All Tech Considered
Thu February 6, 2014
Author: When It Comes To High-Speed Internet, U.S. 'Falling Way Behind'
Originally published on Fri February 7, 2014 11:41 am
For an increasing number of Americans, access to high-speed Internet has become an essential part of our lives. We do work, email friends, find restaurants, watch videos and movies, and check the weather. And the Internet is increasingly used for important services, like video medical consults and online education, and is relied upon by businesses for critical operations.
Under a recent court decision, Internet service providers, primarily cable companies, aren't required to treat all websites equally. They can make deals to provide faster service to some, or slow down sites that refuse to pay them extra fees. Law professor Susan Crawford says you may be experiencing the effects of this — without realizing it.
Why, for example, do you have to wait for YouTube videos to buffer? Crawford explains: "You may think it's the YouTube application. You may think there is something wrong with your computer. It's probably the network provider making life unpleasant for YouTube because YouTube has refused to pay in order to cross its wires to reach you. And we'll be seeing much more of that kind of activity in the future."
Crawford, author of Captive Audience: The Telecom Industry and Monopoly Power in the Gilded Age, explains how we got to this point. "The [Federal Communications Commission] in the early 2000s really thought that competition would do the job of regulatory oversight — that that would protect Americans," she tells Fresh Air's Dave Davies. The idea was that cable, telephone and wireless companies would battle it out, which would yield low prices for American consumers. "As it turns out, they were wrong and we've come into an era where these markets have consolidated and for most Americans, their only choice for high-speed, high-capacity Internet connection is their local cable monopoly."
Crawford says that American Internet service is falling behind other nations because cable companies have such dominance in many markets, and that will undermine our ability to compete in a global economy. She warns: "Unless somebody in the system has industrial policy in mind, a long-term picture of where the United States needs to be and has the political power to act on it, we'll be a Third World country when it comes to communications."
On how the Internet is like the railroad
For every part of our modern lives we depend on information flows coming into our houses and our businesses. They're just like the railroad in that if you were a farmer in the 1890s, the only way to get your goods to market would be to work through the railroad. ... We just can't operate without it. They're also like them in that they're expensive businesses to build in the first place — it's very hard to come in and compete against one of these guys once they've built one of these giant networks. They're also like the railroad in that it takes intentional policy to make them stretch all the way across the United States. We wouldn't have had the transcontinental railroad without Lincoln; we wouldn't have had the federal highway system without Eisenhower; because markets, left alone, don't provide this kind of universal access.
On why communications access shouldn't be treated as a luxury
I think the problem is actually much more profound than mere discrimination by a few cable actors when it comes to high-speed Internet access. We seem to currently assume that communications access is a luxury, something that should be entirely left to the private market unconstrained by any form of oversight. The problem is that it's just not true in the modern era. You can't get a job, you can't get access to adequate health care, you can't educate your children, we can't keep up with other countries in the developed world without having very high capacity, very high speed access for everybody in the country. And the only way you get there is through government involvement in this market. That's how we did it for the telephone, that's how we did it for the federal highway system, and we seem to have forgotten that when it comes to these utility basic services, we can't create a level playing field for all Americans or indeed compete on the world stage without having some form of government involvement.
On the recent lawsuit between Verizon and the FCC
Verizon was irritated at the December 2010 open Internet rules that had been adopted by the FCC, and [it] came before the D.C. Circuit [court] saying, "Look, we'd like to be able to charge actors like Netflix and Google additional amounts to cross our wires to reach our subscribers, and to pick subscribers to charge more, too, depending on how much bandwidth they're using." And what [Verizon] said was, "Look, you can't allow the FCC to deregulate with one hand, as they had done in the early 2000s, and then impose this open Internet rule, which essentially treats us like a common carrier with the other." And the D.C. Circuit agreed.
On how U.S. service compares with service in other developed countries
[Cable companies] are extracting enormous rents, enormous profits, from what Americans perceive to be a basic service. And the competitive argument they make is a complete canard. If you tried to swap out your wireless connection or use your wireless connection instead of a cable connection for let's say, watching online video — so the average user of a wired high-speed Internet connection uses 50 gigabytes of data a month — if you tried to do that over a mobile wireless device you'd be spending $500 a month. That's because you may get wireless at about the same speeds, but [there are] very low capacity caps, data caps, on the usage of that connection. So it's not a substitute; it's a complement. We love mobile wireless services. It's never going to take the place of a wire.
What's even more disturbing is that in other countries — I've visited both Seoul and Stockholm recently — they take these services for granted. For about $25 a month they're getting gigabits symmetrical service, which is 100 times faster than the very fastest connection available in the United States and for a 17th of the price. It really is astonishing what's going on in America. Americans aren't quite aware of it because we don't look beyond our borders, but we're falling way behind in the pack of developed nations when it comes to high-speed Internet access, capacity and prices.
On what's at stake
What's at stake is whether the new jobs, new ideas, new services of the 21st century will come from the United States or they'll come from Stockholm, Seoul, Beijing, where there are kids already playing in the virtual sandboxes of these very high capacity networks. They take them for granted over there the same way we take for granted electricity. It's a real risk to the country not to be the place where new ideas come from. That's always been our advantage as an entrepreneurial, individualistic society.
On ways to address the problem
There are two routes out of this puzzle for the United States: One is greater oversights, setting a national standard, making sure that everybody gets high-speed fiber access. The other is just leave these guys behind and build better alternative fiber networks in each city in America. And a lot of mayors are extremely interested in doing this because they see it as a street grid or a tree canopy — this is just infrastructure. ... We'll see a lot of developments along these lines the next few years as we try to get out from under the thumb of the cable monopoly for wired service in America.
TERRY GROSS, HOST:
This is FRESH AIR. I'm Terry Gross. For many of us, high-speed access to the Internet has become an essential part of our lives. We do work, email friends, find restaurants, watch videos and movies, check the weather, and the Internet is increasingly used for important services like video medical consults and online education, and is relied on by businesses for critical operations.
Our guest, Susan Crawford, says a new court decision gives Internet service providers, mostly cable companies, the right to discriminate among websites and content providers that use the net. They can make deals to give some providers faster service and slow down or even block websites that don't pay special fees or that compete with content the cable company favors.
Crawford also says American Internet service is falling behind other nations because of a lack of competition in many markets, and she says that will undermine our ability to compete in a global economy. Susan Crawford is a visiting professor at Harvard Law School who specializes in telecommunications policy. She's written a book called "Captive Audience: The Telecom Industry and Monopoly Power in the Gilded Age." She spoke with FRESH AIR contributor Dave Davies.
DAVE DAVIES, HOST:
Well, Susan Crawford, welcome to FRESH AIR. You write in your book that Internet providers like, you know, Comcast or Verizon are something akin to railroads or the electric company or a water utility. How?
SUSAN CRAWFORD: Well, for every part of our modern lives we depend on information flows coming into our houses and our businesses. They're just like the railroad in that if you were a farmer in the 1890s, the only way to get your goods to market would be to work through the railroad, and if you wanted to run a business at any point in our recent history, you'd need electricity.
We just can't operate without it. They're also like them in that they're expensive businesses to build in the first place. It's very hard to come in and compete against one of these guys once they've built these gigantic networks. They're also like the railroad in that it takes intentional policy to make them stretch all the way across the United States.
We wouldn't have had the transcontinental railroad without Lincoln. We wouldn't have had the federal highway system without Eisenhower, because markets left alone don't provide this kind of universal access.
DAVIES: And as the government kind of struggled to deal with how to regulate or not regulate these huge infrastructure companies, a concept emerged of a common carrier. Explain what a common carrier is.
CRAWFORD: Basically what's come down to us in America is that where you're operating a road network in particular or a utility or a communications network, you may be a private company, but you're under public burdens to serve everyone at reasonable prices and not to discriminate when you're providing them those services.
DAVIES: So Internet access is becoming a modern utility. We depend on it for so many things. But it's a relatively new thing. And as the Federal Communications Commission encountered this, it had to figure out how to treat Internet providers. How has it done it since the Internet's arisen?
CRAWFORD: Well, it's been a little bit of a puzzle for the Federal Communications Commission. Initially a lot of us were getting high-speed Internet access over our phone lines. This was called DSL. It still exists in a lot of America. And for the first four years, let's say, after the advent of the modern Internet, that transmission was treated as a common carriage service.
The people selling DSL access had to not discriminate and allow anybody to attach their lines. But then cable actors showed up. They were also selling Internet access. And they'd never traditionally been treated as common carriers. They were a one-way entertainment service for a lot of Americans.
So faced with this puzzle, do you treat cable like telephone, or do you just deregulate the entire sector? The FCC in the early 2000s decided to lift all common carriage obligations from all forms of high-speed Internet access. That includes not only telephone and cable but also wireless and fiber.
DAVIES: Right, so these companies that started providing us entertainment now provide us this service, and the FCC has said, well, you can kind of do what you want?
CRAWFORD: Well, people always have good reasons for doing what they do. And the FCC in the early 2000s really thought that competition would do the job of regulatory oversight, that that would protect Americans, that the cable guys would battle it out with the telcos, and wireless would battle it out with them all, and that that would produce low prices and expanded service for all Americans.
As it turns out, they were wrong, and we've come into an era where these markets have consolidated, and for most Americans their only choice for a high-capacity, high-speed Internet connection is their local cable monopoly.
DAVIES: The case that go so much attention a month ago, that was decided, I guess, by an appeals court in Washington, D.C., this involved a case that was brought by Verizon against the FCC, right?
CRAWFORD: That's right. Verizon was irritated at the December 2010 open Internet rules that had been adopted by the FCC and came before the D.C. circuit saying, look, we'd like to be able to charge actors like Netflix and Google additional amounts to cross our wires to reach our subscribers and to pick subscribers to charge more to, depending on how much bandwidth they're using.
And what they said was, look, you can't allow the FCC to deregulate with one hand, as they had done in the early 2000s, and then impose this open Internet rule, which essentially treats us like a common carrier, with the other. And the DC circuit agreed.
DAVIES: So in the early 2000s, the FCC decides, well, there's going to be competition, so we're not going to require you to treat yourselves like a regular utility, not be a common carrier, not, you know, offer the same conditions to everyone. And then by 2010 they're concerned, and they say, well, you've got to behave, right?
CRAWFORD: That's right. They'd actually said that a couple of times.
DAVIES: You said open Internet. They required that these companies essentially behave as if they were common carriers and offer the same deal to anybody?
CRAWFORD: Well, there are an awful lot of lawyers who work at the FCC, and they're terrific people, and they said we've got to somehow respond to the concern about the built-in conflict of interest that exists for these high-speed Internet access providers. Cable guys in particular also own content of their own or have partnerships with content. So they have a built-in reason to favor that content over other independent companies that might want to reach their subscribers.
DAVIES: Let's kind of make this real to people. When we say a content provider that might be treated differently, what are we talking about?
CRAWFORD: Well, Ars Technica did a great article about this called "Why Does YouTube Buffer?" Why do you sit there in front of what you thought was going to be your favorite YouTube clip, and you see nothing but a multi-colored wheel spinning in space? You may think it's the YouTube application. You may think there's something wrong with your computer. It's probably the network provider making life unpleasant for YouTube because YouTube has refused to pay in order to cross its wires to reach you.
And we'll be seeing much more of that kind of activity in the future.
DAVIES: So streamed audio, radio, other video services?
CRAWFORD: Right. Anything that requires a high-capacity connection. So distance education, streamed video, home security services, anything where the cable operator feels that it could be providing a service that you would love more, they'll try to get you hooked on their service and make life commercially unpleasant for the other service, and you will follow suit.
DAVIES: And I can hear the Internet providers listening and saying we would not do that.
DAVIES: What's the record? Has this happened before?
CRAWFORD: Netflix has asserted that its video and YouTube video are not reaching Americans in ways that are satisfying to view, that they're not getting high enough capacity connections to the cable operators' networks to allow them to reach subscribers. And that is invisible to most of us as consumers. We may think that there's a problem with the Netflix application, or there's, you know, there's some glitch in the system that our network provider has nothing to do with.
But in fact the cable operators are already playing games with the interconnection points between their networks and other networks.
DAVIES: You think this is a terrible thing, to have these - to permit these cable providers to discriminate. What are you worried about?
CRAWFORD: I think the problem is actually much more profound than mere discrimination by a few cable actors when it comes to high-speed Internet access. We seem to currently assume that communications access it a luxury, something that should be left entirely to the private market, unconstrained by any form of oversight.
The problem is, that's just not true in the modern era. You can't get a job, you can't get access to adequate healthcare, you can't educate your children, we can't keep up with other countries in the developed world without having very high capacity, very high-speed access for everybody in the country. And the only way you get there is through government involvement in this market.
That's how we did it for the telephone. That's how we did it for the federal highway system. And we seem to have forgotten that when it comes to these utility basic services, we can't create a level playing field for all Americans or indeed compete on the world stage without having some form of government involvement.
DAVIES: What's an example of how consumers would be harmed in this world?
CRAWFORD: Well, let's take education, for example. What if Comcast decides it wants to offer the next killer education service? It can give very special treatment to that online distance education program, whatever it is. It can take it out of any limits on your online subscription, these are called usage-based caps. It can make sure that its own service isn't subject to those caps.
It can charge any provider of educational online content a lot more than it charges itself and its many big pockets to reach you. And what that means is that they're systematically excluding online innovation. The possibility of other actors providing these very high-capacity, very valuable services for Americans.
DAVIES: So let's look at where we go now. The court ruled that the Internet providers can, in effect, kind of make their deals and discriminate among content providers. But they told the FCC that the FCC, if it wants to, can decide that in fact these Internet providers are common carriers like utilities, in which case they would have to offer equal treatment. Is that right?
CRAWFORD: That's right. So the D.C. circuit is pointing the FCC towards relabeling these services as common carriers, and then the FCC also has another trick up its sleeve. It could forebear, it could back off from applying every detail of common carriage regulation. But its power, its statutory authority to require the high-speed Internet access carriers to act one way or another would be clear.
DAVIES: And what's the FCC inclined to do? Give us a sense of how the stakeholders have reacted here.
CRAWFORD: Well, what's amazing about this story is that the guy who deregulated the high-speed Internet access industry is Michael Powell. He was, at the time, the chairman of the FCC. He's now the head of the cable organization, the National Cable Telecommunications Association. He has said publicly that it will be World War III if the FCC attempts to reclassify high-speed Internet access as a Title II or common carriage service.
So the carriers have made it very clear that they will fight, and the way they fight is to go up on the Hill to congressman and say gut the FCC's budget if they move a muscle towards reclassifying us as utilities.
DAVIES: Does this break down along partisan lines? Do you have, you know, Democrats in favor of more regulation and Republicans in favor of leaving them alone?
CRAWFORD: If you speak to congressmen alone, they'll tell you that they understand that this is a utility service. The problem is the political heft of these players is enormous. So the four enormous carriers - AT&T, Verizon, Time Warner Cable and Comcast - give millions of dollars every year in campaigns and in other, softer ways.
There's no upside right now for anybody in Congress to oppose what the carriers are saying, and so there are very few actors who are standing up on either side of the aisle to say that the FCC should take a stronger hand at this point.
DAVIES: Susan Crawford's book is "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." We'll talk more after a short break. This is FRESH AIR.
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DAVIES: This is FRESH AIR. If you're just joining us, our guest is Susan Crawford. She's a visiting professor at the Harvard Law School. She has a book about the concentration of power in the telecom industry. It's called "Captive Audience."
Let me play devil's advocate here. You know, if you go back to regulating, say, the railroads back, you know, in the early - in the 19th century, you could say it was certainly not fair for railroads to discriminate against or give deferential rates to their preferred customers, but the fact is they did a lot. I mean, they built a nationwide rail system, provided a lot of goods and services, built a lot of industries, and, you know, things often aren't fair but that the existing telecommunications firms have done a pretty remarkable thing in building out the Internet such as it is and that, you know, in the end there will be competition.
You know, there'll be phone companies. You know, there's wireless. There's enormous change and flux in technology and that maybe if you leave it alone, things will be served.
CRAWFORD: That's their argument, and they say, look, we've spent billions on this network, and Americans are happy. What's the problem? The problem is, who's benefitting? Yes, they spent billions, but they've made trillions, and that means that they're extracting enormous rents, enormous profits from what Americans perceive to be a basic service.
And the competitive argument they make is a complete canard. If you tried to swap out your wireless connection or use your wireless connection instead of let's say a cable connection for watching online video - so the average user of a wired high-speed Internet access connection uses 50 gigabytes of data a month.
If you tried to do that over a mobile wireless device, you'd be spending $500 a month. That's because you may get wireless at about the same speeds, but there are very low capacity caps, data caps on the usage of that connection. So it's not a substitute. It's a compliment. We love mobile wireless services. It's never going to take the place of a wire.
And what's even more disturbing is that in other countries - I visited both Seoul and Stockholm recently - they take these services for granted. For about $25 a month, they're getting gigabit symmetrical service, which is 100 times faster than the very fastest connection available in the United States and for a seventeenth of the price. It really is astonishing what's going on in America.
Americans aren't quite aware of it because we don't look beyond our borders, but we're falling way behind in the pack of developed nations when it comes to high-speed Internet access capacity and prices.
DAVIES: I want to talk about some of the trends that you see towards concentration, even monopoly, in the provision of Internet services. And I have to say that this can be confusing to a lot of people, and it seems like there are competing services. I mean there's the Internet that comes - that I get through coaxial cable, I'm a Comcast customer. There's also DSL that's been offered. There's, you know, FIOS, the fiber-optic system that Verizon has offered.
And it seems as if there's some competing services out there. True?
CRAWFORD: It depends how you define the market. So right now the FCC defines broadband as anything over four megabits per second download and one megabit per second upload, not to be highly technical on you. But that's just about the minimum you need to be able to watch video. And if you use that market definition, then yes, there's lots of competition between wireless and cable and DSL and fiber.
But if you look seriously at what people actually do with these connections, you see the competitive picture quite differently. So for example, if you're using a cable modem service, you're able to get much faster downloads than you would ever get using your copper-wire DSL service. This is because of the law of physics. You know, it's not because of the profit-making opportunities of cable. Just copper wire can't conduct as much information as what's possible over the hybrid fiber-coaxial cable that the cable companies work.
So cable, much higher capacity than copper phone lines, and both much higher capacity than wireless. Then it turns out that for truly high-capacity communications, let's say 100 megabits per second or faster, your only choice in America is either your cable company, and they're always a monopoly, or FIOS, Verizon's FIOS service.
But here's the thing: Verizon in March 2010 announced that they weren't going to be building any more FIOS across America. So for only 14 percent of Americans is FIOS even an option. You're lucky if you live in a metro area that happens to have it. For the rest of the country, they're stuck.
If they actually want to have a high-capacity connection, their only choice is cable, and actually the cable companies in 2013 took 99 percent of the new high-speed Internet access subscriptions. People are fleeing copper-wire DSL if they have a chance. And cable knows this. Brian Roberts, the CEO of Comcast, has said that he's looking to control 90, 100 percent of the territory, of the market for high-speed Internet access in each part of his footprint.
DAVIES: And how do our Internet services compare with other developed countries?
CRAWFORD: Well, let's take Sweden for example, very sensible country, actually just as thinly populated as the United States. In Stockholm you can get a connection that's 18 times faster than the one I have in my New York City apartment for a quarter of the price. In Seoul you can get a similarly, you know, many multiples of times faster connection for a fifth of the price.
New York City's peer city in this regard is Istanbul. We're paying many, many times more what other people in particularly countries like Norway and South Korea and Japan and Sweden are paying for far inferior service. The other thing I want to emphasize is that cable service, this hybrid fiber-coaxial service that is better than copper, is far worse than fiber.
The capacity of fiber, which is essentially thin glass tubes with lasers shot(ph) through them, is unlimited, unlimited. You can get 90,000 phone calls in a single strand of fiber. Cable is never going to be able to equal that, particularly when it comes to the uploading capacity.
So bottom line, we're paying many times more what people in places like South Korea and Sweden and Norway and Japan are for services that are many times worse.
DAVIES: What's at stake here besides whether I get to see my movies clearly?
CRAWFORD: What's at stake is whether the new jobs, new ideas, new services of the 21st century will come from the United States, or they'll come from Stockholm, Seoul, Beijing, where there are kids already playing in the virtual sandboxes of these very high-capacity networks. They take them for granted over there the same way that we take for granted electricity.
It's a real risk to the country not to be the place where new ideas come from. It's always been our advantage as an entrepreneurial, individualistic society. And without even being aware of it, we'll falling so far behind that when people from South Korea come to visit the United States, they feel like they're taking a rural vacation, that life slows down. It's peaceful here. That can't be good for us as an entrepreneurial country.
GROSS: Susan Crawford will continue the interview with FRESH AIR contributor Dave Davies in the second half of the show. Crawford is the author of "Captive Audience: The Telecom Industry and Monopoly Power in the Gilded Age." I'm Terry Gross, and this is FRESH AIR.
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GROSS: This is FRESH AIR. I'm Terry Gross. Let's get back to contributor Dave Davies' interview with law professor and telecommunications policy analyst Susan Crawford. She says open access to high-speed Internet service in the U.S. is threatened by the market dominance of cable companies and a regulatory climate in which Internet providers can discriminate among websites and content providers. Internet providers can offer faster service to websites they favor, and slower service to websites that compete with them or that don't pay special fees.
When we left off, Crawford was saying that Americans pay more and get slower Internet service than other countries, and that inferior service here will slow innovation and undermine our ability to compete in a global economy.
DAVIES: If I have a startup, how is a startup in the United States handicapped by the speed of our Internet service?
CRAWFORD: A startup in the United States is being handicapped in several ways. First of all, if they're trying to reach an audience and attract investment and they're very (technical difficulties) a startup that's going to be using up a lot of bandwidth, say, something that relies on presence, presence of your doctor to you, presence of you in a business meeting, their future is going to depend on how these very few carriers treat them. That means it's going to be difficult to attract investment in the first place, because their future is so contingent on how they're treated by, say, Comcast or Time Warner Cable or Verizon. So that's one way in which they're constrained. A second...
DAVIES: So, in that case, it's because what they propose to do simply won't work with the bandwidth available to them?
CRAWFORD: Or if - even if the bandwidth is available to them today, it could be yanked away tomorrow if they grew large enough to become a threat to an existing incumbent service being provided by Comcast or Time Warner Cable. So the risk is to their ability to attract investment in the first place, because there's no solid ground. There's no sidewalk. There's no utility service that they can depend on.
The second risk to a startup here in America is that they can't be constantly playing around with what's possible using these very inexpensive, very high-capacity networks. I call it a sandbox. They don't have the sandbox to play in. They are stuck. Their imagination is limited by the nature of the network that they're allowed to use.
DAVIES: Can you give an example of that? I'm not sure I understand the sandbox.
CRAWFORD: Well, let me put it to you this way: When electricity was first invented and people first started paying for it, it was similarly a private, very rare luxury service. And people called their electricity bill the light bill, because they couldn't imagine what else you would use electricity for. It was only for screwing in a single light in your house. We know now that we can use electricity to power all kinds of appliances and objects and make our lives much more productive. If we had been left just thinking of electricity as the light bill, we wouldn't have become the nation that we have become today. It's the same thing for communications networks.
If you can't imagine what's possible, if you can't play around with plentiful, cheap, ubiquitous capacity to communicate, you can't imagine new ideas into being, and you can't get people to rally around your new business, because that's what happens with these high-capacity networks. They're as different from existing Internet access as having electricity was different from not having electricity. They fire the imagination.
DAVIES: Is one explanation for the inferiority of our networks the fact that we're such a geographically large country with a population that's, you know, particularly an affluent population that's sprawled out across suburbs and exurbs and rural areas and cities?
CRAWFORD: No, because again, Sweden is just as sparsely populated as we are. And, in fact, something like 70 percent of Americans live in 2 percent of the land mass. We're pretty clustered. No, what's happened in America it's that we've gotten stuck on a plateau, that the cable guys have taken the wired marketplace, absolutely. They control it. The telcos - AT&T and Verizon - have retreated to a wireless, where their profits are more certain and they're not building out more fiber. And we're stuck at the second-class network stage, which is relying on cable for all of our wired connections.
They're never going to upgrade. They're under no competitive threat and under no oversight threat to act any differently.
DAVIES: Are municipal Internet networks a realistic alternative to cable companies?
CRAWFORD: Absolutely. So there are two routes out of this puzzle for the United States. One is greater oversight, setting a national standard, making sure that everybody gets high-speed fiber access. The other is just to leave these guys behind and build better alternative fiber networks in each city in America. And a lot of mayors are extremely interested in doing this, because they see it as a street grid or a tree canopy. This is just infrastructure. And the mayor has a lot of sovereignty, and can use his or her power over streets and rights of way to make sure that a fiber network is put in place that will serve the interests of the - all of the citizens in that city. We'll see a lot of developments along these lines in the next few years, as we try to get out from under the thumb of the cable monopoly for wired service in America.
DAVIES: Sounds expensive. Can cities afford that?
CRAWFORD: Well, again, let's look back at Stockholm. Twenty years ago, 20 years ago, the city decided it didn't want to be under the thumb of its incumbent there, the phone company. So they built a third network. It's a wholesale fiber network. The city never itself self-services to residents or businesses in Stockholm, but it makes that infrastructure available to a host of retail fiber providers. So, in just a few years, that wholesale network paid for itself. They put out of bond issue, and it paid itself back in a few years. And now, 20 years later, the city of Stockholm is coining money, leasing out access to its wholesale network to many retail competitors. And if you move into an apartment in Stockholm, you have a choice of five fiber-to-the-home providers for 30 bucks a month. This is unthinkable in the United States, but it's the right model. It's what should be happening here. It just takes patient capital, infrastructure capital. You know, mayors who build bridges should also be interested in building fiber networks.
DAVIES: Is anybody doing - is it happening in any city yet here?
CRAWFORD: Yes. Chicago is poised to be putting fiber in its sewage system. You know, it's a way of getting fiber into the infrastructure of a city. Los Angeles has announced that it wants to have a fiber network covering all three million of its residents. San Francisco has announced that it's thinking about this. Boston is thinking about it. The political heft on the other side is tremendous, coming from the cable operators. So the mayors have to have all their political ducks in a row to get this off the ground.
DAVIES: You've said we get kind of inferior service, at least compared to other nations, just not getting enough capacity to a lot of places. To what extent are we just not reaching some people, and what about equality of access among the population?
CRAWFORD: Well, we're suffering from a dramatic digital divide internally, and as well as a digital divide between us and other countries. Internally, about 100 million Americans still don't have a wire to their home that meets even the FCC's very low standard for a high-speed Internet access connection. That's a tragedy, because it means we're leaving lots and lots of people behind.
With the phone system, we made sure that everybody got a world-class connection. We haven't done that with high-speed Internet access. Often, the providers will say, well, those people will be fine with wireless access. That'll do it. And, in fact, AT&T has a very large petition in front of the FCC, because it's seeking to abandon a quarter of its territory from, you know, having people lose access to wires and instead rely on wireless. The problem is that wireless doesn't have the same capacity. You can't get the same amount of information into your device. It's not as reliable, and it will never be as good as a fiber or a cable connection.
Very rich people on the coasts may be able to afford the operators' enormously high prices for high-capacity connections, but people who are poor and in rural areas will be left with decidedly second or third-class connectivity.
DAVIES: And what about kind of universal service? I mean, are we getting Internet service everywhere, I mean, to rural areas, as well?
CRAWFORD: Cable operators will say that 93 percent of America is covered by their wires. The problem is that, often, those services are too expensive for people to afford, and that 7 percent that's left is a deeply rural areas that are expensive to serve in the first place. The FCC's doing its best to reach those areas with what it calls Universal Service Funding, but the cable operators aren't contributing to that funding. And it's unclear when we will ever get to the point where almost everybody in America has a fiber connection, which is where they are in Japan and Sweden and Norway, and even in China. China has declared that its citizens will have fiber in the future, and America seems incapable of making that kind of commitment.
DAVIES: There's a program to get service into more rural areas, but you say that cable companies aren't contributing to it?
CRAWFORD: Yeah. This is part of this classification issue. Because we don't treat high-speed Internet access as a utility - as a communications service - that also affects how companies pay in, or don't, to what we call the Universal Service Fund, which is how we have traditionally supported communications access for very high-cost areas or for very poor people. The cable operators are not subject to, you know, the tax, essentially, that pays for those services, and so it's not being adequately funded to cover the rest of America.
DAVIES: So who does fund the Universal Service Fund?
CRAWFORD: Well, all of us do when we pay for voice service on our cell phones and our wire line phones. That's where the money comes from. And it's a very high contribution factor. It's about 18 percent of those bills. Again, the FCC really is doing its best to shift that program over to high-speed Internet access, but this regulatory classification problem is also getting in the way of a successful in Universal Service program, as well.
DAVIES: Susan Crawford's book is "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." We'll talk more after a short break. This is FRESH AIR.
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DAVIES: We're speaking with Susan Crawford. She is a visiting professor at the Harvard Law School. Her book is "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age."
You write in your book about the merger between Comcast and NBCUniversal that was proposed, I guess, 2009, and was considered at some length by the FCC, and as well is the Justice Department's Antitrust Division. First of all, what did these two companies do, and why did they want to get together?
CRAWFORD: Well, NBCU, at the time, was one of our five major media conglomerates. There are only five companies that control about 80 percent of the primetime TV that people watch here in America, and NBCU was one of them. Comcast, at that the time, was primarily a distribution network, although it also owned some content.
And the argument that Comcast made to the Justice Department and to the FCC is that it wouldn't be reducing competition to have these two things merge, because they were two such different kinds of companies. As it turns out, Comcast can use, now, its power over programming to make life very difficult for any new entrant building infrastructure in a city.
Here's why: That new entrant has to enter on two levels. It has to build communications infrastructure. But it also has to get access to programming, because 91 percent of Americans have paid TV prescriptions, as well as high-speed Internet access subscriptions. They want both. So Comcast pays much less for programming - because it has so many subscribers, and because it owns one of the big players - than any new entrant would. This is yet another cudgel, another sledgehammer that Comcast can use to keep any potential alternative network competition at bay.
DAVIES: One of the arguments that was used in support of the proposed merger was that it wasn't a horizontal expansion - that is to say, they weren't buying another company that did exactly what they did, providing cable to everyone. They instead got a company that provided content. What about that argument?
CRAWFORD: Well, that's true. Comcast was primarily in the distribution business, and NBCU was primarily in the content business. The thing that the regulators perhaps didn't focus on was the fact that so many Americans buy both of these things together, and the power of Comcast to bundle inextricably content - particularly sports content - with its distribution network makes it almost impossible for somebody else to show up and build an alternative network in any city in America. So, yes, it's vertical, and regulators have been favoring vertical integration for a while now. It seems less dangerous than horizontal integration. But Comcast is so powerful - it's now the largest media company in the world - that it can use these advantages to make sure that it's never pushed from its perch.
DAVIES: Who opposed the merger, and how did Comcast go about reassuring them?
CRAWFORD: Well, a wide variety of public interest groups attempted to oppose the merger. As I describe in "Captive Audience," they were either selectively co-opted - for example, you know, groups were promised that their programming would appear on Comcast networks, or simply argued to death. Comcast, essentially, has unlimited resources and very fine lawyers. And so the arguments on the other side were both muted and not particularly well-stated. In the end, Comcast smoothly and inexorably prevailed.
DAVIES: Do you want to give an example of - I mean, there were any number of examples that you cite in the book about them making a significant financial commitment, you know, to people who had complained.
CRAWFORD: Yeah. For example, the independent television writers out in California were raising a ruckus about the merger and Comcast made a contribution to their trade association. There was concern about whether or not there was diverse programming that would appear on NBCU. Comcast found a way to quiet those concerns. None of this is illegal, it's just a soft form of influence that's very difficult to combat where the social values, the public values, that should be inherent in the regulator's treatment of such a merger are forgotten.
DAVIES: And it did agree to certain commitments of future conduct, didn't it, Comcast?
CRAWFORD: It did. And some of them were quite imaginative. It agreed to support some local news programs by fostering alliances between journalism schools and local news. It agreed to sell a $10 Internet essential service to many families with school children across the country. It agreed to adhere to the commission's net neutrality order, the open Internet order we started off discussing, for the next few years.
So David Cohen, who's the enormously skilled executive vice president of Comcast and the man who had been really the mastermind behind Comcast's activities, announced the day after the merger was closed to Comcast investors that the conditions to which Comcast had agreed would have absolutely no affect on Comcast's freedom to do business.
DAVIES: But among its commitments was to stick to the open Internet policy through 2018. Does that mean that even though, you know, the court kind of ruled against the FCC in this January ruling that Comcast is committed to treat all of its providers equally?
CRAWFORD: Yes. With lots of exceptions. The open Internet rule adopted by the FCC in December 2010 had many carve-outs in it. It, as a rule, did not make the cable industry uncomfortable to begin with.
DAVIES: In arguing for the merger, I mean, Comcast argued first of all it wasn't acquiring another Internet provider or cable provider, it was acquiring a content provider, but also that it would allow Comcast and NBC to innovate, to create synergies that would allow them to provide exciting options for consumers and permit them to upgrade service. What about that?
CRAWFORD: Well, people engaging in vertical mergers always talk about this, that they're going to be able to smooth out the difficulties between two links in the distribution chain by having them under one house. The question is are any of those safe costs ever handed on to consumers? Do those benefits come back to consumers in the form of lowered subscription costs or better service? That doesn't happen - it hasn't happened - in the Comcast setting.
No one's paying less for high speed Internet access from Comcast than they were before the merger. Comcast is able to keep all the benefits of these cost savings to itself. Again, it's not malign, it's just what investors would expect they're serving their shareholders.
DAVIES: What are the chances that the FCC is going to change its thinking about this stuff?
CRAWFORD: The FCC would face a firestorm of political protest if they tried to act with this long-term view in mind. The problem is that each chairman of the FCC only stays about 2.7 years so they have a short-term vision. They want to get done what they can get done in about two years. Similarly, the companies involved have very short-term visions. They just want to make their quarterly profits.
Unless somebody in the system has industrial policy in mind, a long-term picture of where the United States needs to be and has the political power to act on it, we'll be a third world country when it comes to communications. For electricity, FDR was that actor. He decided that it couldn't just be provided by private companies, that it had to be a regulated utility, and as a result we have electricity throughout the country.
We need to make that same decision now for communications. I hope that the FCC can do it. It may require presidential leadership to get this done.
DAVIES: Susan Crawford, thanks so much for your time.
CRAWFORD: I'm so happy to get to talk to you.
GROSS: Susan Crawford spoke with FRESH AIR contributor Dave Davies. Crawford is a visiting professor at Harvard Law School and author of "Captive Audience: The Telecom Industry and Monopoly Power in the Gilded Age." Coming up, an album by a South African star whose music is now available in the U.S. for the first time. Milo Miles has a review after a break. This is FRESH AIR. Transcript provided by NPR, Copyright NPR.