Susan Crawford [ 12 FEB 2013 | Urban Design | 25:35 ] You’ve heard me before quote one of my mentors who told his students that news is what people want to keep hidden –everything else is publicity. That’s why two books are rattling the cages of powerful people who would rather you not read them.

Here’s the first one – Captive Audience: the telecom industry and monopoly power in the new Gilded Age by Susan Crawford. Read it and you’ll understand why we Americans are paying much more for internet access than people in many other countries and getting much less in return. That despite the fact that our very own academics and engineers, working with our very own Defense Department, invented the Internet in the first place.

Back then the US was in the catbird seat, poised to lead the world down this astonishing new superhighway of information and innovation. Now many other countries offer their citizens faster and cheaper access than we do.

The faster high-speed access comes through fiber optic lines that transmit data in bursts of laser light but many of us are still hooked up to broadband connections that squeeze digital information through copper wire.

We’re stuck with this old-fashioned technology because, as Susan Crawford explains, our government has allowed a few giant conglomerates to rig the rules, raise prices and stifle competition – just like Standard Oil in the first Gilded Age a century ago.

In those days it was muckrakers like Ida Tarbell and Lincoln Steffens rattling the cages and calling for fair play.

Today it’s independent thinkers like Susan Crawford.

The big telecom industry wishes she would go away but she’s got a lot of people on her side. In fact, if you go to the White House citizens petition site you’ll see how fans of Captive Audience are calling on the President to name Susan Crawford as the next chair of the Federal Communications Commission.

Prospect Magazine named her one of the top ten brains of the digital future and Susan Crawford served for a time as a special assistant to President Obama for science technology and innovation.

Right now she teaches Communications Law at the Benjamin Cardozo School of Law here in New York City and is a fellow at the Roosevelt Institute.

Susan Crawford, welcome.

SC: Thank you so much.

BM: Captive Audience? Who’s the captive?

SC: Us. All of us. What’s happened is that these enormous telecommunications companies – Comcast and Time Warner on the wired side, Verizon and AT&T on the wireless side – have divided up markets, put themselves in a position where they’re subject to no competition and no oversight from any regulatory authority and they’re charging us a lot for internet access and giving us second-class access.

This is a lot like the electrification story from the beginning of the 20th century. Initially electricity was viewed as a luxury. So when FDR came in, 90% of farmers didn’t have electricity in America.

At the same time that kids in New York City were playing with electric toys.

FDR understood how important it was for people all over America to have the dignity and self-respect and sort of cultural and social and economic connection of an electrical outlet in their home.

So he made sure to take on the special interests that were controlling electricity then, who had divided up markets and consolidated just the way internet guys have today, he made sure that we made this something that every American had.

BM: We are a long way from FDR, the New Deal and those early attitudes toward industry. What makes you think that’s relevant now, when you come to the Internet?

SC: This is an issue about which people have a lot of passion, because it touches them in their daily lives.

The Wall Street Journal on the front page had an article about kids needing to go to McDonald’s to do their homework because they don’t have an internet connection at home.

parents around the country know that their kids can’t get an adequate education without internet access.

You can’t apply for a job these days without going online.

You can’t get access to government benefits adequately, you can’t start a business.

This feels to 300 million Americans like a utility, like something that’s just essential for life.

And the issue of how its controlled, and how expensive it is, and how few Americans actually sign up for it – is not really on the radar screen.

BM: You describe this frankly as a as a crisis in communication with similarity you say to the banking crisis and global warming. what makes it a crisis.

SC: It’s a crisis for us because we’re not quite aware of the rest of the world. Americans tend to think of themselves as just exceptional.

BM: We did invent the internet didn’t we?

SC: We did, but that was generation 1. Generation 2 we’re being left far behind. and so all the new things that are going on in the world America won’t be part of that unless we are able to communicate. so there’s a darkness descending because of this expensive and relatively slow internet access in America.

We’re also leaving behind a third of Americans.

BM: In here you call it the Digital Divide. Describe that to me.

SC: Well here’s the problem. For 19 million Americans –many in rural areas – you can’t get access to a high-speed connection, at any price. It’s just not there.

For a third of Americans they don’t subscribe –often because it’s too expensive – so the rich are getting gouged, the poor are very often left out, and this means that we’re creating yet again two Americas and deepening inequality through this communications inequality.

BM: so is this why according to numbers released by the Department of Commerce only four out of ten households with annual household incomes below $25,000 reported having wired internet access at home, compared with ninety three percent of households with incomes exceeding $100,000.

These companies are not providing cheap enough access to the poor folks in this country.

SC: these are good American companies their profit motives though don’t line up with our social needs to make sure that everybody gets access.

They’re not in the business of making sure that everybody has reasonably priced Internet access.

That’s how a utility functions. that’s the way we need to treat this commodity. they’re in the business, right now, of finding rich neighborhoods and harvesting – just making more and more money from the same number of people.

They’re doing really well at that.

Comcast is now a hundred billion dollar company they’re bigger than McDonald’s they’re bigger than Home Depot.

But they’re not providing this deep social need of connection that every other country is taking seriously.

BM: You make the point that the United States itself is beginning to experience this digital divide in the world.

SC: It’s fair to say that the u.s. at the best is in the middle of the pack when it comes to both the speed and cost of high-speed Internet access connections. so in Hong Kong right now you can get a 500 megabits symmetric connection that’s unimaginably fast from our standpoint for about 25 bucks a month.

If you’re in Seoul, for $30 you get three choices of different providers of fiber in your apartment. They come in and install in a day – because competition is so fierce.

In New York City, there’s only one choice and it’s 200 bucks a month for a similar service – and you can’t get that kind of fiber connection outside of New York City – in many parts of the country.

Verizon is only serving about 10% of Americans.

So let’s talk about the wireless side for a moment.

The separate marketplace that people use for mobility? in Europe you can get unlimited texting and voice calls and data for about $30 a month.

Similar service from Verizon costs $90 a month that’s a huge difference.

BM: Why is there such a disparity there.

SC: The difference in all of these areas is competition and government policy. it’s not magical. without the intervention of the government there is no reason for these guys to charge us anything reasonable or to make sure that everybody has services.

BM: How do you explain that in the course of one generation from the invention of the internet in this country to falling way behind as you say the rest of the world in our access to it. how did that happen?

SC: Beginning in the early 2000s we believed that the magic of the market would provide internet access to all Americans.

That the cable guys would compete with the phone guys who would compete with wireless and that somehow all of this ferment would make sure that we kept up with the rest of the world.

Those assumptions turned out not to be true.

It’s much cheaper to upgrade a cable connection than it is to up to dig up a copper phone line and replace it with fiber.

So the cable guys, who had these franchises – in many most American cities, they are in place with a status quo network that 94% of new subscriptions are going to.

Everybody’s signing up with their local cable incumbent.

There is not competition for 80 percent of Americans.

They don’t have a choice for a truly high-speed connection.

It’s just the local cable guy – competition has just vanished

BM: The 1996 Telecommunications Act was supposed to promote competition and therefore protect the consumer by bringing prices down that didn’t happen.

SC: that didn’t happen because it’s so much cheaper to upgrade the cable line than it is to dig up the copper and replace it with fiber.

The competition evaporated because Wall Street said to the phone companies, don’t do this don’t be in this business.

So you may think of Verizon and AT&T; as wired phone companies. they’re not they’ve gone into an entirely separate market which is Wireless.

They’re the monsters on the wireless side that control two-thirds of that market. there’s been a division. cable takes wired, Verizon, AT&T, take Wireless.

They’re actually cooperating.

There’s a federally blessed non-compete in the form of a joint marketing agreement between Comcast and Verizon.

So the world is perfect for them, not so great for consumers who are paying more than other people in the rest of the world for slower service

BM: since the 1996 Telecommunications Act which I thought was going to lower the price of our monthly capabilities it’s almost double.

SC: well that’s because Time Warner controls Manhattan. there’s no competition.

The Cable guy’s, long ago – something they called The Summer of Love – divided up systems. they clustered their operations. it makes sense from their standpoint. you take San Francisco, !’ll take Sacramento, you take Chicago I’ll take Boston. and so Comcast and Time Warner are these giants that never enter each other’s territories.

BM: You talk to certain people and they say look I don’t know what this is about I have all the gizmos I want I have a smartphone I have a tablet and they say what’s the crisis because I have more access that I can use.

SC: There are a lot of bright shiny objects that are confusing people about the underlying market dynamics here. what people don’t realize is that for this wireless access you’re paying too much and the coverage is too spotty.

On the wired side, that’s where we’re really being left behind –and here’s the important tie to understand : a wireless connection is just the last 50 feet of a wire.

So fiber policy is really wireless policy.

These two things fit together and if the whole country did an upgrade to cheap fiber everywhere we’d get better connection for everybody.

Right now though if a mayor wants to do this for themselves? They’ll be pummeled by the incumbents.

In almost 20 states, in the United States, it’s either illegal or very difficult for municipalities to make this decision for themselves.

BM: In North Carolina a couple of years ago lobbyists for Time Warner persuaded the state legislature to make it almost impossible, virtually impossible, for municipalities to get their own utility.

SC: Right, that’s exactly right. and so now North Carolina, after being beaten up by the incumbents, is at the near the bottom of broadband rankings for the United States.

BM: And what’s the practical consequence of that.

SC: All those students in North Carolina, all those businesses that otherwise would be forming, they don’t have adequate connections in their towns to allow this to happen.

They’ve got – they’re subject to higher and higher pricing – they’re being gouged.

BM: Your book did underscore for me why this is so important to democracy – to the functioning of our political system, to our role as a self-governing free people. talk about that a moment why do you see this so urgently in terms of our practically dysfunctional democracy today.

SC: we need to be able to speak to each other effectively and effectively to government. we need to empower our citizens to feel dignified and ready to cope in the 21st century.

Having a communication system that knits the country together is not just about economic growth, it’s about the social fabric of the country.

And a country that feels as if it can move together and trusts each other is one that is more democratic.

As a matter of national policy we have forced other countries to talk about the importance of Internet access – foreign policy we’re great at saying make sure Internet is everywhere.

Domestically for some reason we haven’t done so well.

So I see Internet access as the heart of a democratic society.

BM: You use the merger of Comcast and NBC Universal is a window in your book into what this power can do to the aspirations of a democratic internet.

MSNBC: Federal regulators today approve the purchase by Comcast of a majority stake in NBC Universal from General Electric. this merger will create a 30 billion dollar media company with cable broadcast internet motion picture and theme park components.

the deal is expected to close by the end of the month.

BM: you say that the merger between Comcast and NBC Universal represent a new frightening moment in US regulatory history how so ?

SC: Comcast is not only the nation’s largest broadband distributor with tens of millions of customers it also now owns and controls one of the four media conglomerates in the United States. NBC Universal. that means that it has a built-in interest in making sure that it shapes discourse, controls programming, all in the service of its own profit-making machine.

As both the distributor and a content provider it’s in its interest to make sure that it can always charge more for discourse we would think isn’t controlled by anybody.

So it’s a tremendous risk to the country that we have this one actor who has no interest in the free flow of information controlling so much of high-speed Internet access.

You say the merger created the largest vertically integrated distributor of information in the country so what’s the practical consequence of Comcast having this control over its content.

SC: Here’s the consequence: Comcast with a control over its programming and also because it works so closely with a very concentrated programming industry, can raise the costs of any rival coming in to provide let’s say competitive fiber access.

So Google in Kansas City is having real trouble getting access to sports content because Time Warner Cable the local monopoly player there, controls that sports content. so Google or any other competitive fiber provider has to enter two markets at once. one market to provide the transport the fiber and then also the programming market.

And making programming more expensive is yet another barrier to entry and comcast can carry that out now.

BM: so what should the FCC do about that this is a moment when we have to separate out content from conduit. it should not be possible for a local cable actor or any distributor to withhold programming based on volume.

That’s what’s going on. the programmers say we’ll sell the Comcast cheaply because they’re big. but if you’re an upstart we’re going to charge you three to four times what Comcast is paying for the same programming.

That should not be legal everybody should get access to the same stuff at the same price and they should be announced prices.

BM: What about the argument that in this modern world there are certain industries, certain markets that that require an economy of scale. critics have said that you’re ignoring the sophisticated economics that govern these industries.

SC: The economics of these networks did not change when we added a little bit of digital pixie dust to them. it’s still very expensive to build these networks. private actors still don’t have an interest in covering everybody because that’s too much of an economic risk for them. the better route is sensible oversight. we can learn from our mistakes in the past when it came to regulatory regimes that didn’t work. but a regulatory regime is needed without question to make this work for all Americans.

BM: I have to say this is pretty strong stuff . Listen to yourself.

Instead of ensuring that everyone in America can compete in a global economy, instead of narrowing the divide between rich and poor, instead of supporting competitive free markets for American inventions that use information – instead, that is, of ensuring that America will lead the world in the information age –US politicians have chosen to keep Comcast and its fellow Giants happy.

SC: for the last 30 years the rhetoric of the market being the thing we all aspire to has in a sense become the collective vision in America.

Our politicians aren’t separate from that kind of understanding.

I think they believe that it’s better to have government stay out of industry. in this particular place no government intervention is actually disaster for the country. because we leave so many people behind, we subject ourselves to the informational control of just a few giants. the problem for the politicians is that there’s no upside right now to fighting back.

If they do they’ll lose their campaign contributions.

We need to get the public interested in this so that politicians will understand that they’re not acting alone.

BM: In your last chapter you describe what has happened in Lafayette Louisiana when the city decided it wanted the very kind of internet access you’re talking about. and a few years ago my colleagues and I did a documentary called Net At Risk –in which we looked at the threat to Internet access –and we went to Lafayette and lo and behold they’re doing exactly what you’re describing in your book.

CLIP: We have an out migration problem with our young people from Louisiana and I felt it was time for politicians to quit talking and do something.

Something like building every home in business in town its own fiber optic connection to the information superhighway.

We see telecommunications in the way of Internet in the way of fiber connectivity as something that should be available to everyone –just like water sewer electricity telephone I mean it all falls into that same lump.

I think this is a tremendous opportunity for small business and to attract business here.

So what the city decided to do was build its own fiber network through its municipal power and water company Lafayette Utility Systems or LUS.

BM: How did they get away with it in lafayette when as you say they didn’t in North Carolina.

SC: Persistence of a mayor who very much focused on this and said we’re going to get this done. and there wasn’t a statute at that point at the state level making it illegal municipalities have a lot of assets at that disposal. they control the rights-of-way the access to their streets and their poles that people need in order to build these networks.

They can condition access to those rights-of-way on a particular network being built.

Stockholm did this.

They say look you can come in and build a fiber network as long as it’s a wholesale non-discriminatory, really fast fiber network connecting our hospitals and schools and police departments –and then you have to let anybody else connect to it.

Not that hard. You just draft that an RFP request for proposals and the city can do that using its control over its rights of way.

Cities often also have access to this long-term low rate financing.

They can put their good name behind a bond issue and make sure that it gets paid back by the subscriptions to the network over time.

It’s a great investment for the city and that’s what Lafayette found out.

BM: so how is the consumer in Lafayette situated differently from me here in Manhattan with one cable service.

SC: In comparison to where you are in Manhattan – where there’s no government intervention at all –and Lafayette, the municipality is acting as a steward. standing up for you. It is in fact government’s role to stand up against the ethic that might makes right. In most of the United States there is no government actor keeping these bullies from charging us whatever they want.

BM: You described something in your book quote:

The constant easy friendly flow between government and industry in the communications world centered around Washington DC describe that world.

SC: It’s a warm pond of familiarity everybody knows everybody else. they’re all very nice people you’d like to have a drink with them. they go from a inside the regulator to a job in industry to a job on the hill. one easy flow. nice people. outsiders have no impact on this particular world.

I talked to a cable representative not long ago about the need to change this regulatory state of affairs and she looked at me and said but that would be so disruptive.

And she’s right. It would be disruptive.

BM: Oh yeah. The FCC was supposed to be the cop on the beat of the communications world. But for example Michael Powell who served as FCC chairman for four years in the mid-2000s –is now the cable and telecom industry’s top DC lobbyist.

Meredith Attwell Baker who was one of the FCC commissioners who approved Comcast merger with nbc universal, left the agency four months later to join Comcast as a highly paid lobbyist.

That move infuriated media groups.

SC: but that warm pond of familiarity in Washington sees this as absolutely normal behavior.

Just yesterday the former chief of staff of the FCC left to be the general counsel of a regulated company.

It happens all the time. And so in order to change this you’d have to make regulation of this area not be carried out by such a focused agency.

Right now the FCC’s asymmetry of information is striking.

They only talk to the industry. the community is also closed in order to break that up you’d have to make sure you had a broad-based agency seeing lots of different industries.

BM: about the time I was reading your book I also read a speech by the present chair of the FCC Julius Genachowski he said, “the United States is in a global bandwidth race our nation’s future economic security is tied to frictionless and speedy access to information.” if you were chair of the FCC what would you do to move us forward?

SC: I know that it’s important to let these municipalities make decisions for themselves that’s going to take a bill in Congress pre-empting the terrible state laws like the one that happened in North Carolina. We need to make self-determination possible for cities.

And the second one is making sure that there’s low-cost, low rate financing available to build these networks. that’s the stumbling block. Making sure that you can actually build –and without needing to put up all the money yourself –because it pays out over time. It pays out as a social investment for the country.

And then finally changing all those rules at the FCC that are getting in the way of progress.

BM: So briefly describe the need . . .

SC: All Americans need a fast cheap connection to the Internet.

BM: And the problem . . .

SC: A few companies control access in America and it’s not in their interest to bring that fast cheap access to us all.

BM: And the solution . . .

SC: The solution is for people to care about this issue ask hard questions at every debate. make sure you elect people who will act and give your mayor air cover.

So that they can act to make sure that your city has this fast competitive access.

BM: The book is captive audience the telecom industry and monopoly power in the Gilded Age. Susan Crawford, I have enjoyed this conversation, thank you for being with me.

SC: Thank you so much.

Competitive Access
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