"Captive Audience"


How fast is your internet service and how much do you pay for it? Law professor Susan Crawford says that in the United States it's too slow and too much. Though America was the pioneer of telecom technology, we're being left behind, she says, as a handful of companies corner the market and stifle innovation. Crawford joins us on Chicago Tonight at 7:00 pm. Read an excerpt from her book, Captive Audience.

The Federal Communications Commission's (FCC) National Broadband Plan says minimum speeds should be 4 Mbps by 2020. Put that in context.

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That’s fast enough to keep up with e-mail. It would not be fast enough to launch a business that requires two-way video conference calls. It’s not fast enough to watch Netflix, or watch online courses from MIT and Harvard. It’s the bare minimum to send and receive e-mail.

The South Korean government will have 1 gigabit fiber connections in every home in that same time frame, by 2020. What is the breakdown of public/private investment there, and in other countries with better, cheaper connections than ours?

The difference is in policy. South Korea decided it was essential for everyone to have gigabit speeds. They subsidized wholesale facilities--like a train track that’s available for all kinds of competitors. They laid down the fiber in its subways. It was price-regulated and deeply subsidized; 80 percent of the cost is labor, so once it’s in, it can be updated by electronics relatively cheaply. So this could last 50 or 100 years. The government sees such spillover effects, they think it’s worth it do this. They get a percentage of profits from the companies using this to make back the money. And it makes it cheaper for the government to do business itself.

You write about "the summer of love" among cable companies. What was it?

Cable started in the mom and pop business with a lot of tiny businesses. But eventually they consolidated, and said to each other, it will make sense for us to control whole metro markets. So they swapped--you take New York, I take San Francisco. They weren’t setting prices, and weren’t colluding besides not moving into another’s market space. This was described to me by a cable executive. He says it was quite intentional.

You write, “Comcast is smart enough to avoid visible rape and pillage now that the merger [with NBC Universal] has been approved.” What are they doing that doesn’t rise to that level?

They're steadily raising prices on their customers even though it’s getting cheaper to provide services. They’re upping the fee to rent cable boxes, even though that’s gravy for them. And they’ve stopped upgrading--they’re not moving into fiber.

You also say, since their merger, “Comcast has the incentive and ability to minimize the impact of Internet-based communications on its video packages, and to control, constrain and cripple any Internet business that threatens its plans.” They have the incentive, but has Comcast actually acted to exclude competition?

Netflix wants to locate servers next to Comcast customers to make it more efficient. Netflix needs access to Comcast networks to get access to those people, so Netflix is dependent on Comcast's permission. Netflix is offering to do this more efficiently and Comcast is saying no. You’d think Comcast would want that because it saves them the transit to send this to its customers. But they oppose it and they’re at loggerheads. They have every incentive to make Netflix seem a second-run service only.

They could kick them off their network entirely [by preventing Comcast subscribers from accessing Netflix.com] but they won’t do something that crude. They could set usage caps for accessing the site, or they could bundle paid TV with internet such that it becomes prohibitively expensive to buy internet alone. Then people would be incentivized to buy cable TV, and wouldn’t need or want Netflix as much.

Municipalities formed electrical utilities nearly 100 years ago. What stops them from making telecom ones?

Around the country, in 19 states, its difficult or impossible to make these decisions for themselves. They can’t float bond issues in some places. In Georgia, Windstream [a telecom company] suggested that if any locality has access to speeds of 3Mbps or more from a private company, cities would be unable to do anything for internet. That did not pass the legislature. But in North Carolina, Time Warner had a juggernaut lobbying effort to defeat a bill that would permit public telecoms.

Won’t business demands force faster, cheaper service?

Businesses don’t even know what they’re missing at this point. We don’t know what it would be like in a world where there’s no barrier to information-sharing. It was that way for electricity--people thought they were only good for streetlights at first. They couldn’t even imagine the possibilities.

Interview has been condensed and edited.

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