Crawford wrote a book entitled
, Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age. This is a difficult book to review. Not because of some of its
conclusions, which I am hearty agreement with based upon hands on
experience, but because the author all too often steps well outside her
area of expertise and opines on things which are just wrong.
Before
continuing there is one other observation that it appears that anyone
who disagrees with this author seems to get slammed with unhelpful
reviews in what appears to be a blatant attempt to push any negatives out of
view of a potential reader. I initially noticed this happened to this review within the first few hours.
Thus the reader should be advised as regards to the comments. Just an
observation. After a few months of positive reviews I have noticed the
dozens of negative hits coming fast and furious, and rather than commenting on
facts this is a way to push the facts off the table. Perhaps one should
examine the historical precedents for this technique and thus weigh the
votes. After an deliberate attack by the book's followers on Amazon I removed the book review and let it stand here.
However her conclusions are of merit despite, in my opinion, the confusion of her argument.
1.
"Cable Companies are bad". She has some very valid points here as she
demonstrates through the vehicle of the Comcast and NBC merger. She
argues that such a merger should never have happened. One could provide
substantial grounds for preventing it, most on antitrust issues, but
they were never truly approached by the current administration. The
reasons why is a tale unto itself.
2. "Fiber is the only way."
Here I argue she is clearly wrong and is so since she does not
understand the technology. Since this is a key point in her argument one
wonders why she did not at least reach out to find better support and
understanding.
3. "Government is the best market regulator." This
is an extreme position which has mixed, at best, results. In fact it
has been clear in the technology space that the Government is the worst
regulator.
Let me address the above points and relate them to the text itself:
1. Wireless has substantially more capacity than the author understands.
2.
The cost of fiber is dominated by local costs such as franchise
acquisition, costs of pole attachments, and the delay costs of laying
the fiber.
3. There exists a significant body of law the
antitrust laws which can and should be used to manage the industry not
just regulation.
4. Cable companies are monopolies for the most part and should be regulated as such.
Let me now provide some details contained within the book specifically supporting the above:
On
p 78 the author speaks of the abandonment by Verizon of fiber
deployment. Why did Verizon abandon its buildout? Frankly there are two.
First there were the exploding legal costs and delays in getting local
franchises. These were exasperated by the local cable companies but
facilitated by the local towns who often did not understand the
economics of competition, they just asked for more as they were advised
by the incumbent cable operators. Second, and this is a critical
element, was the success of wireless in expanding bandwidth efficiency.
Namely with only a 1 bps/Hz a decade earlier they now were at almost 10
bps/Hz and they could see ultimately even another order of magnitude
increase. This focus on wireless was most evident with the succession to
the CEO position with the wireless head taking the helm. Thus it was to
some degree a problem with the incumbent but it also was an
understanding that the wireless alternative was more than viable.
On
p 90 there is an interesting discussion regarding the "interstate
access charges". In fact these were the interconnect fees. The author
refers to the Prodigy effort, but such an effort was doomed from the
start by the massive overhead put on it by IBM, yet at the same time
they were facing the overhead of AT&T. The access charge issue is a
simple one. There were local phone companies and long distance ones, at
that time.
The local companies demanded and received a fee for
interconnecting to the local company. Even though the local companies
were separately paid by the customer, they were allowed by the FCC to
impose this charge to third parties such as an AOL or Prodigy.
Fortunately the FCC abandoned this stance. The author seems to have not
fully understood this issue.
On p 95 the author tries to outline
the history of on line capabilities using the AOL and Time Warner as an
example. In fact it began in 1978 with Warner Cable and the QUBE system.
This was the first two way cable system that allowed interaction and
online purchasing. This Warner, and perforce Time Warner, had been
developing this for almost two decades. In the early 1980s Warner Cable
developed the first "Electronic Shopping Mall" a two way video on demand
d system in a joint venture between Warner, Bank of America and GTE,
with Bell Atlantic and DEC participating. That effort collapsed when
Warner ran into financial difficulties. Chase Bank and others did the
same during the videotex period. The author appears to posit this sudden
even with Time Warner and AOL when in reality there had been many
trials, tests, and attempts.
On p 125 the author states that
Edison invented the telegraph. What of Morse? Perhaps some fact checking
of simple facts would help.
On p 129 and on the author refers to
Sen Franken so many times one wonders why? The book was not written by
Franken and based upon his public record he was both new and definitely
not an expert in regulatory issues and technology. This continual
referencing becomes a distraction.
On p 133 there is a discussion
of the new channels being cash cows. However there is a very serious
issue here. The cable companies bundle up packages of programs which
they also own and demand that anyone providing one provide the full
package and at premium prices. The consumer gets the full sports package
and pays for it no matter if they have ever seen a single sports event.
This is the major failing of the FCC and the FTC. Legally this is akin
to bundling, a practice clearly prohibited by the antitrust laws. But to
data the DoJ has never acted upon this, nor has the FTC.
On p
156 on the author delves into the cable versus wireless issue and here
she is well out of her depth. It is a pity because this area is a
significant one for possibilities. Let me first outline the wireless
argument and then return to the text:
1. Wireless capacity can be measured by the number of bits per second, bps; it can deliver to a user.
2.
The user demands bps depending on the application and the number of
them the user may have. For example HDTV had been a bid user of
bandwidth.
3. Now two things have occurred technically over the
past ten years. First bandwidth efficiency, measured in bps/HZ, has
increased from 1 bps/Hz to now 10 bps/Hz. Yet at the same time the data
rate required for video has collapsed, going from 100 Mbps down to 4
Mbps. Thus supply, that is bps/Hz, has exceeded the demand, such as
Mbps. Namely we can now easily use wireless for HDTV.
4. The
acquisition of bandwidth by the wireless companies has continued and now
provides almost universal service. Wireless does not require franchises
or pole attachments, and can be delivered in a short order.
5.
Wireless efficiency now at 10 bps/Hz is anticipated to increase to 100
bps/Hz. That means that a 20 MHz spectrum could provide a 2 Gbps channel
to a single user, and with multibeam antennas it can to so to a
plethora of users. This backs up directly to a competitor of fiber. And
at a tenth the cost!
On p 160 the author again reinforces her lack of technical understanding and capabilities. She states:
"When
people want to download a lot of data, say to make a video call, they
overwhelmingly opt for high speed wired connections."
Perhaps she has not been made aware of the iPad.
This distortion continues throughout this chapter. She does it again on p. 161,
On p 251 she states:
"Will wireless help America reach the president's goal of one gigabit to every community? No."
The answer is yes, and since the wireless companies have hundreds of MHz not the 20 above, they can well exceed that.
On
p 258 she describes the franchises being exclusive. In fact almost all
were no-exclusive. The problem was the cost of overbuild.
On p
263 she demands "For starters most Americans should have access to
reasonable priced 1-Gb symmetric." Now I assume she means 1 Gbps not 1
Gb. it is rate not totality, and she
On p 265 she begins her
argument of moving to a utility model. She states "To do this though
American needs to move to a utility model." Frankly the issue should be
one of bundling or tying in and the control is the existing antitrust
laws. The problem with the utility model is all too well known. The FCC
controlled and was controlled by AT&T before divestiture. The result
was very slow development of technology and capability. The utility
model sets prices based on a return on investment, namely the provider
is guaranteed a profit based on invested capital, and their costs are
covered no matter how inefficient. The result is a capital intensive and
bloated system. Better would be a real competitive market where the
barriers to entry are not enforced by the Government but the Government
enforces the antitrust laws already on the books.
On p 267 she
also makes statements regarding the costs of fiber. Based upon my
experience doing this her numbers are categorically wrong. The most
significant costs not included is the franchise acquisition costs, often
in excess of $1,000 per sub, plus the costs of pole attachments and the
delay costs associated with dealing with local regulators.
On p
267 she further states "The government standardizes, regulates, provides
tax subsidies, and puts price supports in place every day." One could
just imagine the Government standardizing wireless or broadband
structures. They have no technical depth and furthermore the politics
that would encompass such would be unimaginable. The Government should
just stand apart from any standards. Let the technical people deal with
that, and live or die by their decisions.
On p 269 she gets into
the Internet discussion. Again for some reason she uses Franken as a
foil but they are a distraction. The fact is that indeed ARPA,
specifically IPTO, developed the early Internet deployment in the 1970s.
In fact I ended up with the task of deploying the international
circuits for IPTO. Then through the early 1980s it somewhat slowed but
with the help of Kahn and Cerf the IETF was formed and began an open
source development of what could be called standards, albeit very
flexible one. Then the DOD abandoned it and spun off a separate network
and the result almost went nowhere but at the end of the 80s we saw such
academic networks such as NYSERNET evolve and the NREN come forth. Thus
the Internet history is a mixed bag of public and private parentage and
the bright line alluded to by the author is without merit.
The
book is worth reading but only, in my opinion, if one can work through
the mire of the author's statements for which she has no basis or those
which are just outright technically in error.
The classic book on
telephone change is the Coll book, Deal of the Century, outlining the
breakup of ATT. Coll is a brilliant writer and deals with facts he both
understands and can explain. The author of this book had such an
opportunity but she clearly went well beyond her ken and the result is
that between the facts and opinions are prognostications based on
fact-less presumptions. The issue she is focusing on is truly an
important issues and needs as much public understanding as possible. The
cable companies have secured for themselves a protected niche and have
further vertically integrated in a manner which later 19th century
antitrust minds would find abhorrent. This is ever so true in view of
the channels they control; information and communications.