January 24, 2013 New York Times

By Susan Crawford

ON Monday, President Obama said that during his second term, Americans would act together to “build the roads and networks and research labs that will bring new jobs and businesses to our shores” and that “we cannot cede to other nations the technology that will power new jobs and new industries — we must claim its promise.” 

The president is right that digital communication networks — especially high-capacity fiber networks reaching American homes and businesses — can be a powerful economic engine. But we are far away from being able to realize that vision, even as we cede the advantage such technology offers to other countries.

Although Julius Genachowski, the chairman of the Federal Communications Commission, has challenged the country to build additional gigabit fiber networks — about 100 times faster than most residential connections today — his words won’t advance our digital future unless they are backed up with the leadership necessary to enact pro-growth, pro-innovation and competition-enabling rules.

At the heart of the problem lie a few powerful companies with enormous influence over policy making. Both the wireless and wired markets for high-speed Internet access have become heavily concentrated, and neither is subject to substantial competition nor oversight. Companies like Time Warner Cable routinely get their way when they seek to prevent local officials from encouraging competition. At the federal level, Verizon Wireless is keeping the F.C.C. in court arguing over the scope of its regulatory powers — a move that has undermined the agency’s authority.

As a result, prices are too high and speeds too slow. A third of Americans opt not to buy high-speed Internet access at home, often because they can’t afford it.

Incumbents like Comcast and Verizon Wireless (now cooperating in a joint marketing venture) claim that their market is characterized by robust competition. But where is the competition when 94 percent of new wired high-speed customers bought service from their local cable distributors during the third quarter of 2012? Not surprisingly, America lags behind almost every other industrialized country in high-speed access — even France, the bête noir of American free-marketeers, has better and cheaper Internet access.

There’s little question that our wired (Comcast and Time Warner Cable) and wireless (AT&T and Verizon Wireless) giants need to be reined in. We need reasonably priced, globally competitive, ubiquitous communications infrastructure so that Americans can compete and innovate.

To get there, the federal government needs to pursue three goals. First, it must remove barriers to investment in local fiber networks. Republican and Democratic mayors around the country are rightly jealous of the new, Google-built fiber network in Kansas City, Mo., which is luring start-ups from across the country. And yet in nearly 20 states, laws sponsored by incumbent network operators have raised barriers for cities wanting to foster competitive networks.

In response, Congress must act to restore local communities’ right to self-determination by pre-empting these unfair and anticompetitive state laws. We must also create infrastructure banks that provide long-term, low-interest financing to support the initial costs of building these networks.

Second, the F.C.C. must make reasonably priced high-speed access available to everyone. In the 20th century, we made a commitment to provide universal telephone service to every American and to subsidize that utility service for our poor and rural neighbors. High-speed Internet access is now undisputedly the dominant communications technology of our era. We need to make sure that subsidies are available for competitive companies willing to extend world-class service to more Americans.

The F.C.C.’s Connect America Fund, which is supposed to promote such expansion, is mostly funneled back through existing communications companies. This isn’t the way to encourage new wired network providers to enter local markets. Nor will voluntary programs run by local monopoly cable distributors like Comcast meet our country’s needs.

Finally, the F.C.C. must foster more competition by changing the rules that keep the status quo in place. There is a raft of regulations and processes at the F.C.C. that incumbents wield to maintain their market power, including rules about access to programming and to telephone poles that favor existing providers. The agency has ample administrative power to fix these details and to gather the information it needs to develop and enforce effective policies.

We have allowed our affection for consolidation and profit-taking to shape our country’s ability to compete on the global stage. Although today’s communications networks should make it possible for anyone to create value, communications companies that control access in America have the ability to crush competition and innovation.

With a truly pro-competition agenda at the F.C.C., we could discover great reservoirs of increased productivity and new forms of making a living. Contrary to what giant companies like Comcast and Verizon would have us believe, communications regulation does not stymie entrepreneurial behavior. It unleashes human ingenuity.

Susan Crawford, a professor at the Benjamin N. Cardozo School of Law, is the author of “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age.”

 

 

"We have allowed our affection for consolidation and profit-taking to shape our country’s ability to compete on the global stage."