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Cable monopolies hurt consumers and the nation

Choice and competitiveness are the casualties when big firms such as Time Warner and Comcast have no motive to upgrade speed or capacity.

August 23, 2013|Michael Hiltzik
  • In 2011 and 2012 combined, Time Warner spent $3.6 billion, or less than 9% of its $41 billion in revenue, to maintain and upgrade its data network.
In 2011 and 2012 combined, Time Warner spent $3.6 billion, or less than 9%… (Patrick T. Fallon, Bloomberg )

Suppose, for the purpose of argument, that by the time you read this Time Warner Cable and CBS have settled their schoolyard dispute over transmission fees, and your CBS and Showtime shows are available again on your Time Warner cable box.

Problem solved, right?

No. The problem's just beginning. I bet you know it, though you may not know you know it.

Let's say that as a Time Warner Cable residential customer, you made up for the loss of CBS programming by watching more on Netflix. Guess what: You almost certainly accessed your Netflix stream via your Time Warner Cable Internet service. You used Hulu? You watched that on Time Warner Cable. Videos via Amazon Prime? You watched them on Time Warner Cable. Spent more hours diddling around at home on your iPad's Wi-Fi connection? You got it through Time Warner Cable.

Feel monopolized yet?

The filthy little secret of home and business Internet data services in the United States is that the vast majority of Americans receive them from their local monopoly cable provider, the two largest of which are the increasingly rapacious and indolent Comcast and Time Warner Cable.

Sure, many also receive data services via their smartphones, but those are pale options for services requiring capacious high-speed data streams, such as video: Not only are their speeds lower than what can be provided via a pipeline to the home, but they commonly throttle data speeds after you use as little as 2 gigabits in a month. That's not enough to view a single high-definition feature film from Netflix.

Those figures come from Susan Crawford, a telecommunications expert at New York's Cardozo School of Law. She should know. The author of the recent book "Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age" and a former special assistant to the Obama administration for science and technology, Crawford has been tracking the tightening death grip of the cable industry over our communications services for years.

"Cable has won; it's a monopoly now," she told me last week. "People are just waking up to that fact." More than 80% of new subscribers to high-speed Internet service are going with their local cable providers. It's not because they think those providers are just grand; it's because in most of the country there's no choice. Local cable service is a monopoly almost everywhere; fiber companies such as Verizon and AT&T, which have the technology to bring you higher speeds, won't spend the money to compete.

And cable is only getting stronger. The Federal Communications Commission waved through the 2011 merger of Comcast with NBCUniversal, making the nation's No. 1 cable operator vastly more powerful. The industry's current concentration, which gives Comcast and Time Warner control over roughly 40% of the broadband Internet market, will increase if the FCC allows smaller companies to merge.

The implications are dire not merely for customer service, but for the nation's economic competitiveness. American business and political leaders obsessed with China's growing footprint in world trade seem to have missed that its government has set a goal of making fiber-optic connections available to 100 million households by 2015.

The U.S. has fallen way behind other developed nations in both the speed of our broadband connections and their cost. Last year the New America Foundation charted the best Internet connection you could find in 22 major cities around the world for the equivalent of $35 a month. In Hong Kong that will buy you a 500-megabit-per-second download connection; in Seoul, Paris, Berlin, and Bucharest, 100 megabits. In Los Angeles, from Time Warner, it will buy you 10.

In a way, that's misleading, because those Asian and European speeds come via fiber, and Time Warner's via a cable connection that might as well be from the Stone Age. But that disparity points to another flaw in U.S. communications policy. We've left the rollout of fiber connections in the hands of private companies that don't care to make the investment anymore.

Verizon's record shows why fiber connections are too important to be left to the private sector. The telecommunications giant started marketing its FiOS fiber service in 2005 as a higher-speed rival to the cable operators. It spent $23 billion on the venture. Then it stopped. Put bluntly, if FiOS isn't available in your neighborhood now, you're not getting it.

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