVS has been doing that in order to steer people to its own mail order and retail pharmacies using its power as an insurance reimbursement. And then they’ve also been jacking up prices to consumers and limiting choices. There’s lots of evidence that people want to have choices, that they prefer the service at local pharmacies and they’re often being denied that.

So now, they want to go a big step further and buy a major health insurance company and have this lock on people from start to finish. When it comes to healthcare provision. They’re envisioning this idea of having more and more clinics in CVS stores. Basically, they’ll control your insurance, what’s covered, where you can use it and they will steer people to their own operations.

The idea that given how incredibly consolidated the healthcare system is, and that we know that that consolidation is driving the huge increases in prices and is pushing out a lot of community-based hospitals and pharmacies and so on. That we would even be talking about this is really astonishing. 

I don’t know what to believe. But it seems like that’s the right decision. I don’t know if you have any comments on that, Stacy, but I’m curious if over the past 12 months you see a shift and you have more hope now, perhaps just because the mergers are slapping everyone in the face at the end of the year. So that you just can’t help that more people are noticing it. 

For a long time we’ve thought, “Oh that’s not a problem.” Now, when we look back at those previous mergers that happened that were of this nature, we’re realizing that those were bad ideas. People are beginning to look with more scrutiny on this, including in the Federal Government, which is a good thing.

I’m also more importantly, just incredibly encouraged by the grassroots swell of opposition. Whether it’s people insisting on owning their own power. Whether it’s the level of interest everywhere now, in anti-monopoly policy and concentration. The fact that we’re seeing elected officials respond to that. We’ve got more members of congress and state agencies and other kinds of local elected officials who are talking about concentration in a way that used to be true.

I think you talked about the professional conservative economists and the very important people. I think there’s a way in which the citizens of this country are at the gates saying, “No more. No more. The establishment has been making decisions in ways that have not benefited my community. And we’ve had it. We’re going to start to take reins in our own way.” 

As I was learning about this then I was learning about Berkshire-Hathaway and the power companies that John’s talking about. And learning about Berkshire-Hathaway, one of the things it did for instance, it owns the trains that lead to the power plants. So they can charge a lot of money for the coal to transport the coal. The rate payers have to pay it. Because the public utility commission is regulating the price of the electricity. If the price of the input goes up a lot, well then people just pay more for their electricity.

I think this vertical merger issue is really good that the economists are recognizing it and the damage that can be done under it. But John, I’m just curious if you have any reflections either about vertical mergers, coal plants or just in general actually, how we’re doing at the end of 2017, versus the beginning of it. 

There is more growth of community-based solutions, whether that’s ways that we can invest collectively or ways that people can have actual choices. It’s helpful because this sector is defined by monopoly for over 100 years. People already knew that it was a monopoly. It’s a known fact that we started with monopoly and that we’re moving away from it.

Whereas, I think the challenge I see in some of our other sectors of our economy is that we have had to describe it as monopoly for people to understand. Like your work on Amazon. So I think when I look at the energy sector, I am very optimistic about the fact that not just this enormous story about 40 billions of wasted rate payer money down in the southeast.

But that people are really focused on what are the motivations of the companies who have this monopoly power? How have they exercised it in a way that’s not in our interest and clearly not in our interest and therefore, what solutions can we turn to, to give us those better choices. I think that’s what is coming up here at the end of 2017 and into next year.

So what I would say to cities in this harkens back there was a campaign here in Minneapolis about four years ago called Minneapolis Energy Options. It was run at the same time as the municipal elections. I think the beauty of that concept is that we need to look at all the options that are on the table.

The city of Minneapolis, Minnesota could form a municipal utility. There’s a statute that gives it that legal authority. But there might be a lot of other ways that it could do that too. It could look at purchasing power directly from energy producers and then having it transmitted to the city. It could facilitate community-based energy production. It could use its own water utility, because it has a utility already, to offer financing for energy. I think there’s a lot of options.

Municipalization, it takes a long time. It takes a lot of lawyers. It’s not necessarily the best strategy. But it should always be there on the table as the big stick that you have while you pursue other choices that you might have.

Stacy, I was curious. Something I read just today about Amazon, was making me think about what is a response that we can have to the way that Amazon’s market power is growing. It was about Amazon selling Apple TV and Chromecast, these two video streaming devices. Amazon is now going to start selling them again after two years of prohibiting their sale. Because they were waiting for Apple to provide in its software, on its streaming device, access to Amazon Prime Video.

They essentially said, “We’re not going to sell your product until it allows people to buy our service.” And that seems to be that power of that platform. Ironically, we’re talking about two of the titans in terms of monopoly power, fighting each other.

But what I’m curious is, what is there that gives us hope to change that. You’ve documented, I think, extensively, the degree to which Amazon is growing its power. It controls the amount of searches for eCommerce. The feeling that businesses have that they need access to that platform.

We’re having better conversations, I think, about anti-trust and Federal enforcement. But what are other ways, what are other means for small businesses or for consumers for citizens to participate in changing this system?

In terms of using the powers of anti-trust law, it’s all there. At the Federal level, we can and should break Amazon into at least two pieces so that it, as a platform, as a platform that other companies depend on in order to reach the market is a separate entity than Amazon as a retailer and a manufacturer of products. Because there’s inherently a conflict of interest there, which is why and how Amazon uses its market power to undermine those competitors. We should break it into at least two pieces.

We should also apply common carrier kinds of regulations to Amazon’s platform so that it has to treat all commerce fairly and in the public interest according to a set of guidelines there. We also need to think about data. One of the things that gives these big tech companies their power now is the enormous amount of data that they have and the fact that a newcomer to the marketplace can’t replicate that and therefore is at an inherent disadvantage and is easily blocked from being able to compete.

There’s a lot of good thinking going on about how to handle data. Whether it’s that people ought to own their own data and be able to port it to other companies. How we should regulate this use. They’re thinking about it quite closely in Europe and so on. There are tools there at the Federal level.

I would say to your question about what do citizens do. I think that we have to keep raising this issue by continuing to talk about it locally. And in particular, we need to get our local and state law makers sensitized to what’s happening to our local economies.

A huge amount of our tax base is the commercial businesses. The main street retailers that make up our streets and that provide a lot of our property and sales tax revenue. There really isn’t a sense at the local level of what’s at stake and how many jobs are associated with this.

What you see is you’ve got cities all over the country who are for example, putting big bids in to get Amazon second headquarters where we’re talking about giving away literally billions of dollars in public money to land Amazon’s headquarters. We’ve got a lot of subsidies for warehouses. There are a lot of ways in which local governments and local communities have been fueling this as well. That’s part of how we need to push back against this.

We were hoping to talk a little bit more about where we think it’s going to go. Let me leave this as an exercise for people who are listening, which is to say, you will determine where this goes. Let’s make sure that we’re organizing around things that we need and solving this problem the right way. Making sure that we’re breaking power up and increasing power at the local level so that we can resolve problems without needing another big firm. Make sure we solve the problem of Amazon in a way that doesn’t just give Apple more power for instance.

I think we should wrap up though with some recommendations. I was going to suggest that people who are interested in the network neutrality stuff, rather than suggesting at article, there are two reporters who are among many who are doing really great work. I can’t list them all, but Jon Brodkin writes for Ars Technica. It’s a wonderful site that does a lot of in-depth technical news. His writing on the network neutrality stuff is great. And Kaleigh Rogers is a writer for Motherboard, which is a bit more irreverent and in some ways just very in-your-face news about technology issues. I recommend following both of them. John, can I guess that you’re going to recommend a certain article from South Carolina? 

What I would say though, in terms of a recommendation is check out a resource that we’ve been building, called the Community Power Toolkit on ilsr.org that looks at the ways that we can act collectively to solve this problem. Not only ways that we can do for example, group purchasing of solar. Getting into this market and helping to reduce our energy use and become more self-reliant. The things that we can ask our utility to do and to change. And finally, the things that we can ask our cities to do because cities do have more authority than they think, over our energy system. There are many ways that they can act to change it.

Chris has graciously pulled up the title of the piece that I recommend you read. Power Failure: How Utilities Across the US Changed the Rules to Make Big Bets with Your Money, by Tony Bartelme. I highly recommend that piece.

The other thing I would say is that we’ve posted a number of resources recently for people who want to take action locally. The one I would point people to that’s on our website at ilsr.org and if you go over to the independent business section, we have eight policy strategies that cities can adopt to strengthen locally owned businesses.

We’ve also got some short videos up of recent presentations that talk about what it is that people can do at the local level to really take control of local economic development and create a more vibrant local economy and insulate your community from some of the effects of monopoly power that we’ve been talking about. 

Thank you for listening to Building Local Power. You can find links to what we discussed today by going to our website ilsr.org and clicking on the show page for this episode. You can sign up for one of our newsletters and connect with us on all of the internet’s social medias.

This show is produced by Lisa Gonzalez and Nick Stumo-Langer. Our theme music, it’s Funk Interlude by Dysfunction_AL. For the Institute for Local Self-Reliance, I am Christopher Mitchell. 2018 is looking like a good time to build local power. We’ll see you there.