Knowledge Problem

Lynne Kiesling

One of the main policy questions in our use of radio spectrum is whether or not to manage the spectrum as a commons. Leaving the 802.11 portion of the spectrum as a commons has created a rich network of wireless access points. Some idealists envision being able to traverse the country and have a continuous wireless connection.

Hang on … isn’t one of the lessons of common pasture, of overfishing, of air and water pollution, that such open access leads to congestion, overuse, and exploitation? And dynamically speaking, who would invest in the wireless network, with no expectation of profit? This is the tragedy of open access.

Thinking about property rights and exclusion costs sheds some light on this conundrum. One fundamental determinant of whether or not we treat a resource as a commons is the cost of defining and enforcing property rights. Another way to put this: what is the cost of excluding non-authorized users? If you can exclude, then you can avoid the tragedy of open access. We do this, through commercial services like T-Mobile, Wayport, and other subscription services. And for people installing wireless networks in our homes, we can exclude via password protection. Thus even though the underlyhing legal treatment of 802.11 is a commons, low costs of exclusion enable us to manage it in such a way to avoid the tragedy of open access while still using the resource productively.

I noticed an interesting twist on the exclusion cost point yesterday at O’Hare. Many frequent travelers have memberships in clubs, like American’s Admiral’s Club. One benefit of the Admiral’s Club is that they provide a T-Mobile Hot Spot for their members. When the airport is crowdes (particularly on days like yesterday with bad weather), you routinely see people siktting on the hall floor outside of the Admiral’s Club, poaching the T-Mobile Hot Spot. They’re not Admiral’s Club members, but they have T-Mobile subscriptions. The cost to American Airlines of excluding people from using it is too high to be worth it (by, say, blocking the signal at the wall, which is expensive). Generally there aren’t enough poachers to create enough congestion to degrade service to Admiral’s Club members. In other words, the hallway poaching is an irrelevant externality. Even without being able either to charge the poachers or to exclude them fully, American Airlines still finds it profitable to provide the T-Mobile Hot Spot.

Much of the discussion of spectrum as a commons treats it as an either-or: etiher commons or pure private property rights. Such a treatment is too simplistic. Low exclusion costs mean we can manage the 802.11 commons to avoid the tragedy of open access, while still enabling us to contruct wireless networks within the commons.

Lynne Kiesling

Manolo’s recent post about fashion and new media is a superb read, and not just for those of us who care about fashion:

Or if you wish to see the same principle at the work in the matter of the housewares look at this, The George Foreman/Michael Graves Grilling Machine.

We now wish our clothes, our things, even our grilling machines to be stylish in the way that we hope reflects our individuality.

At the same of the time, the medias they have become more democratic, and the new media tools, especially the blog, they have given ordinary peoples– shoe lovers, teenaged girls, dandies, stylish college professors, and anyone who has the computer– the tools to talk about the style and the fashion to the wider audience, to become the fashion and style critics. …

Once, we had to wait for the Vogue, or the New York Times to read what the high and the mighty thought about the latest runway show. Now, on the day of the show, we can turn to the La Coquette in the Paris, or the Spirit Fingers in the Hong Kong, or the Cool Chiq in the Scandinavia, or the I Am Fashion girls in the New York and the London for the informed and entertaining commentary.

Stylish college professors? Is there such a thing (wink wink)? And may I point out that La Coquette has decamped from Paris to Chicago for two months. C’est magnifique!

OK, back to the point … Manolo’s point about both the democratization of the idea and manifestation of fashion and the reporting and discussion of fashion is another example of the decentralizing and disintermediation, and in the case of fashion blogs, reintermediation of a different kind, that we have seen in other areas in the past few years.

And I love it.

Lynne Kiesling

I am a hockey fan, and have been since childhood. Because I am from Pittsburgh, it is unimaginable that I would support any team other than the Pittsburgh Penguins, even though I have now lived in Chicago for longer than I lived in Pittsburgh. So I was excited to see that OLN had several Penguins games listed in their TV schedule for the season.

October 10 arrives, Pittsburgh v. Buffalo. I turn on OLN. It’s ice fishing. I rub my eyes and look at the digital schedule. Yep, it’s supposed to be hockey. I look at the OLN website. Yep, it’s supposed to be hockey. I send off an appropriately worded complaint to OLN.

Turns out, I and other hockey fans who subscribe to Dish Network are pawns in a slugfest between Comcast, which owns OLN, and EchoStar, which owns Dish:

EchoStar dumped OLN after the latter, without warning, dropped its NHL coverage for a bass-o-rama show. The crux of the argument: Placement in Dish’s lineup of OLN, devoted mainly to fishing and hunting programming.

OLN is in Dish’s package of 180 channels but wants to be included in the 120-channel package. It’s about money. OLN paid $135 million – not dime-store numbers but not a king’s ransom in the world of sports – to carry the NHL and is using the games to negotiate a more favorable, and possibly more lucrative, spot with Dish.

The latter isn’t biting, calling OLN (and Comcast’s) move an attempt to “bully” Dish’s subscribers into paying more for outdoor programming because, Dish maintains, it would have to charge subscribers more to provide OLN in the 120-channel package.

OLN blocked transmission to Dish customers 10-13 October, and EchoStart subsequently decided to drop OLN from their offerings. Here’s a CNN/SI article on the situation.

I am pretty hacked off about the whole thing; the two reasons we upgraded to the 180 package were 1. Fox Soccer and 2. hockey+Tour on OLN. So I think it’s true that Comcast is trying to bully Dish. But I would also prefer to have OLN included in the 120 (although at the margin my preference is irrelevant, because I’m WTP more to get Fox Soccer, and that’s not going to be in the 120 any time soon).

Both parties are creating lots of bad karma and negative goodwill and reputation capital, as far as I can tell. Honestly, I think if OLN wants to be in the better bundle, it’s going to have to offer less fishing and Survivor and more sports programming. Hockey + Tour de France is a start, but until they get more sports, they will be considered a part of an outdoor package, and thus relegated to the 180.

It’s been three weeks, and no resolution. How stupidly stubborn can either/both be? As stupidly stubborn as, say, the NHL owners and player’s union? Hmmmm … I don’t care which package it’s in, because obviously I’m willing to buy the bigger package for just two channels (although I have to admit that getting the style channel has been an unexpected bonus!), so once they resolve it I get it again. But resolve it already! Yes, they are fighting over big bucks, but think of the losses they are creating by having this drag on for almost a month.

And why is the NHL not weighing in on this? And the Tour? Because ya gotta know that EchoStar will argue that no one is going to watch the Tour now that Lance is retired (I think they’re not entirely correct, but that’s another story). The NHL should care, because I am not following hockey as closely as if I could watch it, and I’m probably pretty representative. Are there sufficiently few Dish subscribers that the NHL doesn’t think they are worth fighting for?

The Pens play the Rangers tonight on OLN. Maybe after my yoga class I’ll go over to my friends who have DirectTV …

Lynne Kiesling

Couple of interesting developments in digital availability of books. Yesterday Google’s release of the beta of Google Print opened many books, particularly ones that are out of copyright (but also ones on which the publishers provided information to Google), for search and online reading. The content provided is the union of the sets at the New York Public Library, Stanford, Harvard, Univ. of Michigan, and Oxford.

Predictably, authors and publishers “representatives” complain that Google will violate copyright by scanning in works without their permission and allowing people to search their contents. Google contends that it will not allow online access to copyrighted works without permission, and that searching a work is different from reading it.

On the same day, Amazon announced that it would take a page out of Apple’s book, and offer online content by the page. Because it would charge for fuller access than just the currently available “search within this book”, their offering is unlikely to set off the property rights argument that the Google approach has.

This Information Week article on the new services is informative.

My take on Google and Amazon is that their offerings may end up being complements more than substitutes, and that in particular the Amazon approach will have a “long tail” nature to it, for the works that it sells. For other works, particularly those in the public domain, the Google service may be more useful, although it’s too early to say.

An illustrative example: I did not have my copy of Schumpeter’s Capitalism, Socialism, and Democracy close to hand the other day, but I wanted to verify which chapter contained his famous discussion of “the perennial gale of creative destruction” for a reading list I was constructing. At Google Print, when I entered “creative destruction” I got a list of links to references within books other than Schumpeter; I got a similarly non-specific result from Google Scholar. Note that this phrase has become like “Kleenex”; it has entered the vernacular sufficiently that searching on it is quite broad. But I wanted to see what I would get.

Then I narrowed my search to Schumpeter perennial gale creative destruction in Google Print, and while I got a lot of references to Schumpeter’s use of the phrase, I didn’t get a link to the actual book (although the first one that popped up was the editor’s introduction to his Theory of Economic Development).

My reaction to both of my Google Print searches was that they revealed to me a list of books that I should read, and perhaps think about buying. Some of the books were ones I had already read, some were ones of which I was aware, but some were new to me, and sounded interesting and valuable. That’s good, and should comfort the authors and publishers who are taking the word-equivalent of the RIAA line on music, and who are incorrect in thinking that online availability will reduce music sales. You can’t buy what you don’t know exists, and Google Print seems like it will create new information about the existence of potentially interesting books. Also, the left-hand side of the page lists places to buy the book, including the publisher, Amazon, Barnes & Noble, Froogle, and BookSense.com (an independent bookseller aggregator).

But I was looking for the precise book reference, so I refined my search to include the book’s title, but it still did not pop up. That is likely to change as the database of titles evolves, but it didn’t help me yesterday.

So off I went to Amazon, and I used the “Search inside this book” function on the page for Capitalism, Socialism, and Democracy. Entered “perennial gale of creative destruction,” and Bob’s-your-uncle, there was the page reference. A quick look at the table of contents, also available online, told me that the discussion occurs in Chapter VII.

From the Information Week article:

Both of Amazon.com’s upcoming services [Amazon Page and Amazon Upgrade] stem from its Search Inside the Book option announced two years ago. The feature lets customers find books by searching the text inside, rather than just by author or title. The company says half of the books it sells in the United States are found through such searches.

Search snippets for free, pay an amount less than full book price for an excerpt, pay full book price for online access. That’s the Amazon plan. I think both Google’s approach and Amazon’s approach will open up new opportunities to sell books in situations and to people in which they might not otherwise have bought books. It’s possible, but still an empirical question, that those sales would more than outweigh any book sale deterrence effect at Google from online access through Google Print.

Note, though, the “long tail” aspect of what Amazon is doing, and how similar it is to iTunes. Pay less than book price for an excerpt. Pay 99 cents for a song. What if I didn’t already own C,S, and D, and just wanted Chapter VII? They could charge me, say $4 (and the bloody thing’s only 9 pages long, so that’s a hefty markup!), and I’d be more willing to buy it if I didn’t want or couldn’t afford the whole book.

Think also of edited volumes of essays, where one or two are relevant to your work but you are not willing to pay for the whole (usually hardbound and expensive) thing. Then you weigh the pros and cons of buying access to them through Amazon versus schlepping to the library, checking out the book (if it’s there), copying it, etc. Every individual’s opportunity cost of time differs, but in my case, even though I adore libraries, I would frequently be willing to pay for one chapter out of esoteric volumes when I know what I’m hunting for. If I’m in “gatherer” mode, then I’m more willing to get the book out of the library or buy it, depending on the price.

Some of the whingeing that has occurred comes from author, publisher, and library “representatives” who decry this unbundling of entire works, arguing that they are meant to be consumed as wholes. I reject that elitist notion, which seeks to tell consumers of knowledge how to consume it. Both Google Print and Amazon Page will expand choice sets for consumers. I also predict that in the “perennial gale of creative destruction” authors will change the nature and formats of their works in interaction with these new methods of disseminating new and old knowledge.

Lynne Kiesling

High-occupancy toll, or HOT lanes, may be constructed both on the Beltway and on I-95 south into Virginia. HOT lanes allow carpools to ride without charge, while single drivers can choose to pay a toll and ride in those lanes.

My former colleague Bob Poole is one of the pioneers of the HOT lanes idea; I first discussed his work here over two years ago. Bob also had a recent oped in the Wall Street Journal on extending HOT lanes to include buses:

Nearly a decade of experience in San Diego and Orange County, Calif., has shown that you can keep traffic flowing smoothly, at the speed limit, even during the busiest rush hours. How? Charge a toll, varying by the density of traffic in the lane, for drivers to use the high-occupancy vehicle lanes (HOV). These high-occupancy toll (HOT) lanes — on I-15 in San Diego and SR 91 in Orange County — have been a big hit with drivers in all income groups.

The next step is to apply this to mass transit. The idea is to reserve a portion of an HOV lane for buses and vanpools, while selling the remainder of the lane’s capacity to motorists at market prices. The result is a virtual exclusive busway — a VEB.

He and Ted Balaker have also done a policy study analyzing the prospects for such virtual busways in HOT lanes.

The interesting challenge in the DC area is the practice of slugging, where drivers swing by particular locations and pick up passengers so they can use the HOV lanes. Sluggers complain that the HOT lane idea might increase traffic and reduce slugging. I think a lot of that depends on how the toll is set during peak hours. If the peak toll is high enough, then that would reduce the incentive to drive separately. Add to that the cost of parking, and I do not think that the practice of slugging will disappear.