Net access vs. net profits

"Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age" by Susan Crawford
"Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age" by Susan Crawford (From the book jacket)

Comcast has attained monopoly power - to the nation's detriment, author writes.

Posted: February 17, 2013

The Telecom Industry and Monopoly Power in the New Gilded Age

By Susan P. Crawford

Yale University Press. 368 pp. $30


Reviewed by Joseph N. DiStefano
In his 2010 book, The Master Switch, Tim Wu told the history of American communications - wire, broadcast, mobile - as a 150-year cycle of ingenious new tools, whose quick popularity is exploited by empire-building monopolists, until the government regulates (or stagnates) prices and markets. The cycle repeats, according to a new book from Susan Crawford.

She tells today's chapter of that story in broad, clear terms that leave no doubt where she finds the current competition-killing, profit-maximizing monopolists: in Philadelphia, at the Comcast Center, and in Washington, where canny lobbyists for Comcast and other big companies, armed with cash and smooth P.R. arguments, relentlessly extend their profitable privileges, trampling would-be advocates of the public interest.

Crawford's passion for the government's role as guarantor of fast, competitive Internet service for all Americans won her what was supposed to be a two-year stint as President Obama's telecom adviser. She preached "Net neutrality," arguing that the nation should treat Internet connections like railroads or phone lines and force owners to carry services from all users, even rivals, at flat prices.

Comcast's lobbyist overseer, Philadelphia lawyer and Democratic fund-raiser David L. Cohen, questioned the need and the nature of Net neutrality. Supportive congressmen added their protests. Obama's nervous political advisers withdrew support. So Crawford left for Harvard University.

Her revenge is this book, which tells of Comcast's subsequent acquisition of NBC Universal, which Crawford tells us makes Comcast "the communications equivalent of Standard Oil," the monopoly that President Teddy Roosevelt famously busted for choking rivals, suppliers, and customers to make the Rockefellers rich.

Though Brian L. Roberts is Comcast's second-generation boss, Crawford reports that "in meetings with [Capitol] Hill staff, Cohen routinely interrupted Roberts and took over the discussion. Roberts did not seem to mind; he understood that Cohen knew what he was doing."

Comcast lore portrays the company as a Roberts family American success story, which it is. But Crawford also finds a "jarring contrast between this family's storytelling, with its connotations of intimacy and support, and the brute strength" with which it can "squeeze all the other players," including towns that dare try to update their community-owned Internet networks in competition with the giants.

Why should we care if our Internet works on TV, PC, and smartphone? Because, in Crawford's telling, Comcast and the smaller local monopolies have so much power - and such fat 40 percent-plus operating profit margins - that they have lost incentive and stopped investing in a faster, better network.

It's different, she tells us, in European and Asian capitals, where Internet service is faster and cheaper, if less profitable for owners, thanks to national regulators who see broadband Internet as a utility best regulated to maximize public access.

It's too bad Crawford leaves details of those comparisons to footnote references, making it tough for the reader to judge their full costs and benefits.

The Comcast-NBC Universal deal, she tells us, "set up a huge conflict of interest," giving Comcast "every incentive to squeeze online services that were unwilling to pay the freight." She points to Netflix and Hulu, cheap, popular Internet video services that have been denied full access to Comcast-owned programs and other services cable companies would rather sell directly.

Sure, the FCC imposed conditions on the NBC deal. But, Crawford notes, Comcast and the other big telecoms know how to deal with vast regulations, which their lawyers use to tie regulators in knots. Comcast bought a controlling stake in NBC Universal from General Electric in 2011, and last week agreed to buy the rest.

She argues for a return to structural standards - like an outright ban on cable utilities owning video production companies. But no one plans to make Comcast give up NBC and its networks.

Comcast and cable have won, though they have left behind tens of millions of Americans who can't afford their service, as Wall Street's leading telecom analyst, Craig Moffett, has written. In Crawford's view, "America has the worst of both worlds: no competition and no regulation . . . Comcast is a great American success story, but its interests are not necessarily aligned with those of the country as a whole . . . . The only threat it faces is action by the government" to make it carry even competitors [such as Netflix], the way phone companies and railroads and other utilities do.

That won't happen, she concludes, until Internet service in the United States has fallen so far behind other countries that it becomes a matter of national security the government can't avoid.


Joseph N. DiStefano is an Inquirer business columnist and the author of "Comcasted: How Ralph and Brian Roberts Took Over America's TV, One Deal at a Time" (Camino Books, 2005). Contact him at 215-854-5194, JoeD@phillynews.com, or on Twitter @PhillyJoeD.

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