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

Tue Feb 12 06:44:06 PST 2013

Chris and all,

Verizon DSL at good speeds is available all over Manhattan. FiOS is coming
fast -- seems to be available in more than half of all living units.

Of the seven major content providers, only Comcast and NBC/Universal are
linked as one combined company. Yes, TWC is loosely tied to HBO (TWC split
off from Time, Inc, in 2009 but there are debt guarantees and some
long-term contracts) and Murdoch has satellite distribution. But in both
cases the ties have loosened because the super-profitable content side is
being dragged down by the network provider side.

At cable industry shows, the high cost of content and the tyranny
of bundling (especially since many DOCSIS providers want to offer fewer
fixed channels so they can get data bandwidth up) is a common discussion.

Crawford says competitors to large MSOs pay "up to four times" what the
MSOs pay for content. As you know, that is a ridiculous statement. It does
happen for isolated channels on isolated systems. But the implication is
that the big broadband providers can "bargain down" the price 3- or 4-fold.
It just is not true. Even 10%-20% is a stretch.

Aside from all of that, just look at the big cable providers and telcos.
Their profit margins are not those of monopolists. Their stock prices are
not those of monopolists.

I am surprised that Verizon does not offer a no-contract plan, but my
argument is the same: You pay the price in either the phone or the monthly
fee. There's no free lunch and no real difference in what Europeans pay
versus what Americans pay (overall) for mobile service. The FCC wisely
would not allow AT&T and T-Mobile to merge, after all. I might add that I
used to pay $80 a month for cellular service in the early 1990s when there
were zillions of separate carriers (mine was Omnipoint, which eventually
merged with VoiceStream, which was bought by Deutsche Telecom to become
T-Mobile). Inflation-adjusted, I pay half that now, for much more bits
moved.

My complaint is much less about pricing than it is about access, for both
mobile and landline. Eighteen states restrict muni broadband at the behest
of big cablecos and telcos that have no intention whatsoever of supplying
services themselves! The stimulus has been spent. RUS was hoping for a few
crumbs of extra funding in the farm bill. The Tea Party's big donors
stopped that.

On Tue, Feb 12, 2013 at 9:08 AM, Christopher Mitchell <
christopher at newrules.org> wrote:

> It saddens me to see Steve fall into the trap that so many seem to be
> falling into these days - suggesting that the cable companies and the
> content providers are separate entities.
>
> It is a very gray area.
>
> We all know that Comcast owns many channels now through NBCU and many
> other cable operators have ownersship stakes in the channels they carry
> (that are supposedly gouging them).  I guess ABC/ESPN/Disney is the
> exception, but to suggest that the cable companies are getting raked by the
> content companies ignores a complicity that benefits them and restricts
> competition.
>
> Susan has a good focus on this in her book, particularly the role of
> sports networks in protecting monopoly.
>
> I don't live in Manhattan, but from what I have seen, FiOS is far from
> widely available yet. It will be eventually, but I think there are some
> years yet left in the expansion there.  Susan likes to learn from mistakes,
> so I hope Steve will point this out to her - I doubt we'll hear her say it
> again if she is presented with evidence that she is wrong.
>
> As for the mobile market, I again think Steve is too charitable to the
> phone companies -- I can buy my own handset but I don't get a break on the
> bill from Verizon... I pay the same damn cost on my phone that is 3 years
> old as I would a new one - that is Verizon's choice and they have made a
> sound one when it comes to extracting the most cash from me. Sure, I could
> go to a small competitor that has crap coverage (I travel frequently enough
> to rural enough spots that it is impractical) but like the vast majority of
> Americans, I find my only real options are Verizon and AT&T for wireless.
>
> As for following the money - who wants to loan capital to anyone that is
> going to compete on a playing field so dominated by Comcast/Verizon/et al?
>  One has to be somewhat crazy, because private sector competition has no
> future in these United States.
>
> Christopher Mitchell
> Director, Telecommunications as Commons Initiative
> Institute for Local Self-Reliance
>
> http://www.muninetworks.org
> @communitynets
> 612-276-3456 x209
>
>
> On Tue, Feb 12, 2013 at 7:42 AM, Steve Ross <editorsteve at gmail.com> wrote:
>
>> 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****
>>> ------------------------------
>>>
>>> No virus found in this message.
>>> Checked by AVG - www.avg.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
>>
>> _______________________________________________
>> 1st-mile-nm mailing list
>> 1st-mile-nm at mailman.dcn.org
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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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