Broadband In Crisis: Does The US Need Regulation To Force Meaningful Competition?

from the two-internets dept

Susan Crawford believes telecommunications in America are going through the biggest crisis ever, and this is just as bad as the banking crisis was. Monday, at the Freedom 2 Connect conference, the Internet law scholar and former Special Assistant for Science, Technology and Innovation Policy at the White House, laid out what's wrong with broadband in America, hinting and what needs to be done to fix it. It's not going to be easy.

"The stakes are extraordinarily high, this has been an incremental crisis for a long time but now it's an actual crisis," said Crawford, whose book analyzing these issues, Captive Audience, will be published in November. The central issue is the so-called digital divide and what Crawford refers to as the "looming cable monopoly." Due to deregulation, which was predicated on the premise that the free market and competition would protect consumers, cable companies have found themselves with an inordinate amount of power to control the Internet and broadband access while, at the same time, traditional phone companies like AT&T are struggling to keep up and veering towards wireless services.

To support her thesis, Crawford presented some stunning numbers. In the last two years, Comcast market share has grown from 16.3 million subscribers to 18.5, a 14 percent growth. Time Warner Cable has grown 10 percent, from 9.2 to 10.7 million customers. Meanwhile, DSL subscribers have plummeted: AT&T and Verizon market share is down 22 and 21 percent respectively.

So, while it's good to be Comcast, it's not good to be an American citizen. Without competition, there's no drive to improve the service. The average speed of an Internet connection in the United States is around 5Mbit/s. An astoundingly low number if you look at other western countries. South Korea, for example, has an average of 50Mbit/s. And faster connections are starting to be implemented around the world. One gigabit connections are available in countries like Japan, Portugal or Sweden and at much better prices than in the U.S. – in Hong Kong, connecting at one gigabit per second costs $26 a month while in Chattanooga, TN, it costs $350.

What does this mean to the average citizen? It means the United States are giving up their leadership. Crawrford said this means “the next Google won't come from America.” And, even within U.S. borders, there's a fundamental problem: you either pay premium for a mediocre service or you are left behind.

“We end up with two Internets, two societies in America,” Crawford said to me in an interview.

One America does some tweeting and Facebook on their inferior, slower wireless devices. The other America not only gets to enjoy video online, but they can also apply for jobs, do video-conferencing, get an education online and, ultimately, live in the 21st century. Crawford argues that this digital divide ends up creating inequality between the haves and have-nots in America.

The only solution, Crawford argues, is for the government to intervene and regulate. Internet access, particularly high-speed access, should be treated “as a utility, just as electricity, gas and water.” Doing so would make the Internet a natural monopoly in which the government would provide the pipe and guarantee equal opportunity of access to everybody.

It might not happen immediately, but Crawford hopes that, with her influence and that of other thinkers like her, this will come to the forefront of the public discussion. She believes that, eventually, in every district, there will be elected officials who understand and care about these issues. That will be when we'll be able to look for a solution. "We make this a voting issue, that's how we fight back."

Filed Under: competition, freedom 2 connect, hong kong, internet law, japan, portugal, south korea, susan crawford, sweden
Companies: comcast


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  1. icon
    Seegras (profile), 25 May 2012 @ 1:15am

    Monopolies

    Cables in the ground are pretty much a natural monopoly. Of course you can allow everyone to lay their own cables, but as with electricity and water, it doesn't make too much sense to do so, and it's expensive.

    And, as with any natural monopoly, it makes sense to let the community control it. The city to control the cables in its ground, the state (or whatever bigger entity) the overland ones. That's not to say you should bar private entities from owning their own cables.

    Now the service on these cables is something completely different. Everyone can do it; so there is no natural monopoly, and consequently the government should keep out of it. Some communities might opt to offer a service themselves, but they need to be very careful that they don't start looking at cables+service together as a profit-center, and thus impede service-providers which need to use the same cables. But with that a given, services offered by the community can be an effective competition to services offered by third parties, and thus lead service providers to be at least as competitive as the community-owned services.

    The main problem with this setup is, that lobbying can lead to the creation of artificial monopolies. But then again, rent-seeking is a general problem everywhere, and not something that needs to be solved specifically for broadband access.

    There are two very simple guidelines:

    If there is a natural monoply, the community must hold it

    If there is no natural monopoly, the community must do everything to prevent artificial monopolies

    (Of course, things like "granting patents" fly totally into the face of the second one, as do a lot of "regulations" which are obviously only drafted to raise the market-barrier)

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