Tuesday, April 18, 2017

Susan Crawford's at It Again: Agitation for Regulation by Mischaracterization

Susan Crawford’s at it again – engaging in agitation for regulation by mischaracterization.

For many years, Ms. Crawford has advocated that Internet service providers (“ISPs”) be regulated as public utilities. She does so again in her latest fact-distorted piece published in the New York Times.

If you are convinced that the Internet should be subject to rigid government control like a nineteenth-century public utility, perhaps nothing will dissuade you. But if facts matter at all, consider what’s misleading about Ms. Crawford’s overheated advocacy. Her entire argument is based – as it always has been – on the false claim that American consumers “don’t have a choice” when it comes to Internet service providers. Here is the entire basis upon which her latest argument rests:

These five companies [Comcast, Charter, Verizon, CenturyLink, and AT&T] account for over 80 percent of wired subscriptions and have almost total power in their territories. According to the Federal Communications Commission, nearly 75 percent of Americans have at most one choice for high-speed data.

In evaluating Ms. Crawford’s claim, initially it’s worth pointing out that in her book, Captive Audience, published in 2013, she asserted, without a smidgen of doubt, that “cable companies” – and especially Comcast – represented the only choice American consumers had for high-speed data services. Indeed, she proclaimed that cable already had “decisively” won the battle. As I pointed out in one of my reviews, Ms. Crawford’s misleading narrative was “based entirely on substantially narrowing the market definition” by defining the relevant market as broadband speeds above 100 Mbps.

Well, as President Ronald Regan once famously, said, “There you go again.”

Ms. Crawford now claims that five companies account for over 80% of wired subscriptions. Please note that three of those five are not cable companies that Ms. Crawford steadfastly asserted, in her 2013 book, already had captured the broadband market.

But let’s move on.

There are two very fundamental analytical problems with Ms. Crawford’s claim that consumers “don’t have a choice” of Internet service providers. First, she limits her analysis to “wired” subscriptions only. And, just as she did in her book, she chooses to define “high speed data” very narrowly, without ever acknowledging she is doing so. Both of these limitations distort current marketplace realities in a way that artificially narrows – and thus mischaracterizes – the actual ISP choices available to American consumers.

It is simply wrong to exclude all non-wired ISPs as “choices.” Indisputably, consumers increasingly are accessing the Internet through wireless broadband providers. According to a study by the Department of Commerce’s National Telecommunications & Information Administration, American consumers at all income levels are rapidly substituting mobile broadband usage for fixed wireline usage. Indeed, the NTIA study showed that the proportion of online households that relied exclusively on mobile broadband service at home doubled between 2013 and 2015, from 10 percent to 20 percent. Thus, according to NTIA, the study showed “[m]obile Internet service appears to be competing more directly with wired Internet connections.” There is little doubt that, today, even more households are wireless-only when it comes to accessing high-speed data. While Ms. Crawford chooses to focus only on wired providers, highly competitive wireless broadband service providers carry an increasing proportion high-speed Internet traffic.

Moreover, in addition to excluding terrestrial mobile broadband from consideration, Ms. Crawford’s limited market view excludes satellite broadband. Not surprisingly, she fails to mention the recent announcement by Hughes that it plans to offer satellite broadband across the country at speeds of 25Mbps. The FCC’s own data show that, even in December 2015, satellite providers offered broadband service across the country at speeds of at least 10 Mbps.

But aside from excluding all non-wireline broadband providers, the second fundamental problem with Ms. Crawford’s claim is that, relying on FCC data from December 2015, she excludes as a consumer “choice” any alternative service that might provide less than 25 Mbps. To be sure, available speeds offered by ISPs are increasing continually across all technological platforms – a fact that Ms. Crawford ignores.  For example, even in 2015, over 95% of American consumers had access to three or more mobile broadband providers at speeds ranging from 13 Mbps to 20 Mbps, and almost 90% had a choice of four. For many consumers, at present, Internet access at broadband speeds in this range satisfies their demands, and represents, for them if not for Ms. Crawford, a perfectly acceptable choice.

You can read Ms. Crawford’s latest piece until the proverbial cows come home, and you won’t find a word about the huge capital investments – exceeding $1.5 trillion and counting – already incurred by private sector Internet providers in building out advanced broadband networks. Suffice it to say that the real-world economics of constructing and operating networks that require massive capital investments has never been her concern. But that’s a whole other story.

In Captive Audience, Susan Crawford argued passionately in 2013 that “America needs to move to a utility model” for the Internet. She’s still at it and unlikely ever to change.

Perhaps, like Ms. Crawford, you may believe that Internet providers should be government-controlled public utilities. That is certainly your prerogative. Please just don’t base that belief on the clearly erroneous assertion that nearly 75% of Americans have only one choice for high-speed data. That’s simply not true.