Book Review: ‘Captive Audience’ Gilded with Fools Gold

Published February 20, 2013

Obsolete thinking and rear-view-mirror analysis comprise Professor Susan Crawford’s new book Captive Audience — the Telecom Industry and Monopoly Power in the New Gilded Age. Unfortunately, the only “gilded” thing in this book is the analysis with fool’s gold.

Obviously nostalgic for the simpler government-controlled times of long bygone eras, Professor Crawford cherry picks her information to try and convince the reader that broadband must be regulated like a public utility, because she thinks broadband is as essential as electricity or water.

Apparently it never occurred to the professor that unlike electric or water utilities — which can only distribute one thing that never changes or varies — broadband can carry near infinite types of digital communication and information: voice, video, content, software, apps, etc.

And broadband, which can be delivered either over copper, coaxial, fiber, cellular, WiFi, microwave wireless, and satellite technologies, is no more a public utility than the post office is, where packages can be delivered electronically; by truck, car, plane or foot; or by  FedEx, UPS, or DHL.

Remarkably, the professor still fears: telecom monopolies when voice is now a free app; Comcast dominance when Google’s YouTube commands 750 million more viewers and 200 times more advertisers than Comcast; and media concentration when she turns a blind eye to the vastly greater concentration of media on the web via the dominance of Google, Facebook, Amazon, etc.

More remarkably, to promote net neutrality, she effectively advocates for a return to 1887-era railroad common-carrier regulation despite the inconvenient truth that the Federal Government ended common carrier regulation for: railroads 36 years ago, bus-lines and trucking 32 years ago, and airlines 28 years ago.

Even more remarkably she imagines that somehow common carrier regulation could outperform the current free market record of vibrant broadband and Internet competition, when pre-1996 monopoly-era common-carrier regulation delayed the broad commercialization of Internet packet switching networks, PC modems, and residential broadband service for almost two decades.

The central thesis of Professor Crawford’s book “Captive Audience” — that broadband should be regulated as a public utility — warrants a more thorough rebuttal in order to show how obsolete and incorrect her analysis is, and how selective her facts are.

Why is broadband not a public utility?

First, broadband is a competitive offering, not a natural monopoly service. The U.S. is the only nation in the world where consumers have their competitive choice of two ubiquitous wire line broadband networks, four ubiquitous wireless broadband networks, and two satellite broadband providers.

Second, public utilities are based on single-use-facility economics. Broadband provider facilities are the opposite enabling multiple-uses and bundle economics of multiple discrete services, e.g. high speed service with a choice of speeds and usage; video with a choice of channel packages or tiers; voice with a choice of usage plans; among other potential bundled offerings like home security services or telemedicine monitoring.

Third, utilities deliver uniform units, while broadband delivers completely variable units. Since electric utilities only transmit electricity and water utilities only transport water, they only require availability management. Broadband is intrinsically different requiring network management to provide quality of service for multiple services with very different performance requirements and to continuously manage and combat: viruses, malware, bot-nets, denial-of-service attacks and spam.

Fourth, utilities are inherently “dumb” networks, while broadband networks are inherently “smart” networks. Central utility managers do not know if an area has, or does not have, functional electricity or water — unless someone is at the distant location to confirm it — either a customer or a service person.

Broadband networks are inherently “smart” networks in that they can be monitored and repaired remotely.

Fifth, utilities are characterized by standard uniformity and glacial rates of change. In contrast, competitive broadband facilities are characterized by diversity, differentiation, and innovation because they operate in a continuously and rapidly changing competitive environment.

Finally, and maybe most importantly, current law, policy and precedent have repeatedly determined that broadband is not, and should not be treated as, a public utility.

To wrap up, someone might want to publicly ask Professor Crawford how she can square her belief that broadband should be price regulated like public electricity or water utilities are, but that broadband should not be allowed to price based on usage like electricity and water are priced everywhere?

Scott Cleland is Chairman of NetCompetition® a pro-competition e-forum supported by broadband interests and President of Precursor LLC, a research consultancy for Fortune 500 companies.

[First published at the Daily Caller.]