Duopoly Carriers Aren’t Evil. They’re Public Policy.

Susan Crawford at Code for America

Susan Crawford at Code for America


Last week I attended a presentation by Susan Crawford, the author of Captive Audience, The Telecom Industry and Monopoly Power in the New Gilded Age. It was held, fittingly, at Code for America in San Francisco.

Ms. Crawford has a pragmatic outlook on the state of telecommunications in America, and I think she’s right on. In highlighting the outcomes of our largely duopoly telecom marketplace in America, in a recent NY Times article, she says “It isn’t evil, it’s just the way things work.”

The fact is, it’s not just the way things work, it is the way the appointed regulators at the FCC from 2001 to 2008 intended it to work. The goal during the chairmanships of Michael Powell and Kevin Martin was “robust, intermodal competition”, where Big Cable and Big Telco would complete, without the distraction of additional competition. In other words, duopoly. And, it’s what we got, by and large. (More on this later; Sonic is the exception.)

So, it’s not evil on the part of the two firms who dominate each regional market, it’s simply the outcome of our regulatory policy.

FCC Chairmain Powell’s BrandX and TRRO, and Chairman Martin’s Broadband Forbearance order together largely eliminated the potential for uniform nationwide competitive pressure on the two operators in each region. The goal was to limit competition in hopes of spurring investment by these two incumbents, with Martin saying about the Forbearance order:

“Promoting broadband deployment is one of the highest priorities of the FCC. To accomplish this goal, the Commission seeks to establish a policy environment that facilitates and encourages broadband investment, allowing market forces to deliver the benefits of broadband to consumers.” -FCC Chairman Kevin Martin

In other words, handing over a doupoly is supposed to encourage the two appointed competitors to duke it out.

I will concede that the policy has worked to some degree. Cable firms have rolled out DOCSIS 3.0 upgrades, and both AT&T and Verizon have made investments to catch up in video and increase broadband speeds. Even Centurylink has made some upgrades to their network.

In a recent article, Susan Crawford points out an op-ed by a Cable executive, titled “U.S. the leader on broadband“. Maybe by making it the headline, it becomes truth.

But, the fact is that we remain well below even the OECD median speed, and we are certainly no leader like Japan, Sweden or Norway. I suppose we can at least take solace that the offered broadband speeds in the US are not as bad as Mexico or Greece.

OECD Broadband Speeds Chart

OECD Broadband Speeds Chart

The policies which arguably helped drive these investments have come at a significant cost to consumers — Americans pay far more for their broadband and get less than citizens of most other developed nations. We pay more than three times as much per megabit as citizens of Sweden or Japan, and a whopping sixteen times as much as those in Korea. In fact, Americans pay more for broadband than residents of virtually all of the OECD countries. Only five countries do worse than US residents: Turkey, Chile, Poland, Greece and Mexico. We are in sad company when it comes to what we pay for broadband.

But, that’s not evil, that’s the outcome of our policy. Cost is the casualty when an intermodal duopoly is favored over full competition as a public policy goal.

OECD Broadband Prices Chart

OECD Broadband Prices Chart

The US median price per megabit is $5.42. Did we get enough performance in exchange for the creation of a virtual duopoly? Probably not, but that’s not evil on the part of our dominant broadband providers, that’s policy, and the way the marketplace was intended to work.

Fusion logo

Postscript:

But what about Sonic.net’s Fusion service?

Fusion is the sort of competition that the 1996 Telecom Act envisioned. And, we are still here despite the de-regulatory hit job by Powell and Martin. We are still here because the basic bones of the 1996 Telecom Act remain strong. While competitive access was curtailed by the intermodal duopoly agenda of the Bush-era FCC, competition is still possible under the Act, at least in metropolitan regions.

Sonic.net’s Fusion service offers competitive European style pricing and features, an “all-in-one” service delivering uncapped and unlimited broadband at up to 20Mbps, plus unlimited nationwide phone service together for one low price. When both the voice and data products are considered, it offers an advertised price about $1 per megabit, better than all but a few of the OECD nations, and less than one fifth of the US median price.

Fusion is available today to four million homes in ninety-six California cities around Los Angeles, the Bay Area and Sacramento. Join up. Then tell a friend. It’s a growing revolution.