[1st-mile-nm] Susan Crawford on Why U.S. Internet Access is Slow, Costly, and Unfair on Vimeo

Tue Feb 12 05:42:40 PST 2013

High prices come about for two reasons: The real costs of providing service
and of course monopolistic rents. As much as I have railed against USA
pricing practices, most of the price really has to be due to costs, not
monopolistic practices, as far as landlines are concerned. Mobile is more
complicated -- Wall Street has provided a lot of money for mobile expansion
but has extracted a high rent of its own. Just look at how telecom/cable
stocks have trended -- middle-of-pack for past decade.

1. Two suppliers are not effective competition, but Crawford says there is
only one in Manhattan. That is a lie. She says TWC monthly bill is $200.
That would mean for someone getting the most expensive video tiers.

2. Sorry, cost of good cell phone to carriers has been $500-600 and when
they charge $100 the balance must be built into the price over the next two
years. I have a "no contract" unlimited-everything 2-line family plan with
T-Mobile for $99. I just bought my wife a Galaxy SIII unlocked for $550.
That's the way it works. Crawford claims cell costs in Europe are $30 a
month. They are not that low and there are a lot of hidden fees and roaming
charges as well. They are lower than in the US, but totally explained by
phone subsidies, really. Apple is the monopolist.

3. Content providers (there are seven major networks, not the four Crawford
claims) are also the monopolists.That's where your fees mainly go. I have
argued that the duopoly's pricing power allows the pass-through of content
costs, but that pricing power has clearly been declining. The content
providers "bundle" their services. You want ESPN 1 and 2? Sorry, you have
to carry the other 9 ESPN channels as well! But as with audio, the bundling
will eventually collapse. The American Cable association (seemingly a
monopolist tool) wants FCC to allow a la carte content over the top (on
internet broadband). Doesn't sound monopolistic to me.

4. On phones, there is not a duopoly -- plenty of low-cost carriers in the
business but not in rural areas. Ugh. Mobile providers also want to cut
their costs by pushing you onto your own wifi and not compensating the
landline provider -- unless of course they ARE the landline provider.

5. I carefully model fiber network building and operating costs, and the
models are downloadable, free, at www.bbcmag.com or the quick link,
www.FTTHAnalyzer.com. Basically, if a network provider can make a gross
profit (before overhead) of $50 per customer per month, it can get by with
8 customers a mile. That typically means 12-16 homes per mile. Any change
in this picture requires government subsidy (which I and Crawford support,
but which is a pipe dream these days) or much lower interest rates (tier 3
LECs these days are paying 10%... ugh).

6. Because of lack of access to reasonably priced capital, hardly any new
networks are being built right now. Our advertising base has been cut in
half as vendors collapse into one another. I always teach my journalism
students to "follow the money." The money goes to handset suppliers and
content providers, not to network providers.

7. Qwest/CenturyLink is indeed screwing folks out west, but they are also
low on cash. A better business model for them would be to partner with
munis, to tap assets that munis can mortgage for cheap capital. That's
where I would fault them.

Steve

On Tue, Feb 12, 2013 at 8:08 AM, Gary Gomes <ggomes at soundviewnet.com> wrote:

> Steve,****
>
> ** **
>
> I read your magazine and appreciate your efforts in promoting broadband
> and recognize that video content providers are a huge problem, but  I hope
> that you do not mean to suggest that two suppliers equals effective
> competition.****
>
> ** **
>
> There are countless studies that document the fact that oligopolists act
> just  like monopolists – even absent overt collusion.  It is just the
> nature of the beast.****
>
> ** **
>
> The problem in the US is that we have virtually unregulated
> monopoly/duopoly for-profit companies running a public utility service
> (cable and fiber plant), another oligopoly running the content creation
> (networks origin) as well as over-the-air waves, and a third duopoly
> running cellular.  Is it any wonder they do not compete on price?****
>
> ** **
>
> Do you really believe that cost of the subsidized phones is the reason for
> the high US cellular rates?     The numbers suggest otherwise.****
>
> ** **
>
> The fact is that unfettered  market competition does not work for the
> consumer (in the long term) in the absence of a large number of potential
> providers.****
>
> ** **
>
> Gary****
>
> ** **
>
> *From:* 1st-mile-nm-bounces at mailman.dcn.org [mailto:
> 1st-mile-nm-bounces at mailman.dcn.org] *On Behalf Of *Steve Ross
> *Sent:* Monday, February 11, 2013 10:20 PM
> *To:* Tom Johnson
> *Cc:* Friam at redfish. com; 1st-Mile-NM
> *Subject:* Re: [1st-mile-nm] Susan Crawford on Why U.S. Internet Access
> is Slow, Costly, and Unfair on Vimeo****
>
> ** **
>
> I'm a reluctant fan of Crawford and Moyers, but her book and this
> interview miss the mark. There are major inaccuracies in the interview
> itself. For instance, Crawford says Manhattan suffers from a Time Warner
> Cable monopoly, although Verizon is bringing FiOS to every household in
> NYC. I have a small apartment in Manhattan and I have a choice! So does
> Crawford, I suspect.****
>
> ** **
>
> But the biggest problem is with the content providers, not the broadband
> providers. Thanks to predatory practices among the content providers there
> is almost no profit in video -- but they have to provide it. SOMEONE has to
> pay for building the network, and that someone is the consumer of pure
> Internet broadband. The providers need to get $20-30 profit per month per
> subscriber to pay for the network, and they only get $5-10 from video, zero
> from voice.****
>
> ** **
>
> BTW, data we're publishing this month shows that fiber customers pay the
> highest monthly fee for pure broadband access but they pay the least per
> Mbps.****
>
> ** **
>
> My magazine (www.bbcmag.com) calls for anyone to be able to build
> networks and we have editorialized for public broadband. But between higher
> content costs and less population density, and  oddities in pricing
>  (Europeans pay low phone bills but pay $500+ for the phone!) most of what
> Crawford is complaining about is not caused by the companies she faults. In
> this interview, she comes across as either an idiot or a liar. She's better
> than that.****
>
> ** **
>
> On Mon, Feb 11, 2013 at 10:39 PM, Tom Johnson <tom at jtjohnson.com> wrote:**
> **
>
> http://vimeo.com/59236702
>
> Susan Crawford on Why U.S. Internet Access is Slow, Costly, and Unfair
>
> -tj
>
> _______________________________________________
> 1st-mile-nm mailing list
> 1st-mile-nm at mailman.dcn.org
> http://www2.dcn.org/mailman/listinfo/1st-mile-nm****
>
>
>
> ****
>
> ** **
>
> --
> Steve Ross****
>
> Corporate Editor, Broadband Communities Magazine (www.bbcmag.com)
> 201-456-5933 mobile, 781-284-8810 landline
> 707-WOW-SSR3 (707-969-7773) Google Voice
> editorsteve (Facebook, LinkedIn)
> editorsteve1 (Twitter)
> editorsteve at gmail.com****
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>

-- 
Steve Ross
Corporate Editor, Broadband Communities Magazine (www.bbcmag.com)
201-456-5933 mobile, 781-284-8810 landline
707-WOW-SSR3 (707-969-7773) Google Voice
editorsteve (Facebook, LinkedIn)
editorsteve1 (Twitter)
editorsteve at gmail.com
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