The Charlatan’s Cartels

OK, this is almost too easy to bother with, but I can’t help myself. Last week a former journalist with a book to sell wrote an Op-Ed for the New York Times touting the “woe is us, our network sucks” premise of said book. Because it neatly encapsulates the nonsensical thinking of so many people, it’s worth comparing it to the facts to see just how poorly it stacks up. So in the finest traditions of blogging, here we go with a “fisking” of David Cay Johnston’s “Bad Connections” and his related book,”The Fine Print: How Big companies Use “Plain English” to Rob You Blind,” not to be confused with his previous classic, “Temples of Chance: How America Inc. Bought Out Murder Inc. to Win Control of the Casino Business” on the mafia.

He begins his New York Times Op-Ed with the following pearl:

SINCE 1974, when the Justice Department sued to break up the Ma Bell phone monopoly, Americans have been told that competition in telecommunications would produce innovation, better service and lower prices.

What we’ve witnessed instead is low-quality service and prices that are higher than a truly competitive market would bring.

The average price of telephone service in 1974 was $19.95, which comes to $93.61 in today’s dollars. Basic telephone service from AT&T is now $21 per month with unlimited local calling, which would be $4.48 in 1974 dollars. Lower prices? You betcha.

Do we also have more innovation? Well, gee, how about DSL, DOCSIS, and cellular? Does the Internet, which was invented in roughly the 1974-1980 time span, count? What do we make of the millions of mobile apps? Innovation, check.

And higher quality? Hmm…Skype and Facetime video calling vs. POTS? Not always perfect, but we didn’t have picture phones in 1974, did we?

The $93.61 in today’s dollars that basic phone service cost in 1974 will buy you a smartphone package today that includes an iPhone or Android phone, local calling as well as long distance, text messaging, e-mail, LTE broadband access to the whole Internet, access to an app store, and a GPS navigator from any of the big four cellular providers, almost exactly. Is this something to complain about?

After a brief fling with competition, ownership has reconcentrated into a stodgy duopoly of Bell Twins — AT&T and Verizon. Now, thanks to new government rules, each in effect has become the leader of its own cartel.

Century Link is also still in business, so the original group of seven “Baby Bells” has been reduced to three, each operating in its own territory. At the same time, cable companies have entered the telephone business, so there is side-by-side competition in the vast majority of moderately and highly populated areas of the U. S. And while we have furious competition for both landline telephone and cable TV services, we also have the satellite companies in the TV business and all the cellular companies in the voice business. This obviously isn’t your grandpa’s “cartel.”

The AT&T-DirectTV [sic] and Verizon-Bright House-Cox-Comcast-TimeWarner [sic] behemoths market what are known as “quad plays”: the phone companies sell mobile services jointly with the “triple play” of Internet, telephone and television connections, which are often provided by supposedly competing cable and satellite companies. And because AT&T’s and Verizon’s own land-based [sic] services operate mostly in discrete geographic markets, each cartel rules its domain as a near monopoly.

Gulp, there’s that “c” word again, I’m sensing a pattern, so I have to ask if the facts actually, you know, fit it. AT&T has a deal with DirecTV that allows them to bundle DirecTV television service in some areas, mainly places where the telephone network runs on wires that are too long to support VDSL+, the technology that AT&T uses to deliver video programming to its “Uverse” triple play customers. So AT&T competes with DirecTV in some markets, and bundles it in others. What self-respecting cartel would do that?

On the other side, some but not all of the cable companies have joined forces with Verizon to co-market quad play bundles alright, but consumers are free to shop for the best deals they can find by freely mixing services as they see fit. The cable companies are happy to sell you an Internet service that you can mix with satellite TV and a mobile phone from AT&T, for example. If you go that route, you may pay more than you paid in 1974, and you may pay less, but in every case you’ll get a vastly more comprehensive service than the POTS plan and separate cable service that were your only options in the “good old days.”

The result of having such sweeping control of the communications terrain, naturally, is that there is little incentive for either player to lower prices, make improvements to service or significantly invest in new technologies and infrastructure. And that, in turn, leaves American consumers with a major disadvantage compared with their counterparts in the rest of the world.

So how do we explain AT&T’s announcement that it’s increasing its investment in infrastructure by $14B, or Sprint’s $8B increase, or lowly T-Mobile’s $4B bump? These companies are motivated to catch up with Verizon, a company that has invested in fiber to the home as well as in a massive LTE network nationwide. We’re also left wondering why the United States leads the world in the deployment of the next-generation mobile broadband technology, LTE.

On average, for instance, a triple-play package that bundles Internet, telephone and television sells for $160 a month with taxes. In France the equivalent costs just $38. For that low price the French also get long distance to 70 foreign countries, not merely one; worldwide television, not just domestic; and an Internet that’s 20 times faster uploading data and 10 times faster downloading it.

Yes, you certainly can buy a low-cost triple-play package in France if you’re willing to do business with Free.fr, a budget-priced new entrant who’s desperate to make an impact, although it’s not nearly as cheap or as good as all that. Free’s basic package offers the equivalent of basic cable programming, not the kind of premium channel triple play package you’ll get in the U. S. for $89 per month that certainly does include some foreign TV.

In most parts of France, you’ll also get DSL at a speed lower than the average cable connection rate in the U. S., but in some parts of Paris you will get blazingly-fast fiber speeds, although the service quality tends to be quite variable because Free.fr’s network is over-subscribed. You’ll also be unable to call cell phones, because Europe has a “calling party pays” system that penalizes those who call cell phone users.

One of the main reasons the bill is so low in France, however, is that taxes on connectivity go in the opposite direction compared to the U. S. We add taxes to your bill to pay for things like universal service, while France subsidizes connectivity.

But seriously, when’s the last time you deliberately watched a French TV show?

America’s Internet started out as No. 1 in speed. It now ranks 26th, far behind the networks in Bulgaria, Ukraine and Lithuania. Americans pay the sixth highest median price in the modern world for Internet data — 16 times the rates paid by South Koreans, according to the Organization for Economic Cooperation and Development.

This is some seriously factually-challenged stuff that Johnston has obviously lifted from New America. In the first place, there’s no reason to expect the United States will ever have the fastest or cheapest broadband networks in the world, and it would be ridiculous for us to out-spend every other nation on earth just for the bragging rights. This is mainly because of the way our population is distributed. The lowest costs and highest speeds are always going to found in nations like Singapore, Korea, and Hong Kong where most people live in high-rise apartment buildings, and there’s no getting around that.

Geographic disadvantages aside, the U. S. ranks 13th in connection speed per the Akamai reports, and we’re on an upward trend at the moment thanks to the rollout of DOCSIS 3. As AT&T and Verizon build up their backhaul per their current plans, and Century Link and AT&T deploy vectored DSL, our position will end up in the top ten next year or the year after, which is as high as we should ever hope to get.

The price-per-bit number depends on distance as well, since throughput degrades with distance in every known communication system. The nations that have just undergone a major upgrade are always going to do best on this scale, and for the U. S. the important fact is that our price per bit is falling. Cable broadband, for example, provides users an average speed of 25 Mpbs today for the same price that 2 Mbps cost at the dawn of the broadband era, and cable customers can sail up to 100 Mbps or more if they want to pay more. The price per bit in a $100/100 Mbps plan is obviously better than in a $50/25 Mbps plan, but that doesn’t make a meaningful difference to the consumer. Price per bit is a junk statistic, what counts is the price for the level of connectivity that’s sufficient for you to do the things you want to do.

Just as serious is the problem of coverage: in France, South Korea and other modern countries a superfast Internet is or will soon be available everywhere. In America, AT&T’s fiber optic lines stop short of homes and small businesses, while Verizon plans to end its fiber-optic installation work once it reaches 18 million residences.

America has more cable in more places than France, and more cable miles than Korea, but so what? 90% of America has access to cable broadband, a system that currently goes up to 160 Mbps and potentially can go several gigabits per second, so the plans and realities of the AT&T and Verizon networks don’t tell the whole story even if they’re accurately reported, which this sentence doesn’t do.

As mentioned, AT&T is investing heavily in reducing the copper in their network. Verizon is also replacing copper damaged by Sandy with fiber. As time goes by, the entire copper network will be replaced with fiber, but there’s no hurry to do this faster than consumers are willing to switch. That’s the lesson Verizon has learned from FiOS. And in any event, consumers are clamoring more for mobile capacity right now than they are for faster wired networks.

As of now huge parts of the United States will never get on the information superhighway but will rather slog along on the digital equivalent of a country road. This presents a genuine economic threat to America: the future industries and jobs that require a universal ultra-high-speed network, after all, will most likely be developed somewhere else.

Johnston is dead set on ignoring the realities of cable and mobile networks that are better in the U. S. than in any other part of the world, despite our geographic challenges. Why is that?

But the problem is more immediate for consumers. That’s because both of these cartels are telling lawmakers that they need less regulation, not more. A lighter government hand, they say, will mean more competition and yield a better deal for consumers.

So the U. S. leads the world in LTE, offers two wired alternatives to 90% of the nation, leads the world in privately-financed fiber, invents DOCSIS, DSL, VDSL+, and OFDM, but these cartels (that aren’t really cartels at all since they compete with each other) are destroying our competitiveness because our cable TV bills are higher than they are in France?

That’s the argument as I understand it so far. My goodness, what’s next?

In practice, though, deregulation has meant new regulations — written by corporations and for corporations — that have often thwarted competition and run roughshod over the customer.

Clearly, this explains why TV programming developed in the United States is exported all over the world, we lead the world in smartphone platforms (iOS and Android) and mobile apps, and why our Internet-based businesses like Netflix, eBay, Amazon, Facebook, Twitter, and Google dominate the world market in the their categories. It’s because the phone companies are writing regulations that suit their interests while they strangle innovation. That has to be the reason we’re in such an abysmal place in all the international rankings that matter, right? Cool, thanks for explaining that.

Few know, for example, that since 1913, Americans have had a legal right to telephone service at any address — or did until recently. Asserting that we now live in a world of competitive telecommunications, the Bell Twins have already managed to repeal this right in at least six states (Alabama, California, Florida, North Carolina, Texas and Wisconsin). And the cartels are apparently working vigorously to extend this repeal. Doubters have only to count the lobbyists hovering around state legislatures: in Kentucky, AT&T employs 36 of them.

Aha! Those damn cartels employ lobbyists! Clearly, they’re corrupt. Just like the ACLU, the Sierra Club, the World Wildlife Federation, the Red Cross and Save the Children, other organizations that employ lobbyists.

But the universal service concept is something that few people understand. Does it cost the Bell Twins (I like how Century Link has become the red-headed stepchild in Johnston’s America, don’t tell them) any money at all to provide service to any address in rural America? No, it doesn’t cost them a dime, because rural phone service is provided by small subsidized carriers, many of them co-operatives who are funded directly by telephone users in the cities. City dwellers can look for that “Universal Service” tax on their phone bill and ask why rural residents who benefit from this tax don’t help them with a subsidy for parking or housing, things that are less expensive in rural areas. Why indeed.

So this is an issue that depends on the friction between the taxpayers in the cities, many of them poor, and the tax recipients in the country, many of whom are not at all poor; Aspen is a rural area for USF purposes. We’re moving away from the a system of subsidized phone service in the countryside to a system of subsidized broadband and mobile administered by the FCC, so Kentucky law is irrelevant. How can Johnston not know this?

The new regulations have the potential to leave some customers with only mobile telephone service, which does not work in many areas. Moreover, some proposed new rules, if adopted, may actually put people at risk: AT&T, for instance, has suggested shutting down its old copper wire system — the only telecommunications platform that worked in some areas after Hurricane Sandy because it relies on a separate, minimal supply of electricity.

Gosh, shutting down the old copper wire system that served us so well for 100 years is just about as sad as, I don’t know, shutting down the buggy whip factories that kept our horses going at top speed before Henry Ford’s wicked Model T put them out to pasture. Shall I shed a tear? I don’t really think I will, thank you. It’s nice in theory to have two electrical grids, one for general power and the other only for phones, but in the overall scheme of things when one grid fails for weeks at a time, the other is not going to work too well either.

You see, the problem is that the phone network switching offices get their power from the general grid, so the two systems are Siamese twins. The phone companies have generators at key locations, but these need their fuel tanks refilled every few days when the general grid is gone, so what are we going to do? In general, the battery powered cellphone is a more reliable system than the old black telephone simply because it’s mobile and rechargeable in any automobile. I’ll keep my smartphone, thank you very much.

The remedy for these anti-consumer practices is straightforward: bring back real competition to the telecom industry. The Federal Communications Commission, the Justice Department and lawmakers have long said this is their goal. But absent new rules that promote vigorous competition among telecom companies, it simply won’t happen.

But we have more competition in the phone business than we’ve ever had before. How many carriers did the average American have to choose from in that golden year, 1974? I can only guess that Johnston means to complain about the new, super-evil “cartels” consisting of AT&T and DirecTV on the one hand and some of the cable companies (not all the ones on his list are actually joint marketing with Verizon, such as Cox) and Verizon. But these agreements are fairly recent, and all the statistics that Johnston uses come from the pre-agreement days when we did have more competition, in his estimation that we have now. The history since these agreements were signed, roughly a year ago, shows increased investment, higher speeds, lower price per bit, and more innovation. So he’s not really making any kind of a decent case here.

Just as canals and railroads let America grow in the 19th century, and highways and airports did so in the 20th century, the information superhighway is vital for the nation’s economic growth in the 21st. The nation can’t afford to leave its future in the hands of the cartels.

We can ill afford to leave it in the hands of charlatans and liars either. It appears that Mr. Johnston can turn a phrase, but that he has an aversion to doing actual research. His facts aren’t facts, and his Op-Ed displays no more insight that any teenager could gain from reading two or three blog posts at the New America Foundation’s site or similar ones provided by Free Press or “Stop the Cap.”

We have some serious issues in telecom policy in the U. S. these days related to the new subsidy plan for rural dwellers, the apportionment of radio spectrum between civilian and military users, the restrictions that keep networks healthy and the means of financing and managing next-generation fiber and wireless networks, but broadsided criticisms that are all but completely divorced from the facts aren’t going to help policy makers solve our problems. They may just sell some books, however, and that appears to be David Cay Johnston’s sole concern.

[This post is also on High Tech Forum.]

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About the author

Richard Bennett is an ITIF Senior Research Fellow specializing in broadband networking and Internet policy. He has a 30 year background in network engineering and standards. He was vice-chair of the IEEE 802.3 task group that devised the original Ethernet over Twisted Pair standard, and has contributed to Wi-Fi standards for fifteen years. He was active in OSI, the instigator of RFC 1001, and founder, along with Bob Metcalfe, of the Open Token Foundation, the first network industry alliance to operate an interoperability lab. He has worked for leading applied research labs, where portions of his work were underwritten by DARPA. Richard is also the inventor of four networking patents and a member of the BITAG Technical Working Group.
  • DavidCayJohnston

    The Charlatan Critique
    OK, it is so easy to show that Robert Bennett can’t get even the simplest facts right from his first sentence that it is almost too easy to bother with his post, but I can’t help myself.
    I am not a “former” journalist, but an active one writing national and global investigative columns every week for the past four and a half years, as well as magazine stories, including a Newsweek cover last month, whole books and chapters for books while currently serving as president of the board of the 4,200-member Investigative Reporters and Editors (IRE) and teaching regulatory, tax and property law in the law and graduate business schools at Syracuse University.
    My book The Fine Print is not about “our Internet sucks,” though Bennett’s tasteless description accurately captures one aspect of my book. And Bennett’s crude language does accurately characterize our slow, low-capacity, expensive and not universally available Internet, which we suffer with despite the telecom industry promising in testimony to build universal high-speed service and getting paid to do so, as I document in THE FINE PRINT.
    Rather, my book is about how the laws of competition and fair play, are being replaced with unconscionable new laws, regulations and practices in a host of industries, all without little to no news coverage. Among the industries scrutinized are pipelines, railroads, tax software, electric and water utilities, mutual funds, Hollywood and workers compensation insurers, one of which asked a paralyzed man named Bob Manning to die because keeping him alive cut into its profits.
    Bennett obviously has never read my Pulitzer-, Polk- and numerous other award winning works or he would never have written that I have what he calls “an aversion to doing actual research.” He obviously doesn’t know that I lecture across the country, in Europe and China on reporting technique, from using numbers to digging out hidden documents to how to cross-check sources.
    No one reading his error-riddled screed would he know that I spent four years interviewing hundreds of people and reading many tens of thousands of pages of documents to ferret out the stories told in The Fine Print, like how one electric utility got money to replace power poles on a 50-year cycle and then actually replaced them on a 775-year cycle or the machinations that allow monopoly pipelines to include corporate income taxes in their rates even though as Master Limited Partnerships they are exempt from that levy.
    It was facts I dug out and presented that prompted Congress to pass laws that by the official estimates saved taxpayers at least $266 billion (note that B) over a decade.
    There are many other such laws, including those passed by various state legislatures, and rules changed by regulatory agencies that grew from my work.
    Or how stone cold killer I hunted down, resulting in freedom for an innocent man after his fifth trial. Or Jack Welch giving up his retirement perks worth many tens of millions of dollars after I revealed their economics. Or George W. Bush making his only major change in tax policy, when he dropped his stealth plan to eliminate the gift tax. Or the Clintons changing the way they file their income taxes, resulting in more money to charity. Or six broadcast stations being forced off the air for news manipulations, government and corporate officials fired or eased out, dangers abated, lives saved and… . I could go on here for enough to fill several books, but even Bennett should get the point that his accusation is baseless and, like his post, does not stand up to factual scrutiny.
    Bennett reveals his paucity of analytical skills when he comes up with a non sequitur linking the cultural dominance shown by exports of American television programming and suggesting I phone companies that “strangle innovation.”
    As I wrote in my brief essay for The New York Times (where I reported for 13 of my 46 years so far as a journalist) since 1974, after a brief era of price competition, “what we’ve witnessed instead is low-quality service and prices that are higher than a truly competitive market would bring.”
    Notice that I wrote about price competition, not technological innovation.
    For sure Ma Bell’s spawn, whom I call “stodgy,” would never have given us the digital wonders we all enjoy nor would Ma Bell herself. Had Bennett read my richly detailed reporting in The Fine Print he would know about the promises made under oath, the statements made in private meetings to people like Adam Leipzig and the documented anti-competitive behavior of the Bell system and its reconstituted duopoly. (CenturyLink, which owns the old Qwest, serves the least populated area of the conterminous United States, which is why I ignore it in my brief essay; it is a Lilliputian among Gargantuans.)
    Curiously, Bennett never challenges one of my main points – that our Internet is 26th in speed, down from first place. He says Hong Kong and Singapore will have faster cheaper Internet because of density, yet he ignores Manhattan and other high density places in America where prices are much higher and speeds much slower. But then I am being redundant, having already shown that Bennett cannot logically organize his thoughts.
    He also misuses data and does so crudely, like his language. He compares the average cost of local and long distance service in 1974 to “basic” service today, which is like comparing apples to mangoes as well as a good example of misleading with statistics. Had Bennett read my book he would know that the FCC’s data collection has changed dramatically for the worse in terms of quality of the information and that I examined actual phone bills going back many decades (and cite someone else who did as well) to show that Verizon’s local phone charges have been rising at more than twice the rate of inflation since the early 1990s. All sorts of services that were once considered basic now charged separately. Bennett should consult the California legislative report showing all the subtle ways AT&T has added on ancillary charges and raised them by dozens of times the rate of inflation.
    Finally, how curious that my piece – and my trilogy of books Perfectly Legal, Free Lunch and The Fine Print – all argue for competition and against oligopolies and cartels, while Bennett ignores the cross-marketing I describe which is inherently anti-competitive.

  • http://bennett.com/blog Richard Bennett

    Actually, David, the guy “who can’t get even the simplest facts right” is named Richard, not Robert.

    I would paraphrase Capote and say that what you’re doing isn’t journalism, it’s typing, and not very good typing at that. In your random, scatter shot way you seem to be saying “Hey, I’ve done a bunch of serious investigation in the past, so trust me, I’ve been right before.” But you fail to respond to any of my specific charges in a serious way.

    I say, for example: “Geographic disadvantages aside, the U. S. ranks 13th in connection speed per the Akamai reports” but you claim “Bennett never challenges one of my main points – that our Internet is 26th in speed.” Is my statement – and its supporting source – unclear? I also say: “…we’re on an upward trend at the moment thanks to the rollout of DOCSIS 3. As AT&T and Verizon build up their backhaul per their current plans, and Century Link and AT&T deploy vectored DSL, our position will end up in the top ten next year or the year after, which is as high as we should ever hope to get.” I’d say that’s a very substantial challenge.

    You criticize me for “a non sequitur linking the cultural dominance shown by exports of American television programming” when your Op-Ed complains that American television costs more to watch than does French television. Don’t you think there might be a correlation between price and quality in this field as there is in so many others?

    Certainly that assertion is pertinent to the discussion of television subscription prices, much more than your claim that “workers compensation insurers…asked a paralyzed man named Bob Manning to die because keeping him alive cut into its profits.” Surely, a Pulitzer Prize winner can see there’s little or no connection between the Manning case, whatever its particulars may be, and the price, speed, and reach of broadband in America.

    You claim repeatedly that we in the U. S. have a “low-quality service and prices that are higher than a truly competitive market would bring” but neglect to show that the U. S. has actually failed to deliver in comparison to nations with similar urbanization. Simply pulling a number from a New America Foundation Pando Networks “report” that claims the U. S. ranks behind some number of nations in one dimension of the overall equation of availability, investment, price, performance, and adoption doesn’t illuminate the story.

    What we can expect – and should expect – is that the U. S. and other nations should invest an amount of money in the broadband plant that’s sufficient to allow those of us who care to participate in the Internet to do so at a price we can afford and at a level of service that allows us to enjoy the Internet’s benefits.

    We can’t expect U. S. firms, or U. S. taxpayers (because the money all comes from the people’s pockets one way or another, after all) to bleed money in an attempt to provide broadband networks to the most far-flung outposts in rural America for the same price and at the same speed as high-rise dwellers in Hong Kong, Seoul and Singapore. The level of investment such a thing would require exceeds social utility by such an enormous amount that the only way it could be funded would be sharply reduce support for education, police, firefighters, medical care, highways, and green energy. That’s simply not a sensible public policy trade-off.

    You also complain about my urbanization point: “[Bennett] says Hong Kong and Singapore will have faster cheaper Internet because of density, yet he ignores Manhattan and other high density places in America where prices are much higher and speeds much slower.” Actually, you’re ignoring the American concept of Universal Service.

    We consider it unfair for Comcast customers in San Francisco to pay substantially lower prices than Comcast customers in Santa Rosa, the sleepy little Sonoma County burg where Luther Burbank developed his fine plums and cherries, so they don’t. Yet there are cherry-pickers in the urban markets today (and only in those markets) who offer very high speed services to apartment dwellers at low prices, so you’ve missed out on another key fact: Urbanization has its benefits.

    In order to support the kind of case you’re trying to make, you would need to make
    some apples-to-apples comparisons between nations with similar geographic and population characteristics that take into account the entire range of financing sources, the capability of each national system to respond to investment, and the hoped-for benefits. We do that sort of thing at ITIF all the time, most recently in our report “Explaining International Broadband Leadership” (http://www.itif.org/files/ExplainingBBLeadership.pdf ) which we’re currently updating.

    The research that goes into a report of this kind is painstaking and tedious, but that’s the nature of the enterprise. If you’re not willing to diligently examine the data on these issues, I recommend that you let the blogs that have apparently supplied you with your conclusions speak for themselves. You’re adding nothing to the discourse, and taking valuable time and attention way from the serious people who are working to ensure that we make the kind of progress we need to make, when need to make it, at investment levels that don’t starve other essential services.

    If nothing else, please try to digest this one point: The end goal of U. S. broadband policy is social utility and price, not bragging rights on some meaningless international score card that’s stacked against us. Sports fans like to wave their foam “Number 1″ fingers in the stadiums, but public policy has to be more sophisticated than that. If you can’t make such an analysis, be happy that the U. S. is number 1 in 4G/LTE adoption today. You somehow failed to mention that, despite your obsession with rankings.

    I understand that you’re trying to cover a lot of ground and can’t dig very deeply into the specifics in any one area. I hope I’ve shown you that your analysis of broadband is lacking, regardless of how fine your treatment of Jack Welch’s retirement plan, the Bush Gift Tax, or the Clinton tax returns may have been.

  • Bruce kushnick

    I read your materials about David Cay Jonhston’s book — which quotes my work… And I was surprised by what you wrote — as you left out the punch line.

    You forgot to mention that we paid for the upgrades $360 billion dollars to do the upgrades and the price increases were to pay for fiber optic services — Where Verizon and now- AT&T charged customers extra money to fund these upgrades state-by-state.

    Well documented – and the research was based on my two books and our state and federal filings over the last 2 decades..

    Read our work on Verizon, New Jersey — where Verizon was supposed to have 100% of the state completed by 2010 with a fiber optic service capable of 45 Mbps in both directions and completed by 2010. —

    http://www.huffingtonpost.com/bruce-kushnick/broadband-wars-the-battle_b_1541089.html

    And that is what the price increases relate to and why America is 15th in the world in broadband — And you quote this from AT&T.

    o how do we explain AT&T’s announcement that it’s increasing its investment in infrastructure by $14B

    Again, you didn’t do your homework. AT&T is spending maybe $5 billion — based on their own SEC filings — and that’s an if based on the history of the company.

    http://www.huffingtonpost.com/bruce-kushnick/atts-14-billion-dollar-br_b_2104100.html

    Where’s the upgrades to California or Illinois or — Oh, I forgot – you
    haven’t done the research on what the companies didn’t do.

    While David’s just a reporter — he did have the data — and only used a fraction of what I gave him.

  • http://bennett.com/blog Richard Bennett

    After reading chapter 5 of Johnston’s book, Bruce, I see that you, Pando Networks, and Susan Crawford are his sources, not New America as I had surmised; New America uses Pando as a source.

    Johnston says the U. S. is “29th and falling” in broadband speed rankings, an odd conclusion to reach from the one-time Pando study that has us in 26th place (out of 230) and doesn’t say a thing about who’s rising and who’s falling. So there’s a certain degree of, let’s call it “embellishment” going on.

    Your concern seems to be some regulations that were adopted in the 1990s before cable emerged as a competitor to the traditional phone company in broadband and telephony, and before DBS and telco emerged as TV competitors. Those regulations have generally been re-written now that regulators can rely on facilities-based competition to ensure adequate service quality, reasonable prices, and regular investment. The monopoly communications market is history, in other words, so the deals made in its last days are no longer pertinent.

    If your claims were correct as a present-day matter, I would expect the financial statements of companies such as Verizon and Comcast to show insanely high levels of profitability, but in reality they’re less profitable than content players such as Google and Netflix, so I don’t think your observations have much relevance any more, if they ever did.

    A 45 Mbps two-way switching infrastructure would be a step backwards from the middle mile facilities that companies like Verizon have had for a long time in any case; they’re switching their middle mile at 10 Gbps and beyond.

  • http://bennett.com/blog Richard Bennett

    Actually, David, the guy “who can’t get even the simplest facts right” is named Richard, not Robert.

    I would paraphrase Capote and say that what you’re doing isn’t journalism, it’s typing, and not very good typing at that. In your random, scatter shot way you seem to be saying “Hey, I’ve done a bunch of serious investigation in the past, so trust me, I’ve been right before.” But you fail to respond to any of my specific charges in a serious way.

    I say, for example: “Geographic disadvantages aside, the U. S. ranks 13th in connection speed per the Akamai reports” but you claim “Bennett never challenges one of my main points – that our Internet is 26th in speed.” Is my statement – and its supporting source – unclear? I also say: “…we’re on an upward trend at the moment thanks to the rollout of DOCSIS 3. As AT&T and Verizon build up their backhaul per their current plans, and Century Link and AT&T deploy vectored DSL, our position will end up in the top ten next year or the year after, which is as high as we should ever hope to get.” I’d say that’s a very substantial challenge.

    You criticize me for “a non sequitur linking the cultural dominance shown by exports of American television programming” when your Op-Ed complains that American television costs more to watch than does French television. Don’t you think there might be a correlation between price and quality in this field as there is in so many others?

    Certainly that assertion is pertinent to the discussion of television subscription prices, much more than your claim that “workers compensation insurers…asked a paralyzed man named Bob Manning to die because keeping him alive cut into its profits.” Surely, a Pulitzer Prize winner can see there’s little or no connection between the Manning case, whatever its particulars may be, and the price, speed, and reach of broadband in America.

    You claim repeatedly that we in the U. S. have a “low-quality service and prices that are higher than a truly competitive market would bring” but neglect to show that the U. S. has actually failed to deliver in comparison to nations with similar urbanization. Simply pulling a number from a [delete: New America Foundation; add:] Pando Networks “report” that claims the U. S. ranks behind some number of nations in one dimension of the overall equation of availability, investment, price, performance, and adoption doesn’t illuminate the story.

    What we can expect – and should expect – is that the U. S. and other nations should invest an amount of money in the broadband plant that’s sufficient to allow those of us who care to participate in the Internet to do so at a price we can afford and at a level of service that allows us to enjoy the Internet’s benefits.

    We can’t expect U. S. firms, or U. S. taxpayers (because the money all comes from the people’s pockets one way or another, after all) to bleed money in an attempt to provide broadband networks to the most far-flung outposts in rural America for the same price and at the same speed as high-rise dwellers in Hong Kong, Seoul and Singapore. The level of investment such a thing would require exceeds social utility by such an enormous amount that the only way it could be funded would be sharply reduce support for education, police, firefighters, medical care, highways, and green energy. That’s simply not a sensible public policy trade-off.

    You also complain about my urbanization point: “[Bennett] says Hong Kong and Singapore will have faster cheaper Internet because of density, yet he ignores Manhattan and other high density places in America where prices are much higher and speeds much slower.” Actually, you’re ignoring the American concept of Universal Service.

    We consider it unfair for Comcast customers in San Francisco to pay substantially lower prices than Comcast customers in Santa Rosa, the sleepy little Sonoma County burg where Luther Burbank developed his fine plums and cherries, so they don’t. Yet there are cherry-pickers in the urban markets today (and only in those markets) who offer very high speed services to apartment dwellers at low prices, so you’ve missed out on another key fact: Urbanization has its benefits.

    In order to support the kind of case you’re trying to make, you would need to make some apples-to-apples comparisons between nations with similar geographic and population characteristics that take into account the entire range of financing sources, the capability of each national system to respond to investment, and the hoped-for benefits. We do that sort of thing at ITIF all the time, most recently in our report “Explaining International Broadband Leadership” (http://www.itif.org/files/ExplainingBBLeadership.pdf ) which we’re currently updating.

    The research that goes into a report of this kind is painstaking and tedious, but that’s the nature of the enterprise. If you’re not willing to diligently examine the data on these issues, I recommend that you let the blogs that have apparently supplied you with your conclusions speak for themselves. You’re adding nothing to the discourse, and taking valuable time and attention way from the serious people who are working to ensure that we make the kind of progress we need to make, when need to make it, at investment levels that don’t starve other essential services.

    If nothing else, please try to digest this one point: The end goal of U. S. broadband policy is social utility and price, not bragging rights on some meaningless international score card that’s stacked against us. Sports fans like to wave their foam “Number 1″ fingers in the stadiums, but public policy has to be more sophisticated than that. If you can’t make such an analysis, be happy that the U. S. is number 1 in 4G/LTE adoption today. You somehow failed to mention that, despite your obsession with rankings.

    I understand that you’re trying to cover a lot of ground and can’t dig very deeply into the specifics in any one area. I hope I’ve shown you that your analysis of broadband is lacking, regardless of how fine your treatment of Jack Welch’s retirement plan, the Bush Gift Tax, or the Clinton tax returns may have been.

  • http://www.ivpcapital.com/blog Michael Elling

    If we hadn’t disintermediated AT&T horizontally (WAN vs MAN) we wouldn’t have had the internet develop rapidly in the early 1990s (due to the flat-rate dial-up plans made possible by the Bell local price reaction in the mid to late 1980s to the competitive WAN threat) and the resulting scaling of silicon and software that lead to competitive wireless pricing of 10 cents in 1996. All three represent digitization waves where pricing dropped 98-99% in ten years.

    Of course, as Susan points out, we failed miserably at our attempts at vertical disintermediation beginning with the farcical Telecom Act, so the jury is out on whether that would have succeeded or not. In my opinion it would have if it had been given half a chance and the act had had teeth in it; which was my chief criticism back then.

    But I believe it still will, from the simple fact that vertical integration in networks (particularly balkanized ones) is unsustainable. They simply do not scale rapidly obsoleting investment over limited demand. If there is one thing that communications history and technology development has taught us it is that price arbitrages are not sustainable. With the telecom Act, special access “de”regulation, and equal access rescission between 1996-2005 oligopoly led bandwidth performance/price disconnected from moore’s and metcalfe’s laws. Yes it improved 6-10% annually, but it should have improved 30-50%, so that the arbitrage today is something like 30-150x depending on where you are in the InfoStack. I think Google Fiber (1gbps/$70) is just the beginning of demonstrating the arbitrage opportunity.

    The question today is less where we are, rather where would we be if the above events hadn’t happened in the 1980s and where will we be in 15 years given the current inefficient structure?

  • skpdx

    Dear Richard,

    Clearly, you have not read the fine print on AT&T’s telephone bills or service contracts today. In 1974, Americans could ACTUALLY get basic phone service for $19.95/mo. But you are flat wrong to think that you could actually get basic telephone service via AT&T or any other company in America for just $21/mo now. Clearly, it is you who has failed to do any real research, or, as I mentioned, even read the fine print (no pun intended). I still have a traditional copper-wire line myself, via Century Link, and I think my “basic phone service” is about $15 plus $5 taxes and govt-mandated fees …BUT my total phone bill is nearly triple that amount. The “basic telephone service” is a tiny proportion of all the mandatory services and fees.

    I will be calling Monday morning to see if I can get it reduced, but I doubt they can reduce it much by cutting services — because, you see, few phone companies offer a truly basic service these days. Yet, I might be able to reduce my bill by signing a new type of contract or by jumping to cable then jumping back later, if I want to. I’ve done that before.

    You see, in today’s America, it’s the loyal & trusting customers who end up paying the most for the worst services — whereas new customers get very good offers for their first year or so of service.

    (For example, I also get DSL internet service. When I began the Qwest/Century-Link DSL service a few years ago, it was no more than $25 per month, then it went to $35 per month for a year or more. Now it is a whopping $54.99 per month, not counting the insignificant $5 discount for having “bundled” service, DSL+phone. And what, you ask, is my download speed? According to the official service plan it’s just 7mbps. But in reality, it doesn’t even reach 7mbps. In my tests, it ranges from 3.2mbps to 5.9mbps. *But* I just saw that new Century Link DSL customers can get 7mbps for $19.99, and 12mbps is the same price. In fact, my monthly charge isn’t even an option for new Century Link customers. Even those paying for $40mbps pay $29.99 or $44.99, depending on whether they intend to get 12mos of service or sign up for a fixed 5-year contract. And I live in central Portland, Oregon, where I should have a wide range of DSL options.)

    (Btw, I’ve had cable internet service too, and it is faster, but Comcast was dreadful, and Comcast has a monopoly where I live. There is no other cable option. While on Comcast, I had to call a number for an automatic modem reset every other day, and I had to deal with tech support for an hour every other week, for nearly a year, before anyone at Comcast believed me when I said that the used modem they’d rented me was failing. A new modem the mailed me finally fixed the problems, but they refused to credit the modem rental rates or apologize at all. In fact, they insisted that I hand-deliver the old modem to a suburban office, a 3-4 hour bus ride from where I lived — or they promised to charge me for the modem: $120!)