I will stipulate at the outset that Susan Crawford, a former
high-ranking Obama Administration telecom official, may be a nice person. And
well-intentioned as well.
But her recent piece
for Wired, "Be Very Afraid: The
Cable-ization of Online Life Is Upon Us," is downright flighty.
And if it were to be taken seriously by policymakers, it
would be downright frightful.
At its core Susan's piece is about a 9:00 P.M. flight from D.C.
to Boston, "a particularly crazy gate agent," and Susan's viola.
To make a short story just a bit shorter, the gate agent
that Susan identifies as "crazy" wouldn't let Susan store her viola
in the closet used by first class passengers, or even in the overhead bin.
Susan was traveling coach.
As an aside, Susan reports that the crazy gate agent even forced
another passenger to remove a bag from the overhead bin that the agent thought shouldn't
be there.
Anyway, rather than checking her fragile viola, Susan slept
overnight at a friend's house. At the airport the next morning: "Same
airline, same gate, different gate agent: No problem." Back to Boston in a
jiffy, and all was well.
Now, you might be forgiven if, thinking ahead, you assume the
point of Susan's piece is going to be a proposal for the government to crack
down on crazy gate agents, or at least the airlines that employ them. I was
anticipating a "crazy gate agent" rulemaking proposal!
But, alas, no.
What Susan took from the Viola Episode was this: She had
confronted a "gatekeeper," a "single delivery network,"
that can make rules on the fly because the gatekeeper knows you have nowhere
else to go. And, from this, she leaps to the assertion that Comcast is such a
"gatekeeper," and that the company should be regulated as "an essential
consumer utility." In other words, Comcast (and other broadband cable
operators as well) should be subject to public utility-like regulation like the
old Ma Bell telephone system prior to the 1990s.
As I said, this is not only flighty, but also frightful.
Susan does not suggest the airline market is not
competitive, or that other travel alternatives to Boston were not available.
They are, of course. Remember, the "gatekeeper" Susan confronted was
a "crazy gate agent."
More to the point, Susan does not present any real market
analysis purporting to show that cable operators possess market power akin to
the old Ma Bell monopoly, or to other entities that are regulated as public
utilities. They don't, of course. Susan rests her plea for government
regulation of Comcast and other cable operators largely on analogizing them to
her favorite crazy gate agent.
But there is this bit more in the way of assertion: Susan is
displeased that Comcast does not exempt Netflix's over-the-top video streaming
service from counting towards certain usage caps that may trigger higher rates if
exceeded. She says that Netflix's CEO Reed Hastings doesn't want to be
"shaken down by Comcast." And she is also displeased that the Al Jazeera network is carried by very
few cable operators.
In Susan's view, Netflix's and Al Jazeera's supposed travails are attributable to the fact that "Comcast
and the other major cable distributors get to decide who wins and who loses,
and under what terms."
Of course, this is a superficial portrayal of the realities
of the current broadband marketplace. Comcast and the other broadband cable
companies compete at several different levels and in different forms with
broadband services, including in the video market segment that concerns Susan. Competitors
include "telephone companies" like Verizon and AT&T, satellite
operators like DIRECTV and Dish Network, and a number of different wireless operators.
I understand the services offered by these various competitors are not all
exactly comparable. Some have more bandwidth than others; some may be more
secure and reliable than others; some are more or less costly than others; and
so forth. And, by the way, due to rapid technological advances, the composite
of features and prices is constantly changing, not frozen in time. For example,
viewing videos on smartphones is simply exploding as robust 4G wireless
services become more ubiquitous.
I'll grant that, even though Comcast and other cable
operators offer their subscribers hundreds of unaffiliated independent channels
of incredibly diverse programming, Susan may nevertheless claim she is unable to
get exactly the feature or program she
prefers, say, the Al Jazeera channel
or a movie streamed from Netflix, at exactly the price she would prefer to pay.
In fact, I'll bet, like Netflix's Reed Hastings, she would prefer to pay less rather
than more for whatever she gets!
But this misses the point, entirely. We know that consumers,
increasingly, have choices among broadband providers, even if the choices offered
over differing technological platforms are not perfect substitutes for one another
in all respects. And, we know, based on the rapid build-out and ongoing upgrade
of broadband facilities and the substantial take-up rate for subscriptions,
that consumers largely are satisfied with the marketplace choices and the way
the broadband environment is developing.
And here's what else we know.
It would be crazy to make communications policy based on
Susan Crawford's unfortunate experience with her viola and a "crazy gate
agent."
The public utility-type regulation that Susan long has advocated
for broadband service providers – and which she advocates anew in her Wired piece – would require the
government to regulate the providers' rates and to restrict differential treatment
of users. In other words, under this regime, the government would fix the rate
and terms and conditions of Comcast's carriage of Netflix's video streaming
service, and it would decide whether Comcast must drop another channel and add Al Jazeera.
The regime Susan advocates surely risks stifling the
investment and innovation that thus far has characterized the broadband marketplace.
Last year, U.S. broadband providers invested approximately $65 billion dollars
in private capital building out new broadband facilities. From 1996 – 2010, the
amount of private capital invested totaled approximately $1.1 trillion. Absent
flexibility to respond to consumers' evolving demands for different levels of
usage and different features and terms of service, service providers will be
reluctant to continue putting capital towards new investment and innovation.
You could fly hundreds, if not thousands, of violas "first
class" back-and-forth between D.C. and Boston every day for the next
hundred years for much less than the amount of private capital already invested
by cable and satellite operators, telephone companies, and wireless firms in
broadband networks.
These broadband providers should be allowed to continue to
invest and innovate free from public utility regulation.
If we do that, you can deal with crazy gate agents however
you please. I won't say a word. Promise.
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