[governance] FT: The power of the US cable (Internet) barons must be challenged

Mon Apr 14 16:06:38 EDT 2014

>From the Financial Times (UK)

The power of the US cable barons must be challenged

Edward
LuceBy Edward LuceAuthor alerts <javascript:void(0)> 

No one in Washington seems to have the will to stop industry moguls from
tightening their grip on the internet 

Matt
Kenyon illustrationCMatt Kenyon

Imagine if one company controlled 40 per cent of America's roads and raised
tolls far in excess of inflation. Suppose the roads were potholed. Imagine
too that its former chief lobbyist headed the highway sector's federal
regulator. American drivers would not be happy. US internet users ought to
be feeling equally worried.

Some time in the next year, Comcast
<http://markets.ft.com/tearsheets/performance.asp?s=us:CMCSA> 's proposed
$45.2bn takeover
<http://www.ft.com/cms/s/0/c0a0f348-bf27-11e3-8683-00144feabdc0.html?siteedi
tion=uk>  of Time Warner Cable
<http://markets.ft.com/tearsheets/performance.asp?s=us:TWC>  is likely to be
waved through by antitrust regulators. The chances are it will also get a
green light from the Federal Communications Commission (headed by Tom
Wheeler, Comcast's former chief lobbyist).

The deal will give Comcast TWC control of 40 per cent of US broadband and
almost a third of its cable television market. 

Such concentration ought to trigger concern among the vast majority of
Americans who use the internet at home and in their work lives. Yet the
backlash
<http://www.ft.com/cms/s/0/5645e304-97f5-11e3-8c0e-00144feab7de.html>  is
largely confined to a few maverick senators and policy wonks in Washington.
When the national highway system was built in the 1950s, it provided the
arteries of the US economy. The internet is America's neural system - as
well as its eyes and ears. Yet it is monopolised by an ever-shrinking
handful of private interests.

Where does it go from here? The probability is that Comcast and the rest of
the industry will further consolidate its grip on the US internet because
there is no one in Washington with the will to stop it. The FCC is dominated
by senior former cable industry officials. And there is barely a US elected
official - from President Barack Obama down - who has not benefited from
Comcast's extensive campaign financing. As with the railway barons of the
late 19th century, he who pays the piper picks the tune.

The company is brilliantly effective. Last week, David Cohen, Comcast's
genial but razor-sharp executive vice-president, batted off a US Senate
hearing
<http://www.ft.com/cms/s/0/1931611e-c004-11e3-bfbc-00144feabdc0.html>  with
the ease of a longstanding Washington insider. A half smile played over his
face throughout the three-hour session. One or two senators, notably Al
Franken, the Democrat from Minnesota, offered sceptical cross-examination
about the proposed merger. But, for the most part, Mr Cohen received
softballs. Lindsey Graham, the Republican from South Carolina, complained
that his satellite TV service was unreliable when the weather was bad. Like
many of his colleagues, Mr Graham either had little idea of what was at
stake, or did not care. With interrogations like this, who needs pillow
talk?

Comcast is aided by the complexity of the US cable industry. Confusion is
its ally. The real game is to control the internet. But a lot of the focus
has been on the merger's impact on cable TV competition, which is largely a
red herring. The TV market is in long-term decline - online video streaming
is the viewing of the future.

Yet Comcast has won plaudits for saying it would divest 3m television
subscribers to head off antitrust concerns. Whether that will be enough to
stop it from charging monopoly prices for its TV programmes is of secondary
importance. The internet is the prize.

The public's indifference to the rise of the internet barons is also
assisted by lack of knowledge. Americans are rightly proud of the fact that
the US invented the internet. Few know that it was developed largely with
public money by the Pentagon - or that Google
<http://markets.ft.com/tearsheets/performance.asp?s=us:GOOG> 's algorithmic
search engine began with a grant from the National Science Foundation. It is
a classic case of the public sector taking the risk while private operators
reap the gains. Few Americans have experienced the fast internet services in
places such as Stockholm and Seoul, where prices are a fraction of those in
the US. When South Koreans visit the US, they joke about taking an "internet
holiday".

US average speeds are as little as a tenth as fast as those in Tokyo and
Singapore. Among developed economies, only Mexico and Chile are slower. Even
Greeks get faster downloads.

So can anything stop the cable guy? Possibly. US history is full of
optimistic examples. Among the dominant platforms of their time, only
railways compare to today's internet. The Vanderbilts and the Stanfords had
the regulators in their pockets. Yet their outsize influence generated a
backlash that eventually loosened their grip.

For the most part, electricity, roads and the telephone were treated as
utilities and either publicly owned, or regulated in the public interest.
The internet should be no exception. Much like the progressive movement that
tamed the railroad barons, opposition to the US internet monopolists is
starting to percolate up from the states and the cities. It is mayors, not
presidents, who react to potholed roads.

Last week, Ed Murray, the mayor of Seattle, declared war on Comcast even
though it donated to his election campaign last year. Drawing on the outrage
among Seattle's consumers, Mr Murray seems happy to bite the hand that fed
him. "If we find that building our own municipal broadband is the best way
forward for our citizens then I will lead the way," he said.

Others, such as the town of Chattanooga, Tennessee, which is distributing
high-speed internet via electricity lines, are also doing it for themselves.
Forget Washington. This is where change comes from. "We need to find a path
forward as quickly as possible before we [the US] fall even further behind -
our economy depends on it," said Mr Murray. As indeed does America's
democracy.

edward.luce at ft.com 

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