Monday, May 20, 2013

Broadband Hurt By Lack Of Competition

David Carr's article in today's New York Times shares with us a new book.  "Susan Crawford, a professor at the school, has written a book, 'Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age,' that offers a calm but chilling state-of-play on the information age in the United States." It is unfortunate, but true, that there is a lack of broadband and wireless competition in this country and as any good economist can tell us, monopolistic industries tend to cause higher prices and less innovation.  As Professor Crawford shares, "that the airwaves, the cable systems and even access to the Internet itself have been overtaken by monopolists who resist innovation and chronically overcharge consumers."

When the concern was once about telephone, the government forced the break-up of AT&T into the Baby Bells.  One baby bell ended up owning AT&T while the other NYNEX became Verizon.  Cable, too has seen its share of consolidation with two cable operators owning a majority of franchises and two satellite providers.   But government intervention to force breakups is clearly not the answer.  That stopgap proved temporary at best.  Rather the solution is to simply encourage new broadband and wireless infrastructure to be built.  Google is trying to become a player but is currently in just a couple markets.  Lightsquared tried but is now in bankruptcy.  Clearwire is looking for a partner either with Sprint or Dish.  But are these few enough?

Other utilities are already touching the home.  Water, electric, and gas companies are all connected to the home.  Could government support encourage these utilities to expand into the broadband field?  The cost to build broadband infrastructure is expensive, communities continue to fight back the rise of cellular towers.  But if we are pushing to be a wireless, always on, society, then more competition and more improvement in the speed of the networks are desperately needed.  But government's support of new entrants does not appear likely.  According to Professor Crawford, "And because telecoms and cable companies have done a great job of developing relationships in Washington — as a business, it is more generous in terms of donations than the banking industry — there is little pressure from politicians or regulators."  And that spells bad news for consumers.

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