California has Potential to be a Strong Contender in Amazon's Search for New Headquarters

Last week, an exciting opportunity arose for cities throughout North America. Amazon Inc. announced its plans to expand further by building a second headquarters, dubbed HQ2. Since the announcement, mayors and governors across the United States have been submitting proposals and offering tax incentives to the giant company, trying to get Amazon to choose them. According to Andrew Khouri's L.A. Times article, California won't be offering quite as much as other states when it comes to tax incentives, but instead, will be relying on its inherent attractiveness as a metropolitan area with good weather, education opportunities, and skilled laborers.

In some states, like Wisconsin or Nevada, billions of dollars in subsidies and tax incentives are offered to manufacturing and tech companies looking to make a move. They hope that the tax incentives they provide initially will be paid off in the future by thousands of more jobs in the area and an improvement in the housing market. Wisconsin is in the process of working out a $3 billion package with television producer Foxconn. In 2014, Nevada's $1.3 billion package earned them Tesla's lithium-ion battery factory, a factory that Governor Jerry Brown has been vying for.

The amount of money being offered may not matter as much for landing the Amazon deal. Amazon is one of the wealthiest companies in the world, and they have made the parameters of their new headquarters well known. They are looking for a metropolitan area with skilled workers, desirable housing, good distribution routes, and a strong base of customers. With its shipping ports, high quality of life, and many prestigious public universities, California could be a strong choice for Amazon's second headquarters.

Analysts believe that Amazon's main purpose in being so public about their search is to try to get competing offers from different cities so that they can use them to leverage a better tax incentive package from whichever city they actually want for their headquarters. That's why they believe that California has a good chance. Research shows that around 90% of the time, companies would choose the city they chose whether they got the same incentive package or not. It really seems to be up to California itself to shine. Either Amazon wants to build HQ2 here or the company doesn't. The amount of money being offered is unlikely to make much of a difference.

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Uber and Lyft's Low Prices Won't Last Forever

Besides its convenience factor, a user's ability to rate their drivers, and the inherent safety that comes with the app tracking your motion along a pre-determined route, Uber has attracted so many customers in large part due to its subsidized pricing. Over the years, Uber has aggressively pushed to become the leader in the ride-sharing market. To do so, they have often offered prices that are discounted to such an extent that the company sinks billions of dollars into the app each year. While it may seem counter-intuitive to lose money, Uber is actually proceeding exactly as planned: they are focusing first on acquiring customers and forcing out any competitors before they try to turn a profit. Tracy Lien, in her L.A. Times article, addresses Uber's plan and describes how such a monopoly might affect the market.

Uber and Lyft, the most popular ride-sharing services, both know that the fastest way to get loyal customers id to give them a cheaper alternative to taxis. While many consumers still prefer taking a taxi over using one of the ride-sharing apps, most people care more about saving some money. Fortunately for consumers, the ride-sharing apps are not only competing against taxis, they are also competing against each other, which has allowed prices to fall even lower. Eventually, though, as economists have reiterated time and again, when one of the companies gains control of the market, their prices will go up. Maybe it will be slow at first, but it is a law of economics that if one company is the only source of a good or service, consumers are either forced to pay whatever price the company sets or live without it.

Uber is currently valued at over $62 billion, and is by far the market leader, even though they continuously lose money or barely break even in their attempt to grow their market share. While Lyft is in second place, they also have plenty of money to burn, especially after a recent $500 million investment by General Motors. In fact, while Lyft is falling behind Uber in most areas, they have nearly half of the market share in their hometown of San Francisco. It's possible that Uber won't be able to force Lyft out of the competition in the long-run, or they may find that the attempt would be too costly to be economical. However, economists still worry about what might happen if Lyft and other competitors were forced to back out.

Uber just lost a battle in China to become the main provider of ride-sharing services. That loss could lead Uber to focus on the US and Europe more closely and work harder on taking as much market share as possible. Therefore, it is believed that their prices will go even lower in the near future. If they can keep their prices low enough for a long enough time, they may be able to gain enough customers to be unstoppable. Some economists believe that Uber should look toward becoming more valuable to the consumer rather than a cheaper option. The Premier options in ride-sharing apps attract upper-class customers, which could be a substantial source of boosted income for Uber, even if they don't succeed in encapsulating the entire market.

While it is likely that all of the ride-sharers will eventually start raising prices in the future, there are several reasons why they wouldn't suddenly shoot up to exorbitant rates. First, there are anti-trust laws and similar regulations on how much a company can charge for a product or service, especially if that company is one of only a few providers. Additionally, if Uber or Lyft suddenly started charging extremely high prices, their customers would just switch to taking taxis. So, whatever happens with their market share, economic theory would tell us that the ride-sharing apps would steer away from charging more than taxis unless they somehow found a way to remove that competitor entirely, which is unlikely.

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FCC Introduces Rules Promoting Net Neutrality

2/27/15 - One of the most controversial topics in recent discussion is net neutrality. Net neutrality is the principle by which Internet providers provide equal access to all online materials, without favoring particular websites. The push for net neutrality comes from a common practice among Internet providers by which certain online content has slower speeds than others. This “speed discrimination” leaves users with two options: wait extra time to access certain data, or pay to use “faster lanes.” The FCC has, as of Thursday, passed a set of rules that provide for the government's regulation of Internet speeds. Jim Puzzanghera, in his L.A. Times article, discusses what this means, economically and otherwise.

While the Federal Communications Commission claims that these regulations will not be anywhere near as tough as the provisions in other industries, these net neutrality rules mean that the government will have some semblance of control over the Internet. Conservatives and telecommunications companies fear governmental intrusion in a system that is already working well, and liberals applaud the FCC for promoting free and equal access to all legal online materials.

Broadband, just like water and electricity, has become a commodity, a necessity in the everyday life of an average American. However, like with water and electricity, there may be some sense in the government regulating broadband, since it would give everyone access. Quoting similarities to freedom of speech, supporters of net neutrality feel that it is the best way to give everyone equal ability to acquire information.

Generally, neither side of the argument disagrees that Internet providers should have some sort of checks and balances. It is the extent of these regulations that worry many. The Internet, if treated as a commodity, should be as it is now. People can pay more money for a better product, just as people can pay more money for access to a better Internet connection. The two seem very similar. On the other hand, if treated as a utility, like water or electricity or telephone service, broadband seemingly should be equally available to all potential consumers.

In the past, two attempts by the FCC to introduce net neutrality rules have been blocked by federal judges as illegal in some way. Tom Wheeler, Democratic member of the FCC and architect of this net neutrality plan, seems confident that it will be successful. Wheeler decided to classify Internet as a “utility-like” product, which may or may not help his cause. There are sure to be many attempts to throw out the proposed FCC rules, and so, none are quite sure whether net neutrality will be a lasting phenomenon in our future.

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