QOTD: Are You Ready For Showroom Neutrality?
You’ve probably heard all the brouhaha lately about “net neutrality” and its recent demise at the hands of Ajit Pai and the FCC. In my opinion, it’s a more complex issue than the multi-million-dollar avalanche of spam support suggests. (You can read more of that opinion here, if you like.) But it does raise some very interesting questions regarding monopolies, infrastructure investment, disruption, and opportunity costs. Some of those questions might be worth considering in the auto-industry context.
The proponents of Net Neutrality believe that your Internet Service Provider should be treated like a public utility or a public-supported railroad. But there’s a flaw in that argument: in most cases, the infrastructure owned by your ISP was built with private funds for private ends. Should that infrastructure be regulated like a utility even though it didn’t start that way?
Let’s expand this heretical line of thinking to something highly applicable to the car biz: Tesla and its dealership problem.
According to the neutrality proponents, your local cable company shouldn’t be allowed to restrict or slow your Netflix viewing, even though Netflix “disrupts” their TV/HBO/on-demand service. You can use my own situation as an example. I was paying $194 a month for the full-monty TV service, even though I didn’t watch TV. (See Katt Williams’ comments on silk pillow covers to understand why.)
I decided to buy a full commercial Internet pipeline for $89 a month instead, plus $35 or so for HBO GO, Showtime, and Netflix via Amazon Prime. This saved me a ton of money, at the cable company’s expense. No doubt they’d like to reverse that situation. Maybe they will now, at which point I’ll just turn everything off because watching TV isn’t worth much to me.
My cable provider, which was QUBE then was Warner Cable then was Time Warner and is now Spectrum, raised its own money and did its own work to connect my house to the Internet. But according to Net Neutrality, they have to roll over and let Netflix use that infrastructure for a low cost or no cost at all. This let Netflix become a billion-dollar company on the backs of all the ISPs out there.
Now think about Tesla. They’re in a similar situation; they have a product but very little infrastructure. The same goes for Alfa Romeo, and it would also be true of, say, Peugeot if they wanted to come to the United States. Shouldn’t we have “dealership neutrality?” Shouldn’t you have the right to have a Tesla sold and delivered to you by whatever dealership happens to be up and running in your neighborhood? And shouldn’t the profit margin on a Tesla be the same as the profit margin on a Chevy, at least for the dealership in question?
Think of the benefits to the public if every dealer was treated as a utility. You could get a Ferrari delivered to you in Peoria, or a Tesla in rural Alabama. The dealers might not like it, and some of the manufacturers might not like it, but the same was true of Comcast and Verizon during the Net Neutrality period. Most people don’t have all the dealerships near them. Why should they be penalized for a monopolistic lack of common infrastructure?
Or maybe something seems wrong to you about that. Can you articulate it logically? Or will the tide of American business continue to turn in the favor of the oligarch disrupters, regardless of its impact on local business?
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To put the dealership analog in my situation would be: There is one auto dealership in my area and it is a Chevy dealership. I don't like GM and don't want one but I pay them $60 a month for their dealership "service" so I can get my maintenance done, or car buying done or car washed, whatever the "service may be. Now, you would think "service is service" but they really don't want to service the Explorer you have because it isn't a GM so you get your service done, but it takes 2 hours for an oil change where the Acadia is done in 20 minutes. Mind you, I am still paying them a monthly fee because they are the only game in town. Oh, and when I want to buy a new vehicle I have to do it through them because they are the only game in town so I pay 3% over invoice for a new Explorer through them or 1% under invoice if I get a new Suburban even though they don't have to do any more work on their end, or less for the Ford because all they have to do is allow the truck to unload it in their parking lot so I can pick it up with the key that was sent to me. Sure, they have to provide a lot but everyone in the area is paying them $60 per month whether they buy a car, have an oil change, tire rotation or do nothing at all. Same with the corporate pipes, if we had interstates where Fords could only run at 50mph and GM cars at 70mph because GM "owned" those interstates it would not be any different than the backbone which some content providers do pay extra for to maintain quality. I am not saying it is a perfect solution but Verizon has already been sued for censoring multiple times and they aren't the only one. I do agree that setting the ISP up as Title II was a stupid solution. One other example is a doctor putting in a pacemaker you bought somewhere else. If you are paying the doctor a retainer to do whatever work you ask of him that would be a reasonable request. If they were not med-neutral he would take your retainer but only do work he wanted to do like prescribe your meds.