Is Broadband Internet Access a Public Utility?

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Courtesy of Yale University Press

Susan Crawford is the author of "Captive Audience: The Telecom Industry and Monopoly in the New Gilded Age.”

Should broadband Internet service be treated as a basic utility in the United States, like electricity, water, and traditional telephone service? That’s the question at the heart of an important and provocative new book by Susan Crawford, a tech policy expert and professor at Cardozo Law School. In Captive Audience: The Telecom Industry and Monopoly in the New Gilded Agereleased Tuesday by Yale University Press, Crawford argues that the Internet has replaced traditional phone service as the most essential communications utility in the country, and is now as important as electricity was 100 years ago.

“Truly high-speed wired Internet access is as basic to innovation, economic growth, social communication, and the country’s competitiveness as electricity was a century ago,” Crawford writes, “but a limited number of Americans have access to it, many can’t afford it, and the country has handed control of it over to Comcast and a few other companies.”

Because the U.S. government has allowed a small group of giant, highly profitable companies to dominate the broadband market, Crawford argues, American consumers have fewer choices for broadband service, at higher prices but lower speeds, compared to dozens of other developed countries, including throughout Europe and Asia.

“In Seoul, when you move into an apartment, you have a choice of three or four providers selling you symmetric fiber access for $30 per month, and installation happens in one day,” Crawford told TIME in an interview Tuesday. “That’s unthinkable in the United States. And the idea that the country that invented the Internet can’t get online is beyond my imagination.”

Crawford, who has been a visiting professor at Harvard, Yale and Michigan, spent a year on the National Economic Council as a top telecommunications advisor to President Obama. In her book, she directs much of the blame for the sorry state of the U.S. broadband market at the federal government. “Instead of ensuring that everyone in America can compete in a global economy,” she writes, “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 — U.S. politicians have chosen to keep Comcast and its fellow giants happy.”

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One of the main themes in the book is the “digital divide,” which refers to the fact that millions of people in the U.S., mostly in the poorest and most rural communities, don’t have access to affordable broadband service, including 2.2 million people in New York City, according to Crawford. “We’re depriving people of basic communications access,” she says. Still, broadband and wireless services have become so important to our business and personal lives that most people are willing to pay up, even in the face of high prices driven in part by a lack of competition in the broadband and wireless markets.

Crawford’s top target is Comcast, the nation’s largest cable company, which recently purchased a controlling stake in NBCUniversal, the iconic news and entertainment company. In completing that purchase, which was opposed by media reform advocates and heavily scrutinized by federal regulators, Comcast achieved what might be called the “holy grail” of telecommunications: ownership of a major content creation company, and control of a vast content distribution network.

The FCC‘s approval of the Comcast/NBCU merger created a huge conflict of interest, according to Crawford. “Even as the Internet was becoming the world’s general-purpose network, the merger would put Comcast in a prime position to be the unchallenged provider of everything — all data, all information, all entertainment — flowing over the wires in its market areas,” writes Crawford, who is also an adjunct professor at the School of International Affairs at Columbia University. “Instead of electricity or water, Comcast was gaining dominion over the country’s latest utility infrastructure: high-speed Internet access.”

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Let’s take a step back and look at the basic contours of the landline U.S. telecom and cable market. In general, there are three types of wired networks that serve America’s phone, cable, and Internet consumers. Copper wire (traditional phone lines, DSL, slow speeds); cable (faster speeds, mostly for downloading); and fiber (potentially unlimited speeds, data is transmitted through pulses of light). In over 75% of the country, the only broadband choice for Americans will soon be cable, according to Crawford. Consumers are fleeing their relatively slow DSL service so rapidly that 94% of new broadband subscriptions in the third-quarter of 2012 went to faster cable service.

In most of the country — including major cities like Chicago, Boston, Philadelphia, Detroit, Houston, and Denver — there is only one major cable provider, which happens to be Comcast. In many of these markets, much smaller providers do, in fact, exist around the edges of the dominant company. “Standard Oil did the same thing,” Crawford said during a lecture last fall at Harvard’s Berkman Center for Internet and Society, where she recently joined the board of directors. “You let a little bit of competition exist so you can point to it and say ‘Ha, we’re competing!’ But otherwise it’s mostly controlled by one company.”

Meanwhile, Comcast has sharply reduced its capital expenditures, which have now fallen to 14% of revenues from over 35% a decade ago, even as it enjoys a whopping 95% profit margin on its broadband service. “They’re not expanding and they’re not enhancing their service,” Crawford says. “They’ve done their investment, now they’re just harvesting.” Not surprisingly, Comcast’s stock price increased over 50% in the last year, and nearly 200% over the last four years. “Shareholders are doing well,” Crawford says. “The rest of the country, not so great.”

Verizon’s FIOS high-speed fiber service, which is faster than cable, is available only to about 14% of residences nation-wide, Crawford says, and wireless service “will not substitute” for the lack of fiber access because it is slower. That reality was driven home last year after the FCC allowed Verizon and Comcast to strike a deal to market each other’s services. Verizon will sell Comcast cable service; Comcast will sell Verizon’s wireless service. This is not competition. “Fierce competitors don’t offer to sell each other’s products,” Crawford writes.

Indeed, AT&T and Verizon — which dominate the U.S. wireless market — are moving aggressively to exit their traditional wireline phone businesses, in favor of much more profitable wireless service.

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In Europe, where there is much more robust wireless competition, one gigabit service with unlimited minutes and text messages is available for $12 per month, according to Crawford. A comparable service in the U.S. costs anywhere from $50 to $90 per month, depending on the contract. It’s no surprise, then, that the average revenue per user raked in by AT&T and Verizon in the U.S. is soaring, while in Europe the average revenue per user is steadily declining. “People who come here from other countries are just perplexed,” says Crawford. “They wonder what is going on here?”

Given how profitable broadband and wireless service is for the cable and telecom giants, it’s also no surprise that the CEOs of these companies are among the most highly-paid executives in the country. In 2011, Comcast CEO Brian Roberts (whose family controls the voting stock of this ostensibly public company) made $27 million; Verizon CEO Ivan Seidenberg made $26 million; and AT&T CEO Randall Stephenson made $22 million. Seidenberg and Stephenson made about 500 times their employees’ average annual salary, while Roberts and Time Warner Cable CEO Glenn Britt made about 1,000 times what their employees earn every year. (Time Warner Cable is a completely separate public company from TIME parent Time Warner, which spun off the cable giant in 2009.)

For most American companies the ratio is about 380 times, according to Crawford. “I’m not saying we’re doing great on the inequality metric,” she says, “but when it comes to these media companies that would have been viewed as utility companies in the past, it’s really striking.”

According to Crawford, the interests of cable and telecom giants like Comcast, Time Warner Cable, Verizon, and AT&T, are not aligned with the interests of the public. Those corporate giants are concerned first and foremost with maximizing the profits of their shareholders. And all too often, profit maximization — especially in a market that lacks robust competition — is not consistent with providing the best possible service at reasonable prices.

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After spending a year as a top tech advisor to President Obama, Crawford concluded that federal policy makers have little incentive to upset the telecom and cable giants. She attributes this partly to the fact that, since 1998, AT&T, Verizon, and the National Cable and Telecommunications industry trade group have spent nearly half a billion dollars lobbying the federal government, according to the Center for Responsive Politics. Just in terms of campaign contributions to Congress, AT&T has spent $50 million since 1989, making it the third largest donor during that period of time. And no fewer than 49 members of Congress are actual AT&T shareholders, giving them a direct financial interest in the telecom giants’s profitability.

This has led to what some legal scholars call “regulatory capture” at the Federal Communications Commission, the agency charged with overseeing the industry and preventing abuses that harm consumers. Like many other federal agencies, the FCC has seen numerous examples of the “revolving door” dynamic in Washington, D.C., in which insiders move back and forth between telecom industry heavyweights and the agencies that are supposed to regulate them. For example, Michael Powell, who served as FCC chairman for four years in the mid-2000s, would later become CEO of the National Cable and Telecommunications industry trade group. He is now the cable and telecom industry’s top D.C. lobbyist.

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Meredith Attwell Baker, who was one of the FCC commissioners who approved Comcast’s merger with NBC Universal, left the agency four months later to join Comcast as a highly-paid lobbyist, in a move that infuriated media reform groups. At the time, Craig Aaron, president and CEO of Free Press, a public interest group, described Attwell’s move as  “just the latest, though perhaps most blatant, example of a so-called public servant cashing in at a company she is supposed to be regulating. No wonder the public is so nauseated by business as usual in Washington, where the complete capture of government by industry barely raises any eyebrows. The continuously revolving door at the F.C.C. continues to erode any prospects for good public policy.”

Crawford makes a series of policy prescriptions that she says would improve U.S. broadband service, penetration, and competition, while reducing prices. At a minimum, the U.S. government should see to it that each citizen has access to a low-cost (say, $30 per month) Internet connection, says Crawford, much as it does with other basic utilities like electricity and water. Where it’s too expensive for the private sector to provide that service, in very rural areas for example, the federal government should step in.

State and local laws that make it difficult — if not impossible — for new competition to emerge in broadband markets should be reformed, according to Crawford. For example, many states make it very difficult for municipalities to create public wireless networks, thanks to decades of state-level lobbying by the industry giants. In order to help local governments upgrade their communications grids, Crawford is calling for an infrastructure bank to help cities obtain affordable financing to help build high-speed fiber networks for their citizens. Finally, U.S. regulators should apply real oversight to the broadband industry to ensure that these market behemoths abide by open Internet principles and don’t price gouge consumers.

Should broadband Internet service be considered a public utility like water and electricity? “We treated the telephone industry like a utility and people don’t seem to be surprised by that,” says Crawford. “High-speed Internet access plays the same role in American life. It’s just that these guys have succeeded in making us think that it’s a luxury.”

Crawford’s book is the most important volume to be released in the last few years that describes the sad — some might say embarrassing – state of the U.S. telecommunications market. Reasonable people can and do disagree about policy solutions, but the facts are not in dispute. Americans have fewer choices for broadband Internet service than millions of other people in developed countries, yet we pay more for that inferior service. The reason for that, according to Crawford, is that U.S. policy makers have allowed a small number of highly profitable corporate giants to dominate the market, reducing competition and the incentives for these companies to improve service and lower prices.

By taking on one of the most powerful industries in the United States, Crawford knows that she will not endear herself to the CEOs of Comcast, Time Warner Cable, AT&T and Verizon. “I’m not going to be on their Christmas card lists this year,” she quips. And given the entrenched influence of these companies in Washington, D.C., many — if not most — of her policy prescriptions seem a tad far-fetched. Is the U.S. government about to mandate low-cost broadband Internet access for all Americans? It’s not likely any time soon. But her book does provide a vivid and eye-opening description of what ails America’s cable and telecom market, and for that reason, it should be required reading for anyone interested in tech policy. Crawford’s book also lays out a road-map for solutions, quixotic as they may be. But, as Crawford says: “There is always hope.”

33 comments
Oona
Oona

Considering giving up my phone & internet. Verizon & Time Warner have a dual monopoly here in Manhattan & keep the price @ $80 a month. I think that's crazy for telephone & internet access.

qzyxya
qzyxya

Kind of sad that the country that created the internet has fallen so behind on this

Adam72
Adam72

Comparisons to Europe and Korea are absurd. Population density makes a network much more profitable to operate. Korea is the size of Delaware with a population of 50m. The population density of the U.S. is one twelfth that of the Netherlands, and one fifteenth that of South Korea. That's a LOT more network to build and maintain.

Groper
Groper

Yes, and those of us behind broadband for the US having been saying this for how long now!  

davetroy
davetroy

Susan Crawford would make a great FCC Commissioner. Here's a petition to ask President Obama to appoint her as commissioner. http://wh.gov/yG4i

egcroan
egcroan

Spoiler Alert Fred Campbell Jr. is a liar with his alternative point of view. The sources he quotes are a familiar form of propaganda where some hidden "Big Business" or Right Wing extremist organization that apposes all forms of Government Regulation of Big Business or their Corporate Masters who pay for the setting up of this Fake Authority to use a a reference point for debunking anyone who opposes their agenda. Follow the sources back to who sponsors this website, and you find a Anti Government Regulation Agenda funded likely by some Lobbying Group. I despise these people, but I got to hand it to these guys they have copied, and expanded upon the tactics used so successfully by the Nazi's in the 1930's.


Before you accept any o0f his falsehoods investigate the organizations behind the "Alternative" point of view as they hide behind terms that would imply they are above progress when in fact they oppose it, and wish to protect the interest of the Technology Giants they truly serve.

leonardgrace
leonardgrace

This is the most honest article on the state of our telecommunications model in recent history. Susan Crawford has done her research highlighting the true interconnection between big business and our legislators. It is deplorable. If campaign election reform is not taken seriously, no change in Washington, D.C will be forthcoming. Conflicts of interest, deeply ingrained in our political system, stalls any hope of true reform.

America has lost its way in the competitive business model. 

Leonard Grace

Founder at Broadband Convergent

StephenKelly
StephenKelly

I think water should be considered a much higher priority then electricity and the Internet. Water is needed for Life. Electricity and Internet improve the quality of life and drive Commerce. I can survive without electricity / Internet access I can not survive without water.

jrep
jrep

Comcast provides excellent cable networking.

AT&T provides poor telephone service.

Explain to me why it's in the interests of the consumer to regulate the former more like the latter?

jym.allyn
jym.allyn

As Shakespeare said, "First thing we do is shoot all of the lobbyists."


RichardBennett
RichardBennett

Crawford's "facts" are very selective. The United States leads the world in the adoption of the 4G/LTE mobile technology that's more important to more people than the ultra-high speed couch potato networks that Crawford wants to see, but there's no mention of this fact in the review or in Crawford's book.

Similarly, it's not the case that 1 gigabit fiber networks are widely available in Europe, at $12/month or at $1200. Most of Europe has no technology choice beyond copper DSL, and European regulators are distressed. See Kevin O'Brien's recent article in the New York Times, http://www.nytimes.com/2012/12/17/technology/eu-plan-could-raise-phone-rates.html:

"Only 2 percent of the households in the European Union have access to
broadband download speeds of 100 megabits per second or greater. In the
United States, by comparison, at least 50 million homes, or nearly half,
are connected to networks with speeds of at least 100 megabits per
second. By 2020, the commission’s goal is for half of E.U. households to
have access to this service. Meanwhile, only half of E.U. households
have service at 30 megabits per second. By 2020, the commission wants
all E.U. households to have this as an option."

This book follows the familiar tactic that claims "everything is SO much better in Europe." That only works when reviewers are too lazy to examine the facts.

PhillipDampier
PhillipDampier

There are a number of consumers already engaged in this fight and have been for several years. Stop the Cap! was launched in the summer of 2008 to fight the unwarranted introduction of usage-capped and throttled broadband, as the duopoly of cable and phone companies now seek to monetize broadband usage on top of charging outrageously high prices for service.

When Time Warner Cable tried to ram a usage billing experiment down the throats of customers, we organized and fought back, including picketing the local cable offices in several cities. The media showed up, and elected officials soon followed, and TWC quickly shelved the idea.

Consumers have more power than they realize, if they organize and protest. Elected officials look the other way until it is clear constituents are paying attention. So get informed, involved, and help organize the movement. Broadband is an essential utility, not a corporate money machine that can milk customers and retard innovation along the way. Companies like AT&T and Time Warner Cable are pushing their agenda to stop competition, win deregulation, and raise prices. Let's push back.

Phillip M. Dampier

Editor, Stop the Cap!

http://stopthecap.com

fredbcampbelljr
fredbcampbelljr

@egcroanThe sources I cite are the Society of Professional Journalists, AT&T, FCC Chairman Julius Genachowski, Public Knowledge, the Minority Media and Telecommunications Council, and Susan Crawford. Which ones or a "familiar form of propaganda"? All of them?

egcroan
egcroan

@leonardgrace I agree with you and as a 35 year veteran of the telecom industry myself I* can personally testify to the correctness of the article. I have worked for many of the larger companies mentioned, and I can personally attest to their motives changing as the regulations that kept them moving in the right direct for the consumers were removed, and replaced with the false Religion of Free Market Capitalism is always the best method. The history of this industry clearly shows that the US Government has shifted away from aggressive regulation to actually allowing them to place the profits of their shareholders over the duties to provide reliable telecommunications.

egcroan
egcroan

@StephenKelly That is an overly simplistic view,a nd you know it so please spare us your ignorance of the subject matter. The analogy was an appropriate one to be made as you very well can't survive economically without electricity or the Internet.

egcroan
egcroan

@jrep Seriously you can't be holding up Comcast as an example of Great Service. You seriously have a very different opinion than most other customers of Comcast were long outages were common place. The fact you think at&t (proper name as the older company was AT&T and not the newer SBC renamed at&t)

egcroan
egcroan

@jym.allyn Taht is pretty much what Jack Abrahamoff has been saying since he served his time, and has emerged on his agenda to restore true Democracy by ending lobbying.

Mike_A_S
Mike_A_S

@RichardBennett  


"The United States leads the world in the adoption of the 4G/LTE mobile technology that's more important to more people than the ultra-high speed couch potato networks that Crawford wants to see"


Who told you that 4G is more important to more people than home broadband access? Can you provide a linke?

tsar100mt
tsar100mt

This 4G you speak of.....does it have a known standard measurment? You know like how Pi is 3.14 and gravity is 9.81 m/s.......The ITU pretty much caved in and just let the wireless giants decide on their own what constitutes 4G.....LOL. AT&T seems to think that HSPA+ is 4G. And Sprint's 4G....hahahah yeah right. Well anyways as long as there is NO know accepted standard as to what 4G is, the claim that America is the biggest adopter of "4G' is complete garbage. This "4G" moniker that the wireless industry and shills love bragging about is just pure nonsense and kool aid for the idiots.

egcroan
egcroan

@PhillipDampier I posted a previous comment that seems to be gone now support your position, and expanding upon it. Did you delete it someway of did Time's Editorial Staff delete it ??

egcroan
egcroan

@fredbcampbelljr @egcroan I notice you said nothing about my claims you are a right winger blogger or that you quoted any consumer groups. I read the sources you cite, and their sources all are the typical Right Wing Extremist tired baseless Anti Government crap that is getting old. 

I suspect you might actually be of too low of an I.Q. to understand this but you can't quote AT&T as a source if the article is against them. What do you expect Mr. Genakowski  to say about the current FCC and their flawed policies? I suggest you talk to a former commissioner like Mr. Copps who cleared stated on many occasions the Internet needed to changed in definition from an "Informational Service" to a "Telecommunications Service" which would effectively counter the argument made by Verizon, Comcast, and other Big Media Companies that the FCC had exceeded it authority when trying to regulate the Internet. 

The subject of Mr. Genacowski's appointment over Mr. Copps might be a story for another article, but I doubt being the Meat Puppet for Big Business that you are you could right such an article. I have been a licensed FCC Engineer for over 30 years, and seen that agency evolve from an effective regulatory agency to a toothless one that is more interested in a Head Cheerleader like Mr. Genachowski than someone like Mr. Copps who would have had the courage to buck the Status Que, and not give Verizon & Comcast their every desire. 

The Wireless Only model of Verizon & at&t where they have essentially stopped their investments in end user Fiber Optics of either Verizon Fiber To The Home (FTTH) or at&t's Fiber To The Neighborhood (FTTN) will ultimately end up with them gobbling up more precious Radio Spectrum which the FCC has mismanaged this asset which belongs to the citizens, and should only be given to the businesses that serve the public interest. Well at least it was that way originally..Investigate the recent failed attempt by a republican from New York state to strip the Amateur Radio operators of 30MHz of spectrum at 450MHz for his clients at the Cellular Telecommunications & Internet Association or CTIA which is a huge lobbying agency for the likes of Veriaon and at&t.

I have decades of background in Telecommunications (not writing about it but actually doing it) to back up my support of Susan Collins. what do you have but your punk attitude as is clearly evidenced by your attack on her book. I would debate a punk like yo anytime any place. So if Time Magazine or anyone else wants to set that up feel free to invite me so I can shred your lame Right Wing Agenda of giving these under performing companies the constant praise they demand from the media by holding advertising budgets over their heads. Who cares for the consumers. It certainly is so called journalists like you.


Good Day Sir, and it you aren't going to actually address any of my points please just remain silent, or if that isn't clear enough STFU !

jrep
jrep

@egcroan For internet service, yes I am. Your poor review totally matches my miserable former Comcast cable-TV service, but my experience with them as a broadband and phone provider has been night-and-day better.

egcroan
egcroan

@jrep Once we went out and purchased out own equipment we finally after two years got out Internet reliable with Time Warner. I say reliable we still have occasional outages which last way longer than they should, but mostly it is better. The problem is I have no other choices so i have to stick with them.

egcroan
egcroan

@RichardBennett @egcroan Blah Blah just the fact you attack my age and then champion Wireless shows how little you know of what fiber has to offer, and how in Asia, and not the EU which you cherry picked you data from that wired Internet is providing speeds that will never be attained by wireless internet. 

The fact you insult my age just shows what a wet behind the ears punk you are. I worked in wireless for years, but being an Engineer I understand the limitations of the technology better than many, and understand the layer 1 & 2 will obviously see improvements like it has from the days of analog to now digital transmissions, but OFDM that we are currently using is pretty much about as fast as you can get and be cost effective enough to build a sub $1,000 phone. 

Fiber hasn't stood still as many wireless evangelists are preaching, but itself still evolving, but this isn't about technology as you would have us believe. It is about using wireless instead of wireline to avoid regulations in place for the wireline that were never placed on the wireless carriers much in the same way as the Internet was left unregulated in the beginning to allow fast growth. We are past those days as is wireless , and desperately need regulation to insure the companies make the best use of the spectrum for the consumer, and not their business plan. 

The likes of at&t & Verizon have purchased Radio Spectrum just to prevent competition. I suggest you look at the 2.3GHz holdings of at&t that they are just squatting on. Mr. Copps and others wanted this addressed, an look an outsider like Mr. Julius came along to head the FCC and be a cheerleader. If you were honest you would admit the FCC Database is based upon Zipcodes and not actual coverage area so if a single subscriber in an Zipcode is served the whole population is counted in your bogus data. 

Go ahead attack my age, and experience which you obviously lack. I guess the fact I built both the first GSM & CDMA Networks in the USA not qualify me on wireless in your narrow minded slant.

RichardBennett
RichardBennett

@egcroan I love the smell of non sequitur flavored with a little ad hominem and gratuitous gravy. 

Facts are facts: the US leads the world in 4G/LTE, cellular is more important to more people throughout the world than wired broadband, and Crawford is a confused general fighting the last war.  

On top of that, Gustin is summarizing, not analyzing.

egcroan
egcroan

Dude take your fake facts, and go preach at CTIA or somewhere else where they believe your garbage. If you were truthful about the internal struggles inside the 3GPP organization on where the IMS model should evolve to absorb voice you would paint a far less rosy picture. The post call delay times are horrible, and have been getting worse ever since 2G.

tsar100mt
tsar100mt

Wow cool story bro. Just keep on drinking that kool aid. But Let me finish your statement, it seems you forgot a few things.

"Although marketed as a 4G wireless service, LTE as specified in the 3GPP
Release 8 and 9 document series DOES NOT satisfy the technical requirements the
3GPP consortium has adopted for its new standard generation, and which were
originally set forth by the ITU-R organization in its IMT-Advanced
specification. However due to marketing pressures and the significant
advancements that WIMAX, HSPA+ and LTE bring to the original 3G technologies,
ITU later decided that LTE together with the aforementioned technologies can be
called 4G technologies."

Translation: ITU caves in and gives wireless industry their cookie......

PS. Don't try thinking you can just link some biased anaylst "resaerch" as proof. Put a little more effort in it. Oh yeah..... LOL

egcroan
egcroan

@PhillipDampier @egcroan Thank you, and I will invite one of my friends who also has three decades in Engineering & Operations, and Sales in Telecommunications.