Earlier this month, the House of Representatives passed the 21st Century Cures Act in a rare bi-partisan effort. The bill is meant to speed the development of lifesaving treatments, but critics warn it may also allow ineffective or even harmful drugs onto the market.
The U.S. has long been a world leader in technology innovation. Finding ways to profit from the Internet has been no exception. Think Amazon, Facebook and Google. But the next Google will not come from the U.S. Or so argues the author of a new book on the communications industry. She says we’ve allowed a handful of cable companies to become monopolies that stifle competition and innovation. Their monopoly status is also why Americans pay more money for worse Internet service than consumers in most other developed nations. Diane speaks with a communications policy expert about who controls Americans’ access to the Internet and why.
- Susan Crawford professor, Cardozo Law School; fellow at the Roosevelt Institute; member of New York City Mayor Michael Bloomberg's Advisory Council on Technology and Innovation.
Read An Excerpt
Excerpt from “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age” by Susan Crawford. Copyright 2013 by Susan Crawford. Reprinted here by permission of Yale University Press. All rights reserved.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. A decade ago, the U.S. had some of the fastest speeds and lowest prices for a high-speed internet service. Today, that competitive advantage has all but disappeared. A top telecom analyst has written a book explaining what went wrong. The book is titled "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." Author Susan Crawford joins me in the studio.
MS. DIANE REHMI'm sure many of you will have your own thoughts and comments. Give us a call 800-433-8850. Send us your email to email@example.com. Follow us on Facebook or Twitter. Good morning to you, thanks for being here.
MS. SUSAN CRAWFORDGood morning, thanks for having me.
REHMIndeed, you draw parallels in your book, "Captive Audience," between the railroad, oil and steel monopolies of earlier times and internet service providers today. Explain what you're seeing.
CRAWFORDWell, if you've got a commodity that everybody needs as an input into their businesses, like, take railroads for example, and it costs a lot to initially build that network so it's hard for someone else to enter and you can cooperate with your colleagues who are also providing that service and divide up markets, you've got a monopoly business that just produces gravy.
CRAWFORDWe've seen this happen with wired internet access in the United States and I'm hoping that this story is as viral as your last hour.
REHMTell me who the big cable companies are and roughly how much of the U.S. market they control.
CRAWFORDWell, here is what's happened. For wired internet access, it turns out to be much cheaper to upgrade your cable infrastructure than to dig up our old telephone phone lines and replace them with fiber. So the big players in the cable marketplace have done this. They've made these investments. They've upgraded what are de facto exclusive franchises in most of America's big cities. Those big companies are Comcast and Time Warner.
CRAWFORDComcast has about 22 million subscribers, Time Warner, fewer. Comcast is really the big player in this game. So if you're in Boston, San Francisco, Chicago, Philadelphia, really your only choice for wired high-speed internet access at home is Comcast.
REHMWhat about fiber optics?
CRAWFORDFiber optic is actually a better technology because it's symmetrical, which means that you can be creative and upload all kinds of things to the cloud as well as download. Cable is much more constrained on the uploads than fiber is.
CRAWFORDFiber is also future-proof. It, you know, we will have very good internet connections using fiber for the next 50 to 100 years. It's just expensive to install. Again, it's more expensive than cable so right now Verizon is our fiber player in America, for most of America.
CRAWFORDThey're serving about 6 million Americans and they've announced in 2010 that they're not going to be expanding their distribution of fiber. So even places like Baltimore and Alexandria, perfectly respectable American cities, were really hoping for Verizon service to show up and it's not going to and it's also very expensive. I'm a New Yorker. In New York City, Verizon's subscription is about $200 per month.
CRAWFORDAnd I spent last week in Seoul, South Korea, and there if you move into an apartment in Seoul, you have a choice of three different providers. They show up in a day because there's so much competition and they charge you $30 a month for TV, everything, all combined.
CRAWFORDKoreans, when they come to the United States, feel as if they're going on a rural vacation. Life slows down because connectivity is so bad here. They actually laugh at us for how expensive and how slow it is.
REHMYou know, it's fascinating because you're talking monopoly power and yet wasn't the 1996 Telecommunications Act supposed to prevent that kind of monopolistic takeover?
CRAWFORDWell, we had a dream back in the time of the 1996 Act and, by the way, internet is only mentioned once in that Act. We had a dream that cable would compete with phone companies, which would also compete with wireless and maybe some new technologies would show up.
CRAWFORDWe really thought they would all be battling it out and that, as a result, consumers would be protected. Somehow, magically lots of systems would be built across the country and we'd have the cheap internet access we thought was necessary.
CRAWFORDFast forward to today, it turns out that where consolidation is possible, competition is impossible. So just last year, Verizon and Comcast actually made a deal. It's kind of a federally-blessed non-compete agreement. So Verizon and Comcast and Time Warner are all going to be reselling each other's services.
CRAWFORDSo these are hardly fierce competitors when they finally found a way to cooperate, just as the railroad barons and Standard Oil holding companies did back in the beginning of the 20th century.
REHMAnd what was the FCC's role in all of this?
CRAWFORDWell, the FCC in the early 2000s did, I believe, think that competition was going to do the job, that new forms of technology would show up and that regulation was kind of 19th century, old fashioned. But it turns out that these old ideas about the importance of a utility function for communications haven't gone out of style and that the market realities of the expense of building this infrastructure and then the difficulty of competition emerging have remained.
CRAWFORDSo in the telephone world, we actually require telephone companies to allow internet service providers to connect to their lines. That's what allowed the internet to take off in the mid-'90s. We gave up on that.
CRAWFORDThe FCC dropped those rules beginning in the early 2000s. And since then, the whole thing has been completely deregulated.
REHMAnd deregulation has meant that nobody's watching what's happening?
CRAWFORDThat's right. We've got the worst of both worlds, both no competition that might force people to upgrade and worry about customer service and no cop on the beat, no oversight that would keep prices in check, that would make sure that.
CRAWFORDRemember that storm in July 2012, the derecho here in the Washington area? We find out today that many 911 services went down during that storm because those companies are under no obligation to keep that stuff going.
REHMSusan Crawford is professor at Cardozo Law School, a fellow at the Roosevelt Institute, a member of New York City Mayor Michael Bloomberg's Advisory Council on Technology and Innovation. She served as President Obama's special assistant for science, technology and innovation policy in 2009.
REHMDo join us 800-433-8850. What about this merger between Comcast and NBC Universal? How does that affect the whole picture?
CRAWFORDJohn Malone, who is known as the cable cowboy for when he used to own a lot of cable systems in the United States, had a great quote when this merger was announced. He said if Comcast can't rape and pillage, it's their problem and, in fact, since the merger was approved in January 2011, Comcast stock has gone up by two-thirds.
CRAWFORDComcast is now $100 billion-company. They have a higher market cap than McDonald's or Home Depot. They've been able to use programming, one of the media conglomerates of NBCU as an additional barrier to entry for any possible competition.
REHMBecause they've got it all together?
CRAWFORDRight, they've got not only the stuff coming through the pipe, the oil, if you will, but also the distribution network that reaches millions of American homes. And in many cities it's effectively an exclusive relationship. You don't have a choice.
REHMYou know, you talk in the book about the fact that initially there was some outlay of cash, but now it's just perfectly all profit.
CRAWFORDWell, that's right, they're harvesting. Their revenues are enormous and only 14 percent of those revenues are being used for, what's called capital expenditure, the cost involved in improving their infrastructure.
CRAWFORDNobody is pressuring Comcast to install fiber which is the world-class kind of network that many other developed nations have. So that's what Hong Kong and Seoul and Japan, that's what they're all doing.
REHMWho could pressure them?
CRAWFORDWell, right now, only Verizon and Verizon is trying to please Wall Street. These are all very rational decisions. These are private companies. They want to keep their stock price up too and they're spinning off enormous dividends so the essential public problem is when the private incentives of these giant companies don't line up with our public need to make sure that everybody has high-speed internet access at a reasonable cost, we're in trouble.
CRAWFORDSo for the first generation of internet innovation, absolutely the U.S. was in the lead. It's a pressing question whether the U.S. will have any leadership role in this second generation.
CRAWFORDIt's clear that in Seoul they're thinking about things like ultra-high-speed TV which will have 16 times the resolution of existing hi-def TV. So imagine what that will allow huge screens on the sides of buildings, God knows what, enormous capacity. That can only be handled with very big pipes that the United States doesn't have.
CRAWFORDSo Seoul and Tokyo and China have big fiber plans. They will be the places where the new things emerge, that are sold to these enormous markets and not the U.S.
REHMSusan Crawford, her new book is titled "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." When we come back, we'll talk further, take your calls, your comments. I look forward to speaking with you.
REHMAnd Susan Crawford, as you can imagine, because of the richness of your book, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." We already have many emails and the phone lines are filled. Here's the first email, the number have come in this way. The email reads: Many of us that keep up with this topic have been excited at the prospect of Google Fiber beginning in Kansas City had amazing prices and possibly spreading in the next five years. Please comment on Google's move here, what it might mean for Internet users across the country.
CRAWFORDGoogle's move is amazing. And it should embarrass the rest of the country that Kansas City is getting this kind of affordance and the rest of the country isn't. They are offering for $70 a month. A submetric gigabit connection. That's a thousand times faster than what you might get, say, on your wireless Smartphone. It's extraordinarily fast. So startups are moving to Kansas City. It's a real story of economic growth and joy, frankly, for the people there.
REHMSo why isn't it moving the rest of the country?
CRAWFORDWell, the incumbents in this area have made it either impossible or very difficult in 19 states for cities to do this for themselves. They found ways to get the state legislature to pass laws making it really impossible for cities. So Google can only offer this kind of service where the city has the power to do it.
REHMBut why wouldn't state legislatures want this?
CRAWFORDThey might be confused. And the incumbents have enormous power at the statehouse level. But here's...
REHMYou're talking about the incumbent.
REHMYou're talking about Comcast.
CRAWFORDI'm talking about Comcast, Time Warner and AT&T and Verizon. Something your listeners should understand is that these companies have divided the market. You may think of AT&T and Verizon as a telephone company, they are -- actually, two-thirds of their revenues or more come from wireless. Wireless and the wire connections are two separate marketplaces.
CRAWFORDSo Comcast and Time Warner in the summer of love divided up cities in America and clustered their systems. And AT&T and Verizon are focusing almost wholly, almost completely on wireless. But all of these actors are very effective at the state level in passing laws, making this very difficult. So that's one point. Second point, we shouldn't have to wait for a private company, a single private company called Google to take care of what is essentially a public service.
CRAWFORDA hundred years ago, we made a commitment that every American will have a phone at a reasonable price. It is essential to human thriving to our ability to function as a nation to have all of us with an equally fast connection. And right now, only 43 percent of people with incomes under $25,000 in America have a home broadband connection.
REHMSo it's going to be the haves and the have nots.
CRAWFORDWe're creating two Americas. One with this ability to use a very fast wired connection to apply for a job, you know, start a new business, run a video conference from your home. And the other sort of entertaining itself with social network updates, but not able to do those kinds of things using a home broadband wired connection.
REHMYou know, it's interesting. There are a lot of people out there who would say, why is speed so important? Why do we have to go faster and faster and faster?
CRAWFORDFirst of all, we're Americans, so we invent things that go fast. We like faster cars. But it's not just that. This is about full bandwidth communications. I can see you here, Diane. It makes a huge difference that we're in the same room. If you have more information flowing back and forth, you're closer to the objects of your communication. You can actually have a telepresence call where people feel that they're right there.
CRAWFORDYou can actually upload and download a high quality video. And that's not just a movie, it could be a business phone call that you're running with people appearing to be in the same place. That's extraordinarily important for new kinds of businesses, new ways of making a living. And that's where economic growth comes from, new ideas. New ways of thriving as human beings.
REHMYou know, one of the new ideas that we are considering for this very program is video streaming of the radio program. Now, in order to video stream, because of connections we currently have, I would assume that the picture would be kind of fuzzy, wouldn't you?
CRAWFORDIt would probably be very frustrating for your watchers at that point. So in Seoul last week, it was almost hallucinatory. I was in the subway, everyone around me was watching full motion video on their handheld devices.
REHMFull motion video.
CRAWFORDTV, absolutely. It's unthinkable in America today and we can't even imagine what this is going to make possible, but yet we're so far off the track at this point. Thirteenth among the developed nations for speed. One of the highest prices in the world for broadband access is here in America, and yet we're the nation that invented the Internet.
REHMSo, you believe the answer is regulation?
CRAWFORDI believe the answer, first, is public awareness. The telecom companies, Time Warner and Comcast, AT&T and Verizon are able to make such headway because this is almost an invisible issue. This is like banking or it's like what global warming used to be. Without people caring about this and then electing people on the basis that they are going to do something about this situation, it's not going to change.
REHMAnd speaking of elections. You did work for President Obama for a time. What was the kind of reception your ideas have?
CRAWFORDIt was a great honor to be allowed to come in to this new administration. You know, Diane, what's amazing is that when this government starts, there is no government and there are people of enormous goodwill doing the very best they can under very strained circumstances. You got to remember, 2009, the country was falling into an abyss. And the banks were falling apart and the cars are falling apart.
CRAWFORDSo tech policy was not at the very top of the administration's list of issues. I think it will be in the second administration, it has to be, because this is where America's competitive advantage comes in.
REHMAnd people are talking about competition. People are talking about how our schools, for example, seem to be slowing down in terms of producing innovation, producing wonderful ideas for the future. So something's got to happen.
CRAWFORDYeah. We shouldn't be too sad about America. There's a wonderful spirit in our country. We can accomplish all kinds of things, but we have to have a shared sense of purpose. That it's important for all Americans to get a great education, not just those who can pay to go to Exeter. It's important for all Americans to communicate.
REHMSo you said the first step has to be public awareness. But is regulation the next step?
CRAWFORDIt always has been for these industries, because it really doesn't make sense to have more than one wire into our homes. It is a very expensive thing to install. Once it's there, it has to be kept up to the highest level of maintenance. It has to allow for lots of competition at the retail level across this wholesale facility. And it has to be available to consumers at a reasonable cost.
CRAWFORDThat kind of result isn't produced by the marketplace. It doesn't happen by magic because, again, when you can divide markets and cooperate, you're not going to come up with the best solution for consumers.
REHMSo with so much political sentiment against the government doing any kind of regulation, how optimistic are you?
CRAWFORDWell, people may say that about government, but look at Sandy. Huge storm. The first set of complaints is, where's the government? Where's the government? How are they going to help us? This is this essential kind of function. As long -- we care about public safety, we care about communication. We care about giving our citizens dignity. This and people still want to drive in highways, as far as I could tell.
CRAWFORDAll of these are only things that can be done by collective action in a democracy. And other countries have made this decision and they're watching us to see how we fair.
REHMSo you've written this book. Your book was featured in Time magazine, you're here on this program, going elsewhere. How should ordinary Americans get something done?
CRAWFORDThe first step is to vote on this basis. Merely complaining to ourselves that there is a problem isn't going to change anything. So in each congressional district, people should be asking hard actions at debates. People should be helping their city figure out how to do this, giving their mayor political cover. Right now, there's no upside for an elected official to take a stand on this issue because they will lose campaign contributions and they'll be driven out of office.
CRAWFORDAT&T has given way more money than Goldman Sachs to politics over the last 20 years. They are enormously politically connected companies. So helping your elected representatives to get a handle on this, driving for facts, that's what the public can do.
REHMAll right, we're going to open the phones and hear what they'd like to do. First to Kevin in Tulsa, OK. Good morning, you're on the air.
KEVINGood morning, Diane. I run an information technology support firm, a regional one. And it's really sad because I only have two core options to offer my customers. They are very expensive, they're not real fast and, in many cases, when it's a rural area, if I'm luck, I have one and it's not always a good one. There is a third usually, which might be cellular, but that's immensely expensive.
KEVINI've seen over the years -- I've been in for about 25 years -- and I've seen speeds not really increase much and capacity not increase much. As the you all had mentioned around the country and around the world where I've seen, they're just moving leaps and bounds around us and I don't know how else to help my customers because the infrastructure is just not being built up as our costs rise. I just don't see it going back in to improve the quality and option.
CRAWFORDWell, thanks so much for that comment. Fully a third of Americans don't have this connection at home and 19 million Americans can't get it at any cost. So we've got this tremendous gap, particularly in rural areas. Now electricity used to be thought of as a luxury a hundred years ago. And only enormous private companies hold it. And it took great political effort by FDR and others to change it into something that we treat as a utility.
CRAWFORDWe take that for granted to day. We've got to make the same step with telecommunications.
REHMAnd you're listening to "The Diane Rehm Show." Let's go now to Florence, SC. Hi there, Mike.
MIKEHey, how you doing?
MIKEHey, I just want to comment. You know, I've read the book and my main comment here is that she, Ms. Crawford, talks like a pessimistic, technological Eeyore. It will never happen. The market is static. It's broken. But even by the FCC standards, choice abounds. And wireless is a big part of that. The FCC doesn't really think so and certainly Ms. Crawford doesn't think so.
MIKEBut this is a dynamic that will shape the so-called dominance of the dominant players right now. It will evolve and it will change the market. That or another technology to give us the choice that we need. It's improving and I think she short changes the market, which I believe is a pretty good thing.
CRAWFORDMonopolies always say, look, it's just about to change. Everything's going to be fine. Ninety-four percent plus of people subscribing to wired broadband today are going for their local cable monopoly. And it's true that wireless Smartphone's are very popular, but more than 83 percent of people who have Smartphone's also have a wired connection at home. These are not substitutable objects.
CRAWFORDThey are different marketplaces. We love wireless for its mobility. We love it for its ease of use. But you can't apply for a job or it's very difficult to apply for a job using a wireless device. You would never want to depend on it for launching your business or getting a good education because the capacity, because of the laws of physics, not because the FCC, is just not there. Brian Roberts, the CEO of Comcast, told investors in 2011 that he had just one competitor.
CRAWFORDThat competitor is Verizon. He's not competing with Verizon FiOS. He's not competing with wireless. He's only competing with Fiber. And we don't have it for most of the United States. In only 15 percent of Comcast territory does Verizon have any installations.
MIKEYeah. I'd like to add, I mean, it's just not there, I think, it's belied by the fact that we have LTE. These services that are going, you know, into far flung parts of America, serving virtually all of America and these are evolving services. I mean, I started with a 300 Baud modem. And now, I'm speaking to you on a Smartphone, LTE, in Florence, rural Florence, SC.
MIKECome on. I mean, you got to give it, it's going to evolve. It's not static, as you surmise. It's changing and dynamic. And this technology, who'd want to be wired when they can do it mobile?
CRAWFORDSo, back to Seoul. No one is Seoul relies on a Smartphone. They have both home connections and a Smartphone. And they think of the United States as being five years behind them in technology.
REHMAll right. Thanks for calling, Mike. Let's go to Cape May, NJ. Good morning, Drew.
DREWGood morning. My question is -- and it goes with the wireless. More and more people are using their wireless phones as their main phone. And with all the -- I remember when they -- this was a digital TV, all these wireless network supposed to be opening up. Why are we still behind the times as far as like being double dipped when you get charged for an incoming call and an outgoing call in other parts of the world?
DREWLike I know in Ireland, people have wireless phone, you don't get charged on both ends of the phone call.
CRAWFORDIt's great you asked that. So wireless is extraordinarily expensive in the United States. In Europe, you can get a gigabyte of data, can you imagine, for an unlimited voice and text for about $12 a month. Here, Verizon for a similar service would charge $90 a month. So it's because this guys are so powerful, they can create scarcity and they don't have to compete. So they can just keep raising prices.
REHMAnd you think that's going to continue?
CRAWFORDI don't see any trend going the other direction until the public gets really exercised about this.
REHMSusan Crawford, her new book is titled, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." After a short break, more of your calls. I look forward to hearing from you.
REHMAnd welcome back. If you've just joined us, Susan Crawford is with me. She's a professor at the Cardozo Law School and a fellow at the Roosevelt Institute. She's a member of the New York City Mayor Michael Bloomberg's Advisory Council on Technology and Innovation. She is here because she's written a brand new book. It's titled, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." Let's go to Ft. Worth, Texas and to Amanda. Good morning.
AMANDAGood morning, Diane, what a great topic and what a great book title. I am really looking forward to reading it. I just wanted to refute the previous caller who said why go wired when you go wireless? I completely disagree. I am a college student at Texas Wesleyan. And I have a wireless device and home computer.
AMANDAAnd I guess another comment I just want to make and I'll take it off the air is that we absolutely do not have a data plan on our cell phone. So everything's kind of disconnected in that way. We have our cell phones that just can text and then, you know, we can communicate because the data plan is really cost prohibitive for us. And I just wanted to throw that out there because you were saying that it's very expensive in America. So...
CRAWFORDYeah. It's a great point. And people will give up on food and squeeze their clothing allowance because you really can't live without this connection to the world. And it's getting more and more expensive. So electricity, again, used to be the same kind of thing. And now when you go home and have that lovely moment of turning on an electrical switch and seeing that lambent light that took a political battle. And there was a point when FDR came into office when 90 percent of farmers did not have electricity while rich kids in New York City were playing with electric toys. We decided, as a country, that that was a problem. And we had the will and the political heft to do something about it.
REHMAnd here's a follow up to that point, Chad in Chapel Hill, N.C. you're on the air.
CHADHi. Thank you for having me. Yeah, I just wanted to say I think we need to look at this issue of access to communication tools as a social justice issue. You know, here in North Carolina we had a bill that deregulated cable. And that basically allowed AT&T to build out its new faster networks into just rich neighborhoods and then basically pull out of the rest of the market.
CHADMeanwhile, the cable company unregulated got to do whatever it wanted, even pull out of poorer neighborhoods or serve them in poorer ways. And this is just as important as having access to water or electricity or, you know, the telephone. And we need to dispel this myth to politicians that competition is possible in this marketplace because we really only have five, you know, huge corporations that manage this infrastructure.
CRAWFORDYeah. It's a good point.
REHMAll right. To Cortland, New York, good morning, Susan, hi there.
SUSANGood morning, Diane. Thank you for having my call.
SUSANAnd I really appreciate your guest. I haven't read the book yet, but I'm really interested to know. I'm curious you made a comment earlier that you didn't foresee anything changing until the public did something about it. And I wonder if you have any thoughts on that because as many people have said, people are becoming dependent on these cell phone plans now and there are very few options where I live.
SUSANYou know, people hear New York and they think metropolitan. But I'm in rural upstate New York. And there's really minor options, you know, very few as far as what the coverage is going to be. I'm going to be out, you know, in the far reaches of this county and not be able to get any reception if I don't have one of the two major carriers.
CRAWFORDWell, for the cable companies and their brethren, Verizon and AT&T, it's very useful for them that this issue is not on their radar screen. Oh, I'm sorry. It's very useful for them that nobody is thinking about this issue as a social policy issue. And so they deliberately try to ensure that every price increase is, sort of, incremental. People never get angry enough, you know. And there are no real choices. But it all seems, sort of, shiny. There is a movement in America that exists that is mad about this. It just has to see itself. It has to understand that there's power in people to elect regulators to office to make sure that this issue is taken on with real gusto.
REHMHere's an interesting email from Lynn in Charlottesville, Va., a university community. She says, "I had a special rate for Comcast internet for one year. Then the price increased to $100 a month. I had to cancel my service. I tried to get another broadband service, but the come-on prices advertised all require you to bundle telephone, TV, et cetera. And then the price soars. She says I'm using a high-speed dial up service to email you. It took me seven minutes...
REHM...to sign on and get to my email account. That was faster than usual. This costs me $15 a month. I can no longer watch or upload news, instructional videos, educational videos. My income is less than $900 a month. The poor don't count in this society."
CRAWFORDThese are not evil companies. But it is in their interest to gouge the rich and leave the poor out because that's where they're going to make the highest revenues. That's where they're going to be able to spin off these dividends and keep their stock price high. The problem is that that market doesn't fit with what the country needs as a matter of its own competitiveness.
CRAWFORDImagine all the good ideas spread throughout America that can't come to fruition, that don't, you know, create new businesses. That don't allow people to communicate with the richness that they deserve. It's just like not allowing people to get a basic education or not giving them clean water. It's just a utility.
REHMTo Baltimore, Md., hi there, Jay.
JAYHi, thank you for taking my call.
JAYAnd I have this question about a satellite internet connection. How do you compare this speed with fiber optic and wired connection? And what is the future? And if they provide satellite internet connection spread over all of America (unintelligible) housing market also the prices maybe go down and people will move out to rural area and this will be -- have a more far reaching effect?
CRAWFORDWell, here's the problem with satellite. It's a long way up and it's a long way down. So communications are extraordinarily expensive and very slow that run through satellite connections. As an absolute last resort if you can't get access to a wired of course you're going to use satellite. But it would never be a chosen form of internet access for anybody who had another wired alternative. So the good news about satellite is that it has a huge footprint, covers the entire country. Bad news is it creates enormous friction and expense for communications.
REHMTell us a little about Comcast, how it got started.
CRAWFORDIt's a great American success story. These guys started really -- Ralph Roberts, Brian Roberts' father, went to Mississippi. In the early '60s he'd been a belt and suspenders guy, literally. He sold men's accessories. And he had some extra cash left over when he sold that business. He went down to Mississippi and bought an exclusive franchise in this brand new business, the cable business. He'd been in the Muzak business, or his cousin had, I think.
CRAWFORDAnd these are great businesses because once you make your initial investment it's like -- he called it chicken in the grocery store. Just -- thing -- money just keeps rolling in. So Ralph Roberts really liked the cable business from the beginning. And he was a really smart, scrappy guy. He's now over 90 years old, still involved in the business. And the family's very proud of him. He began -- after that initial investment he never put in anymore of his own money. And he just used the profits from the existing cable systems to buy more cable systems and cluster them.
CRAWFORDHere's the other thing. Comcast was always very careful to market to the areas that were the best off. And there's a famous story about them in Meridian, Mississippi. They were obligated by the town fathers to make cable service available to anybody who asks. But they made it very difficult to find out about the service. And marketed with clean cut college kids to favorable blocks and were able to pay off the bond because they said, well, we sold it to everyone who asked. But not everybody knew. And that is kind of a classic Comcast story, a way of using an exclusive franchise to get the best par to the market.
CRAWFORDNow they no longer -- I would never want to accuse Comcast of redlining at all. They cover huge territories, but they're very careful to get that exclusive franchise. They were only outlawed in 1992, exclusive franchises. Between the '60s and the '90s Comcast did a lot of rolling up of systems. And so they built themselves into a $100 billion company. And they're one of the most stable, you know, highest ranking stocks around. It's a great company.
CRAWFORDSo that's their story. They've done a lot of rebranding to call themselves Xfinity, which sounds, sort of, futuristic and pleasant. But actually it is still Comcast.
REHMIt's still Comcast.
CRAWFORDAnd it's still Comcast and they're -- they now control NBCU, which gives them a huge sledgehammer, which is sports. They have a lot of very valuable sports content and, especially, in Philadelphia they didn't allow the satellite company, that might otherwise compete with them for video, to have access to that local sports content. They are a bundle of richness Comcast. Brian Roberts last year made $27 million. And he also controls the voting stock in Comcast. This is another gilded age comparison. These individuals wield these companies. And so his decisions are really the decisions of Comcast.
REHMDo you -- have you had an opportunity to talk with Brian Roberts?
CRAWFORDNo. I did try very hard to talk to David Cohen, who I profile in the book. He's really the genius, the, sort of, political (word?) behind Comcast. And suddenly I got a call returned from David Cohen's office. He said -- his assistant said David will have lunch with you on X date. And I accepted with glee. It turns out his assistant was writing to the Susan Crawford who works for AT&T. It was a mistake. And so they backed away. They withdrew.
REHMSo you never had an opportunity...
REHM...to speak with anyone.
REHMBut what kinds of reactions have you had from them?
CRAWFORDThese guys are very well messaged and controlled. They're not going to say anything about this until they're forced to.
REHMSo what you see and hear, perhaps, are representatives around the country.
CRAWFORDYeah. They're very well politically connected. And so they've got lots of proxies who can speak for them. And lots of people who are very grateful for the contributions Comcast has made over the years to their nonprofit functions. You know, they -- they really are plugged in a way that's undeniable. So the President is meeting with people about violence, I think, today or tomorrow, Politico reported. Two of the people meeting with him are David Cohen and Brian Roberts. So they're -- and Brian was named to the American Council on Competitiveness. They're very well plugged in.
CRAWFORDSo, again, there's no upside for political officials to do anything about this. This is not about corruption per se at all. It's about a mindset that great private companies are what we admire. And we do. But when it comes to essential public needs like electricity, gas, water, all of those things, we treat as utilities. For some reason, we treat communications like a first run movie and it's really not.
REHMAnd you're listening to "The Diane Rehm Show." Let's go now to Hot Springs, Ark., good morning, Mike.
MIKEOh, hello. Great show. One of the things I wanted to commented on was that I -- back in 2010 I had lost my job. And we had to cut back on a lot of things. And the first thing, obviously, we did was the cable and the internet. But it was very quickly realized that how -- how much I needed the internet because nearly every job out there has to apply online nowadays.
MIKEAnd it's getting to the point where I was listening to NPR not too long ago someone was talking -- a show was talking about QR codes that link to videos of yourself. And I mean, we tend to demonize the poor in this country nowadays and, you know, we talk about how it's a luxury to have the internet or something like that. But it's such a needed tool just to find a job now. And I just -- I hope that we come to some point where it is readily available for everyone at a good price.
REHMI'm glad you mentioned that, Mike.
CRAWFORDSo very important topic that public libraries are taking up a lot of the slack here and they're completely over burdened. They're just -- many people today see a library as a place for internet access because when they need to apply for a job, they need to find out about how to do their homework, the place they have to go is the public library. Libraries are stuck.
CRAWFORDAnd they're doing their best, but they have to limit those patrons to just a little bit of time on those machines. So it's like your air supply if you were a scuba diver. I mean, you get this little amount of time and then they're going to have to chase you away. And the idea that Americans would have to depend on this third civic space of the public library as their only source for this necessity seems unbelievable to me.
REHMSo you're here in Washington. What are you going to do while you're here?
CRAWFORDWell, I'm speaking to as many journalists as I can. I'm delighted to be here with you today. And I'll be back every week, actually, after my classes are over in New York to talk to people about this.
REHMWhat about Capitol Hill?
CRAWFORDWell, next week I'll be doing a briefing for senate staff on Verizon's argument that it's a first amendment speaker just like the New York Times, even if it's just carrying information from point A to point B. They are making the claim in the D.C. circuit that they are -- they get speech rights. They get our speech rights. It's such a cynical and destructive argument because what it would do -- it's like Citizens United. What it would do is make any regulation of their broadband operations unconstitutional. There goes consumer protection. There goes anti-trust all out the window.
REHMSo what kind of reception do you think you'll get on Capitol Hill?
CRAWFORDI think people are eager for knowledge about this area. The asymmetry of information here is stunning. They hear a lot from lobbyists coming in who can blanket the Hill. I'm outmanned, outwomaned, in every possible way. But I've got a lot of facts on my side that can't be changed. And I'm hopeful -- I'm more than hopeful that we'll have a positive reception.
REHMSusan Crawford her new book is titled, "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age." Congratulations on your book, good luck to you.
CRAWFORDThank you so much, Diane.
REHMThank you and thanks for listening all. I'm Diane Rehm.
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