Commentary

Communications trouble

The New York TimesDecember 3, 2012 

Since 1974, when the Justice Department sued to break up the Ma Bell phone monopoly, Americans have been told that competition in telecommunications would produce innovation, better service and lower prices.

What we’ve witnessed instead is low-quality service and prices that are higher than a truly competitive market would bring.

After a brief fling with competition, ownership has reconcentrated into a stodgy duopoly of Bell Twins – AT&T and Verizon. Now, thanks to new government rules, each in effect has become the leader of its own cartel.

The AT&T-DirectTV and Verizon-Bright House-Cox-Comcast-TimeWarner behemoths market what are known as “quad plays”: The phone companies sell mobile services jointly with the “triple play” of Internet, telephone and television connections, which are often provided by supposedly competing cable and satellite companies. And because AT&T’s and Verizon’s own land-based services operate mostly in discrete geographic markets, each cartel rules its domain as a near monopoly.

The result of having such sweeping control of the communications terrain, naturally, is that there is little incentive for either player to lower prices, improve service or significantly invest in new technologies and infrastructure. And that, in turn, leaves American consumers with a major disadvantage compared with their counterparts in the rest of the world.

On average, for instance, a triple-play package that bundles Internet, telephone and television sells for $160 a month with taxes. In France the equivalent costs just $38. For that low price, the French also get long distance to 70 foreign countries, not merely one; worldwide television, not just domestic; and an Internet that’s 20 times faster uploading data and 10 times faster downloading it.

America’s Internet started out as No.1 in speed. It now ranks 26th, far behind the networks in Bulgaria, Ukraine and Lithuania. Americans pay the sixth highest median price in the modern world for Internet data – 16 times the rates paid by South Koreans, according to the Organization for Economic Cooperation and Development.

Just as serious is the problem of coverage: In France, South Korea and other modern countries, a superfast Internet is or will soon be available everywhere. In America, AT&T’s fiber optic lines stop short of homes and small businesses, while Verizon plans to end its fiber-optic installation work once it reaches 18 million residences.

As of now huge parts of the United States will never get on the information superhighway but will rather slog along on the digital equivalent of a country road. This presents a genuine economic threat: The future industries and jobs that require a universal ultra-high-speed network, after all, will most likely be developed somewhere else.

But the problem is more immediate for consumers. That’s because both of these cartels are telling lawmakers that they need less regulation, not more. A lighter government hand, they say, will mean more competition and yield a better deal for consumers.

In practice, though, deregulation has meant new regulations – written by corporations and for corporations – that have often thwarted competition and run roughshod over the customer.

Few know, for example, that since 1913, Americans have had a legal right to telephone service at any address – or did until recently. Asserting that we now live in a world of competitive telecommunications, the Bell Twins have already managed to repeal this right in at least six states (Alabama, California, Florida, North Carolina, Texas and Wisconsin). And the cartels are apparently working vigorously to extend this repeal. Doubters have only to count the lobbyists hovering around state legislatures: In Kentucky, AT&T employs 36 of them.

The new regulations have the potential to leave some customers with only mobile telephone service, which does not work in many areas. Moreover, some proposed new rules, if adopted, may actually put people at risk: AT&T, for instance, has suggested shutting down its old copper wire system – the only telecommunications platform that worked in some areas after Hurricane Sandy because it relies on a separate, minimal supply of electricity.

The remedy for these anti-consumer practices is straightforward: Bring back real competition to the telecom industry. The Federal Communications Commission, the Justice Department and lawmakers have long said this is their goal. But absent new rules that promote vigorous competition among telecom companies, it simply won’t happen.

Just as canals and railroads let America grow in the 19th century, and highways and airports did so in the 20th century, the information superhighway is vital for the nation’s economic growth in the 21st. The nation can’t afford to leave its future in the hands of the cartels.

The New York Times

David Cay Johnston, a visiting lecturer at Syracuse University’s College of Law, is author of “The Fine Print: How Big Companies Use ‘Plain English’ to Rob You Blind.”

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