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Captive Audience

Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age

Copyright Date: 2013
Published by: Yale University Press
Pages: 256
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  • Book Info
    Captive Audience
    Book Description:

    Ten years ago, the United States stood at the forefront of the Internet revolution. With some of the fastest speeds and lowest prices in the world for high-speed Internet access, the nation was poised to be the global leader in the new knowledge-based economy. Today that global competitive advantage has all but vanished because of a series of government decisions and resulting monopolies that have allowed dozens of countries, including Japan and South Korea, to pass us in both speed and price of broadband. This steady slide backward not only deprives consumers of vital services needed in a competitive employment and business market-it also threatens the economic future of the nation.

    This important book by leading telecommunications policy expert Susan Crawford explores why Americans are now paying much more but getting much less when it comes to high-speed Internet access. Using the 2011 merger between Comcast and NBC Universal as a lens, Crawford examines how we have created the biggest monopoly since the breakup of Standard Oil a century ago. In the clearest terms, this book explores how telecommunications monopolies have affected the daily lives of consumers and America's global economic standing.

    eISBN: 978-0-300-16737-5
    Subjects: Law, Business, History

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Introduction
    (pp. 1-18)

    On a gray day in february 2010, Brian Roberts sat facing the Senate Judiciary Committee’s Antitrust Subcommittee. The subcommittee was holding its first hearing on a proposed merger between two of the country’s most powerful media companies, the cable distribution giant Comcast and the entertainment conglomerate NBC Universal (NBCU). Roberts, the chief executive officer of Comcast, was a calm and friendly witness that day, as he testified before the branch of government that had created the antitrust laws in the first place. If the merger were approved by the Justice Department’s Antitrust Division and the Federal Communications Commission, Comcast’s future...

  4. 1 From Railroad to Telephone
    (pp. 19-34)

    At the beginning of the twentieth century, Theodore Roosevelt received complaints from all parts of the country about the depredations of the railroad moguls, a problem that had been decades in the making. Beginning in the 1820s, states and local communities had provided extensive direct aid to railway entrepreneurs in the form of land grants, loans, and outright cash donations hoping to attract routes that would serve their citizens and boost economic growth.¹ By the 1860s, states and localities had provided at least half the capital for the early railways.² But all this boosterism was unaccompanied by oversight. Many of...

  5. 2 Regulatory Pendulum: THE LONG TWILIGHT STRUGGLE
    (pp. 35-63)

    Cable started out as a disruptive business. The first cable systems were mom-and-pop operations consisting of wire strung from antennas on hillsides providing three or four channels of broadcast television to towns that were too remote to pick up a signal. In the 1950s, these so-called community antenna television systems, or CATVs, were springing up everywhere.¹ None of them was being regulated by the Federal Communications Commission, which had virtually no information about CATV. But in the summer of 1951 a lawyer running the Telephone Service System Facilities Branch of the Common Carrier Bureau of the FCC, E. Stratford Smith,...

  6. 3 A Family Company
    (pp. 64-85)

    Cable has won the race to sell services to Americans seeking high-speed Internet access. People are dropping DSL service delivered over metal phone lines in droves, as those services prove increasingly unable to compete with cable for the kind of speeds that households and businesses demand. And wireless Internet access does not and cannot keep up. Wireless is great for mobility—Americans love their smartphones—but no one starting a business would depend on the wireless data speeds provided by Verizon and AT&T. Wireless is a complementary service, and only people who have no other option (usually rural, minority, or...

    (pp. 86-109)

    At the february 2010 senate antitrust subcommittee hearing, Colleen Abdoulah, the energetic president and CEO of WOW!, one of the small cable operators that competed with Comcast in the Midwest, expressed her worries about Comcast and NBC Universal joining forces. “It concerns me because the combined entity will have powerful abilities and incentives to hurt a competitor like ourselves and increase our costs,” she said, her animated voice a scratchy contrast to Brian Roberts’s smooth impassivity.¹

    Like Comcast, WOW! is in the business of distributing video to its subscribers. But that’s where the similarities end. WOW! has superb customer service—...

  8. 5 Netflix, Dead or Alive
    (pp. 110-122)

    During the february 2010 senate antitrust subcommittee hearing, consumer advocate Andy Schwartzman testified emphatically about the risks a combined Comcast–NBC Universal would pose to online video. “They have every reason,” he said, “to withhold NBC programming from . . . online-only competitors.”¹ But Brian Roberts had a different view: of all video viewed online, “NBC has less than 1 percent; Comcast has less than half of 1 percent; Hulu [co-owned equally by NBC, ABC, and Fox at the time] has less than 4 percent; and Google has over 50 percent. It is a dynamic, rapidly changing market, but as...

  9. 6 The Peacock Disappears
    (pp. 123-140)

    When the antitrust policy firebrand Senator Herb Kohl (D-Wis.) launched the Senate Antitrust Subcommittee hearing on the Comcast merger in February 2010, he was clearly focused on the programming assets NBC Universal would contribute to the deal: “NBC Universal . . . includes the family of NBC broadcasting and cable networks, 25 local NBC and Telemundo stations in some of the nation’s largest cities, and the Universal Pictures Movie Studios. NBC has some of the most popular programs on television—from the Olympics, to NFL football, to NBC news programming, to entertainment programs ranging from ‘The Tonight Show’ to ‘The...

  10. 7 The Programming Battering Ram
    (pp. 141-155)

    Brian roberts’s favorite sport may be squash, but as a businessman he knows the real value in American television entertainment lies in controlling rights to football, basketball, and baseball games. If there was a guiding ethos to Comcast’s pursuit of NBC Universal, it was to gain control over more sports programming. Live sports is the one thing that people can get almost nowhere else—not on DVD, not online—the only options are pay-TV or a stadium seat. Leo Hindery, a thoughtful former cable guy who has played leadership roles in TCI, AT&T Broadband, and Liberty, thinks that the winners...

  11. 8 When Cable Met Wireless
    (pp. 156-169)

    By 2012 the world was going mobile, with major consequences for the data and video industries. People around the world love their handheld devices and prize mobility; in dozens of countries, there are more mobile subscriptions than there are people. For billions, a handheld device is always within reach. By 2011, Apple had logged 15 billion downloads of its apps; nearly 90 percent of all app downloads were of Apple-approved applications, and Apple had sold nearly 55 million iPads by the end of that year. By March 2012 the company was sitting on $100 billion in cash reserves.¹ Some analysts...

  12. 9 The Biggest Squeeze of All
    (pp. 170-187)

    As he opened the senate antitrust subcommittee hearing on the Comcast/NBC Universal merger in February 2010, Senator Herb Kohl was clearly worried: “We must pay particular attention,” he said, “to the effects of this merger on a new and promising form of competition—video programming on the Internet.”¹ Later in the proceedings, consumer advocate Andy Schwartzman chimed in: “NBC and Hulu have denied access to NBC programming to existing over-the-top video provider Roku. That is not hypothetical. That is a fact. So there is every reason to expect that the combined entity will have even greater reason to . ....

  13. 10 Comcast’s Marathon
    (pp. 188-207)

    The february 2010 hearing before the Senate Antitrust Subcommittee was more about politics than policy. The senators were there to put the witnesses through their paces, and they had the ability to raise the political stakes, but the merger would ultimately be reviewed by the Antitrust Division of the Department of Justice and the Federal Communications Commission. Opposition was strong from the public advocates’ side, but it was a vertical merger, and suing to block it would be an uphill battle for the Justice Department, given a string of cases in which vertical deals had received favorable reviews. Senator Herb...

  14. 11 The FCC Approves
    (pp. 208-222)

    The communications merger process at the Federal Communications Commission, one content-industry employee told me, is “just awful.”¹ It’s a game: the companies that plan to merge know that if they can get the regulators to spend enough time considering the deal, it will probably go through. There may be a brief struggle with underfunded public-interest groups, but if no other large companies oppose the deal, the feds’ investment of time in working with the merging parties, coupled with their interest in moving on to other items on their agenda, generally overcomes any private concerns about consolidation of market power. Just...

  15. 12 Aftermath
    (pp. 223-232)

    After its $13.8 billion purchase of 51 percent of NBC Universal in January 2011, Comcast moved professionally ahead.¹ A cheerleading town meeting for NBCU’s thirty thousand employees was sent via Webcast from theLate Night with Jimmy Fallonstudio at 30 Rockefeller Plaza, with Ralph Roberts, emcee Ryan Seacrest, andSaturday Night Live’sSeth Meyers onstage; during that event, according toDaily Variety, the ordinarily calm and reserved Steve Burke told the crowd that “whatever we do, we should be in it to win it. . . . We got big for a reason.” A new logo was revealed: no...

  16. 13 The AT&T–T-Mobile Deal
    (pp. 233-253)

    Federal regulators had barely recovered from their efforts to understand the cable industry when they were confronted with AT&T’s plan to merge with T-Mobile. AT&T and its grand strategist James Cicconi made David Cohen and Comcast look junior league. Imagine creating a spectrum crisis, getting the commander in chief to warn the nation about it, and then claiming to solve it—and America’s Internet access crisis—through a proposed merger. You had to admire these guys.

    There are many similarities between the AT&T–T-Mobile and Comcast-NBCU mergers. Both were designed to achieve greater scale and thus lower the carrier’s costs....

  17. 14 The Costly Gift
    (pp. 254-270)

    Terry huval is a large, friendly man with a lilting southern accent who plays Cajun fiddle tunes in his spare time. He is also the director of utilities in Lafayette, Louisiana, where the system is owned by the local government. “Our job is making sure we listen to our citizens,” he says. In recent years, the citizens of Lafayette have been asking for speedier Internet access.¹

    In 2004 the Lafayette utilities system decided to provide a fiber-to-the-home (FTTH) service. The new network, called LUS Fiber, would provide everyone in Lafayette with a very fast open Internet connection; the plan was...

  18. NOTES
    (pp. 271-343)
    (pp. 344-344)
  20. INDEX
    (pp. 345-360)