Susan Crawford

Roosevelt Institute Fellow

Recent Posts by Susan Crawford

  • What Verizon's Op-Eds Won't Tell You About America's Slow, Costly Internet Access

    Jul 23, 2013Susan Crawford

    Roosevelt Institute Fellow Susan Crawford responds to two recent New York Times op-eds that claimed high-speed Internet access is in good shape in the U.S. Click here to read an extended version of this article.

    Roosevelt Institute Fellow Susan Crawford responds to two recent New York Times op-eds that claimed high-speed Internet access is in good shape in the U.S. Click here to read an extended version of this article.

    Last month, two New York Times op-eds published during a single week, one written by the CEO of Verizon, claimed that the United States is doing well when it comes to high-speed Internet access. Both of these op-eds mentioned me and sharply criticized my calls for reform.

    It's great that Americans are finally paying attention to this crucial policy problem. We are subject to several great digital divides. There is a divide between Americans who have a wire at home and those that don't, a divide between affluent Americans who will be able to pay for cable's high-capacity (yet still second-class) high-speed connections and those who won't, and a divide between America as a nation and those countries that have prioritized symmetric fiber access as a widely-available, reasonably-priced utility. All of these divides cast shadows over our nation's future.

    You shouldn't be fooled by the incumbent companies' misleading rhetoric and cherry-picking of data. You need to understand how successful cable operators are in controlling markets for wired data distribution in America these days, how willing telephone companies are to cede the wired field to cable and retreat to selling separate mobile wireless services where their profits are more certain, and how widespread cooperation -- rather than healthy market cooperation -- is across the entire industry.

    In a nutshell, America has a series of regional cable monopolies controlling the pricing and capacity of fixed high-speed Internet access (and every other form of data reaching Americans). As former TCI CEO John Malone said in 2011, "cable is basically a monopoly now." Wireless is not a substitute for these cable services. And the wireless and cable companies are collaborating.

    The incumbents are trying to confuse you. They are hoping that Americans don't notice that they're focusing on the wrong definition of high-speed Internet access and blurring two separate markets -- mobile wireless and fixed connections.

    First, the relevant market for everyone should be high-capacity, low-latency, symmetrical fiber connections to homes and businesses of at least 100Mbps. That's what they have in South Korea, Japan, Sweden, and (soon) Australia and China. The large cable distributors in America -- who never compete directly with one another -- have clearly become the nation's monopoly suppliers of terrestrial wired connections, each in its own footprint. Their market power is unrestrained. They can charge whatever they want for whatever services they choose to provide. They have little incentive stemming from either market pressure or public oversight to upgrade to symmetrical fiber, which is the world standard, or to charge reasonable prices for world-class access. Right now, the vast majority of Americans are stuck with the cable guys' product, which is very expensive (three or four times as expensive for the same download services as in other countries) and second-best (because it doesn't provide symmetrical, or equal, upload capacity). It's not fiber, and it's under the complete price/service control of individual companies that, are subject to neither oversight nor competition and have no incentive to make the upgrade to fiber. 

    Meanwhile, our former telephone companies, Verizon and AT&T, have retreated almost entirely to wireless services - complementary, non-threatening to the cable guys, and highly lucrative. People who can afford it have both a mobile and a fixed connection: At least 83 percent of people who have a smartphone also have a wired connection at home. This reflects the fact that mobile wireless has inherent capacity limitations relative to wired connections, along with highly restrictive usage caps that can send monthly bills skyrocketing for even moderate users. As a result, it can't fully substitute for a wired connection, especially for popular applications like streaming video.

    The steep capacity limitations of mobile wireless and, because of those capacity limitations, its enormous expense relative to wired or fixed access (doing the same things by way of a mobile wireless device costs much more than it does over a wire) dictate that it isn't substitutable for that fixed connection. Nothing highlights the lack of real competition between wired and mobile wireless more clearly than the co-marketing, co-development agreement among Verizon Wireless and cable giants Comcast and Time Warner Cable (among others) that was approved by the FCC in 2012.

    Because the existing incumbents (i.e., Comcast, Time Warner Cable, Verizon, AT&T) are doing very well in their separate worlds, they have no incentive to allow for any loose talk about changing the status quo. Hence, op-eds in mainstream media claiming that the U.S. is doing much better than everybody thinks.

    I specifically point to distortions in Verizon CEO Lowell McAdam's piece. He claims that in Europe only about 2 percent of households have access to broadband networks with 100-megabit-plus speeds. This is flatly wrong. It turns out that, according to the EU, although only 2 percent of European users actually subscribe to 100megabit-plus speeds, 39.4 percent of the households in Europe are reached by a cable DOCSIS 3.0 connection that is certainly capable of 100 Mbps downloads. The cable industry is marching on Europe, looking to duplicate the success it has had in re-monopolizing America.

    McAdam also asserted that "More than 80 percent of American households live in areas that offer access to broadband networks capable of delivering data with speeds in excess of 100 megabits per second.” Though these networks (almost uniformly controlled by local cable monopolists) might be “capable” of high speeds, those speeds aren't always turned on for consumers, and they're very expensive.

    The incumbents are missing the point. Northern European and Asian countries are upgrading to advanced fiber Internet access connections to homes and businesses. The availability of very-high-capacity, inexpensive communications facilities in those countries will trigger direct and indirect economic and social benefits for their citizens, in the form of increased productivity and new ways of making a living. Here in America, we have no national plans for such an upgrade.

    If we had a stagnant market in the U.S. we would be seeing high margins for leading companies that are not losing market share to competitors—and we are. We would be seeing that we are paying more for the same product than people in other countries are—and we are seeing that.

    Americans know that our communications picture is dire. The recent op-eds should be viewed with skepticism; the status quo is serving our existing giant telecommunications companies well.

    Here are the facts.

    Susan Crawford is a Fellow at the Roosevelt Institute.

     

    Snail on computer mouse banner image via Shutterstock.com

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  • Making Telecom Central Again: Our Economic Future Depends on High-Speed Internet For All

    Sep 20, 2012Susan Crawford

    Expanding high-speeding Internet access to all Americans is as essential now as the Rural Electrification Act was in the 1930s.

    Expanding high-speeding Internet access to all Americans is as essential now as the Rural Electrification Act was in the 1930s.

    The basic facts are familiar: of a nation of 314 million Americans, 100 million of us lack high-speed access to the Internet. We're behind 15 other countries when it comes to that high-speed access; none of top city hubs for fast, affordable access are in the United States. Speeds are slow, prices are high, and a third of us are being left behind. Most people who make less than $20,000 a year don't have access; everyone who makes more than $75,000 a year does. Almost every part of life today, and every policy area you care about, depends on a reliable, affordable, high-speed connection. For everything from finding a job to accessing online classrooms, those without access are at a distinct disadvantage. And our country as a whole is at a disadvantage, as new developments that require working collaboratively with massive amounts of data will happen elsewhere.

    Why did this happen, and why do I care?

    It happened because of policy. We're being squeezed by a deregulated and enormously powerful industry that has no incentive to build a fast, affordable, level digital playing field for Americans.

    This narrative is really just like the electricity story. In 1920 in America, unregulated private companies controlled electricity. The result? 90 percent of farmers didn't have it, at the same time that all rich people in New York City did. And it was wildly expensive in many places. Although it's now considered an essential input into everything we do, at the time electricity was seen as a luxury; the companies served the rich and big businesses, and left everyone else out. The electricity business, after all, involved very high up-front costs. If you could make that initial investment, it served as an extraordinarily effective barrier to entry -- who needed two electrical lines? -- and you could pick off the rich customers, making life difficult for any second comer, because they'd be stuck with serving people who were more spread out and not as wealthy. Then, once your lucrative business was in place, you could raise prices with impunity. You didn't have to expand. You could just harvest.

    We did something about that problem at both the local and national level. It took tremendous leadership by Franklin Roosevelt, who went to swim in Warm Springs, Georgia and was horrified by the expense of the scarce electrification there. Although a rich and privileged man, he instinctively understood that the success of the entire nation depended on having a large marketplace for electricity -- both for people to thrive and for American industry to sell new goods to. And so he mounted enormous rural electrification efforts in the 1930s and regulated these companies, making sure that they received a fair profit for a world-class and universally provided service.

    Today, the U.S. is falling far behind when it comes to the 21st century version of electrification: the country's upgrade to fiber connectivity, the global standard. Although our U.S. telephone system was the envy of the world when it was built, and served every American at a reasonable price, we're apparently unable to think of fiber as a utility. We've seen enormous consolidation and monopolization of both wired and wireless access in America by the companies to which we've entrusted our daily lives of information. This isn't good for any part of American society, and it is, or should be, a truly bipartisan issue.

    It's also, like electricity, both a local and a national issue. There are bright spots across the country where communities are coming together to commission fast, cheap fiber networks. We need to make it possible for every community to make that choice. That will require federal legislation to block state laws that lock up localities and keep them in the incumbents' hands. We need to make sure that there are rules in place to protect competition and allow for oversight at the federal level as well.

    Finally, it's an urgent issue. Right now, a tsunami of state-level deregulation is sweeping the country. Right now, Verizon is telling the D.C. Circuit that it is a First Amendment "speaker" and that therefore any regulation of its activities is unconstitutional. Right now, the regional cable monopolies are buying up former competing telecom companies, strengthening their grip on wired access across the country.

    I care because I think we face a choice between two fundamentally different visions of the future. Today's free marketers seem to be content with a second-class network that only rich people can afford. They're pushing for even fewer regulations on the giant telecommunications companies who have the power to control everything we learn and create. Think about that: they want to give the richest and most powerful companies in our country even more riches and more power to serve as gatekeepers over everything we do. To harvest us. And at the same time, they want to make sure that basic high-speed infrastructure isn't a priority for the country. Their vision is simple: "Communicating is a luxury for the rich." I don't think that's right, and most of our peer nations don't either.

    I'm thrilled to be invited to be a Fellow at the Roosevelt Institute. One of the high points of this year for me was meeting members of the Roosevelt Institute | Campus Network at their summit at Hyde Park. They are so smart, so focused, and so energetic. This generation understands how essential fast online access is, and how important it is for local communities to protect their ability to communicate at a reasonable cost. What's unique about Roosevelt is that it operates on both a local, decentralized level and on the national level -- just like the Internet itself. I'm looking forward to taking on this issue with the Roosevelt team. 

    Susan Crawford is a Fellow at the Roosevelt Institute.

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