Eco-Justice Ministries  

Eco-Justice Notes
The E-mail Commentary from Eco-Justice Ministries

Extortion as Good Business
distributed 8/30/02 - ©2002

The theory says that capitalism is very efficient in allocating goods and services. The "invisible hand" of the market uses the desire for profit to create benefits for buyers, sellers, and the community at large.

That's the theory. And it works well in a setting with lots of small-scale buyers and sellers who are exchanging essential products, and where social costs are factored in.

But the theory often breaks down in a setting with huge corporate players, and where non-essential products are being sold.

A situation is emerging in Denver and other large cities which provides a case study of capitalism run amok. Publishing multiple phone books is a scheme that creates fat corporate profits, but hurts most businesses, individuals and the larger community.

I don't have any quick-fix solutions or action strategies. I lift up this case to help us in the ethical task of monitoring our key social systems to see if they are serving us in ways that promote justice and sustainability.

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Denver has two companies providing telephone directories -- the dominant provider of local phone service (Qwest), and an independent publisher (McLeod). Now another telecommunications giant (Verizon) is gearing up to publish a third phone book.

For each of the companies, selling "yellow pages" advertising is a very profitable business. (Indeed, debt-ridden Qwest just sold off its phone book operation in 14 westerns states for over $7 billion.) They distribute those ads by dumping the free phone books on the doorsteps of every residence and business across the metro area.

So what's the problem?

With two or more phone book publishers, we're essentially seeing an extortion scheme that enriches the publishers, and hurts everyone else.

One phone book provides an important service. A second publisher offers no new information to the community, but may provide some competition to hold ad rates down. (But if companies now have to buy two ads, they won't see any real savings.) A third publisher does not add either helpful content or competition.

It takes a big business with deep pockets to launch a new phone book project. Their threat to publish has to be seen as credible to many potential advertisers. Once they've committed to printing a directory, you can hear the sales pitch: "Your competitors will have an ad in our book. You'll lose business if you don't have one, too."

And so many companies will buy another expensive ad to reach exactly the same set of customers that they're already reaching with the existing directories. Fear of their competition causes everybody to spend more advertising money without any real benefit to their business.

The damage spreads far beyond the ad budget of local businesses. It hits all of us who receive the directories, and it especially slams the environment.

All of us get stuck with a small mountain of bound newsprint through the course of a year. Recycling the obsolete and unwanted directories is notoriously difficult. There's no way to "opt out" and refuse the volumes that we don't want and won't use.

Qwest, the "original" phone book publisher, put out 2.2 million directories last year. Their full set of white and yellow pages weighs in at close to 11 pounds, so each distribution uses 12,000 tons of newsprint.

Newcomer Verizon expects to put out 1.3 million of their books, a number probably comparable to McLeod's current distribution. McLeod's directory is just shy of 5 pounds. (Obviously, not all businesses give into the extortion threat -- but enough of them buy ads to make the scheme effective and profitable.)

Those second and third directories mean that close to 3 million "extra" phone books will be passed out free across the region, using about 7,500 tons of newsprint per year.

It takes 12 trees to make a ton of newsprint. Turning those trees into paper takes extravagant amounts of water (7,000 gallons per ton) and chemicals. Creating a ton of paper takes enough energy to run an average American home for 6 months.

Printing a third set of phone books for Denver looks good for the Gross Domestic Product (GDP), because it moves money, materials and services through the economy. But that third set of directories provide no new information, costs businesses advertising money, clutters homes and businesses, and creates an environmental disaster.

There's something wrong with an economic system that rewards a publisher with fat profits for such an extortionary "service".

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An e-mail earlier this week had links to several resources on the UN conference now underway in Johannesburg. A problem with word-wrap messed up the National Geographic link. The full address to that page is magma.nationalgeographic.com/ngm/0209/resources_planet.html (there's no "www" at the start).

For an in-depth report on daily developments at the summit, several environmental groups are working together to produce the "Eco-Equity" newsletter. A link to the current day's issue is on the EarthJustice website, http://www.earthjustice.org.

Shalom!

Peter Sawtell
Executive Director
Eco-Justice Ministries

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