Forbes commentary on Susan Crawford’s “broadband monopoly” thesis

by on March 4, 2013 · 3 comments

Over at Forbes we have a lengthy piece discussing “10 Reasons To Be More Optimistic About Broadband Than Susan Crawford Is.” Crawford has become the unofficial spokesman for a budding campaign to reshape broadband. She sees cable companies monopolizing broadband, charging too much, withholding content and keeping speeds low, all in order to suppress disruptive innovation — and argues for imposing 19th century common carriage regulation on the Internet. We begin (we expect to contribute much more to this discussion in the future) to explain both why her premises are erroneous and also why her proscription is faulty. Here’s a taste:

Things in the US today are better than Crawford claims. While Crawford claims that broadband is faster and cheaper in other developed countries, her statistics are convincingly disputed. She neglects to mention the significant subsidies used to build out those networks. Crawford’s model is Europe, but as Europeans acknowledge, “beyond 100 Mbps supply will be very difficult and expensive. Western Europe may be forced into a second fibre build out earlier than expected, or will find themselves within the slow lane in 3-5 years time.” And while “blazing fast” broadband might be important for some users, broadband speeds in the US are plenty fast enough to satisfy most users. Consumers are willing to pay for speed, but, apparently, have little interest in paying for the sort of speed Crawford deems essential. This isn’t surprising. As the LSE study cited above notes, “most new activities made possible by broadband are already possible with basic or fast broadband: higher speeds mainly allow the same things to happen faster or with higher quality, while the extra costs of providing higher speeds to everyone are very significant.”

Even if she’s right, she wildly exaggerates the costs. Using a back-of-the-envelope calculation, Crawford claims that slow downloads (compared to other countries) could cost the U.S. $3 trillion/year in lost productivity from wasted time spent “waiting for a link to load or an app to function on your wireless device.” This intentionally sensationalist claim, however, rests on a purely hypothetical average wait time in the U.S. of 30 seconds (vs. 2 seconds in Japan). Whatever the actual numbers might be, her methodology would still be shaky, not least because time spent waiting for laggy content isn’t necessarily simply wasted. And for most of us, the opportunity cost of waiting for Angry Birds to load on our phones isn’t counted in wages — it’s counted in beers or time on the golf course or other leisure activities. These are important, to be sure, but does anyone seriously believe our GDP would grow 20% if only apps were snappier? Meanwhile, actual econometric studies looking at the productivity effects of faster broadband on businesses have found that higher broadband speeds are not associated with higher productivity.

* * *

So how do we guard against the possibility of consumer harm without making things worse? For us, it’s a mix of promoting both competition and a smarter, subtler role for government.

Despite Crawford’s assertion that the DOJ should have blocked the Comcast-NBCU merger, antitrust and consumer protection laws do operate to constrain corporate conduct, not only through government enforcement but also private rights of action. Antitrust works best in the background, discouraging harmful conduct without anyone ever suing. The same is true for using consumer protection law to punish deception and truly harmful practices (e.g., misleading billing or overstating speeds).

A range of regulatory reforms would also go a long way toward promoting competition. Most importantly, reform local franchising so competitors like Google Fiber can build their own networks. That means giving them “open access” not to existing networks but to the public rights of way under streets. Instead of requiring that franchisees build out to an entire franchise area—which often makes both new entry and service upgrades unprofitable—remove build-out requirements and craft smart subsidies to encourage competition to deliver high-quality universal service, and to deliver superfast broadband to the customers who want it. Rather than controlling prices, offer broadband vouchers to those that can’t afford it. Encourage telcos to build wireline competitors to cable by transitioning their existing telephone networks to all-IP networks, as we’ve urged the FCC to do (here and here). Let wireless reach its potential by opening up spectrum and discouraging municipalities from blocking tower construction. Clear the deadwood of rules that protect incumbents in the video marketplace—a reform with broad bipartisan appeal.

In short, there’s a lot of ground between “do nothing” and “regulate broadband like electricity—or railroads.” Crawford’s arguments simply don’t justify imposing 19th century common carriage regulation on the Internet. But that doesn’t leave us powerless to correct practices that truly harm consumers, should they actually arise.

Read the whole thing here.

  • patrik69

    Bull. That Forbes article was written by a guy in bed with the wireless and cable companies. He was defacto paid to spout their propaganda.

  • txpatriot

    @patrik69:disqus the article discloses the fact that the authors received compensation from broadband providers. When has Susan Crawford ever disclosed the sources of her money?

  • patrik69

    The difference is she is speaking the truth. If you know anything about the wireless industry you can see plain and day what AT&T and Verizon are doing. Giving less for more. When school kids have to go to McDonalds after school to do their homework because they don’t have internet at home well that’s a problem. Tell me what’s right about a company who says you have 5gb of data to use this month on your cell phone. But you can only use it on your cell phone. You can not use the cell phones built in hot spot function unless you pay us an additional fee of $20 and you are still limited to that same 5gb limit.

    All smart phones have the hardware and software necessary to be a wifi hotspot. That’s just the nature of the technology. I am not saying carriers should make everything unlimited. What I’m saying is they shouldn’t care where a customer uses his or her 5gb. Once that customer uses up that 5gb they can buy some more. Just dont tell that customer where they can and can’t use it.

    How can you even use the word Liberation in your blog’s name when the cell carriers want anything but liberation. They want to shackle every customer down with fees for this and fees for that. The carriers do more to stifle innovation and competition than actually offer a pro-consumer choice.

    And this is the last of my postings to your site. I’m going to go over to Google’s Play store and buy and unlocked, carrier unrestricted, free of carrier bloat ware, no-fee hotspot Nexus 4 cell phone that I can use anywhere in the world with any GSM carrier for $299.

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