Question: what do broadband oligopolies and global warming have in common? Answer: they both have their share of deniers. Chief among them in both cases is the American Enterprise Institute, an influential right-wing think tank funded by the likes of Exxon and AT&T.
The AEI has been on a tear of late in regards to broadband, paying writers and academics to counter the raft of literature and critics who are rightfully complaining about the moribund state of high-speed internet access in the United States (which has relevance to Canada, where the situation is similar).
Just this week, the organization fielded its own columnist James Pethokoukis to pen “10 reasons why U.S. broadband isn’t as bad as you think” for Business Insider, and Roslyn Layton, an American working as a professor and telecom consultant in Denmark, to write about how “America’s broadband service is not falling behind.”
Both articles offer the same rationalizations put forward by another think tank, the Information Technology and Innovation Foundation, in a report earlier this month that found American broadband to be, well, not so bad. The articles and report offer up some great guffaws, like pointing out that the United States leads the world in 4G/LTE wireless deployment, as if that’s supposed to mean anything.
Ars Technica did a good job of dismantling the original AEI report. On the LTE point, for example, Ars pointed out that while 4G wireless is indeed pretty fast, it’s prohibitively expensive with relatively tiny data caps. It’s not an adequate replacement or competitor to wired internet by any stretch of the imagination, nor is it likely to ever be.
The AEI is the same group that was busted years ago for offering $10,000 cheques to scientists and economists willing to dispute a major climate change report. The organization, which had close ties with the Bush administration, was doing its level best to prevent new regulations from hitting its sources of funding by introducing doubt into the science. You know, much like they’re trying to do now with the broadband situation.
Fortunately, there are credible people talking about the other side of the story, such as Pulitzer Prize-winning journalist David Cay Johnston, who says telecommunications is grossly uncompetitive:
A growing number of industries are monopolies, duopolies and oligopolies, even as they claim to be in highly competitive markets. Cable, internet and telephone provide a good example of this. In most places you have one phone company and one cable company offering similarly slow, by world standards, internet speeds and very similar prices.
But hey, that’s just his imagination, right? He probably also thinks the world is getting warmer. What a kook.
Infostack
March 1, 2013 at 9:22 am
The pro-competition forces have had a failed marketing campaign for the past 15-20 years. What’s needed is a rigorous, business model driven policy and capital “horizontal” framework that is consistent with the new digital world (convergence of supply, divergence of demand) and not the vertically integrated mindset from the analog past. Unfortunately, Sue Crawford’s Captive Audience, while I applaud her attempts at galvanizing the pro-competitive forces, will likely be another in a string of failures by those I refer to as “competitive apologists.”
Peter Nowak
March 1, 2013 at 9:43 am
I’m not entirely sure what you’re saying. Are you suggesting we need government-owned infrastructure with strong open access rules? That seems to be which way the logic winds are blowing. “Intermodal” competition doesn’t seem to be working.
Infostack
March 1, 2013 at 11:28 am
No. I believe the natural monopoly theory has been disproved.
The problem is with the policy and business model frameworks that hold to vertical integration. The problem with the structural separationists is that they “assume” layers 2-7 will naturally compete, in addition to thinking that layer 1 investments by governments are riskless. That’s why I call them competitive apologists. It hasn’t happened and never will. Instead we need a pro-competitive, open access approach at lower, middle AND upper layers.
Lower is easy to understand, or so we think: fiber, vs coax, vs copper vs wireless. But wait, there are many flavors and choices of those outcomes when we add layer 2 protocols/electronics. Then, we really upset the lower layer assumptions when we introduce switching (layer 3) tradeoffs. And we haven’t even introduce upper layer supply/demand dynamics.
The middle layers are all about directories (addressing), security, network controls/access and…most importantly the basis for settlement systems. Bill and keep is a competitive and new service/infrastructure dead end. We need balanced settlement and exchange models that create incentives from upper to lower layers and from network A to B. The developent of CDNs (1-way) and session border controllers (2-way) and big data (advertising) have scaled layers 3-5 of the IP stack.
Oversight into upper layer applications is important as well. Should the markets and governments (and end users) condone closed communities (FaceBook, Twitter, Apple) or condone and support open systems. Don’t need to decide on that. And imporantly, I think we’ll see a lot more overlap and tie-in between corporate and consumer demand in the upper layers, which by default will require them to be open.
It’ pretty funny that in 99% of discussions regarding ICT business models and regulations most people have a very easy time defaulting to vertically integrated silos when the horizontally open exchanges and ecosystems have created the greatest demand and revenue opportunities.
Lastly, I’ve said it elsewhere and I’ll say it again, balanced settlements are the key to corporate subsidization and centralized procurement to make access free. Wait til we see this applied to Google’s KC Fiber. If it happened in the 1980s and 1990s with 800, VPN, email, etc…, it will happen in the future.
Tom
March 1, 2013 at 10:25 am
I think we should take a moment to remember U.S. versus Microsoft (1998). In that case the US decided to be aggressive in promoting and preserving competition. Without that there would be no Apple today (MS then agreed to keep Office on Mac, and made capital available to Apple via an investment), and everyone would be using IE7 with ActiveX controls…
The ultimate result of that action is that the ‘big 3′ consumer tech companies, Google, Apple, and Microsoft, are all very healthy companies making plenty of money and competing like crazy to the benefit of consumers and productivity.
In Telecom, things have gone quite differently in the US, here, and in most countries, even though the telecom companies are more like utilities and are often using public infrastructure (the ‘airwaves’) so one might expect them to be subject to much more anti-trust scrutiny. Perhaps this is because they have done a much better job of lobbying? Or because of the national nature of telecom? In any event, the results speak for themselves.
Infostack
March 1, 2013 at 11:37 am
Tom, funny, but I wrote in 1997 that if the government wanted to break the MSFT Wintel monopoly it should break the Baby Bell access monopoly. The reality is that broadband competition from the cable cos and wireless access via the smartphone has exploded the need for the cloud and opened up the range of OS’ to support the explosion of application ecosystems. All that did more to destroy the MSFT monopoly than the government. The history of government oversight into telecom networks has been to sustain vertically integrated networks and destroy equal/open access. It wasn’t congress or the FCC that broke up AT&T. It was MCI (Bill McGowan) and the DoJ that broke up AT&T and forced equal access. The FCC killed equal access 9 years ago, but Steve Jobs has resurrected it in the form of Wifi on the smartphone. Let’s see if someone can ride the wifi trojan horse into the walls of the monopoly.
Jonathan Blaine (@jonathanblaine)
March 1, 2013 at 11:11 am
When I first entered the US cable TV market in the early 1990s, there were about 50 cable companies. Now, there’s essentially 4 that matter. Granted, they were local monopolies, as there wasn’t stuff like satellite dishes and phone companies into video. Almost none of the programming was owned by any company in cable. Now, almost all of it is “vertically integrated” in the US, and that percentage is even higher in Canada. Comcast, Time Warner, Rogers and Bell want to own all of the content coming over their systems, and they do with video for the most part. The idea of Comcast buying NBC would have been laughable a decade ago. The US is quickly turning into the homogenous media market that Canadians have been suffering for a long time.
Broadband companies’ collective heartburn stems from consumers wanting to get their stuff elsewhere, without a payday for the broadband provider. I can imagine the boardroom conversations in some of the same buildings I frequented: “Why should we make things more robust and faster it we’re only going to be the pipeline?” Canadian companies, apparently, were much ahead of that game with draconian caps on the “free” Internet. Which is arguably wrong and something that the Canadian government should have blocked, but didn’t.
Compared to Canada, the US is still competitive to a point in broadband and wireless. One can still get video, if there is line of site, to 2 satellite TV choices that are not owned by the terrestrial broadband companies, unlike in Canada. However, US cable, wireless and telephone companies like Verizon are moving towards caps that have no foundation in financial or bandwidth realities, other than greed. And, there has been little to no expansion of existing broadband pipes for years.
Infostack
March 1, 2013 at 1:28 pm
Jonathan, there many examples where the lower layers (aka the dumb pipes, which aren’t really if you look at my above comment) have made lots of money and been enriched by developments in the middle and lower layers.
Our vertical or silo thinking goes back to the infancy of communication networks when we made the fatal and misinformed mistake of blessing it in 1913 with the Kingsbury Commitment. We are 292 days away from the 100 year anniversary of that fraudulent and farcical agreement. Anyways, the result was creation of other information monopolies in broadcast and radio.
The big problem is that we shoot ourselves in the foot with the gun that we hold to seemingly defend ourselves. Our antitrust rules support vertical integration (which sustains monopoly) and fights against horizontal consolidation which drives efficiency.
All the regulators have to do is come up with policies and approaches that foster open, equal access to the rights of way/conduit/frequency/locations that they are giving or selling (and using to fund public programs) the layer 1 providers.
Imagine, if you will, that instead of natural monopoly hypothesis and the Kingsbury Commitment we had adopted an equal access approach and focus on open horizontal intranets and exchanges at every layer of the stack back at the turn of the century. Then maybe we would have rethought our spectrum licensing and we wouldn’t have gotten vertically integrated programmers, who only wanted to show their programs (good or bad) on their frequencies. Of course the outcome of this was to create latent demand for a lot more programming from a different distribution media. Cable was born.
But what if broadcasters (TV and radio) had thought differently and had opened up their networks? Maybe then, the airwaves would have gone digital in the 1980s and fit in 5 more programs into the same space. Going digital would have been very easy if it were a handful of open companies that each owned 20-30 channels (120-180 mhz each) and they worked together via a market-driven standards body. And they could have implemented 2-way and response systems either inband or out of band creating yet more value for the infrastructure.
What could have been? No, what should have been and what could be if we simply follow a horizontal, open access approach. And its a great thing for the players since they are not capable, like the broadcasters of generating ROI on rapidly obsoleting supply across narrow demand.