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“Our current incumbent providers are not going to help”

October 3rd, 2012

 

The website for Wired magazine has an opinion piece on making ultra-high-speed connectivity a reality in the U.S. The piece is written by Susan Crawford, visiting Stanton Professor of the First Amendment at Harvard’s Kennedy School and a Visiting Professor at Harvard Law School, whom we quoted in this blog post.

We find ourselves agreeing again with Ms. Crawford’s views. Opening the article, she rebuts those who claim municipal efforts like UTOPIA are only getting in the way of investment from the private sector:

Our current incumbent providers are not going to help. They’re not going to be the ones rolling out the fiber-to-the-home networks that could provide this speedy access to information. Why? They have no incentive to do so. Because they never enter one another’s territories, they don’t face the competition that might spur such expansion.

Instead, incumbent internet access providers such as Comcast and Time Warner (for wired access) and AT&T and Verizon (for complementary wireless access) are in “harvesting” mode. They’re raising average revenue per user through special pricing for planned “specialized services” and usage-based billing, which allows the incumbents to constrain demand. The ecosystem these companies have built is never under stress, because consumers do their best to avoid heavy charges for using more data than they’re supposed to. Where users have no expectation of abundance, there’s no need to build fiber on the wired side of the business or build small cells fed by fiber on the wireless side.

Not only does this ecosystem manifest itself as a monopoly or duopoly, it constrains demand. In other words, the goal is not ultimately to provide connectivity that meets the end-users needs, but rather it’s to squeeze as much cash flow as possible from each customer while sticking with creaky infrastructure.

Fiber provides the abundance Ms. Crawford says is lacking. To make fiber more feasible, she says, “We need policies that lower the barriers to entry for competitors. Otherwise, we’ll be stuck with the second-best cable networks now in place around the country, with their cramped upload capacity, bundled nature, deep affection for usage-based billing, and successful political resistance to any form of oversight.”

Ms. Crawford shares four proposals for making “ultra-high-speed connectivity in the U.S.” a reality:

Provide loan guarantees for building basic competitive fiber infrastructure;

  1. Preempt state laws that make it difficult (or impossible) for municipalities to commission their own fiber networks;
  2. Require wholesale providers to build open, non-discriminatory networks as a condition of getting access to rights-of-way; and
  3. Require separation between content and transport providers to avoid the risk of harvesting.

She also shares the success of New Zealand’s fiber effort, and concludes her piece by making clear the role government should play in such a project: “New Zealand is willing to assume that some government involvement in basic utility services is essential for competition to flourish.”