Susan 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about broadband penetration, price, and its monopoly/duopoly status relies on industry-supplied statistics and outdated government research.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.

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’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.

[flv width=”636″ height=”380″]http://www.phillipdampier.com/video/Susan Crawford on Captive Audience The Telecom Industry and Monopoly Power in the New Gilded Age 12-12.flv[/flv]

Invest an hour of your time and learn about how America ceded its broadband leadership to a handful of telecom companies that have carved out comfortable, barely competitive territories for themselves, leaving Americans overpaying for slow broadband service. Susan Crawford is author of the new book, “Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age,” which has just been published. (65 minutes)

Time Warner Cable is sending apology letters to former customers acknowledging the company’s cable service has not always lived up to expectations, but improvements have been made that ex-subscribers should consider.

The effort is part of a $50 million marketing campaign that will push a 30-day money back guarantee and claims their competitors’ promised savings have not materialized.

“The Better Guarantee”-campaign will target customers who have dropped the cable operator in favor of competitors that include AT&T U-verse and Verizon FiOS.

Although both AT&T and Verizon offer attractive introductory rates, Time Warner Cable says the savings disappear after the promotion expires. The company’s new ad campaign will attempt to entice customers back with offers of lower rates, a $200 reward card, and better service, including faster broadband speeds and new products like online apps for video streaming and home security services.

The New York Times reports the campaign was announced one week before the cable operator releases its latest fourth quarter earnings, which may show a growing number of customers canceling their cable television service. Jeffries & Company forecast Time Warner will report 140,000 subscribers lost during the last quarter, up from 129,000 in the same quarter of 2011.

Customers are invited to sample Time Warner’s offerings for 30 days. If they don’t like the service, the company will send their money back.

That may not be enough. The American Consumer Satisfaction Index has top-rated Verizon FiOS for three years in a row. Time Warner Cable received a below average, but improving rating.

[flv width=”640″ height=”380″]http://www.phillipdampier.com/video/TWC The Better Guarantee 1-21-13.flv[/flv]

Time Warner Cable’s new television ad promoting its “Better Guarantee.”  (1 minute)

Follow the money to the real root of this argument.

After conclusive evidence that cable broadband upgrades have eliminated any congestion problems, the cable industry has finally admitted usage caps are not about “congestion relief,” but are, in their view, “about fairness.”

Reports of the Internet data exaflood, tsunami, brownouts, or even blackouts are highly exaggerated and always have been. But we knew that from the first day Stop the Cap! got started.

In the summer of 2008, Frontier Communications attempted to define a top limit on their residential DSL accounts at a staggeringly small 5GB per month. Time Warner Cable initially thought 40-60GB a month was more than fair when it tried to ram its own Internet Overcharging scheme down the throats of customers in New York, North Carolina, and Texas in April 2009. Comcast said using more than 250GB a month could create congestion problems on their network and be unfair to other customers. To this day, AT&T, one of the nation’s largest telecommunications companies, claims that anything more than 150GB on their DSL service or 250GB on U-verse could bring their entire network to its knees.

The Holy Grail of Wall Street economics for broadband is to monetize its usage, creating an endless money party for what is today a utility service. Millions have been spent lobbying anyone who will listen that usage caps and consumption billing were essential to promote investment, upgrades, and to expand broadband service into rural America. Since those arguments have been made, broadband rates have increased, investment has decreased on a per customer and often real basis, and the government is now trying to chip in public taxpayer dollars to get providers to wire areas that will never pass demanding return on investment formulas.

The second prong of selling this meme is the creation of an Internet boogeyman — the “data hog,” a largely fictional creature that supposedly cares only about consuming every possible bit of bandwidth and slowing your web browsing to a crawl. Shouldn’t he pay more, you are asked, at the same time these same companies continue to raise your rates and now attempt to limit your use of a service that should cost less.

This week, Michael Powell, former FCC chairman turned head of the nation’s largest cable lobby — the National Cable & Telecommunications Association, capitulated on the “congestion” myth to an audience at the Minority Media and Telecommunications Association.

Asked by MMTC president David Honig to weigh in on data caps, Powell said that while a lot of people had tried to label the cable industry’s interest in the issue as about congestion management. “That’s wrong,” he said. “Our principal purpose is how to fairly monetize a high fixed cost.”

He said bandwidth management was part of it, though a more serious issue with wireless.

But he pointed out that the cable industry had to spend a bunch of money on its network before the first customer was signed. So, for a business that requires “enormously high” fixed costs — digging up the streets, put the wires in — and operational expense, “it is a completely rational and acceptable process to figure out how to fairly allocate those costs among your consumers who are choosing the service and will pay you to recover those costs.”

When will Washington regulators and lawmakers stop drinking the Kool-Aid handed them by high-paid lobbyists?

But our readers know Powell’s arguments are based on nothing more than the same empty rhetoric that declared the Internet exaflood was at hand.

Cable broadband was introduced as an ancillary service in the late 1990s utilizing cable television infrastructure that was constructed and paid off years earlier. Introducing broadband required only incremental investment and that remains true to this day. Cable operators more than cover their costs with sky high prices for service delivering some operators as high as 95% gross margin on broadband. Capital investments have broadly declined for years as have the costs to deliver the service on a per customer basis.

Suddenlink president and CEO Jerry Kent admitted the days of expensive system upgrades were over and it was now time to rake in profits.

“I think one of the things people don’t realize [relates to] the question of capital intensity and having to keep spending to keep up with capacity,” Kent said. “Those days are basically over, and you are seeing significant free cash flow generated from the cable operators as our capital expenditures continue to come down.”

Powell’s arguments ironically may apply partly to Verizon’s FiOS fiber network, which requires the retirement of copper wire infrastructure around since Alexander Graham Bell, but even Verizon covered much of its costs winning permission to raise rates years earlier to cover fiber upgrades. Much of that money was diverted to their wireless business instead. Today, Verizon FiOS manages just fine with no usage limits at all.

In fact, the only argument about fairness that should be open for debate regards the current cost of broadband service in the United States when compared against operators’ enormous profit margins. The lack of competition has allowed providers to increase prices and introduce “creative pricing” that always guarantees protection for the incredibly high average revenue per customer already earned.

Too often, Washington regulators and lawmakers drink the Kool-Aid handed them by an industry with an incentive to distort the truth. That incentive is the billions at stake in this fight.

Powell has even shelved the notion of the Cheetos-eating data hog burning up the Internet in his parent’s basement and has elected to try class warfare instead, claiming the most capacity is used “by a high end elite subsidized by the rest.” The real high-end elite are the telecom company executives cleaning up overcharging customers for a service that has become a necessity. Arguing for usage caps as a way to offer “lower prices” for those who cannot afford the ridiculously high prices the industry charges today only creates a new digital divide – the have’s and the have only so much.

Either way, providers laugh all the way to the bank.

Although Verizon Communications has stopped expanding its FiOS fiber-to-the-home service outside of areas it already committed to serve, its gradual rollout continues in Philadelphia.

Gradual is right. On Kalos Street in the Wissahickon section of Philly, it all depends on which side of the road your house resides. Odd-numbered customers were in luck this week as Verizon took its marketing efforts to the street, with a temporary tent emblazoned with Verizon’s logo installed on the sidewalk, giving pedestrians a few minutes of warmth from a portable heater.

FiOS tent (Courtesy: J. Chakars/WHYY NewsWorks)

Inside the tent, would-be customers are given a preview of the fiber optic service and some free gifts just for stopping by on the cold winter night. Those who took Verizon up on its offer walked away with free ice skating tickets. Those that didn’t got a refrigerator magnet and a tote bag as consolation prizes.

Verizon’s sales force, braving the weather, has made inroads in the city that is home to Comcast’s corporate headquarters.

Joanne Weill-Greenberg told WHYY/NewsWorks she called Comcast to deal for a lower rate and Comcast refused to match Verizon FIOS’ introductory offer. She is now an ex-Comcast customer, and not just for the money. She explained FiOS offers channels Comcast does not carry, and because FiOS also carries Comcast’s regional sports channel, there is nothing holding them to the cable company.

The Verizon tent does not stay in any one location too long.

In a few days, they will relocate to another neighborhood that is now primed for fiber upgrades from the phone company.

Pennsylvania residents can just be thankful the winter weather has not gotten brutal enough for Verizon to deploy its inflatable igloo.