monopolies in internet access, WIRED AND WIRELESS

Susan CrawfordThe Big SqueezeJune 2011

• What next?– enormous up-front

costs– crushing economies

of scale and scope– steeply declining cost

curves in the last mile

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Why should you care?

• Bottleneck for the future of computing in America

• Without high speeds, low costs, and wide availability, new Facebooks/Googles will come from Berlin and Osaka – not from the US

• Incumbents have no Wall Street incentive to invest in core networks – and no competitive reason to do so

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Why should you care? (2)

• Tokbox – latency a real problem for real-time video

• Sensors – how will all that data be shipped around and visualized?

• AWS buying dark fiber – but “eyeball networks” still absolutely controlled

• One man’s “oppty for abuse” may be another’s opportunity to launch a new business

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High-speed Internet: Two stories• Wired:– Rich in urban areas are paying very high prices for high

wired speeds • John Malone, May 2011: “Cable is a monopoly now” in

data• Cable upgrade path much cheaper than telco• Largest growth area for cable is high-speed Internet

access services• Built-in conflict of interest – think Al Jazeera• Large operators never compete with one another

– Poor/rural aren’t adequately reached or access for many is unaffordable

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High-speed Internet: Wireless

• Wireless:– Same rich/poor divide (smartphones as dividing

line)– Not substitutable for wired access (think

videoconferencing)– Second-best (not what other govts plan for)– No price constraints imposed on VZ/ATT by

competition (usage-based billing the big move)– Compressed/prioritized/billed-for services

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International high-speed access• FCC, May 2011: “Mean actual download speeds

in some European and Asian cities are substantially higher than in comparably sized U.S. cities”

• 24.8 megabits per second (Mbps) in Paris • 35.8 Mbps in Seoul – versus 6.9 Mbps in San Francisco, 9.4 Mbps in

Chicago, and 9.9 Mbps in Phoenix• US prices substantially higher ($105 v. $40, eg)• Other countries have gigabit goals

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Takeaways

• Two natural monopolies: wired and wireless– high upfront costs– unbridgeable advantages of scale and scope– pricing power, cherry-picking, prioritizing

• Plenty of smart people in 1970s. Technology doesn’t emerge by magic.

• Pragmatic muddling-through is high-risk for US• Lack of vision/fear leading to fettered market

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Imagine national goals

• Gigabit symmetric to most of the country’s homes/businesses

• Separation between transport and content ownership

• Separation between wholesale and retail transport

• Support for core network upgrades and municipal networks

• Intervention to ensure unfettered competition9