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Telecom Lobbyists Flood Media With Hit Pieces Against New Book Criticizing Telecom Monopolies

targetSusan Crawford’s new book, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age,” is on the receiving end of a lot of heat from industry lobbyists and those working for shadowy think tanks and “consumer groups.”

Most of the critics have not disclosed their industry connections. Stop the Cap! will.

Crawford’s premise that Americans are suffering the impact of an anti-competitive marketplace for broadband just doesn’t “add up,” according to Zack Christenson and Steve Pociask, both with the American Consumer Institute Center for Citizen Research.

Christenson and Pociask’s rebuttal of Crawford’s conclusions about broadband penetration, price, and its monopoly/duopoly status relies on industry-supplied statistics and outdated government research. For instance, the source material on wireless pricing predates the introduction of bundled “Share Everything” plans from AT&T and Verizon Wireless that raised prices for many customers.

Their proposed solutions for the problems of broadband access, pricing, and competition come straight from AT&T’s lobbying priority checklist:

  • Free up more wireless spectrum, which is likely to be acquired by existing providers, not new ones that enter the market to compete;
  • Allow AT&T and other phone companies to abandon current copper-based networks, which would also allow them to escape legacy regulations that require them to provide service to consumers in rural areas.

One pertinent detail missing from the piece published in the Daily Caller is the disclosure Pociask is a a telecom consultant and former chief economist for Bell Atlantic (today Verizon). The “American Consumer Institute” itself is suspected of being backed by corporate interests from the telecommunications industry. ACI has closely mirrored the legislative agendas of AT&T and Verizon, opposing Net Neutrality, supporting cable franchise reform that allowed U-verse and FiOS to receive statewide video franchises in several states, and generally opposes government regulation of telecommunications.

Critics for hire.

Critics for hire.

The so-called consumer group’s website links primarily to corporate-backed astroturf and political interest groups that routinely defend corporate interests at the expense of consumers. Groups like the CATO Institute, the Competitive Enterprise Institute, the Koch Brother-backed Heartland Institute, and the highly free-market, deregulation-oriented James Madison Institute are all offered to readers.

The Wall Street Journal trotted out Nick Schulz to handle its book review. Schulz is a fellow at the American Enterprise Institute, which is funded by corporate contributions to advocate a pro-business agenda.

Schulz attempts to school Crawford on the definition of “monopoly,” eventually suggesting “oligopoly” might be a more precise way to state it.

“Washington’s fights over telecommunications—and just about every other industrial sector—could use a lot less militancy and self-righteousness and a lot more sound economics,” concludes Schulz, while ignoring the fact interpretation of what constitutes “sound economics” is in the eye of the beholder. All too often those making that determination are backed by self-interested corporate entities with a stake in the outcome.

Hance Haney from the Discovery Institute claims Crawford’s conclusions are “misplaced nostalgia for utility regulation.” Haney cites AT&T’s breakup as the spark for competition in the telecommunications sector and proof that monopolies cannot stand when voice, video, and data service from traditional providers can be bypassed. That assumes you can obtain those services without the broadband service sold by the phone or cable company (that also likely owns your wireless service provider and controls access to cable television programming).

Haney also ignores the divorce of Ma Bell has been amicably resolved. AT&T and Verizon have managed to pick up most of their former constituent pieces (the Baby Bells) and today only “compete” with one another in the wireless sector, where each charges identically-high prices for service.

Crawford

Crawford’s critics often share a connection with the industry she criticizes in her new book.

Haney places the blame for these problems on the government. He argues exclusive cable franchise agreements instigated the lack of cable competition and allowed “hidden cross-subsidies” to flourish, causing the marketplace to stagnate. Haney’s argument ignores history. In the 1970s, before the days of USA, TNT and ESPN, the two largest cable operators TelePrompTer and TCI nearly went bankrupt due to excessive debt leverage. With a very low initial return on investment, exclusive cable franchise agreements were adopted by cities to attract cable providers to wire their communities. Wall Street argues to this day that there is no room for a high level of competition for cable because of infrastructure costs and the unprofitable chase for subscribers that will be asked to cover those expenses. Government was also not responsible for the industry drumbeat for consolidation, not competition, to protect turfs and profits.

The cable industry repeated that argument with cable broadband service, claiming oversight and regulations would stifle innovation and investment. The industry even won the right to exclude competitors from guaranteed access to those networks, claiming it would make broadband less attractive for future investment and expansion.

Haney never discloses the Discovery Institute was founded, in part, to support the elimination of government regulation of telecommunications networks. Broadband Reports also notes the Discovery Institute is subsidized by telecom carriers to make the case for deregulation at all costs.

The Discovery Institute is essentially a PR firm that will present farmed science and manipulated statistics for any donating constituents looking to make a political point.

Broadband for America, perhaps the largest industry-backed astroturf telecom group in the country and itself cited as a source by the American Consumer Institute, seized on the criticism of Crawford’s book for its own attack piece. But every book critic mentioned has a connection to the telecom industry or has ties to groups that receive substantial telecom industry contributions.

NetCompetition chairman Scott Cleland, who accused Crawford of cherry picking information, does not bother to mention NetCompetition is directly funded by the same telecom industry Crawford’s book criticizes. Cleland in fact works to represent the interests of his clients: large phone and cable operators.

Randolph May’s criticism of Crawford’s book is unsurprising when one considers he is president of the Free State Foundation, a special interest group friendly to large telecom companies. FSF also supports the work of the American Legislative Exchange Council (ALEC), a group with strong ties to AT&T.

Richard Bennett, who once denied to Stop the Cap! he worked for a K Street lobbyist (he does), attacked the book on behalf of his benefactors at the Information Technology and Innovation Foundation, a group Reuters notes  receives financial support from telecommunications companies. He also received a $20,000 stipend from Time Warner Cable.

In fact, Broadband for America could not cite a single source criticizing Crawford’s book that does not have ties to the industry Crawford criticizes.

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Currently there are 24 comments on this Article:

  1. [...] Original post: Telecom Lobbyists Flood Media With Hit Pieces Against New Book … [...]

  2. [...] via Telecom Lobbyists Flood Media With Hit Pieces Against New Book Criticizing Telecom Monopolies | Stop…. [...]

  3. elfonblog says:

    I watched the video you embedded in the earlier post. I really enjoyed it and thought Crawford covered some good points. However, the presentation really seemed to be academic to academic, and they didn’t really cover items that the end customer of Internet service might relate to. I hope they do the documentary discussed during the ending questions. Hopefully, this will be in language suitable for the average Joe watching TV, (as if it would ever be allowed on a major network).

    • That is partly why we are here. In addition to helping ordinary consumers deal with cable, broadband, and telephone issues, we are trying to educate the public about policy issues in as plain language as possible. We also have an audience of local officials learning about community broadband, those interested in public policy as it relates to broadband, techies who simply want the best and fastest service they can get, and of course the audience who despises data caps.

      It’s clear Susan Crawford is hoping a documentary-activist filmmaker will get on board and produce a movie about the state of American telecom appealing to a general audience.

      As a history buff, I think I am seeing the start of a new era of progressive activism era (that does not mean ‘liberal’) we have not really seen since the start of the 20th century. As corporate interests continue to grab political power and influence public policy towards their own self-interests at the expense of the public good, citizens will begin to rally and push back.

      Things were even worse in the early 1900s than they are today. Robber barons and monopoly trusts in commerce, energy, and raw materials were commonplace back then and regulators and politicians looked the other way. It took a progressive movement to break up the trusts with new laws that still exist today — the ones that killed the T-Mobile/AT&T merger. But everything seems to be cyclical.

      When the 1992 Cable Act was passed that reregulated several aspects of the cable industry, the problem was more or less solved for consumers looking for competition, but the telecom industry saw it as a challenge to overcome, so after four years of hard lobbying and a lot of money, the 1996 Telecom Act was passed into law, which largely deregulated the industry again and eliminated a lot of consumer safeguards.

      Now the industry overreaches again and consumers restart their own push to fix the problem all over again. And so it goes.

      • txpatriot says:

        “When the 1992 Cable Act was passed that reregulated several aspects of the cable industry, the problem was more or less solved for consumers looking for competition”

        Are you sure?

        Have you looked at your cable bill lately? The ’92 amendments gave local officials rate authority over the “basic” tier of cable service, a tier that virtually no one subscribes to. The ’96 amendments to the Communications Act may not be perfect, but at least you have your choice of telecom providers (unless you live out in the boonies). Choice of cable providers?

        Not so much . . .

        • Scott says:

          Any data to back that up? Basic tier accounts for a large percentage of cable customers in Alaska due to limited broadcast service and reception, however it’s still quite expensive for what you get.

          There was never going to be competition between cable providers and never will be as long as they collude together to divide up their markets across the country. If one company ever dares to break that inside deal and enter the market of another cable company it would be all our war and their extremely high profit margins would take a nose dive as they would have to compete on price again.. which would make Wall St scream and calls would go out to fire the respective CEO’s to be replaced with ones that would bring back the status quo.

          They have zero incentive to do that, they’re better off attempting to out-gouge customers between themselves in their protected markets to eventually see who can finance a merger first so they can eventually buyout one of their cable ‘competitors’ to further lock-in their service monopoly across the US.

          • txpatriot says:

            I don’t have national statistics on the % of customers who subscribe to the basic tier, but according to this article:

            http://www.columbian.com/news/2012/may/11/comcast-raise-rates-basic-cable-service/

            in Vancouver, WA, only 11% of Comcast customers subscribe to the regulated basic tier. So I admit I exaggerated when I said “virtually no one” subscribes to the basic tier. OTOH, Alaska conditions are unique so I’m not surprised the % is higher there.

            But the point I was responding to was Phillips’ claim that the ’92 amendments basically “fixed” the competition problem for cable customers. I believe that is wrong, given the self-evident lack of competition, and runaway cable prices over the last 20 years.

          • txpatriot says:

            Scott: I fpound another data point:

            “The majority of consumers choose “Expanded Basic”, with only about 25% consumers choosing just the “Basic” tier of service in our data”

            https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=IIOC2012&paper_id=265

            Frankly, I’m surprised the subscription rate for the basic tier is that high in their data, but it’s still nowhere near the majority.

        • I am aware of what is in the ’92 Act because I was fighting for its passage.

          I am not a big fan of regulating cable rates, so the basic cable rate tier issue was of minor consequence. What was important is the end of certain exclusivity agreements and discriminatory activity that kept cable programming at reasonable prices away from the emerging competitors of that era: home satellite and DBS (Dish/DirecTV).

          If the 92 Act did not pass, there never would have been small dish satellite services.

          The 96 Act was a Christmas tree loaded with lobbyist ornaments that lifted limits on media concentration and weakened provisions in the 92 Act based on endless promises of direct competition. This was the same era the telcos were getting rate hikes with the promise they would roll out fiber upgrades everywhere. That didn’t really happen either.

          • txpatriot says:

            I managed to get us off-topic again. Returning to Ms. Crawford: when I read her NYT Op-ed piece:

            http://www.nytimes.com/2013/01/24/opinion/how-to-get-high-speed-internet-to-all-americans.html

            I can’t help thinking I’m reading a populist screed who’s purpose is to stir up interest in her book.

            • She has been saying this even before there was a book, so there is more to it than that. I have been saying it and I don’t have a book. She is driving to help awaken a larger audience to the issues we have been talking about around here for several years. You need a critical mass of constituents to become aware and involved to get politicians to stop fronting for telecom companies.

              If her only interest was peddling a book, she would not have been pounding lecterns around the country in speeches and presentations long before the book was being written.

              • txpatriot says:

                True. But it does seem to me that her output of op-ed pieces has increased exponentially recently. Of course I’ve been wrong before.

  4. James says:

    She is right, the industry is running the regulators, who often go work for industry directly (FCC Commissioner Baker went to Comcast and/or indirectly FCC Chairman Powell for cable lobby). Our regulatory regime is limiting competition and clearly is not looking out for the American Consumer. ATT, VZ and COMCAST are sticking it to the American people every day with the FCC’s help.

  5. Earl says:

    She should be considered for the position of FCC Chairman, since Genachowski is leaving!

  6. txpatriot says:

    Phillip: let me give you one example of why Susan Crawford isn’t the telecom guru she makes herself out to be. Last July, she wrote this article for Wired:

    http://www.wired.com/business/2012/07/telecom-regs/

    In it she makes this statement: “In Michigan, a local phone company no longer has to provide wired service and is no longer subject to any quality-of-service requirements or rate regulation.” That statement is in reference to an NRRI report available here:

    http://www.nrri2.org/documents/317330/0179150e-ef83-4e94-bf94-80c7af830ab6

    I invite to read the report; the QoS statement is correct, but you’ll search in vain for ANYTHING that even remotely supports her claim that local telcos in Michigan no longer have to provide wired service. The report was authored by Sherry Lichtenberg; she acknowledges the assistance of Robin Ancona of the Michigan PSC.

    Having read the report myself and thinking I must’ve overlooked something (I mean, surely the esteemed Ms. Crawford wasn’t making sh*t up, right??), I went straight to Ms. Lichtenberg and Ms. Ancona and asked them where in the report did either one say local telcos no longer have to provide wired service in Michigan.

    Both assured me the report says nothing of the sort. Then I asked Ms. Ancona if Michigan had passed any law that says telcos no longer had to provide local phone service, and she answered no.

    Now Ms. Crawford is an attorney. She may not be expert in Michigan telecom specifically, but as a lawyer she knows how to find the law and how to interpret it. Is it possible she simply made a mistake in her statement? I suppose it is. But the WHOLE POINT of her article is the deregulatory zeal sweeping the country. If that’s the central thesis of the article, wouldn’t you expect her to make her case on rock-solid facts?

    If she can’t get a basic fact like that correct, how in the world can you trust anything else she writes?

    • txpatriot says:

      And before you ask, yes I sent the same questions to Ms. Crawford and never got a response. I don’t expect a superstar like herself to respond to every Tom, Dick, and Harry that writes her. OTOH, the two ladies who authored the NRRI report responded fairly quickly.

    • I don’t have time to dig too far into this today, but I think the issue here is Ms. Crawford may have not used the best available source. As you know, we have been tracking AT&T-backed deregulation measures introduced in statehouses across their service area for several years.

      In Michigan, this effort came in the legislature with the introduction of H.4314 in 2011. That bill now appears to be law, at least from what I can ascertain from the state of Michigan’s website. The Senate committee member analysis was able to summarize the impact of the legislation as it stood at the time it was in the pertinent Senate committee (http://www.legislature.mi.gov/documents/2011-2012/billanalysis/Senate/pdf/2011-SFA-4314-S.pdf). I quote from the report below. The key provisions for the purpose of this debate are the following:

      a) limiting the scope of the Michigan PSC, which effectively discards many oversight and rate regulation provisions;
      b) eliminate regs on VoIP service, which AT&T provides over its U-verse platform and wireless networks (at least under the Michigan definition);
      c) Allows AT&T to discontinue its network if a competitor providing “comparable” service exists. Of course, what is “comparable” is open to a lot of interpretation.This is the key provision which lets AT&T tell rural customers their landline is going away, but they can obtain service with an AT&T cellphone instead.

      I admit I have no time to scour the final legislation to be certain these provisions actually survived into the final bill signed by the governor. Often provisions passed through the two state bodies end up amended or stricken from the bill when enough members believe there is an overreach.

      The final Public Act is here: http://www.legislature.mi.gov/documents/2011-2012/publicact/pdf/2011-PA-0058.pdf

      Perhaps you can report back your own findings after reviewing the legislation to see if these provisions actually survived.

      The bill would amend the Michigan
      Telecommunications Act (MTA) to
      eliminate various provisions, repeal a
      number of sections (including a section
      requiring primary basic local exchange
      service), and do the following:
      – Revise the Act’s purposes.
      – Limit the scope of the Public Service
      Commission’s (PSC’s) rule-making
      authority to the authority granted in
      the Act, and rescind existing rules
      that are inconsistent with this
      authority.
      – Specify that the PSC would not have
      authority over voice over internet
      protocol (VoIP).
      – Allow a telecommunication provider
      to opt out of a requirement to file a
      schedule of rates, services, and
      conditions of service with the PSC.
      – Establish an expiration date of June
      30, 2011, on certain service quality
      rules.
      – Allow a provider of basic local
      exchange or toll service to
      discontinue service to an exchange
      only if an alternative provider offers
      a comparable service, rather than
      the same service.
      – Prohibit basic local exchange service
      providers, rather than
      telecommunication providers, from
      taking certain actions, and delete
      some actions from the list of
      prohibitions.
      The bill would eliminate the following:
      – A requirement that the PSC preserve
      the provision of high-quality basic
      local exchange service.
      – A requirement that the PSC report
      annually on the state of competition
      in telecommunication services in
      Michigan.
      – Provisions authorizing the PSC to
      require changes to the provision of
      regulated services by a provider who
      violates the MTA or a Commission
      order.
      – Provisions prohibiting a basic local
      exchange service provider from
      acquiring assets from or transferring
      them to an affiliate for less than the
      fair market value.
      – A requirement that a
      telecommunication provider give a
      customer a clear and simple
      explanation of the terms and
      conditions of services before the
      customer purchases them.
      – A requirement that a provider give
      each customer a printed telephone
      directory.
      – A requirement that the PSC
      promulgate rules establishing
      privacy guidelines.

      • txpatriot says:

        The key provision of the bill (now law) is that an incumbent’s COLR obligation is lifted ONLY if the incumbent faces at least one competitor in the exchange.

        Susan overlooked that (assuming she looked at the law itself). If she relied just on the NRRI report summary of the bill, then I can see how she might’ve drawn that conclusion because, despite what I said about the report, it DOES say in a chart at the end of the report, that incumbents don’t have to provide local service. So the chart is mistaken (I think the author wrote in shorthand given the space limitations of the chart).

        Still, I was wrong in saying that the report said no such thing — it does, although the report is mistaken in that regard. So I owe Ms. Crawford and your readers an apology on that point.

        • AT&T’s lobbyists always push the reneging of their “carrier of last resort” commitment in language that suggests consumers can get phone service from almost anybody, so why should they be forced to provide it.

          But that is precisely the point of COLR. It only becomes a big issue when consumers cannot find other providers. In markets where competitors provide service, AT&T wants to be one of them. In markets where the numbers don’t work for competitors, they probably don’t work well for AT&T either.

          What I am certain you already know is that AT&T is seeking to exit the rural landline business because they can never accomplish the kind of ARPU and ROI numbers they can get in urban areas with U-verse and across the board on wireless. No American would be happy paying $60 a month for a basic landline, but they won’t think twice about paying that and more for a cell phone.

          Follow the money:

          Once certain “enhanced services” for telephones were deregulated, phone companies made their profits selling phone features at whatever price the market would tolerate. $8-10 a month for Caller ID? Bundled feature packages including that and more (three way calling, call forwarding, call waiting, etc.) earned them even more. Then they tried bundling plans with flat rate long distance to boost ARPU even higher.

          A decade ago, Verizon and AT&T saw customers start giving up landlines, so additional ARPU opportunities came from the TV and broadband markets. But early attempts over inferior copper networks made it too costly to remain competitive with cable, which has a platform that can introduce ancillary features without much thought. So both companies grudgingly updated their urban networks with more fiber even as they were pouring most of their investments into high profit wireless. Wall Street howled.

          Now we have incomplete FiOS and U-verse networks. Both companies learned they can hit earnings metrics in urban areas but neither have proved a runaway success because incumbent cable operators have been willing to slash prices in retention offers to hold customers.

          Both Verizon and AT&T have the same basic agenda: they want to maintain the expectations of Wall Street, so attention is paid on high profit wireless, legacy employees are increasingly shown the door in regular cost cutting efforts, existing legacy networks are allowed to deteriorate, and rural areas aren’t worth the investment to maintain, much less upgrade.

          COLR forces AT&T and Verizon to either maintain service or sell those rural networks off to someone else. If AT&T thought they had a buyer for rural landlines, they would have sold them in a shot. But they really don’t. So now they are attempting to force a market solution through legislative accommodation: abandon rural networks and serve those rural markets with their wireless service, which has much greater pricing power and is frankly cheaper to maintain than 20, 30, or even 40 year old infrastructure held together with electrical tape.

          I would be more empathetic with the plight of AT&T and Verizon had this not been part of a much larger grand deal. These companies sought and won certain relaxation of legacy regulation in return for their promise to continue to serve all of their customers. Now they want to keep the deregulation and break their commitments.

          • txpatriot says:

            I agree with you. The only thing I would say in their defense is that those commitments were made before anyone was aware of what a disruptive force the Internet would become. Still, they made their bed . . .







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