This final note today: another item from the agenda of the Federal Communications Commission.
The FCC voted this week to review the dreaded blackout rule -- most commonly observed in the National Football League.
It's when a home game doesn't sell and so is 'blacked out' on local television.
There is a catch, of course. Cable and satellite broadcasters would be allowed to broadcast games.
But the NFL could still impose a blackout if it was in the contract with the network.
But at least we're not gonna have cell phones on planes is all I have to say. The CEO of Delta announced today they're just not gonna allow it.
There's been a big development in the worlds of sports and entertainment. The Hollywood talent agency William Morris Endeavor is buying the sports marketing firm IMG Worldwide, which represents star athletes and even fashion models.
Once upon a time, William Morris Endeavor made good, steady money representing mega-stars. But that pot of money is shrinking, according to Ben Sturner, CEO and founder of the Leverage Agency.
"It’s diversify or die for William Morris," he says.
While Hollywood stars’ paychecks are shrinking, Sturner says, top athletes still command top dollar. So now, if one of IMG’s sports stars wants to become a movie star -- it’ll be one stop shopping. Plus, Sturner adds, “There’s a book publishing division of William Morris Endeavor, and that helps as well.”
So, William Morris Endeavor could produce a coffee table book for, say, Peyton Manning. Paul Swangard, who teaches sports marketing at the University of Oregon, says he sees more synergies.
"And maybe it’s entertainment events that now add a sports or fashion component, or a sport event that adds entertainment," he says.
And we’re likely to see more sports-entertainment mergers, according to Jack Myers, chairman of Myers Biz net.
"Companies coming together because there’s so much new competition bubbling up from Silicon Valley and elsewhere," he says.
According to Myers, the big, established Hollywood names realize they have to change, or be shouldered off center stage by the likes of Amazon and Netflix.
It’s called a “driveway moment.” You’ve arrived home, but you’re so engrossed in a radio story – usually on public radio – that you can’t leave your car until it ends.
I had such a moment today in my office parking lot, compliments of an unlikely storyteller: Federal Reserve chairman Ben Bernanke. His swan song news conference featured him at his human best: Clearly explaining the arcana of monetary policy, showing empathy for Americans whose lives are recovering even slower than the economy itself, and deftly marketing one of the Fed’s most anticipated decisions since the end of the financial crisis.
The Fed had just announced it would begin curtailing its bond-buying, a form of economic stimulus that has kept interest rates low and stock prices high. Investors had fretted about this day for months. But as Bernanke spoke, markets soared. This time, investors got his message: Look beyond the tapering of bond purchases, the Fed will keep short-term interest rates near zero until “well after” the unemployment rate drops to 6.5 percent. That level is a threshold, he said, not an automatic trigger. The stimulus lives on.
But it wasn’t the economic prescription or the soaring stock prices that made Bernanke, shall we say, good radio. It was his authority, clarity and wit. He graciously countered reporters’ suggestions that the Fed had failed or was abandoning its aggressive policies to prod the economy. When a network television reporter asked him why he wasn’t considering injecting “more direct” stimulus, Bernanke called her bluff. What sort of stimulus did she have in mind, he asked. The reporter offered a meek reply, and Bernanke proceeded to give a primer on what the Fed can and can’t do.
He flashed his diplomatic wit when asked what advice he has given his presumed successor, Janet Yellen, about how to deal with Congress. Some Fed skeptics on the Hill are threatening to “audit” the central bank and try to clip its powerful wings. Very good question, he said after a pause. Without the benefit of TV, I pictured Bernanke suppressing a smile. Then he said he reminded Yellen that “Congress is our boss.” Another smile suppressed, perhaps.
Quarterly news conferences were among Bernanke’s innovations at the Fed. He certainly had small shoes to fill in terms of communications skills. When Alan Greenspan spoke, the average American cringed. Bernanke had his missteps too, but his avuncular demeanor, professor’s precision and self-deprecating wit during a period of crisis have set a high bar for Yellen.
And a new standard for a driveway moment -- provided by the fusty Fed.
China burns 3.5 billion tons of coal a year, as much as the rest of the world combined. Here in the mountains of Shanxi Province is where much of it comes from. Red coal trucks the size of armored vehicles rumble through the toxic sulfur smog blanketing China’s coal country. Coal continues to move out of Shanxi to China’s rapidly growing coast at a steady pace, but the industry is in flux.
Coal prices are at historic lows, pollution from burning coal at historic highs. State-owned coal companies are spending more cleaning up their mines, making them safer, and there’s little money left for miners.
“We make a fraction of the salary we made a couple of years ago, and that’s if we get it at all," complains coal miner Ma Huiming.
Ma says his company, Yangmei Group, owes him and others here in the mining town of Majiapo three months of unpaid wages. His neighbor, Ma Yingfei, says there’s another reason behind the hard times in China’s coal country.
“So many power plants on China’s coast are now importing coal from foreign countries instead of buying our coal,” he mutters.
Ma Huiming works at a coal mine near his village of Majiapo in Shanxi province. He says his employer, Yangmei Group, owes workers three months of unpaid wages. Credit: Rob Schmitz/Marketplace
The reason boils down to simple economics.
“Because we lack the infrastructure here, moving coal from China’s mountains to its coast by rail or by truck is actually more expensive than shipping coal from foreign countries," says Hu Xiaoyong, who works on mergers and acquisitions for government-owned coal companies in Shanxi’s capital city of Taiyuan. "That’s why China’s big coastal cities are abandoning Shanxi coal.”
Coal imports to China are up 20 percent over last year. Most of that coal arrives on ships from Australia and Indonesia. And perhaps someday, from the U.S. Proposed terminals in the Pacific Northwest could export more than 100 million tons of coal a year to China.
“China consumes 3 billion tons of coal a year, and so if you’re looking at a port of a little over a hundred million tons, you’re talking about less than a percent. It would be a really small change to the coal mix," says Susannah Kroeber, an energy analyst at J-capital in Beijing.
She says 100 million tons of American coal a year would be a drop in the bucket for China. Kroeber thinks China would buy it, ironically, for environmental reasons. Coal from Montana’s Powder River Basin, which would be burned at power plants, produces less sulfur emissions than much of China’s domestic coal. Though China’s investing billions in renewable energy, Kroeber says the sheer number of Chinese entering the middle class and using more electricity than ever means coal is going to stick around for a while.
“China’s going to burn coal," Kroeber says. "They don’t really have an option. So if your options are replacing worse coal with better coal, then that’s probably a good tradeoff.”
But for the environment, it’s not an ideal tradeoff. Wang Tao, a climate expert at the Carnegie-Tsinghua center for Global Policy, says coal consumption in China will continue to grow. The China National Coal Association predicts the country will burn 4.8 billion tons of coal by 2020, a more than 70 percent increase from what China burns today. That will make China an attractive market for U.S. and Australian imports, both of which are low-sulfur.
But it could prevent China from fully developing its potential for renewables.
“There could be the scenario that the coal price from the U.S. is so cheap that it makes coal-fired power plants more competitive and squeeze out space for renewables or hydropower, so this is a side effect that we have to consider," says Wang.
A coal truck drives by the stream that runs through the mining town of Majiapo, in Shanxi province. The waterway, polluted by chemicals from Yangmei Group's coal mine upriver, is the main source of drinking water for the village. Credit: Rob Schmitz/Marketplace
In that scenario, China, currently hooked on low quality coal, becomes addicted to cleaner-burning coal and then shuts out cleaner energy solutions.
Whether it’s imported coal or renewable energy, villagers in Majiapu hope something replaces the dirty coal being mined from their mountains. Ma Huiming looks in disgust at the stream running by his home that provides the village with its drinking water.
It’s turned bright orange.
“The mining company discharges all its wastewater into this stream and now look at it -- it’s all poisoned," screams Ma. "The dust from the mine has turned the cabbage in the fields pitch black. Who pays for the cost of all this pollution? We do!”
Ma says the way things are now, he’d be happy to lose his salary at the coal mine and make less as a farmer if it meant his children could drink clean water and breathe clean air. But beyond the mountains of Shanxi, the world’s largest metropolises continue to grow - and so does their hunger for coal.
There goes Senator Elizabeth Warren again, working to corral bad business practice with her lasso of truth. The founder of what became the Consumer Financial Protection Bureau continues with her “Justice League” ways by introducing yesterday a bill called the Equal Employment for All Act which would prevent employers from requiring job applicants to inform them of their credit history or to disqualify job hunters based on their credit rating.
Using credit history as a tool for gauging the potential risk of hiring someone was a practice once reserved mostly for fields where security and money-management are day-to-day tasks: Accounting for example, or human resources. But now, nearly 50 percent of all employers use credit history as part of your application process. To use your credit history as a character reference may seem useful, but it's only a useful trust-reference if your credit history is bad because you're irresponsible with debt. Trouble is, that's not usually the case these days. As Senator Warren says:
“People shouldn't be denied the chance to compete for jobs because of credit reports that bear no relationship to job performance and that, according to recent reports, are often riddled with inaccuracies."
Millions of Americans, particularly the long-term unemployed, have found themselves with bad credit history and resulting credit scores due to just what they’re trying to rectify by applying for a job: A lack of income.Others fell behind because of medical debt. As we all know, getting sick in this country can put a major kink in your financial life.
But the other, possibly bigger reason, as Warren mentions, as to why using credit histories in this way is bunk has to do with accuracy and oversight. The credit reporting agencies -- Experian, Transunion and Equifax -- are businesses. Big businesses. It’s in their best interest for our credit to be used to determine nearly everything in life. Credit reporting agencies are very much like the pharmaceutical business, where there’s a lot of “You need this.”
If the agencies were fantastically accurate and quick to correct errors on your credit reports, I’d have a lot more faith as to how reliable our credit histories can be. But there are too many mistakes and omissions in our credit reports, not only within our overall histories but between agencies.
Think it only happens to other people? When’s the last time you looked at your FICO scores? (The credit scores that are in the widest use.) These scores are built off of your credit reports. So if these agencies are each accurate with tracking your credit, using supposedly the same parameters of fact-finding, why do most of us have three, sometimes three very different, scores? My own scores vary between 25-30 points. And I have great credit.
Life happens. People get sick. They lose jobs. They’re not running around Bergdorf’s swiping credit cards for bags or ties. And that job they’re applying for may be just what’s needed to get their credit back in shape. Hardship should not be a reason to be denied a job.
Keep on swingin’, Ms. Warren.
Ok first a quick refresher: We’re talking about the Federal Reserve’s decision to reduce (taper) it’s bond-buying program. Since September of 2012, the Federal Reserve has been trying to juice the economy by buying bonds. That artificially inflates demand for bonds and mortgage-backed securities. Artificially-high demand means bond interest rates (and yields) are artificially low (think of it this way -- if you sell bonds, and there’s a lot of demand, you don’t have much incentive to offer a high interest rate. You can slide by offering a low interest rate). Those basic interest rates determine other interest rates -- like your mortgage.
So, you might think “well dag nabbit, does this Taper mean my adjustable-rate mortgage is going to go up?”
It would appear not, at least for now.
“Everyone was positioned appropriately,” explains Chris Low, chief economist with FTN Financial, of big investors reaction to the Fed’s announcement.
Investors made a bet, says Low, that interest rates would rise when the Fed stopped propping up demand. So they started setting aside tons of cash to buy those bonds with new, higher interest rates. But guess what? When everyone rushes in to buy, demand goes right back up, and interest rates -- including on things like mortgages -- will go right back down.
“The Fed is buying $10 billion fewer in bonds every month but its more than likely investors will make up the slack,” says Low.
There’s another big reason why tapering won’t disrupt the economy as many had feared. That’s because on the one hand, yes, the Fed eased up the gas pedal by saying it would buy fewer bonds. But on the other, it basically said, “Don’t worry! We’re going to do extra to keep other interest rates (on things like car loans or business loans) down.”
“What they’ve promised to do,” says Dan Greenhaus, Chief Global Strategist at BTIG, “is keep interest rates lower for longer, longer than we thought.”
He’s talking about the rate that banks charge to one another. If that stays low, our interest rates – like on cars or business loans – stay low too.
“What that means for the average person in theory is that then you should be able to gain access to loans, your credit card balances won’t accumulate interest at as rapid a pace,” Greenhaus says.
There’s some good news for the stock market too. A lot of people were worried that when the Fed stopped propping up the bond market, the stock market might fall as people retreat from stocks to fill the vacuum in bonds. Scott Wren, Senior Equity Strategist at Wells Fargo Advisors, says it doesn’t look like that’s happening.
He says there’s going to be a lot of volatility in the coming months, and that’s actually a good thing for investors. “That creates buying opportunities and that’s what we like to see.”
While the Fed has tried to be really clear about where it’s going, saying its decisions will be based on economic data and that investors should be able to follow along so there are no surprises, there’s still a lot of uncertainty.
For one thing, Wren says the Fed’s predictions of economic growth are far higher than what Wells Fargo Advisors predicts. So not everyone’s on the same page.
“Every meeting here on out is going to be all about whether the Fed is going to do more, do less, even boost bond purchases again,” adds Wren.
That, he says will lead to volatility in the market, and volatility will lead to buying opportunities.
So all in all this taper has proven pretty gentle. But the Fed’s meeting again in a month, and it’ll be the same questions all over again.
British Petroleum was dealt another legal blow today, or at least one of its employees was. A federal jury convicted a former BP drilling engineer, Kurt Mix, of one charge of obstruction for deleting text messages related to the Deepwater Horizon oil spill. The conviction comes on the heels of BP's latest public relations move, full-page ads in the New York Times that single out what BP says are frivolous claims by businesses affected by the spill.
The bold print headline of the Times ad reads, "Would you pay this claim?" It goes on to describe an anonymous celebrity chef, widely believed to be Emeril Lagasse, who was awarded more than $8 million dollars for what BP calls fictional losses. The ad claims they were fictional because the chef's management company made more money the year of the spill than the two years prior.
But legally it's all moot. The claim is being paid under the terms that BP agreed to.
"They are now objecting to awards that have been upheld, even within the internal review process," says Georgetown law professor Heidi Li Feldman, "so now they are going to the court of public opinion."
Feldman says that technically speaking, the public's opinion on claims like this one has no legal bearing on their outcome. So why spend thousands of dollars on an ad that isn't going to change things?
"Insofar as BP influences, even subconsciously, the people who are operating the claims procedure," says Feldman, "a public relations campaign could benefit them greatly."
BP likely chose the New York Times because of its wide reach, and because of who reads it, says Roger Williams University law professor David Logan.
"They know the New York Times is the paper of record for lawyers, judges and law professors, and it must be viewed as a sound, strategic investment," he says.
Neither BP nor Lagasse agreed to an interview, though BP issued a statement stating it will continue to fight in court all interpretations of the settlement agreement that it disagrees with.
On Wednesday, the Federal Reserve announced it will cut its bond-buying program by $10 billion starting January.
In its statement, the Fed cited stronger labor market conditions as a primary factor in the decision. The announcement may have surprised many investors who were keenly watching the relationship between quantitative easing and inflation.
The Fed began its series of large-scale bond purchases -- known as quantitative easing -- 15 months ago to boost hiring and economic growth. The annoucement today is a major pivot point for one of the Fed's largest monetary policy experiments.
JPMorgan and Deutsche Bank are prohibiting the use of some chatrooms amid ongoing investigations of currency manipulation. The move comes after UBS’s investment banking arm did the same last month.
The leader of Ukraine is welcoming a $15 billion early holiday gift from Russia. After weeks of demonstrations from Ukrainians protesting closer links with Russia versus the European Union, the prime minister said the package from Moscow will help Ukraine return to economic growth.
With the year winding down, Marketplace regular Allan Sloan makes some predictions about business and markets in 2014. Bond funds? Bad. Hedge funds for the masses? Very bad. What about the Federal Reserve? Will the stimulus be withdrawn?
The talent agency William Morris Endeavor made a deal to buy rival agency IMG Worldwide for a cool $2.4 billion. William Morris is best known for representing famous actors and IMG, the company its buying, is known for representing famous athletes.
“There’s increasing interest on the part of these agencies to represent sports clientele rather than acting clientele,” says Andrew Zimbalist, Robert A. Woods Professor of Economics at Smith College. He says the DVR has made it easy to skip over ads in television shows and that’s given an edge to game night.
“People want to watch their sports live, so a lot of advertisers have been migrating to sports rather than doing the traditional television shows.”
That extra ad money has trickled down to athlete’s salaries and corporate sponsorship, Zimbalist says. At the same time, the Hollywood star-scape has changed.
“They come and go much quicker than they ever did in the past,” says Porter Bibb, a managing partner at Media Tech Capital Partners in New York. “Therefore, their monetization potential is a lot less certain.”
Bibb says there’s also less distinction between stars of one kind and another. He predicts football’s Tim Tebow will make more money as a celebrity off the field than he ever did on.
The Obama administration has chosen a new head of the glitch-plagued healthcare.gov website. Kurt DelBene is a former Microsoft executive who used to run the company's Microsoft Office division. So for some DelBene's appointment represents the kind of recruitment from the private sector that should have happened a long time ago.
But others argue Microsoft isn't the healthiest tech company at the moment.
"You can make an easy joke that Microsoft Office is an expensive and bloated product, which is kind of the problem with healthcare.gov," says Adrianne Jeffries at The Verge.
But, Jeffries says DelBene will bring an important outside perspective. And as the replacement for Jeff Zients, who came most recently from the Office of Management and Budget, DelBene bring something very important -- that wasn't there before.
"There were 55 contractors involved," Jeffries says. "There were a bunch of different government agencies, and a bunch of people at those government agencies that were sort of responsible for bits and pieces, but nobody was really standing up and taking responsibility for the whole thing."
With the year winding down, Marketplace regular Allan Sloan makes some predictions about business and markets in 2014. Bond funds? Bad. Hedge funds for the masses? Very bad. What about the Federal Reserve? Will the stimulus be withdrawn?
“I think it will finally happen in 2014, and the withdrawal symptoms will probably not be anywhere near as bad as people think,” says Sloan, senior editor-at-large for Fortune magazine. “Just because everyone has been expecting this to happen for so long.”
JP Morgan and Deutsche Bank are prohibiting the use of some chatrooms amid ongoing investigations of currency manipulation. The move comes after UBS’s investment banking arm did the same last month.
Traders use the chatrooms to coordinate with each other. They say it makes it easier to communicate with colleagues in different buildings or even on different floors of the same building. Traders also use them to communicate with their counterparts at other banks to negotiate prices and execute some trades.
These aren't the sort of chatrooms that most of us are familiar with, but they're not that different either. Many traders use the instant messaging feature on their Bloomberg terminals, which feed them financial data and are used to make trades.
But there have been problems associated with the chatrooms, and abuse of them figured prominently into the LIBOR scandal. Traders have used them to manipulate short interest rates and foreign exchange markets and rig prices. Banks have paid steep fines for these kind of conspiracies. Since last summer, big banks have been penalized nearly $6 billion for rigging interest rates.
Now banks are trying to take away what they see one of the key facilitators behind the problem. JPMorgan CEO Jamie Dimon even took the unusual step of telling employees to watch what they write in instant messages.
Bloomberg LP, which has sold some 300,000 terminals to various Wall Street firms at around $20,000 a piece, is worried about losing business over the abuse and has vowed to tweak messaging features to give banks and financial institutions more control over employees communications.
Thanksgiving came late this year, leading to a compressed gift-buying and sending season. In fact, there are six fewer days to ship presents in 2013 when compared with last year. Some retail analysts think that may lead to more people paying extra for two-day or overnight shipping in order to get gifts to friends and family in time.
That could benefit companies like FedEx and UPS. Jack Atkins, a retail analyst with Stephens Inc., is relying partially on his personal experience. "I have a lot of shopping to do over the next seven days," said Atkins. "I get it done every year, but I always wait until the last minute."
Others aren't convinced that procrastinating shoppers will give shippers a bounce.
"The difference between a four week or a five week or a three week holiday season isn't that big of a deal," said David Ross, a transportation analyst at Stifel.
All this week we're talking about the digital currency Bitcoin. We've learned about what Bitcoin actually is. We've also checked in with Coinbase, the company trying to become a kind of version of PayPal for bitcoin that connects customers to businesses. Today we hear from a business that has started to accept Bitcoin. Dr. Paul Abramson runs a private practice called My Doctor Medical Group in San Francisco. He says that he's actually treated patients for substance abuse who prefer to pay with the cryptocurrency.
Click the audio player above to learn more.
The Senate Commerce, Science and Transportation Committee holds a hearing today titled “What Information Do Data Brokers Have on Consumers and How Do they Use It?”
Committee Chair Jay Rockefeller, IV (D-W. Va.) is already conducting an investigation (launched in October 2012) of nine data brokerage companies that collect information about internet-using consumers, assemble profiles of them, and sell the profiles to media, advertising and retail businesses. He expanded the investigation this fall with inquiries to twelve websites popular with consumers in the areas of personal finance, health and family life (including About.com, Self.com, Ehealthforum.com and Finance.youngmoney.com) asking how those companies collect and share user information with other businesses.
The following scenario will likely be familiar to many consumers:
You log onto Facebook, and an ad appears along the right-hand side for a dating service -- right in the age-bracket you’re looking for. Or it’s for ski-jackets, and you just searched for lift tickets online. Or, an herbal remedy for a slightly embarrassing medical condition you just found out you might have.
These are just some of the ways that so-called "data-brokers" might help deliver your eyeballs to online marketers. But they’re largely invisible to most of us who use the web, says internet privacy activist Adi Kamdar at the Electronic Frontier Foundation. “As a consumer, you pretty much never have a direct interaction with a data broker,” he says.
But companies like Acxiom, Rapleaf, Datalogix, Epsiolon, Spokeo and perhaps hundreds of others, have a lot of interaction with us. Based on the websites and stores we visit, DMV and mortgage records, Tweets and Facebook-likes, hundreds of data points on each one of us—they assign us marketing profiles. Examples Sen. Rockefeller has publicized from his investigation include "Rural and Barely Making It" and "Ethnic Second-City Strugglers."
Chris Calabrese is legislative counsel for the ACLU in Washington, and advocates for consumer rights in this burgeoning business. “There are marketing lists of people with Alzheimer’s, bipolar disorder, people who like to play the lottery,” says Calabrese. “They can use that to serve you ads, to try to interest you in projects, to target people who are vulnerable on the basis of their weakness.”
Calabrese backs more regulation to let consumers check and correct the data, to prevent its use in employment screening, and to allow consumers to opt out of data collection and sharing by brokers and marketers altogether. He thinks controls on data gathering and use should be similar to what already applies to credit-reporting bureaus under federal law.
Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association, will testify at the Senate hearing. Cerasale says the DMA represents both marketers and data brokers. He argues the industry’s self-regulation has largely worked to police the behavior of data brokers and online marketers. He believes any government regulation or enforcement should be narrowly targeted to bad actors in the industry, and that a broad expansion of government regulation could make targeted advertising less helpful to consumers, as well as less efficient and effective for those selling products and services to consumers.
Jobs, for pretty much any age group, aren't all that much of a problem in North Dakota. Tens of thousands of people have flooded the small towns out there to work in the oil fields. In fact, jobs are so prevelant in the state that Elsie Ejismekw has two of them. During the day she drives a truck, and in the evenings she drives a cab. An elderly mother of five, she says after her divorce, she left her life in Illinois behind to start a new one in a North Dakota town called Watford City.
"I went through a divorce and we had a five bedroom house that we had to sell and the market was so low on it and I just wanted a fresh start."
Marketplace is airing a series of Todd's vignettes of people and scenes from the boom region.
Todd Melby's series, "Black Gold Boom," is an initiative of Prairie Public and the Association for Independents in Radio.
Au. Bling. Gilt.
No matter what you call it, the mention of gold brings a certain sparkle to the eye of most of us. But how and why did gold become the basis for much of the global economy?
Our every-now-and-then contributor Justin Rowlatt from the BBC has been working on a series called Elementary Business all about the chemical elements that make the economy go 'round. He says gold, despite being the "most charismatic of all elements," is actually quite boring.
"It's quite easy to see of the 118 elements there are in the periodic table, why many of them just simply wouldn't be suitable for currency. For example, a gaseous currency? It's never going to be that good is it? I mean, carrying around little vials of colorless gas will make it pretty hard to establish what you've got. Then you've got all these reactive elements. You don't want an explosive currency. So it turns out the fact that gold is so uninteresting is one of the reasons why it's so useful."
This final note today, in which we learned skinny jeans almost doomed the American dollar.
From the pages of the Washington Post, this historical tidbit:
Cranes -- the company that for more than a century has supplied the cotton fiber from which greenback are made -- used to use discarded denim for its cotton.
Until back in the 1990's the fashion world discovered spandex and how it helped jeans fit just right. And, sadly, spoiled denim as a currency-source forever more.
Now, Cranes just goes straight to plant.
Tech companies like Google and Facebook don’t just want to dominate the web, they also want to takeover the pipes that bring you the Internet. For example, Google has been laying cables in the oceans around Asia and Facebook has secured fiber cables to move traffic back-and-forth from its data centers.
Right now, access to the Internet is still largely controlled by telecom companies, said Allan Hammond, the director of the Broadband Institute at Santa Clara University. To explain why the tech companies might want a biger part of that pie, Hammond launches into a a fairy tale of the “Three Billy Goats Gruff”...
"There were three billy goats gruff, who wanted to cross the bridge to eat the grass on the other side," Hammond says.
The first goat tries to cross but the troll living under the bridge, tells him to get off.
"In this case, the troll under the bridge are the telecom companies," he says.
The bridge is the Internet pipeline that they control. And the goats are tech companies like Google, Netflix and Amazon who need the bridge to deliver their content. In the fairy tale, the goats get rid of the troll. But in real life Hammond says, the tech companies have decided to build their own bridge.
He adds that companies like Verizon have made it clear that they want to start charging tech giants for distributing data heavy content like video. But Dan Bieler, a telecom analyst at Forrester, says it's not just video that the tech giants are worried about. As our lives move onto the cloud tech companies will need an ever-bigger bigger pipeline.
"If you upload a document on Dropbox, if you use Google apps" you're using the cloud, Beiler said. And more-and-more companies are ditching their servers and renting space on Amazon, Google and Microsoft’s cloud.