Susan Crawford’s Captive Audience

Law professor Susan Crawford has received much attention from her book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age. She advances a thesis about a cable/telco duopoly and argues for government ownership of broadband networks.  I read the book closely and found many flaws, which I point out in my review on Amazon.

Crawford recently made an op-ed warning EU VP Neelie Kroes not to take the approach that would allow cable and telecom companeis to get scale so they can invest in much needed broadband infrastructure.  Kroes wants to remove the barriers and redundancy imposed by 27 countries (each with their own rules, regulator and tax regime) to allow cable/telco companies to operate across the region as a single entity, something we take for granted in the US.

Here is my response to Crawford’s article.

Ms. Crawford has received much attention about her duopoly thesis from her recent book.  It is a nice format that helps her to tell a certain story to the public. The problem with this thesis is that its oversimplification ignores important details that have material impacts to the discussion, particularly with regards to Europe.

Similarly in an attempt to forward her thesis and to oversimplify the situation in the EU, a complex, fragmented market of 27 countries, Ms. Crawford overlooks important facts and history. Europe was late in its cable development compared to the U.S.  Communities in many European countries created their own “antenna associations”.  Their challenge was that they didn’t have the wherewithal to invest in the the DOCSIS standard for broadband innovation, thus many gladly sold their networks to larger cable companies who completed the upgrades. In Germany the government forced separation between cable infrastructure and cable retailing. This explains why there’s relatively low cable penetration in this large European nation.  With however noble intentions, many European interventionist policies have had the opposite of intended effects. Therefore we should be skeptical of Ms. Crawford’s call for government-owned networks for broadband.

American broadband networks have helped the U.S. create 15 global internet powerhouses where the EU has but one.  Thus European Commission Vice President Neelie Kroes advocates a digital single market to help the EU create the advantages of the U.S.  Her call for private investment in broadband dates to at least February 2011, well before the publication of the Liberty Global study which Ms. Crawford claims is the foundation for Kroes’ idea. Indeed Ms. Kroes observed, “In the USA, ultrafast, 100-Megabit broadband networks go past four in five households: a proportion that’s quadrupled in just three years.”

Years ago, Europe and the U.S. took divergent tracks—the European approach to forced unbundling, and competition management by regulators, and the U.S. more committed to competition and lighter regulation to promote investment.  The U.S. has had a surge of investment and growth while Europe stagnated. The U.S.accounts for nearly a quarter of the world’s broadband investment and buys more fiber than all of Europe combined.  Now Europe wants to emulate the U.S.

As an American living in Europe, it’s strange to me that anyone would favor following Europe’s lead on economic and regulatory issues given the economic decline in most European countries.  It’s therefore perplexing that Ms. Crawford supports European-style interventionist policy in broadband networks.

Roslyn Layton
PhD Fellow, Center for
Communication, Media and Information Studies
Aalborg University, Denmark