Hobson's Choice: US drifting towards monopoly control of telecoms and cable
May 29, 2013
Professor Susan Crawford of the Benjamin N. Cardoso School of Law at Yeshiva University in New York City was US President Barack Obama's Special Assistant for Science, Technology, and Innovation Policy and is a former Board Member of ICANN. Her field is telecommunications and information systems law.
The prof has just published a new book, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age" in which she argues that ongoing consolidation in these sectors in the US, in combination with poor (and poorly policed) regulation, is leading inexorably to a drift back to conditions that are remarkably reminiscent of the landscape of the early 1980's before Ronald Reagan broke-up AT&T and monopoly provision ruled the American telecoms roost.
Susan Crawford's basic thesis is that most US consumers have a very limited choice of suppliers of "high speed" Internet access and cable TV. She claims the foreclosing of options is resulting in “the communications equivalent of Standard Oil.” (i.e. de facto monopoly).
Professor Crawford uses the example of Comcast, (the biggest cableco in the US), and its recent merger with NBC/UNiversal as a case in point from which to extrapolate her argument that consumers, suffering as a direct result of poorly-framed and badly-policed legislation and regulation are on the losing side when it comes to broadband access.
Describing this as a "communications crisis", Ms. Crawford argues that the with a deceasing number of corporations controlling access to information systsems, tens of millions of American citizens are being effectively disenfranchised from the Information Society because they are being charged "too much for too little". This, she claims, is "great for providers but an expensive mess for everyone else".
She further says that the much-vaunted 1996 Telecommunications Act, introduced with great fanfare and elaborate promises that it would foster competition and cut prices, has been an abject failure. Indeed, rather than freeing-up the sector, Professor Crawford posits that the 1996 Act allowed telcos and cablecos to divide the market up between them and then slowly but surely bring it back under de facto monopoly control by dint of mergers, partnerships and acquisitions. The result is market domination by organisations that now routinely resist and delay innovation whilst overcharging consumers for slow and less than robust services.
To support her argument the Professor explains that access to landline, cable and wireless communications is now controlled by a caucus just four companies. She says that Comcast and Time Warner utterly dominate the broadband markets they play in while Verizon and AT&T between them control 64 per cent of the US wireless market. She claims, “They have acted in parallel to exclude competitors and used every lever they have to gain control over their markets".
The author says that to stop the inexorable tectonic shift back to a monopoly/duopoly market, individual states, cities, municipalities and townships should, on their own or in concert with others, wrest back control of their information infrastructure before it is too late.
She warns that 19 states have already given in and surrendered to the intense political and economic influence of the big comms players and have acquiesced to their demands that insurmountable barriers be placed in the way of projected public-private partnerships that would provide viable competition to the established vested interests.
Susan Crawford also emphasises that the slow spread of fast, fibre-based Internet connectivity is affecting US economic competence and competitiveness and cites Verizon's decision to cut back sharply on the deployment of fibre - on the grounds that it is expensive and return on investment takes "too long" - despite the fact that important clauses of the 1996 Telecommunications Act were predicated on the promised rapid expansion of fibre networks.
In the event the deployment stalled back in 2010 with just 14 per cent of the US population within reach of the fibre nirvana. Then, in 2012, the US regulator, the Federal Communications Commission (FCC) changed its policy to allow Verizon to get into a joint marketing deal with the cablecos. The result? Former cut-throat competitors are now tucked-up very cosily in bed with one another while consumers lose choice and pay through the nose.
Professor Crawford's parthian shot is that, “We are in this position as a country because we assumed that the magic of the marketplace would provide competition and provide world-class communications, but history has demonstrated that left to their own devices, companies will gouge the rich, leave out the poor, cherry-pick markets and focus solely on their profits. It isn’t evil, it’s just the way things work.”
Google and its ilk will take comfort from that conclusion.
At one time Susan Crawford was favourite to be the next Chairperson of the FCC. In the event that didn't happen. I wonder why?
*The Cartoon above was published in 1889 and depicts corporate interests - steel, copper, oil, iron, sugar, tin etc - as giant money bags looming over the tiny senators. The cartoon reflected the growing public unease at the concentration of economic power in the US which led to the passage of the Sherman Anti-Trust Act the following year.
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